Federal Funds Oversight Act

Summary

This model policy increases oversight, transparency, and accountability when a state considers funding from the federal government.

Federal Funds Oversight Act

(1) State agency federal funding requirements.

(a) Prior to accepting federal funding, the state budget office and the agency which will be charged with accepting the federal funding shall provide a report to the governor, state legislature, auditor general, state treasurer and the Independent Fiscal Office (or relevant state agency), which includes:

    1. A summary of the program accepting the federal funding, including a citation to the statutory authority for the program.
    2. The compelling reasons to accept the federal funding.
    3. The performance metrics and achievable goals of the federal funding.
    4. The amount of new federal funding the agency anticipates receiving.
    5. The time frame for the receipt of funds and when the federal funding ends.
    6. The federal requirements, mandates and maintenance of effort requirements attached to the federal funding and their impacts on the program, state funding and goals of the program.
    7. A fiscal note disclosing the total cost of federal funding, including an analysis of the cost of the federal mandates for the current fiscal year and the proceeding four fiscal years. The fiscal note shall clearly delineate:

(i) Acquisition costs.

(ii) Personnel costs.

(iii) Maintenance costs.

(iv) Advertising costs.

(v) Cost-per-person for which the federal funding will assist.

(vi) Salvage costs.

       8. A statement as to whether the anticipated funding is allocated through an existing or new federal program and, if an existing program, the current amount of general fund or state dedicated fund or account committed to the program.

       9. A statement as to whether additional state employees are necessary to oversee or administer the federal funds.

       10. The requirements associated with spending the federal funds, including any state match or cost share requirements, percentage limitations and time frames.

       11. An analysis of internal controls used to prevent and eliminate improper payments and fraud.

       12. The process by which the agency will operate and distribute federal funds to meet performance metrics and goals.

(2) Requirements on agencies.

(a) State agencies receiving federal funds shall:

    1. To the extent allowable under law, leverage the new federal funding to offset existing state general fund obligations rather than apply the federal funds to new or expanded programs.
    2. Only hire new employees in connection with or as a result of the new federal funding to limited-service employees whose employment shall not last beyond the expenditure of the federal funds.
    3. Financially manage federal funding to ensure that the loss of federal funding does not result in a budget deficit for the program.
    4. Provide complete access for the Independent Fiscal Office (or relevant state agency) to provide a quarterly update on Federal funding and how it is meeting the performance metrics and goals as stated in this article.
    5. Provide complete access for the Auditor General to perform audits on the agencies’ internal control processes.
    6. Report alleged or potential improper payments or fraud to the:

(i) Attorney General.

(ii) Auditor General.

(iii) Office of Inspector General.

(iv) United States Attorney.

(v) United States Inspector General with oversight of the federal funds.

(3) Transparency portal.

(a) Establishment: An agency shall establish a transparency portal on the agency’s publicly accessible Internet website. The transparency portal shall provide current information about expenditures of Federal funding that is updated from the close of the prior business day.

(b) Contents: The transparency portal shall include all of the following information:

    1. The eligible entities that received a portion of the federal funding.
    2. The amount of federal funding each eligible entity received.
    3. The total dollar amount of federal funding disbursed.
    4. The amount of federal funding that remains not disbursed.
    5. How the agency is meeting the performance metrics and goals under this article.
    6. An analysis and summary of improper payments under the Improper Payments Elimination and Recovery Act of 2010 for federal and state funds.

(c) Submission: Documents submitted to an agency by eligible entities pertaining to federal funding shall be posted on the agency’s publicly accessible Internet website.

(4) Report.

(a) After the final disbursement of Federal funding received by an agency, the agency shall submit a report to the General Assembly, Inspector General and Auditor General on all of the following:

    1. The final disbursement of the federal funding.
    2. The use of the Do-Not-Pay Pilot Program established under section 5.
    3. The number of entities that were eligible and ineligible to receive the federal funding.
    4. The savings to the State Treasury as a result of the identification of entities that are ineligible to receive money from the federal funding.
    5. The results of the single audits of the program and how the agency addressed the findings of each single audit.
    6. The results of any other federal or state audit and how the agency addressed the findings of each audit.
    7. The total amount of federal funding received in each county.
    8. The total improper payments under the Improper Payments Elimination and Recovery Act of 2010 for federal and state funding.

(5) Do-Not-Pay Pilot Program.

(a) Establishment: The Do-Not-Pay Pilot Program is established in the Treasury Department. As part of the program, the State Treasurer shall enter a memorandum of understanding with the United States Department of the Treasury that satisfies the requirements of this section.

(b) Use: Before issuing a reimbursement for eligible expenses under this article to an entity, the State Treasurer shall utilize the Do-Not-Pay Pilot Program to ensure that the entity is eligible to receive the reimbursement.

(6) Improper payments and misuse of funds.

(a) Improper payments: An eligible entity that receives money from the fund and makes improper payments shall be held liable by the state under the Improper Payments Elimination and Recovery Act of 2010 for the total amount of any disallowance of federal funds as a result of the improper payments.

(b) Misuse of funds: An eligible entity that misuses federal funds shall be subject to civil action under the False Claims Act.

(c) Notice: The State Treasurer shall provide notice of the penalties specified under subsections a. and b. to each eligible entity that receives Federal funding from the State Treasury.

(7) Nonacceptance of Federal funds.

(a) General rule: If acceptance by an agency of federal funding is expected to cause a budget deficit within the general fund within five fiscal years, the governor and the agency shall not accept the federal funding.

(b) School mandates: The governor, Department of Education and school districts shall not accept federal funding that mandates a public school in this state to teach a specific program, topic, subject, curriculum or standard.

(c) Contrary to State law: If federal funding requirements, mandates or maintenance of effort by an agency contradict state law, the governor and agency may not accept the federal funding.

(d) Negative impact on enforcement of internal controls: If federal funding requirements, mandates or maintenance of effort by an agency does not allow, bans or hinders the agency to enforce internal controls to prevent fraud and improper payments, the governor and agency may not accept the federal funding.

(e) New programs: If federal funding requires an agency to establish a new program, the governor and agency may not accept the federal funding.

(8) Fiscal review of current and previous fiscal year federal funding.

(a) The Independent Fiscal Office (or relevant state agency) shall review current federal funding received by state agencies under the direct control of the governor and shall identify:

    1. Mandates, requirements and maintenance of effort requirements.
    2. Cost of the mandates, requirements and maintenance of effort identified in paragraph (1), including:

(i) The prior five fiscal years’ costs by fiscal year.

(ii) The current fiscal years’ costs.

(iii) The estimated costs over the next four fiscal years for each fiscal year.

      3. Improper payments for each federal program, including:

(i) The total amount of federal and state improper payments over the previous five fiscal years.

(ii) The estimated improper payments for the current fiscal year.

(iii) The estimated improper payments for the next four fiscal years.

(iv) The improper payment error rate under subparagraphs (i), (ii) and (iii).

(v) The reasons for the improper payments.

      4. If the agency that accepts the federal funding has met the federal requirements and performance measures of the federal government.

(9) Applicability.

(a) This article shall only be applicable to federal funding received by the state after [DATE].

(b) This act shall take effect immediately.