We’re happy to offer news, updates, and thought leadership to our clients, friends, and subscribers. Please feel free to look around and subscribe to whatever topics you’re interested in using the form to the right.

The Funding Has Arrived – Now What? Internal Control Guidance Over Coronavirus State and Local Recovery Funds

by | Oct 12, 2021 | #COVID-19News, Federal Services, Government Entities

Beginning in 2021, and continuing through 2024, various local government entities (LGEs) have been given the opportunity to receive funding from the Coronavirus Local Fiscal Recovery Fund. This relief fund was created by the American Rescue Plan Act of 2021 (ARP) in order help local governments mitigate the financial impacts of the COVID-19 pandemic. This funding was intended to help LGEs strengthen COVID-19 response efforts, replace lost revenue, provide stability for residents and local businesses, and ensure the systemic equality of public health resources and economic opportunities.

With such grant funding comes the responsibility to ensure that the LGE is spending the funds appropriately. Local governments that receive relief will need to adhere to the U.S. Department of Treasury’s funding objectives. Implementing proper internal controls over the grant funds is vital, as spending federal monies without such controls puts LGEs at risk of losing or having to return funds to the federal government. The table below illustrates examples of strong internal control policies and procedures that LGEs should consider implementing before spending the grant funds:

Allowable Activity

Internal Control

Replacing lost public sector revenue

  • Utilize the Division of Local Government Services’ (DLGS) revenue loss calculation worksheet to ensure the accuracy of the calculation.
  • Assign one employee to complete the calculation and an additional employee to sign off and review its compliance with grant provisions.
  • Maintain an approved copy of the revenue loss calculation on file.

Investing in water, sewer, and broadband infrastructure

  • Procure an engineer and other vendors for infrastructure projects in accordance with NJ Local Public Contracts Law.
  • Implement policies for the LGE to oversee all vendors awarded such projects.

Providing premium pay for essential workers

  • Adopt a resolution or amend the salary ordinance approving any premium payments.
  • Maintain time and effort documentation on file for any compensation in addition to base pay.

Supporting public health expenditures

  • Appoint an employee to review and approve all expenditures prior to disbursement. Maintain proper documentation over the approval.

Addressing COVID-19 related negative economic impacts

  • Create and utilize a standardized form for any business, citizen or sub recipient to apply for and receive aid.
  • Require eligible entities to submit proof of economic impact. Maintain such proof on file.
  • Appoint an employee to oversee, monitor and approve of all expenses and reimbursements.

Addressing the disproportionate public health and economic impacts of the crisis on the hardest-hit communities, populations, and households

  • Maintain documentation on which communities within the LGE are eligible for funding.
  • Devise a written plan of how the LGE will address the disproportionate impact (which activities will be eligible) and adopt such plan via resolution.
  • Appoint an employee to review and approve that all expenses are in accordance with the LGE’s adopted plan.

No matter how each LGE plans to spend the grant funds, for best practices, the LGEs should establish written policies and procedures before spending. In addition to ensuring compliance with grant provisions, establishing such policies and internal controls prevents future audit findings. The Office of the State Controller has issued best practices and an internal control checklist that we encourage all LGEs to utilize in their efforts to establish their written internal control policies. At Bowman & Company LLP, we believe in taking a proactive approach to ensure LGEs appropriately spend grant funds and hope this article is helpful. Our professionals are available to assist you with any questions you may have on internal controls and this new funding.


Subscribe to Email Updates

Posts by Topic

Skip to content