On March 19, 2020, the Office of Management and Budget (OMB) released M-20-17, Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations (henceforth “OMB memo”). Although many of the operational impacts and costs of COVID-19 are unknowable at this point, the memo identifies time-limited administrative flexibilities that federal agencies may allow to help recipients manage under 2 CFR 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) during this emergency, without compromising accountability. 
Uniform Guidance Flexibility Under Recent OMB Memo
The OMB memo provides for many flexibilities while emphasizing the need to maintain appropriate records and cost documentation during this time of uncertainty. These flexibilities include:
- SAM (System for Award Management) Registration
- Application Deadlines
- No-Cost Extensions for Expiring Awards
- Financial, Performance, and other Reporting
- Expiring Indirect Cost Rates
- Close Outs
- Single Audit Submissions
Other Temporary Administrative Relief:
- Abbreviated non-competitive continuation requests
- Waiver for Notice of Funding Opportunities (NOFOs) Publication
- Prior Approval Requirement Waivers
- Exemption of Certain Procurement Requirements
Additionally, the memo provides that awarding agencies may allow recipients to continue charging salaries and benefits to currently active federal awards in accordance with the recipients’ policy of paying salaries (under unexpected or extraordinary circumstances) from all funding sources, both federal and non-federal. If employees are performing activities related to COVID-19 during this period, their time should be adequately tracked to substantiate costs are due to the COVID-19 pandemic.
Finally, awarding agencies may permit recipients to charge some costs to awards, due to the health emergency, without regard to certain provisions in 2 CFR §200.403 – Factors affecting allowability of costs, 2 CFR §200.404 – Reasonable costs, and 2 CFR §200.405 – Allocable costs. Eligible costs are those incurred in relation to:
- the cancellation of events, travel, or other activities necessary and reasonable for the performance of the award, or
- the pausing and restarting of grant funded activities due to the public health emergency.
Please note: Not all federal agencies have issued guidance to allow the OMB administrative flexibilities. Because these flexibilities are at each federal agency’s discretion, be sure to check their websites for details, as costs and activities may differ from one agency to another.
Documentation of COVID-19-Related Expenses
One thing that the OMB memo does not do is relieve grant recipients from the need to track and document costs related to COVID-19. Throughout response and recovery efforts, agencies should continue to maintain detailed documentation and accounting requirements in the same manner as for any federal award in accordance with 2 CFR §200.302 – Financial management and 2 CFR §200.333 – Retention requirement of records. It must be possible to trace funds to a level of expenditures adequate to establish that such funds have been used in accordance with applicable federal statutes, regulations, and award terms and conditions.
Records must clearly identify the source and application of funds for federally funded activities. This includes tracking actual expenses to each of the new funding streams specific to COVID-19, such as those from FEMA, the Coronavirus Preparedness and Response Act, the Families First Coronavirus Response Act (FFCRA), and the Coronavirus Aid, Relief and Economic Security (CARES) Act. It also applies to existing funding streams where additional funds have been provided, such as the Community Services Block Grant (CSBG), as well as to existing grants that are temporarily repurposed to address issues related to the virus. Comprehensive records of the staff time and expenses associated with the interruption of operations or services and response actions due to COVID-19 must also be differentiated from general operational costs. (FEMA Disaster Financial Management Guide.)
Under 2 CFR §200.430, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must:
- Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;
- Be incorporated into the official records of the non-federal entity;
- Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities;
- Support the distribution of the employee’s salary or wages among specific activities or cost objectives, if appropriate.
In order to charge these costs to new pandemic-related funding streams and repurposed grant funds, we recommend that all staff carefully document their time through the appropriate time tracking method for time spent on COVID-19-related activities. Those participating in COVID-19-related activities who also participate in random moment time studies should use the existing activity, “Temporarily or Permanently Working Outside of Agency Duties,” making note of what the activity is and the fact that it is COVID-19-related.
In accordance with 2 CFR §200.333, financial records, supporting documents, statistical records, and all other non-federal entity records pertinent to a federal award must be retained for a period of three years following either:
- the submission date of the final expenditure report, or
- the submission date of the quarterly or annual financial report, respectively, as reported to the federal awarding agency (for awards that are renewed quarterly or annually).
The only exception to the three-year requirement applies to records subject to litigation, claims, or audits, which must be retained until the completion of the action involving the records.
Excerpted from FEMA Disaster Financial Management Guide
Additional Recommendations for COVID-19-Related Cost Documentation
Document All Expenditures Related to the COVID-19 Response and Recovery
Establish and use a separate disaster accounting general ledger using lines consistent with the agency’s chart of accounts. Ledger line items allow jurisdictions to track costs precisely, report them to federal agencies for reimbursement and conduct detailed reporting and analysis.
The jurisdiction must justify each expenditure and directly relate it to the incident response, as well as differentiating response costs from concurrent general operational costs.
Log and Track Time and Expenses
Disaster cost reimbursement requires accurate and detailed records of the time and cost associated with the response actions. Reimbursement for associated costs incurred for actions taken during a response or recovery requires precise and acceptable documentation.
Compile Cost and Expense Data
To achieve certain thresholds for disaster cost reimbursements, jurisdictions must show proof of cost and impact.
Document Use of Mutual Aid and Volunteer Programs
Jurisdictions must document and track their mutual aid agreements and the cost associated with those response functions.
Continue Documentation Processes
Detailed documentation and accounting requirements should continue throughout response and recovery efforts.
PCG is available to answer questions about tracking COVID-19-related expenditures; provide recommendations to ensure compliance with federal guidance, internal controls, and standard of documentation requirements; and review current practices for compliance with COVID-19 expenditure tracking. If you have any questions, please contact Beth Bowsky, Sr. Advisor, at email@example.com or Ruth Quirion, Sr. Advisor, at firstname.lastname@example.org.