Additional funding options for COVID-19 recovery

Apr 23, 2020
Helping state and local governments navigate funding options under the COVID-19 CARES Act—how to use HUD CDBG, OMB guidance, and GSA to get aid.

HUD’s Community Development Block Grant (CDBG) funding supports state and local governments in their community development and housing missions. It’s also used for disaster relief (CDBG-DR) and mitigation efforts (CDBG-MIT). The COVID-19 pandemic and the CARES Act have introduced a new category of CDBG funds that grantees can take advantage of in their pandemic recovery efforts—CDBG-CV.

What expenses are covered under CDBG-CV, and are state and local grantees allowed to redirect their other CDBG funds to cover COVID-19 costs? What contracting vehicles can you use to simplify procurement of materials and services? And the all-important question — how do you avoid duplication of benefits and ensure reimbursement, given the complexity of funding sources in the mix?

In this podcast, three ICF experts explain how grantees can leverage new and existing federal funding options for COVID-19 recovery efforts, and how to navigate changing rules and procurement requirements in light of the pandemic. Kelly Price, Vice President of Community Development; Deborah Siefert, Senior Disaster Recovery Consultant; and Karolyn Gardner, Vice President of Contracts and Pricing, discuss how HUD is implementing the COVID-19 CARES Act funding and share advice and procurement best practices with grantees. Moderated by Marko Bourne, former director of policy at FEMA, the conversation covers topics such as:

  • A breakdown of community development funding resources that are available for COVID-19 response.
  • Regulatory waivers and administrative flexibilities that grantees can take advantage of under the CARES Act.
  • Types of activities that are eligible under CDBG-CV to aid in state and local response to COVID-19.
  • How state and local grantees can reimburse themselves for pandemic-related expenses already incurred on eligible projects under CDBG-CV.
  • How COVID-19 is impacting CDBG disaster and mitigation grants, and what allowances HUD is making to grantees.

Full transcript below: 

Marko: Hello. I'm Marko Bourne, senior vice president at ICF for disaster management strategic initiatives. Welcome to another podcast in ICF Insights with regards to COVID-19 and the response and the recovery efforts that are underway across the nation. This series of podcasts is designed to help our clients, state and local governments, private sector, and even the public understand the federal programs that are in play, the activities that state, local, and private sector clients can actually undertake, and examine some of the issues surrounding this most unique challenge in the history of our nation.

Today, we're going to be discussing the Housing and Urban Development Community Development Block Grant funding that has been made available under the CARES Act for COVID response. And we are going to be discussing the Office of Management and Budgets’ recent rulings and memos regarding the use of grant dollars from other grant programs, as well as the existing disaster to grant programs and how that is changing as a result of COVID-19 and the efforts that those funding streams can be used for.

We have three experts today from ICF who have been part and parcel of both the Housing and Urban Development CBDG programs for decades, as well as our contracts lead and expert with regards to the OMB guidance that was recently put out regarding existing dollars and existing funding.

First off, I'd like to introduce Kelly Price. Kelly is vice president of ICF’s housing and community development program based in Charleston, South Carolina with over 29 years of experience in planning and affordable housing disaster recovery programs. And Kelly works at local government levels designing and administrating community development programs and affordable housing programs, and has been delivering for many years technical assistance for various Department of Housing and Urban Development offices, their grantees, and the Office of Block Grant Assistance. She works directly with state and local government clients on design and implementation of community development programs.

We also have with us today Deb Siefert. Deb has 20 years of specialized experience in managing HUD programs and HUD funding programs, especially the Community Development Block Grant Disaster Recovery programs. She started with ICF in 2006 as a senior manager and has been the program manager for over $4 billion in CBDG disaster funds to include Texas, Louisiana, North Dakota, New York City, and Colorado. She’s a subject matter expert in CBDG disaster funding and is the senior management disaster management consultant for ICF's disaster management practice.

Finally, we have Karolyn Gardner. Karolyn Gardner is our vice president for contracts and pricing at ICF with over 25 years in contracts management experience. She leads the ICF team for contracts and pricing to support both the disaster management division as well as our public sector operating groups. Her experience spans both the public and private sector in identifying and managing risks for a wide range of contracting services involving various capabilities like engineering, training, design, consulting, and environmental remediation.

She has extensive experience with the federal acquisition regulations and cost accounting standards and compliance for delivering U.S. programs worldwide. She's also a member of the National Contracts Management Association and the International Association of Contract and Commercial Management. And I'd like to welcome all three of you today to the podcast.

Obviously today we're going to be talking about Community Development Block Grants, otherwise known as CBDG. CBDG, of course, has been around for decades, serving and helping our communities in their community development and in their housing missions. Also, in the last several decades, it's been used for disaster relief and there are specific programs for CBDG-DR--as it's well known. And upcoming, there will be a CBDG mitigation dollars that are being made available to the states as well.

Resources to augment the CARES Act

But COVID-19 and the CARES Act has raised another level of support--and another sense of activities--surrounding the use of CBDG dollars that have been specifically earmarked by Congress for COVID-19 response, which is I believe a first for this type of an event. Much like other federal programs that have been used for natural hazard disasters such as floods, tornadoes, and hurricanes are being adapted and used in a slightly different way for this coronavirus activity.

Toward that end, we have a lot of different issues with regards to how can these funding resources be used, what are they, and how are they available for our COVID-19 response. Kelly, what are these resources and how are they going to be used based on the CARES Act?

Kelly: Sure. Thanks, Marko. Thankfully the recently enacted CARES Act actually provides more than $12 billion in total to HUD, the U.S. Department of Housing and Urban Development, for a wide range of programs. Everything from homelessness prevention to public housing, but also included in that $12 billion is $5 billion for specifically the program that you've mentioned--CDBG--which is an important cornerstone program for communities across the country already. So, $5 billion for CDBG for COVID response, and HUD has now named this program, CDBG-CV. So now we have a name for the program.

Marko: Another acronym to add to the list. How much funding is available for CBDG-CV as opposed to the rest of the CARES Act funding?

Kelly: Right. So again, the total allocative was $5 billion for CDBG-CV, but it was allocated in three different groupings. $2 billion of the $5 billion is already essentially available. Congress specified that that funding be appropriated using the federal fiscal year 2020 CDBG formula methodology. So how the money was determined this past round for CPG funding for states and entitlement communities was to be used to allocate that first $2 billion tranche of funding.

So those allocations have actually been announced. They're posted on HUD's website and as I understand it, a grant agreements or modifications to grant agreements are already in process. So that's essentially immediately available and we'll talk more in a minute about being able to pay for costs already incurred.

The other $3 billion of the $5 billion is a little more complicated. Congress specified that that funding have formulas. $2 billion will have a specific formula related to certain factors and another $1 billion of the $3 billion will have another formula based on factors, both of which are tied specifically to the coronavirus response and threat going forward. So, HUD has to take some time to analyze those data factors, determine what methodology will be used. And that will be published in a federal register notice that is said to be in process right now.

The “fine print” and funding flexibilities

Marko: Obviously with any federal grant program in under normal circumstances, there is a tremendous amount of regulatory activities that have to take place on how the money is used and how it's managed. And certainly, caution always--no matter what the federal grant funding source is--all of our clients to read the fine print. In this case, there had been some regulatory waivers and flexibilities that have been added because of the uniqueness of COVID-19. Can you talk a little bit about those?

Kelly: Sure. And as you said, Congress actually anticipated a number of these and included them specifically in the CARES Act language. And then HUD is authorized also, with the CARES Act, to implement other necessary and appropriate waivers and administrative flexibility. So, I think we'll see this kind of come out on a rolling basis.

The items that were in the CARES Act specifically are the removal of the traditional 15% cap on expenditures for public services. Normally CBDG has a 15% cap per grant year on the amount of money that can be used for service-related activities. So very limited. Removing that cap completely, as you can see, really opens up a lot of options. They also are allowing for shortening of public comment periods for grantees to amend their existing action plans.

An action plan is essentially an annual plan that goes to HUD--and the public--to outline exactly how funds will be used. And they are shortening the normal comment period on that to five days. So, grantees can move quickly. And given the social distancing that's happening, they've also allowed for virtual public hearings and there's some guidance already published on those virtual public hearings.

Those flexibilities that I just mentioned--the public service cap waiver, the shortened comment period, and the virtual public hearings--also apply retroactively to grantees’ federal fiscal year 2019 and 2020 regular CDBG grants. So not only to the new $2 billion and coming $3 billion in CBDG-CV, but also to the two prior years of CDBG funding if they should need that.

HUD is also continuing to put out additional guidance on other flexibilities that they're able to do. One example of that, that is a common area for grantees to be concerned about, is the environmental review requirements. And there are a few administrative flexibilities that the office that handles that at HUD has posted also on both hud.gov and the HUD exchange to provide them a little bit of relief in that regard.

And again, the most important thing I would say to folks is to make sure they're looking out for the pending Federal Register notice. That will be the vehicle by which not only the methodology for these formula allocations for the other $3 billion will be included, but also additional waivers and flexibilities will be published vis-a-vis that Federal Register notice--and according to HUD as of yesterday--that again is in process.

Eligible activities for CBDG-CV grants

Marko: Well, when we look at what CBD traditionally has been used for, we think of it in fairly normal terms. You know, community development, building construction projects, housing is a huge portion of what CBDG funding is for. In this case, what types of activities for COVID-19 are state and locals able to look at when it comes to this particular CBDG-CV money?

Kelly: Sure. That's a great question. And one of the things that everybody who loves CDBG loves about it, is that it does have a long list of eligible activities that are allowed under the program. Some of them are more specific than others, but it already has room for grantees to really think outside the box in terms of their response to COVID and the other economic implications that are coming from this challenging time that we're in.

So, HUD's actually already put out a guide to potential eligible activities. It's not meant to be all-encompassing, but some great examples. Again, that information is available on the various HUD websites. But just as an example, acquisition repairs or rehab or construction for any type of public facility or building that might be providing any type of testing, diagnosis, treatment--that type of thing--would be eligible.

Again, because of the lift on public services cap, a lot of grantees are looking to provide or supplement existing or provide new services that we didn't know we needed before now. So new or quantifiably increased public services--that can include a wide range of things from job training for folks to move into new type of positions, meal deliveries like Meals on Wheels, supplies, testing, treatment services, it can even include emergency assistance for rent or mortgages or utilities. Right now, the cap on that is three months. That's an important element in the prevention of eviction and foreclosure and that comes under the public services line item in terms of eligibility.

In terms of economic response, CDBG has always been a great program to provide grants and loans to businesses that can be for working capital. It can be for physical improvements provided that, you know, the grantee can document that they're preventing job loss or helping to create new jobs of some type. And that would even apply to micro-enterprises, which are very small businesses. There's a lot of talk going on about what is considered small. And so CDBG already has a provision by which grantees can do a separate program just for very small businesses, and that can include technical assistance as well to help them get through this difficult time.

And of course, grantees can always do planning capacity building of their own partners and to roll out these new programs. That's always included as a possibility.

Marko: Well, we look at grantees needing to wait until they actually execute grant agreements normally. Is that changing under the CV funds?

Kelly: It is with one caveat. So, HUD's published guidance on this already as well, anticipating this might be a problem. So, they have said that for the CDBG-CV funds--that's that $2 billion already allocated and potentially the $3 billion coming--they will be able to reimburse themselves essentially for costs already incurred on eligible projects.

And of course, there's a lot in that. But essentially, it does recognize that yesterday, last week, two weeks ago, a month ago, they may have had to incur costs related to some of these services--or what have you--and there'll be able to reimburse themselves appropriately as long as they have sufficient documentation as such.

Now, again, that only applies to the CBDG-CV specific funds. Unfortunately, it does not go retroactive to the federal fiscal year 2019 and '20 grants as the provisions I mentioned before apply. Again, lots of guidance on that available as well.

Combined (and possibly competing) funding sources

Marko: No, that makes sense. Obviously in this particular case, we're looking at requirements for this particular program and because so many federal agencies are involved in providing some level and aspect of assistance in various forms, how is that playing out in terms of any new requirements that CBDG funding needs to be aware of--and our state and local clients need to be thinking about--as they're applying those dollars and other dollars?

Kelly: That's a great question as well and I think thankfully so far, the recognition in the CARES Act and what HUD is doing so far has been to provide waivers and flexibilities as much as possible. But the CARES Act was enacted under the auspices of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. All states have been designated as with disaster declarations. Therefore, the Stafford Act, as we call it for short, does apply the duplication of benefits requirements in that Act does apply to the CDBG-CV funds.

And that's a complex topic that in fact, we're going to hold on another podcast. ICF already published some guidance around duplication of benefits for the CDBG-DR program. But just simply put, what that means is that grantees will have an obligation to ensure that they're not duplicating any assistance that a person, a business or a nonprofit, let's say, is already receiving from the federal government.

One of the most common examples is some of the SBA assistance and also FEMA assistance since they're also partners in early on a disaster response and recovery. So, there's a process by which those things can be checked and documented--and we always encourage grantees to make sure they thoroughly understand those requirements and have the systems and processes in place to carry out that DOB requirement.

Marko: Finally, I'd ask where is the best place for our clients to go to in terms of other than the icf.com website? We certainly want them going there, but where else should they be looking within the federal government for this particular information regard to COVID and Housing and Urban Development?

Kelly: Sure. hud.gov is going to be one of your primary resources there. And in fact, if you go to hud.gov, you'll see at the very top with a very bright red box all their COVID-19 information. It'll take you to a page that lists everything--and then also a lot of the information that's specific to CDBG in particular, and some of the other programs that are like that--information and more details are often on the HUD Exchange. It's called hudexchange.info. And again, you'll see different places on the homepage directing you to those resources.

Other CBDG programs and their link to COVID-19 relief

Marko: Thanks, Kelly. I appreciate it. Deb, I'd love to bring you in here at this point because there have been questions that have been raised, certainly given the fact that, in some cases, the OMB and the federal government is going to allow prior-year grants from other activities to be redirected towards this. But when we talk about CBDG-DR funding allocated for disaster recovery, is any of that eligible for COVID-19 assistance at this point?

Deb:
Hi, Marko. Thank you. No, unfortunately, the CDBG-DR funds--the CDBG that was given for the national disaster resilience and CDBG fund that's coming out for mitigation--all of these funds have been specifically allocated to address prior disasters and specific impacts in specific geographies. So, the COVID-19 emergency is not something that would be eligible to be addressed with those funds.

Marko: Is COVID-19 impacting any of the disaster and mitigation grants that have been already applied or are or rather are being executed now from prior disasters? Has there been any flexibilities made available under those?

Deb: Yes. HUD provided their FAQ for the COVID-19 and in those FAQ, they did allow these grants that are in motion. Most of these are going through an action plan process. The CDBG-MIT funds have been going through extensive action plan in public hearing requirements. There is the 2019 CDBGDR funds that were just recently allocated, and many of the same staff that manage these funds are now having to turn their attention to the COVID-19 emergency. So, HUD has provided a 90-day extension on those action plan delivery dates.

Marko: Well, in a lot of cases we know the grants--for most of the disaster-related grants that are out there--they're meant to cover abnormal costs. In other words, costs that are not normally covered by other programs or quite frankly, the base capabilities of state, local governments to pay. Can these grants cover costs that are normally not allowable?

Deb:
Yes. They're going to...OMB has put out some guidance and it's also in the FAQs that was issued by HUD. There's been a normal standard test for allowability and reasonableness and allocability under the 2 CFR 200 administrative requirements, federal administrative requirements, and they are allowing some flexibility around this.

For example, normally if you had scheduled to go to a conference and you were using these grant funds to attend that conference and you don't go for some reason, well then you cannot recoup those expenses. But they are allowing that if you document the issue and the reason that you could not--you know, for example, attend a conference or a scheduled meeting or an onsite meeting with your clients--that you can go ahead and get reimbursed for those costs from these grant funds.

Marko: When it comes to what the CARES Act said with regards of changes with the CARES Act is making to the programs, how is that applying or is there any applicability to those changes to the CBDG disaster relief money, the NDR money, or the mitigation money?

Deb: It's going to apply to the CDBG-MIT funds. These grantees are going to be allowed to use the virtual public hearing option which was mentioned under the act.

Marko: What about any other impacts that we should be thinking about when it comes to the CARES Act on some of these programs?

Deb: Well, I want to go back to what Kelly said earlier, and I think that the duplication of benefits under the Stafford Act is going to be a new and challenging territory for a lot of the state and entitlement CDBG recipients as this is a very complex layering of funding and to make sure that you don't duplicate benefits from other sources. As Kelly said, that could be from other federal agencies, it could be from state or local governments, it could from nonprofits. But, you know, it's a complex procedure to go through this duplication of benefits. And as Kelly said, ICF will be putting out some future guidance on those duplicated benefits calculations.

Funding regulations to follow

Marko: Oh, thank you. I appreciate that, Deb. Karolyn, one of the things that is going to be very important for folks to look at beyond the CBDG program is how OMB is looking at the use of grant dollars and the rules that apply to those, given that OMB beyond just the legislative requirements of the regulatory requirements that the programs are developed under has guidance and requirements that federal agencies are required to follow. And quite frankly, our state, local grantees are required to follow when it comes to how they purchase, how they procure, how they manage these funds.

And what kind of advice would you give to grantees--regardless of the programs that they're looking at, but in this particular case, obviously COVID-19 related--that they should be thinking about, with regards to procurement requirements under federal grant that they need to be cognizant of to make sure that they maximize and protect the reimbursement programs that are going to help fund them.

Karolyn:
Right. Thank you, Marko. Yep. I appreciate the opportunity to be a part of this important informative podcast and talk to you all about this. One thing I've seen, in these unprecedented times, is that the agencies are really going out of their way to remind grantees and contractors of flexibilities that are available in the regulations. That there's a lot already there about urgent and compelling and agency is going out of their way to let us know that what we can use and what we can't and how we can step out that direction.

It's important, though, that state and local agencies, you know, make sure that they have program managers that are informed as well as procurement officers are knowledgeable in these procurement practices. They need to understand both their local procurement requirements as well as these federal flow downs and requirements, and the regulations they need to be following--CFR part 200.300, I know that's a mouthful--and then following their own procurement requirements. There's always the difficulty to kind of understand, which do I follow. And the reality is the best guideline there is--whichever is most stringent--follow that.

And that's especially difficult when there are multiple funding streams. So really understanding, all of the funding streams, what are the procurement requirements, and then following your most stringent requirements.

As folks have been mentioning on the podcast here today, the Stafford Act declaration does allow now for increases in a lot of the acquisition thresholds for cost and price analysis. They've increased now the micro-purchase threshold from $10,000 up to $20,000. The simplified acquisition thresholds for analysis has gone from $250,000 all the way up to $750,000, and the simplified acquisition procedures for commercial item buys is all the way up to $13 million. So that creates a great deal of flexibility and understanding in these regs.

And managing any acquisitions under these federal grants, the most important thing you can think about is keeping documentation, having sufficient detail and history of why you selected suppliers, the rationale of the methodology of the procurement, what the contract type--you know, fixed price or T&M--why you picked that, and what's the overall basis of your price in that cost analysis is going to be critical to ensure reimbursement.

And then, you know, thinking through continuing to manage these programs all the way through ensuring that invoices are paid in accordance with the contract terms. I know that sounds basic but sometimes through these, you know, audits that come about after the fact, the IGs will come in and review the contract documentation, modify your contract to make sure these changes occur that these contracts with your suppliers evidence those changes.

Just proper documentation through every step is going to be key to make sure that there isn't going to be any, you know, refunds or withholdings by your funding agencies as you go forward later. That's the biggest thing. What's the old adage? You know, start out with your end in mind. And your end in mind is to get reimbursed.

GSA schedules to use

Marko: When you talk about how state and locals can look at contracting. Obviously, there is a number of states--all states--have their own procurement vehicles or their own procurement activities that they can manage themselves. But there are federal contracts that state and locals are allowed to purchase off of for supplies, for support, for assistance, etc. What are the kind of contracting vehicles that federal grantees, especially state and local governments, can look at to procure materials and services?

Karolyn: That's a great question, Marko. I think the best vehicle really to be thinking about,--and while a lot of state local governments don't realize is available to them--is the GSA schedules. With the declaration of the public emergency health emergency that now opens up the GSA, all GSA schedules to available for state and local governments to access and by using those contract rates.

So, often state and local governments use these vehicles for their IT services. But now with the public health emergency, they can move forward using the entire breadth of GSA schedules for any kinds of services or products that they may need to buy. So, you know, in these prices under the GSA schedule are preestablished, they can go search them online now so they can do research and determine what they need to buy and do some budgeting and analysis without even having to do the first context. And then it will help them work through their cost reasonableness documentation that they need to establish for their files and backup documentation.

The one thing I can counsel though on this is they need to go through what's called the EBI process as opposed to GSA Advantage. EBI gives them the flexibility to be able to add the grant provisions that they need to flow down from their funding source. So that's going to be important to them to have those additional contract terms added because the GSA schedules, while they have standard terms and conditions do not have what's necessary to flow down from the grant provisions that they need to.

So do remember that go through the EBI system and they're also going to be responsible if there's other documentation, you know, other terms of conditions, they need to review them and make sure there's no conflict between what's on the GSA schedule and what they may have from their grants or from their state local requirements but that flexibility is there, and I've seen states have done that through Superstorm Sandy and other and other times of disasters. It's a great vehicle to use.

Marko: Certainly, Karolyn, as state and local governments are looking at this obviously, normal procurement processes can be lengthy--days, weeks, months in length. Obviously, the opening up of GSA helps to potentially shorten that timeline, shorten that schedule. Bottom line though, what's your base bottom-line advice to these state and local governments? How should they make sure that they're doing this the right way?

Karolyn: Boy, there's, you know, I think as I said, before, I think it's starting out with your end in mind and making sure you can step through each of the documentation. That's the most important piece really going through each of the requirements and keeping that backup documentation so that when the audits occur and these IGs we'll come back through each of the...because of this major disaster and all the funding that's coming about, there will be those look backs and having all of that documentation available so that there aren't questions about what you bought and why you bought why you paid what you paid is going to be the most important piece to keep the reimbursements moving.

Marko: Karolyn, thank you. Appreciated. Excellent advice and certainly an almost worthy procurement and OMB guidance is certainly a lengthy subject and we can at a future date take a look at perhaps a more in-depth for those that are interested in those issues as well. But I want to thank you for providing that overview today.

And I do want to thank both Kelly and Deb for also helping us today with the CBDG, and specifically the COVID money and how it relates--not only to the activities going on now--but how it affects potentially prior awarded CBDG dollars from prior grant agreements. All of which is important for our state and local governments to understand as they think about applying those dollars.

It's a great opportunity to also make sure that folks are aware that we are planning, not just a podcast but a webinar on duplication benefits. It's a complicated subject that has many parts to it, especially with so many federal grant programs involved as well as how it intersects with insurance and how it intersects with other funding sources to make sure that grantees at every level, both from a state, local perspective individuals, businesses, etc., need to be thinking about in terms of not running into a duplication of benefits problem.

That usually is a challenge in any disaster. It can be an even bigger challenge given COVID-19 and how unique this particular emergency is.

Thank you all for joining us and remember that the ICF podcast series is available at www.icf.com under Insights. Every one of our podcasts is there as well as additional information, thought pieces, articles, and links to specific information that's been developed about details on any of these topics and programs and links to the federal agencies that are most engaged with various aspects, FEMA, HUD, and others.

We encourage you not only to check out those resources but to give us some feedback on the podcast topics that you wished to see coming. Future topics are going to include, of course, duplication of benefits. But we're also going to be looking at mitigation because we're going to enter into a phase in the months to come on how we mitigate against future COVID activities, certain other pandemics, and also we're going to be taking a good look at what is the call to action to get back to the new normal. How do we plan in advance for coming out of the COVID-19 response, knowing that much of what we do today may change and how we do it in the future.

And we'll be providing some insights from ICF and industry experts on what we should be thinking about as communities, as businesses and as individuals when it comes to creating that new normal moving forward. Again, thank you for joining us and hopefully we'll hear you and get a chance to share additional information with you on future podcasts.

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