CSBG-DCL-2021-30 CARES Spending Notice Solution FY2021

Community Services Block Grant

Dear Colleague Letter

DCL#: CSBG-DCL-2021-30

DATE: September 27, 2021

TO: CSBG States and Territories

SUBJECT: CSBG CARES Spending Notice Solution

ATTACHMENT(S): N/A

Dear Colleagues,

The purpose of this Dear Colleague Letter (DCL) is to inform States that the Office of Community Services (OCS) has identified a solution to extend the CARES obligation deadline for administrative and discretionary funds from September 30, 2021 to September 30, 2022. 

Background

On September 15, 2021, OCS released Community Services Block Grant (CSBG) Dear Colleague Letter (DCL) 2021-28 to remind CSBG grantees of the obligation and expenditure deadlines for the Coronavirus Aid, Relief, and Economic Security (CARES) Act funds. Included in the list of deadlines was a deadline of September 30, 2021, for States to obligate their CARES Act funding, including administrative and discretionary funds. This obligation deadline is one year earlier than the obligation deadline for eligible entities, which created significant concern among CSBG grantees. 

OCS has reviewed all pertinent laws, regulations, and policies, and is providing an update and additional background information on its review of statutory requirements as well as actions taken to implement a solution to grantee’s concerns.

Legislative Instructions

The CARES Act states that eligible entities can carryover funds into the two fiscal years after CSBG CARES funds were allocated to the Administration for Children and Families (ACF), U.S. Department of Health and Human Services (HHS). However, the Act does not extend this flexibility to States. Specifically, the CARES Act states:

“Provided, that to the extent Community Services Block Grant funds are distributed as grant funds by a State to an eligible entity as provided under such Act, and have not been expended by such entity, they shall remain with such entity for carryover into the next two fiscal years for expenditure by such entity consistent with program purpose.”

Because the Act specifically calls out eligible entities and does not state that States have the same carryover timeline, States are subject to the regular block grant regulations, which provide that:

“Amounts unobligated by the State at the end of the fiscal year in which they were first allotted shall remain available for obligation during the succeeding fiscal year …” 45 CFR 96.14(a). 

Given that the CSBG CARES funds were awarded in FY2020, the law requires that the funds remain available during the fiscal year they were allotted (FY2020 in this case) and the following fiscal year (FY2021 in this case). This is why the deadline for States to obligate their administrative and discretionary funds was originally September 30, 2021.

This is also why States’ Notice of Awards (NOAs) explained that “the normal terms and conditions applicable to the CSBG at 42 U.S.C. § 9901 et seq. and 45 C.F.R. Part 96, including all assurances, apply to [the CSBG CARES] funds. And, in line with the CARES Act, the NOAs state that “funds obligated for [the CSBG CARES Act] award must stay with the eligible entity for the next two federal fiscal years [and] remain available for expenditure through September 30, 2022,” but the NOAs do not include States in this specific term and condition.

The Problem

After OCS released CSBG-DCL-2021-28, we learned that many States were not aware of the pending obligation deadline and believed that they had until September 20, 2022 to obligate their remaining funds. This was in part due to:

1.  A long history of obligation deadlines being the same for both States and eligible entities.
2. The NOAs listing the full budget period, including the extended time eligible entities have to obligate their funds, without explicitly outlining the budget period for States’ administrative and discretionary funds.
3. OCS not circling back with States to make sure they understood the terms and conditions in the NOAs.
4. States not fully taking into account how the block grant regulations would apply in this case (given that the obligation deadline is not typically extended beyond the two years noted in the block grant regulations).

Communication and Efforts to Find a Potential Solution

With a clear understanding of how important States’ administrative and discretionary funds are for administering CSBG, including staffing, providing training and technical assistance, conducting oversight and monitoring and funding programs and initiatives, OCS’ senior leaders began reaching out to CSBG State Administrators and program contacts to better understand how the deadline would impact their State, as well as to assure States that OCS was working to identify a solution to remedy the issue.

In tandem, OCS also began working with our Office of General Counsel, the ACF Offices of Grants Management and Budget and Legislative Affairs, as well as the Office of Management and Budget to identify potential solutions.

OCS also released CSBG-DCL-2021-29 to inform States that we were continuing to look for a potential solution, but that they should also work to obligate CARES administrative and discretionary funds by September 30, 2021, in case the solutions we were exploring turned out not to be viable.

The Solution

OCS worked with a variety of offices across the administration to explore several options to extend the CARES obligation deadline for States. OCS received approval to move forward with one of the solutions identified. This solution will give States until September 30, 2022, to obligate all administrative and discretionary funds. As a reminder, the block grant regulations indicate that a valid obligation of CSBG funds is determined according to each State’s laws and procedures for obligating funds, which means States have to work with their fiscal and legal staff to determine what is considered a valid obligation for them. We encourage all States to work with their fiscal, legal, and contracting teams to create a plan for fully obligating the funds well ahead of the September 30, 2022 deadline.  

In order to move forward with the solution that OCS has identified, the Office of Grants Management (OGM) will need to de-obligate and re-obligate each State’s unobligated administrative and discretionary funds.

To facilitate the process, OGM will use the unobligated balance amounts recently reported by each State to guide the process. As an example, if a grantee reported they had an unobligated balance of $10,000 for CARES administrative and discretionary funding, the reported amount will be de-obligated (removed from the grantee’s Payment Management System (PMS)  account) as a FY2020 award and re-obligated (placed back into your account) as a FY2021 award. This amount ($10,000) will then be available to the State grantee to obligate until September 30, 2022. 

During the de-obligation and re-obligation process, which will take place between 3pm (ET) on Monday, September 27, 2021 and 11:59pm (ET) on Thursday, September 30, 2021, States will be prohibited from drawing down CARES Act funding. OGM will issue an NOA to grantees when funds are available again and normal financial activities can commence.

OCS hopes the option made available to ensure CARES administrative and discretionary funding is available through FY2022 will support your staffing needs and provide adequate resources to carry out training and technical assistance and monitoring activities. OCS’ objective was, and will always be, to identify a favorable and allowable solution, taking into account applicable laws, federal regulations, and policies.       

We thank you for your patience as we worked through options to extend the CARES Act obligation deadline, and for your commitment to support vulnerable individuals, families, and communities. As always, if you have additional questions, please do not hesitate to reach out to me or your program specialist.

Thank you for your attention to these matters. OCS looks forward to continuing to provide high-quality services to OCS grantees.

/s/
Charisse Johnson
Director, Division of Community Assistance
Office of Community Services