09.10.2010

|

Updates

When the American Recovery and Reinvestment Act of 2009 ("ARRA"), was enacted in February 2009, the compliance landscape for state agencies and contractors shifted significantly.  Although promising substantial funds to state agencies, the ARRA also demands a level of transparency and oversight previously unseen in government contracting.  State agencies and contractors need to become knowledgeable regarding these compliance "strings" attached to ARRA funds.

This is the first of three updates that will focus on ARRA compliance requirements for state agencies and their contractors or grantees.  This Update focuses on reporting and registration requirements. 

Reporting and Registration Requirements

To achieve transparency in the use of ARRA funds, the ARRA requires recipients and subrecipients of federal agency grants to provide reporting information on a quarterly basis.  Failure to timely report the necessary information may subject recipients to withholding of those funds or termination of the grant or contract, or it may even bar the recipient from future federal funding.

A recipient is any entity that receives recovery funds directly from the federal government.  A recipient may be a federal prime contractor or a state that receives a grant from a federal agency.  A subrecipient is an awardee or first-tier subcontractor of a recipient.  

A state and its contractors must submit their reports at http://www.FederalReporting.gov.  Registration is required before reports can be submitted.  To register at the FederalReporting.gov website, recipients must register in the Central Contractor Registration ("CCR") database at http://www.ccr.gov.  A Data Universal Numbering System ("DUNS") number is required to register in the CCR.  A recipient can obtain a DUNS number from http://fedgov.dnb.com/webform.  Some federal programs or agencies may impose reporting requirements in addition to those enumerated in the ARRA, implementing regulations and Office of Management and Budget (OMB) Guidance. 

Reporting Data Related to Expenditures of Recovery Act Funds

The ARRA requires that recipients of these funds submit quarterly reports to the federal funding agency.  If a state receives funding from more than one agency, it must submit a separate report for the recovery funds received from each agency.  Although a state is ultimately responsible for the reporting of all data required by the ARRA, it may delegate certain reporting requirements to the contractor so long as the state provides the contractor sufficient time to register in the reporting system and to prepare the reports.

The state is also responsible for implementing a process that avoids double entry of report information by the state and its contractors.  As part of this process, the state should maintain an updated inventory of subrecipient delegations and check all submitted data records to ensure that no state agency is reporting information where that duty was delegated to a contractor or other subrecipient.

The state, however, may not delegate reporting responsibilities to vendors.  For this reason, it is important that state agencies properly classify their awardees as either subrecipients or vendors because, as discussed below, a state's reporting requirements for awards made to subrecipients are different from those for payments to vendors. 

To assist the states and their contractors in submitting accurate reports, federal agencies are required to provide recipients with certain key award information.  This includes information regarding the funding and awarding agency code, amount of award, activity code (NAICS or NTEE-NPC, as applicable), and the program source or Treasury Account Symbol code that is specific to a federal agency and account.  There are currently no exceptions to these reporting requirements for contracts for commercial items or commercial-off-the-shelf (COTS) items.

Reporting Deadlines

The state is responsible for submitting the required reports no later than the 10th day after the end of the calendar quarter in which the first invoice or voucher under the covered contract is submitted.  Thereafter, the state is required to report not later than 10 days after the end of each calendar quarter (e.g., for the calendar quarter ending June 30, 2010, you must report by July 10, 2010). 

During the next 11 days (11-21 days after end of quarter), the state is able to review data submitted by itself or the contractor and inform the contractor of any errors or concerns.  The state and the contractor may make any necessary corrections during this period. 

The federal funding agency then has eight days (22-29 days after the end of quarter) to review the submitted data.  The state and the contractor may continue to make changes during this period.  Although errors may be corrected during this period, the state and the contractor are required to report accurate and complete information within the initial 10-day reporting period.

Reported Information

The ARRA requires the state to report the following information in connection with receipt of ARRA funds from a federal agency:

  • The total amount of ARRA funds received from that agency;
  • The amount of ARRA funds received that were expended or obligated to projects or activities;
  • A detailed list of all projects or activities for which ARRA funds were expended or obligated, including:
    • The name of the project or activity;
    • A description of the project or activity;
    • An evaluation of the completion status of the project or activity;
    • An estimate of the number of jobs created and the number of jobs retained by the project or activity; and
    • For infrastructure investments made by state and local governments, the purpose, total cost and rationale of the agency for funding the project with ARRA funds and the name of the person to contact at the agency if there are concerns with the infrastructure investment; and
  • Detailed information on any subawards or subgrants awarded by the recipient valued above $25,000.  The state need not provide detailed information regarding subawards and subgrants below $25,000, but it must report the number and aggregate value of such subawards and subgrants.

OMB has issued guidance detailing the data elements that the state (or other recipients) and, if delegated, its contractor must report.  The data that the state must report is listed in an OMB document entitled "Recipient Reporting Data Model," which is Supplement 2 to OMB's June 22, 2009 Guidance and includes, among other items, the following information:

  • Amount of ARRA funds expended to projects/activities;
  • Job creation narrative and number (discussed in further detail in Section 5 below);
  • The rationale for the expenditure if it relates to infrastructure;
  • The names and compensation of the recipient's five most highly compensated officers (in certain circumstances); and
  • The total number and amount of subawards involving a payment of less than $25,000.

In addition, for any vendors receiving payments greater than $25,000, the state must report:

  • The identity of the vendor (either a DUNS number or the vendor's name and the ZIP code of its headquarters);
  • The amount of the payment; and
  • A description of what was obtained in exchange for the payment.

Federal contractors are required to report similar information pursuant to FAR 52.204-11, which is incorporated in all federal contracts involving ARRA funds.  The primary distinction for federal contractors is that they cannot delegate reporting to subrecipients.  Federal contractors, however, must require each subrecipient to provide any information required to be reported regarding the subrecipient. 

Subrecipient Reporting

A state is authorized to delegate to a contractor the reporting of the Federal Funding Accountability and Transparency Act ("FFATA") data elements identified under the ARRA with regard to the state's payments to the contractor.  The FFATA data elements that must be reported include:

  • Contractor DUNS number and CCR information;
  • Amount of ARRA funds awarded to and received by the contractor;
  • Subaward date and period;
  • Contractor place of performance and area of benefit; and
  • Names and compensation of the contractor's five most highly compensated officers (in certain circumstances).

The state also may delegate to the contractor the reporting requirements for that contractor's vendors.  If the state does so, the contractor need only report the identity of its vendors.  Vendors are not required to acquire a DUNS number or to report executive compensation. 

The information that federal prime contractors must provide regarding subrecipients is very similar to that required for state agencies.  The contractor is required to collect from first-tier subcontractors information regarding the unique identifier, subcontractor physical address, subcontract primary performance location and subcontractor officer compensation.  FAR 52.204-11(d)(10).

Reporting Jobs Created or Retained

Jobs created or retained, for purposes of ARRA reporting, are those jobs funded with ARRA funds.  Jobs not funded by ARRA funds may be reported if they will be reimbursed by covered funds.  Further, jobs that are only partially funded or reimbursed with ARRA funds should be counted based on the proportion funded by the ARRA (e.g., if a job is 50% funded by the ARRA, then a contractor would report 0.5 of the job as created or retained).

A job is created by ARRA funds if it is a new position created and filled or an existing unfilled position that is filled.  A job retained is an existing position that is now funded by the ARRA.  A job may either be created or retained using ARRA funds, but may not be both.  Further, only employment in the United States or its outlying areas is included.  Outlying areas include U.S. territories (e.g., Guam), commonwealths (e.g., Puerto Rico) and minor outlying islands (e.g., Wake Island).

Estimates of number of jobs created or retained must be expressed as full-time equivalents ("FTEs").  When calculating FTEs, the contractor should divide the number of actual hours worked on funded jobs by the number of hours in a full work schedule for the type of job at issue.  The contractor then adjusts the FTEs to correspond to the portion of the job funded by the ARRA.

To the extent that the state awards covered funds to a contractor, the state is required to collect job estimate information from the contractor and its vendors.  The state also must collect such information from the state's own vendors.

If a contractor utilizes an accounting system to separately track workers' hours billed to ARRA and non-ARRA accounts, the contractor may use the number of hours tracked for the ARRA work and divide it by the number of hours in a full-time schedule.

The state and its contractors may be asked to justify their estimates.  As a result, each should be prepared to justify its estimate and should maintain documentation or other written evidence supporting its job estimate calculations.

Reporting Certain Executive Compensation

Entities receiving ARRA funds are required in certain circumstances to submit the names and total compensation of their five most highly compensated officers for the calendar year in which a contract is awarded.  This reporting is required if the entity, in its preceding fiscal year, (a) received 80% or more of its annual gross revenues from federal contracts, subcontracts, loans, grants, subgrants and cooperative agreements, and (b) had $25 million or more in annual gross revenues from federal contracts, subcontracts, loans, grants, subgrants and cooperative agreements. 

There is an exception to this reporting requirement if the information is already available to the public through reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 or section 6104 of the Internal Revenue Code of 1986.

Total compensation includes the cash and noncash dollar value earned by the officer during the entity's past fiscal year, including perquisites or property if the value of such exceeds $10,000.  This may include corporate travel, lodging and similar benefits.

Under grants, only the subrecipient, i.e., the contractor, is subject to the officer compensation reporting requirements.  ARRA § 1512(c)(4).  Under federal procurements, Federal contractors and their first-tier subcontractors are both subject to these reporting requirements if they meet the conditions for reporting.  FAR 52.204-11.

As noted, ARRA reports are published at http://www.Recovery.gov shortly after being submitted and are therefore available to the general public.  Thus, a contractor receiving ARRA awards from a state agency should be prepared to publicly disclose its top officers' compensation if the aforementioned conditions are satisfied.

 

Sign up for the latest legal news and insights  >