Window on State Government - Susan Combs, Texas Comptroller of Public Accounts
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Use of Funds Reports

Each recipient receiving recovery funds directly from a federal agency must tell that agency how the funds are being used. These reports are required and defined by Section 1512(c) of the American Recovery and Reinvestment Act (ARRA), and are called Use of Funds Reports. Recipients must submit these reports on a quarterly basis. Instructions on how to make these reports are included in memos being issued periodically by the Office of Management and Budget. Each memo is called a "guidance." The Office of Management and Budget issued an Initial guidance for the ARRA on Feb. 18, 2009, and an Updated guidance on April 3, 2009. Please check Recovery.gov for guidance updates.

Definition of Recipient

The term "recipient," as used in the Recovery Act, means any entity that receives recovery funds directly from the federal government other than an individual. This includes a state that receives recovery funds. See ARRA Section 1512(b). An entity that qualifies as a "recipient" in the ARRA is also sometimes called a "prime recipient" in guidance memos. See "Initial Implementation Guidance for the American Recovery and Reinvestment Act of 2009," Office of Management and Budget, Feb. 18, 2009, Section 2.9.

Only Prime Recipients Are Required to Submit Reports to the Federal Government

Only prime recipients are required to make Use of Fund Reports to the federal government. Sub-recipients — be they first, second, third, fourth-tier or beyond — receiving sub-awards (sub-contractors, sub-grantees, etc.), of a prime recipient's recovery funds are not required by the ARRA to submit Use of Fund Reports to the federal government. See "Initial Implementation Guidance for the American Recovery and Reinvestment Act of 2009," Office of Management and Budget, Feb. 18, 2009, Section 2.9.

Examples of Sub-recipients

Though only prime recipients are required to submit reports to the federal government, prime recipients are required to report information about awards they have made to lower-tier sub-recipients. Here is an example of tiered recipients:

Prime recipient First-tier sub-recipient Second-tier sub-recipient
Texas Department of Transportation (TxDOT) General contractor hired by TxDOT to build a bridge Concrete contractor hired by general contractor

Contractual Requirements

In addition to being statutorily required by the ARRA, the prime recipients' reporting requirement is contractually required in the terms and conditions in contract documents, grant award documents, etc. between federal agencies and prime recipients. See "Initial Implementation Guidance for the American Recovery and Reinvestment Act of 2009," Office of Management and Budget, Feb. 18, 2009, sections 5.9 (grants), 6.4 (contracts), and 7.4 (loans).

Required Data Elements

Per ARRA Section 1512(c)(1-4), the data elements that the prime recipient must report to the federal government are:

  1. the total amount of recovery funds received from the [federal] agency (ARRA Section 1501(1) defines "agency" in Title XV as it is defined under Section 551 of Title 5, United States Code);
  2. the amount of recovery funds received that were expended or obligated to projects and activities;
  3. a detailed list of all projects and activities for which recovery funds were expended or obligated, including:
    1. the name of the project or activity,
    2. a description of the project or activity,
    3. an evaluation of the completion status of the project or activity, and
    4. an estimate of the number of jobs created and the number of jobs retained by the project or activity.
    Note: If the prime recipient's funds involve infrastructure investments made by state and local governments, the report also includes the purpose, total cost and rationale of the [federal] agency for funding the infrastructure investment with recovery funds, along with the name of the person to contact at the [federal] agency if there are concerns with the infrastructure investment.
  4. detailed information on any subcontracts or subgrants awarded by recipient to include the data elements required by the Federal Funding Accountability and Transparency Act of 2006 (FFATA) PL 109-282. This law has its own set of required elements for subcontracts or sub-grants awarded by the prime recipient. They are:
    1. the name of the entity receiving the award;
    2. the amount of the award;
    3. information on the award including transaction type, funding agency, the North American Industry Classification System (NAICS) code or Catalog of Federal Domestic Assistance (CFDA) number (where applicable), program source, and an award title descriptive of the purpose of each funding action;
    4. the location of the entity receiving the award and the primary location of performance under the award, including the city, State, congressional district, and country;
    5. a unique identifier of the entity receiving the award and of the parent entity of the recipient, should the entity be owned by another entity; and
    6. any other relevant information specified by the Office of Management and Budget.

*For detailed guidance on these standard data elements please review the Office of Management and Budget's proposed rules at 74 Fed. Reg. 14824 (April 1, 2009) and the OMB's Updated Guidance issued April 3, 2009.

Obtaining Underlying Data Elements

In order for the prime recipient to report the data elements accurately to the federal government, the prime recipient will need to consider how it will obtain the underlying information on the data elements. The federal guidance memos issued through April 3, 2009, do not address the collection of such data, but it is critical to accurate reporting.

Consider the TxDOT example used above under Examples of Sub-recipients: in order for the state agency to report the number of jobs created for data element 3(d):

  • TxDOT needs to report the number of jobs the bridge building project created in its report to the federal government.
  • In order for the TxDOT to accurately report that, the general contractor needs to report the number of jobs created to TxDOT.
  • In order for the general contractor to do so, it will need the concrete contractor to report to the general contractor the number of jobs the contract created, and so on.

TxDOT can require, in its contract, that the general contractor provide the number of jobs the bridge project has created. But is that contract provision enough to ensure the critical flow of data? How can TxDOT be sure that the general contractor will be able to obtain the data it needs from the concrete contractor? How can TxDOT avoid making late or incomplete reports because the general contractor was not able to obtain the data elements from the concrete contractor?

In our example, TxDOT could consider including additional terms and conditions that will require the general contractor obtain the required data from any of its subcontractors, and will require the general contractor to in turn require that any of its subcontractors obtain the same information.

Recommended Terms and Conditions

For accurate reporting, prime recipients should consider including their own terms and conditions in award documents that will facilitate the collection of data that they will need for their federal Use of Funds Reports, down to the lowest tier of fund awards.

A sample of such terms and conditions, adapted from an actual contract that will be used by the Comptroller's Office, a prime recipient, is below.

Applying this sample contract language to our TxDOT example, part of a contract between TxDOT and the general contractor would contain four provisions that work together to facilitate TxDOT's collection of the data it will need for its federal reports. These provisions are: Reporting, Data Collection, Assurance, and Flowdown.

  • The Reporting provision requires the general contractor to obtain quarterly reports of 1512(c) elements from its subcontractors — for example, a concrete contractor. This lets TxDOT know that the general contractor's report to TxDOT (required elsewhere in the contract) will contain job creation data from its sub — in this case, the concrete contractor.
  • The Data Collection provision requires the general contractor to retain the documents on which the reports are based, and to allow inspection by TxDOT.
  • The Assurance provision requires the general contractor to make an "assurance" to TxDOT that it will require any of its subcontractors to obtain the same reports from their subs. This lets TxDOT to know that the general contractor's report will also contain job creation data from any of the concrete contractor's subs.
  • The Flowdown provision notifies the general contractor that it is responsible for not just its own performance and reporting, but for the performance and reporting of all of the sub-recipients below it. That means that TxDOT could withhold payment under the contract if the general contractor doesn't perform, or obtain a data elements report from the concrete contractor, or require the concrete contractor to obtain data elements reports from its own sub-recipients.
Sample Contract Language

This information is provided by the Comptroller of Public Accounts as a public service and is intended to be used by the recipient solely for informational purposes. The information provided here is not legal advice and no attorney-client or other confidential relationship exists or is created. The recipient or any other person assumes all risks and liabilities based on, arising out of, or incurred by any person, including the recipient, in connection with the information provided.

Reporting; Data Collection & Access; Assurance; Flowdown Provision

These reporting and assurances requirements are the contractual responsibility of the general Contractor, consistent with the flowdown requirements of the prime contract as set forth below. Failure to submit a quarterly report may be grounds for termination of the contract.

General Contractor Shall Require its Subcontractors to Submit Use of Funds Reports

The general contractor shall require that any sub-recipient with whom it sub-contracts or sub-grants, submit quarterly Use of Funds Reports to the general contractor containing the data elements described in Section 1512(c) of the Act. These reports shall be due on the ___ day prior to the end of each calendar quarter, with the first report due to the general contractor on __________.

Data Collection & Access to Records

General contractor agrees to compile, maintain, and allow TxDOT's inspection of information pertaining to programs or activities developed as a result of the general contractor's award of funds under the Act. Such compilations shall include a quarterly Use of Funds Report, to be submitted to the TxDOT, the entity which awarded the funds that are the subject of this document.

General Contractor Shall Make Assurance to TxDOT that It Will Require Its Subcontractors to Obtain Use of Funds Reports from Lower Tier Subcontractors

General contractor shall require any individual, organization, or other entity with whom it subcontracts, subgrants, or enters into any other contractual relationship involving the transfer or payment of recovery funds originally received from the general contractor to obtain quarterly Use of Funds Reports described in Section 1512(c) of the Act from any entity with whom it enters into any contractual relationship involving the transfer or payment of recovery funds.

To this end, such general contractor shall be required to sign a written assurance form for TxDOT.

This condition shall be met quarterly on the __ day prior to the end of the calendar quarter. Compliance with this condition is defined as the submission of an accurate and completed report to the Subcontractor.

Flowdown Provision

General contractor, in subcontracting any of its performance hereunder, shall legally bind subcontractors and subrecipients to perform and make such subcontractors subject to all the duties, requirements, and obligations of general contractor under this Agreement.

General contractor shall be jointly and severally liable for all performances under this Agreement, including, but not limited to, the performance of its subcontractors and subrecipients, including for all reporting and assurances outlined above, to the maximum extent permitted under the Constitution and laws of the State of Texas.

Other Requirements

Prime recipients should determine whether sub-level recipients of ARRA funds are required by ARRA to apply for, maintain, and report a Data Universal Numbering System (DUNS) number when applying for such funds and whether the recipients are required to maintain a current registration in the Central Contractor Registration (CCR) database. For more guidance see the summary for Issue Brief 09-16 regarding ARRA's Subaward Transparency Requirements. As with the various provisions mentioned above, prime recipients should consider addressing these requirements in their contracts.

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