GAO COVID-19 Funding Oversight – Potential Contractor Implications

Key Takeaways:

• GAO is tasked with providing monitoring and oversight of COVID-19 supplemental funding and is required to deliver its first report by the end of June.
• Information related to contractors that GAO plans to analyze, includes contract spending, use of the Defense Production Act, use of contract-related flexibilities, and reimbursements of paid leave to contractor employees.
• Seasoned contractors and companies new to government contracting should be prepared for potential reporting requirements stemming from the COVID-19 supplemental appropriations bills.

GAO is one of several oversight bodies that will be monitoring spending in response to the COVID-19 pandemic. GAO is not only tasked with conducting audits related to CARES Act spending, but also any other supplemental funding bills related to COVID-19 preparedness, response, and recovery. Their oversight responsibilities include monitoring funding that has been obligated to contractors and subcontractors.

The CARES Act spells out GAO’s responsibilities as it relates to that specific Act, as well as other supplemental appropriations.  The legislation states that GAO is to:

• Provide monthly briefings to the appropriate congressional committees
• Publish reports regarding its monitoring efforts, along with any audits or investigations. 
  • These reports are to be provided to the appropriate Congressional committees and posted on GAO’s website.
  • The first report should be published no later than 90 days after enactment (June 27th), and subsequent reports are to be published every other month until March 27, 2021.
• GAO shall be given access to records of federal, state, and local agencies, contractors, grantees, recipients, and sub-recipients.  
• GAO shall also have the authority to conduct interviews with the above list of entities and inspect their facilities.

In order to fund this work, the CARES Act provides GAO with an additional $20M to cover salaries and expenses related to COVID-19 audit efforts.

GAO has also stood up a webpage on pandemics to offer agencies and the public lessons learned regarding preparedness, response, and recovery, citing previous work on infectious diseases and biological threats such as Zika, Ebola, avian influenza, and H1N1 influenza.  This webpage also provides a link for reporting fraud. With over $2 trillion at stake, GAO is urging private citizens, government workers, contractors, and others to report allegations of fraud, waste, abuse, and mismanagement. GAO plans to update this webpage as it releases reports on its oversight efforts.  

A recent Washington Technology article cited information from a GAO spokesperson saying GAO plans to look at the following information as it applies to contractors that receive federal COVID-19 funding:

• Contract spending
• Use of the Defense Production Act
• Impact on the defense industrial base
• Guidance and implementation of the section of the CARES Act entitled “Federal Contractor Authority.”
• Use of contract-related flexibilities in the CARES Act and the Stafford Act.

“Federal Contractor Authority” as specified in the CARES Act allows agencies to modify the terms and conditions of a contract, or other agreement to reimburse any paid leave a contractor provides to keep its employees or subcontractors in a ready state.

Declaring a national emergency allowed the president to use certain authorities granted under the Stafford Act.  An “emergency” is any situation in which the president determines that “federal assistance is needed to supplement state and local efforts …” Under these circumstances, the president may direct federal agencies to use their resources to support state and local efforts, coordinate disaster relief assistance, and assist in the distribution of medicine, food, and other consumable supplies.  Direct financial assistance can also be provided to state and local governments through congressionally-appropriated funds.

Businesses of all kinds have seen the opportunity to assist with this national emergency to provide pharmaceuticals, medical supplies, PPE, local staff augmentation, logistics, and technical support services, food and consumer goods, delivery services, and decontamination services just to name a few. The crisis has attracted both traditional and non-traditional contracting companies.  Some organizations are receiving federal, or state and local funds, for goods and services, that have never done business with the government in the past.

Companies new to federally funded contracting, even when funneled through state and local entities, need to plan upfront for the numerous federal compliance obligations and mandates specified in the supplemental funding bills.  All contractors should keep diligent records, particularly regarding incurred costs, in order to respond to government auditing requirements.