On April 9, 2020, OMB issued its third memorandum in a series responding to COVID-19 from a federal financial assistance perspective. We previously reported on the first two memoranda here.
While the first two memoranda provided flexibilities for grant recipients, the latest memorandum directs all federal departments and agencies "to marshal all legally available federal resources to combat the crisis." Specifically, memorandum M-20-20, "Repurposing Existing Federal Financial Assistance Programs and Awards to Support the Emergency Response to the Novel Coronavirus (COVID-19)," is a class exception, pursuant to 2 C.F.R. § 200.102(a), permitting federal awarding agencies to "repurpose" their awards to support the COVID-19 response.
As a repurposing example, M-20-20 suggests agencies allow recipients to donate medical equipment, labor, supplies, and contract services purchased with federal funds to hospitals and other entities serving the public in response to COVID-19.
Perhaps recognizing the unprecedented nature of this class exception, OMB makes the following cautionary points:
- Awarding agencies should engage with their respective legal counsel to ensure such donations and repurposing comply with all other legal requirements;
- Regarding these exceptions, awarding agencies and recipients should maintain appropriate records and documentation; and
- Awarding agencies must advise recipients not to assume that additional funds will be available should the donations or repurposing of funds result in any type of shortage.
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Unlike the earlier memoranda, which provided concessions and flexibility, M-20-20, while noble in intentions, could hold pitfalls for overeager recipients. For example, if the subrecipient is a pass-through entity, does it have language in its subaward providing for such repurposing? Just as M-20-20 advises awarding agencies to consult their legal counsel prior to repurposing federal awards, so too should recipients consult legal counsel to ensure they are not overexposing themselves to liability.