During the COVID-19 pandemic, many organizations received increased federal funding from various COVID-19-related relief programs, including the Paycheck Protection Program (PPP), the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Consolidated Appropriations Act (CAA), and the American Rescue Plan Act (ARPA). With additional funding, many organizations face a new challenge: avoiding the federal government’s ban on charging the same costs to more than one federal program.
The concept of ensuring the government doesn’t pay for the same expense twice, commonly referred to as “double dipping,” is new to many organizations. An organization can be surprised by this if it fails to track expenses carefully when spending multiple sources of government funding.
Rules related to double dipping
The prohibition against double dipping isn’t new with recent pandemic-related funding. The concept has long been a part of federal regulations, and is often explicitly prohibited by various state and local government programs. COVID-19 programs have brought the issue to the forefront because they allow organizations to apply federal funds to a large pool of general costs. This differs from more traditional government programs that limit eligible costs to specific categories or charges to run a very specific program.
While double dipping isn’t explicitly addressed within the guidelines of all recent COVID-19-related federal funding, the Office of Management and Budget’s Uniform Guidance provides guidance that applies to most federal grants and contracts. The Uniform Guidance in 2 CFR 200.406 states than any credits received by an entity that relate to allowable costs allocated to a federal award “must be credited to the Federal award either as a cost reduction or cash refund.” This guidance applies to credits received for both direct and indirect costs charged to a federal award.
Additionally, the Office of Management and Budget issued Memorandum M-20-26 on June 18, 2020, to address confusion related to the applicability of the double-dipping regulations to COVID-19-related programs. The memorandum states, “Payroll costs paid with the Paycheck Protection Program (PPP loans) or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.” This memorandum further clarifies that if federal funds are already being received in order to pay for a specific cost, an organization can’t further request federal funds from an additional grant source, which includes COVID-19 grants.
The IRS also weighed in on the notion of double dipping in IRS Notice 2021-20, which states that the same wages can’t be counted toward both the employee retention credit and forgiveness of a PPP loan.
The implications of double dipping
It’s important to consider the implications of double dipping when making decisions for the use of funding. If noncompliance occurs, the organization could face many repercussions, including but not limited to, the need to repay funds and reduced or zero loan forgiveness. Double dipping could also result in financial statements or a single audit finding related to internal control deficiencies or noncompliance with laws and regulations. In some cases, the auditor may report questioned costs for amounts applied to multiple government programs. As a reminder, if you receive a single audit, your financial statements, single audit report, and findings, if applicable, are publicly available via the Federal Audit Clearinghouse’s website.
How to avoid double dipping
Documentation is key! It’s important for your organization to ensure adequate cost tracking controls are established to guarantee funds aren’t being charged to multiple funding sources more than once. You should keep appropriate records and cost documentation as required by 2 CFR 200.302 “Financial Management” and 2 CFR 200.333 “Retention requirement of records.” This will support the allocation of costs across funding sources and allow an organization comfort in knowing they’re not double dipping their costs, which could result in noncompliance of their federal grants.
Request budget revisions, if available. Based on your funding source, consider asking for a budget revision to transfer payroll costs, for example, to other allowable direct costs under the grant.
When in doubt, seek out further assistance or information. If you have additional questions, we encourage you to reach out to your funding source(s) and/or auditors to gain additional clarity. Being proactive will allow you to focus on preparing rather than repairing if the organization chooses to be reactive.
As you navigate the complexities of your federal funding, we’re here and ready to help. Please don’t hesitate to reach out.
