HHS provides updated COVID-19 recovery guidance for Head Start agencies

Recently the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF) issued ACF-IM-HS-21-01 Updated Coronavirus Disease 2019 (COVID-19) Fiscal and Administrative Flexibilities.

Over the last year, ACF has issued other information memorandums (IMs) in response to COVID-19, but those prior IMs have either been rescinded or superseded by this IM, which is designed to provide further guidance to assist Head Start agencies in their response to and recovery from the COVID-19 pandemic. The IM gives relief and guidance in several areas related to fiscal and administrative duties. We’ve summarized 12 major points below:

1. Flexibility with System for Award Management (SAM) registration/recertification

The Office of Head Start (OHS) will accept applications from entities without a SAM number. However, within 60 days of the date of application or by the date of award issuance, whichever is sooner, the awardee must have obtained a SAM number. This flexibility will apply to applications submitted and awards made through September 30, 2021, subject to adjustment at the discretion of OHS. 

What it means: While most organizations already have a SAM number, in the case of possibly new organizations, there is some additional time to receive it prior to the issuance of the award.

2. No-cost extensions on expiring awards

Head Start grantees may request no-cost extensions on expiring awards if the requests do not exceed 11 months from the project period end date, inclusive of any previous extensions. Grantees should submit no-cost extension requests to their regional grants management officer as soon as possible to allow time for processing and issuance of a revised Notice of Award. 

Approvals of no-cost extensions will also be considered for expiring awards when additional time is necessary to transition program services and assets, including real property, to a replacement grantee designated as a successor to some or all of a grantee's service area resulting from Designation Renewal System (DRS) competition, OHS defunding or grantee relinquishment of an award. 

What it means: Agencies that need additional time to complete their award can request additional time. No-cost means that there will not be any additional funding, just time to complete the program. This includes awards that are being transitioned to new grantees.

3. Allowability of costs not normally chargeable to awards

OHS recognizes delivery of Head Start and Early Head Start services, including family supports, during the COVID-19 pandemic is both challenging and complex, especially when many families are isolated and may have experienced job loss, eviction and food insecurity. OHS understands costs that are necessary and reasonable for the performance of Head Start awards during this unprecedented time may be very different from allowable costs during normal operations. Conditions in local communities may also vary within a state and from state to state. 

Grantees are expected to exercise prudent judgment, knowledge of service populations and community data to determine what expenses are necessary and reasonable to maintain comprehensive services and, as soon as feasible, to return to in-person, comprehensive services through reopening centers. Grantees should document the rationale that costs incurred are necessary, reasonable and allocable to the program’s COVID-19 response for enrolled children and their families.

What it means: This provision is substantial in that it gives grantees flexibility in how they expend their funds. OHS realizes that the pandemic has put a lot of strain on agencies and how they respond to COVID-19 in their areas, as it can be different for different agencies. It still stresses necessary and reasonable factors need to be considered (i.e., what a prudent person would do at the time) and that documentation is important when making expenditures that they would not normally make in response to COVID-19 and serving families.

4. Abbreviated non-competitive continuation requests

OHS is accepting abbreviated narrative information in support of continuation applications due between April 1 and December 31, 2021. A grantee applying for a non-competitive continuation award during the noted period must complete the budget and schedule tables in the Head Start Enterprise System (HSES) and submit only a budget justification (Section II) for the Application and Budget Justification Narrative document. Applicants must also complete any other applicable tabs in HSES, with supporting documents.

Guidance around non-federal match waiver requests, governing body and Policy Council approvals is covered in the Waivers and other flexibilities section of the IM. Submission of the noted information indicates the applicant's intent to resume or restore their project activities and accept the continuation award once issued. 

What it means: OHS is reducing the administrative burden on grantees that are not in DRS and are applying to renew their awards.

5. Prior approval waiver requirements 

Grantees may use funds from their current operating awards to respond to and recover from the impacts of COVID-19. All costs charged to federal awards must be consistent with federal cost policy guidelines and the terms of the award, except where specified in the IM. 

For expenses necessary to respond to COVID-19, OHS grantees may use the following waivers of prior approval requirements:

Prior approval for the purchase of equipment: Grantees may purchase equipment needed to respond to COVID-19 with a value of up to $25,000 without prior ACF approval. This waiver applies to purchases made between January 1, 2021, and December 31, 2021.

What it means: For the calendar year of 2021 grantees can make purchases of equipment to respond to COVID without prior approval for purchases up to $25,000.

Budget modifications: To allow grantees more flexibility to spend funds as needed to respond to COVID-19 and, when possible, quickly move to reopen closed centers, prior approval is waived for budget transfers between direct cost categories for an aggregate amount not to exceed $1 million between January 1, 2021, and December 31, 2021. 

What it means: The budget modification approval requirement has been raised from $250,000 to $1,000,000 for direct cost categories for the calendar year of 2021.

Procurement by noncompetitive proposals: OHS recognizes that COVID-19 has created a public emergency for all grantees. Competitive solicitations may result in delays that impair a grantee's ability to respond to or recover from COVID-19. OHS is authorizing grantees to engage in sole-source purchasing between January 1, 2021, and December 31, 2021, to obtain goods and services needed for COVID-19 response and recovery.

What it means: Most procurement transactions (those that exceed an agency’s micro-purchase threshold) require some type of competitive bid process. This provision allows agencies in their response to COVID-19 to award purchases on a non-competitive bases for purchases in response to COVID-19 for the calendar year 2021. As with other areas, documentation is important.

6. Exemption of certain procurement requirements

As appropriate, OHS will waive the procurement requirements related to geographical preferences. Grantees must maintain appropriate records and documentation to support any charges against a federal award. 

What it means: Grantees can award purchases using a geographic preference however documentation is again required.

7. Extension of financial and other reporting

OHS grantees may request to delay submission of financial, performance and other reports up to three months beyond the normal due date. Grantees may continue to draw down federal funds without the timely submission of these reports. However, these reports must be submitted at the end of the extension period. In addition, grantees must continue to submit open/closed center status reports and enrollment information without postponement. 

What it means: Typically reports are due either 30 or 90 days after a reporting period. This provision allows grantees to request an additional 90 days without it affecting their ability to draw down funding. However, Program Information Reports (PIRs) do not have this additional time frame; they are due at the normal due dates.

8. Extension of closeout

OHS grantees with project periods ending between April 1 and December 31, 2021, may request a delay of up to one year for submission of any pending financial, performance or other reports required by the terms of their award. To request an extension, a grantee must submit a written request to its regional grants management officer indicating the financial, performance or other reports for which an extension is requested and the length of the requested extension. Extensions will generally be given in three-month increments and are effective only when approved in writing by ACF. 

OHS will not entertain requests for extension of any closeout reports or other materials needed to transition program services and assets, including real property, to a replacement grantee designated as a successor because of a DRS competition, OHS defunding or grantee relinquishment of an award. 

What it means: For awards that end between April 1 and December 31, 2021, grantee can request an extension to file final reports. The request must be in writing and the approval must be in writing from ACF. This extension is not available for grantees that are in DRS and must relinquish their award.

9. Extension of single audit submission

According to the 2020 Compliance Supplement Addendum, federal awarding agencies must allow recipients and sub-recipients who received COVID-19 funding with original due dates from October 1, 2020, through June 30, 2021, an extension of their single audit submissions up to three months beyond the normal due date. The extension of single audit submission information applies as stated to Head Start grantees. 

What it means: If the due date of your single audit is between October 1, 2020, through June 30, 2021, OHS is allowing a three-month extension. 

However, OMB IM 21-20 is broader. That IM states “recipients and subrecipients that have not yet filed their single audits with the Federal Audit Clearinghouse as of the date of the issuance of this memorandum (March 19, 2021) that have fiscal year-ends through June 30, 2021, to delay the completion and submission of the Single Audit reporting package to six months beyond the normal due date. No further action by awarding agencies is required to enact this extension. This extension does not require individual recipients and subrecipients to seek approval for the extension by the cognizant or oversight agency for audit; however, recipients and subrecipients should maintain documentation of the reason for the delayed filing. Recipients and subrecipients taking advantage of this extension would still qualify as a ‘low-risk auditee.’”

10. Flexibility related to physical inventories

OHS grantees may request a delay of up to 12 months for the performance of a biennial physical inventory of equipment purchased under its federal award, slated to be completed between January 1, 2021, and December 31, 2021. OHS will not entertain requests for extension of the completion of physical inventory or other materials needed to transition program services and assets, including real property, to a replacement grantee designated as a successor because of a DRS competition, OHS defunding or grantee relinquishment of an award. 

What it means: Typically, agencies are required to do a physical inventory of equipment purchased with federal funds once every two years. If you are required to do a physical inventory during calendar year 2021, you can request an extension of up to 12 months to complete that inventory. This provision is not available if an agency is in DRS and has to relinquish their award. 

11. Waivers and other flexibilities

OHS will continue to ease administrative requirements for waiver requests and governing body approvals. The following provisions are applicable: 

Governing body approvals: At a minimum, a statement must be submitted confirming that governing body and Policy Council members available for contact have given their approval of continuation and post-award amendment applications. 

What it means: Governing boards and Policy Council members are required to approve most actions as it relates to awards, funding, budgets and some expenditures. This provision says that at a minimum the members available should approve continuation and post-award applications during COVID 19.

Non-federal share: The Head Start Act recognizes that lack of resources in a community adversely impacted by a major disaster may prevent Head Start grantees from providing all or a portion of their required non-federal contribution. OHS has determined the widespread impact of the coronavirus adversely impacts Head Start grantees. Until further guidance is issued, OHS will continue to approve requests for waivers of non-federal match in applications, including, but not limited to, continuation, COVID-19 and cost of-living adjustment applications. To request a waiver of non-federal match, place the amount of $0 in Section C of your SF-424A. No separate waiver request is required. The issuance of a Notice of Award constitutes approval of the requested waiver. If a waiver of match is needed on a previously issued grant award, grantees must go through the formal waiver process. 

What it means: Due to COVID-19 and centers being closed, many organizations have struggled with generating non-federal share. Waivers will be granted for non-federal share for all applications of funding simply by entering $0 in Section C of the SF-424A. Agencies will need to follow the formal application for waivers on previously issued awards.

Administrative costs: If at any time within a given project period, a grantee estimates development and administration costs will exceed 15% of total approved costs, the grantee may submit a waiver request of the requirement. Requests must be submitted via budget revision in the corresponding budget period, explain why costs exceed the limit and describe what the grantee will do to reduce its development and administrative costs to comply with the 15% limit after the waiver period. 

What it means: HS limits the administrative costs on an award to 15%; however, due to the pandemic, they understand that administrative costs incurred may exceed that limit. This provision allows agencies to request a waiver of that requirement but will need to document what the agency is doing to decrease those costs.

The IM also noted that unless a finite expiration date is noted, these fiscal flexibilities are applicable throughout the duration of the public health emergency declaration. This means that some of the above provisions have certain time restrictions as noted, but those without a time restriction will remain in place until the public health emergency is over or the provisions are superseded. 

Questions? Reach out to your Wipfli relationship executive for assistance. Wipfli will also host a Uniform Guidance session at the Virtual Training Experience July 26-30, 2021. Click here to learn more about the virtual conference, or click here to view our upcoming Head Start and Uniform Guidance trainings. 

Related:

Nonprofit COVID-19 resource center
Head Start/Early Head Start Training
My Wipfli resources