Can We Legally Use Local Funds Instead of Grant Funds?

Q: I manage a HUD CDBG MIT-PPS grant for a public outreach campaign. We have contracts for a variety of services including graphic design, translation, audio/visual, printing services etc. These contracts are used to promote public outreach events and messaging. Our project manager decided to move forward with some of these services. She did not use the properly procured contracts for the services. She has opted to pay for the services with her local outreach budget and did not use grant funds. There will not be a duplication of benefits since we are not claiming the services under the grant. My gut is telling me that this is still problematic if we have local funds that are being spent on a grant-funded campaign. I am getting push back from my superiors on this matter but am struggling to find the Code of Federal Regulations that would apply. Do you see this as an issue and, if so, can you point me in a direct to look for back up support of my gut instinct. Sheri from Sonoma County, Calif.

A: Sheri, thanks for your question. After checking with a grants attorney, we feel it is acceptable to use the non-CDBG funds to pay for these procurements, with a few caveats:

1. If these non-CDBG local funds are part of a match or cost-share, it would still be construed as part of the grant funded program and subject to the federal grant procurement requirements.
2. I presume these local funds are not tainted by other non-CDBG federal funds, meaning they are not otherwise subject to the federal grant procurement requirements.
3. If these expenses will ultimately find their way into an indirect cost allocation, an auditor may take issue with these procurements not following the federal grant procurement requirements.

All of that said, it would seem that these procurements are also relatively small, and it would seem unlikely that they would be individual audited for procurement compliance. In sum, while it’s not ideal to obfuscate the federal grant procurement requirements, there are ways to pay for these that don’t result in a noncompliance, and it is likely a low-risk item anyway.

Hopefully this will help.

Our answer to your inquiry, and our publications, webinars and training content, are designed to provide you with accurate and authoritative information, however, they do not constitute legal or financial advice. In addition, because each grant award differs, this response may not always concur with the circumstances relating to other recipient awards. Should you require further advice or other expert assistance, please seek the attention of legal counsel or financial advisors. I hope, however, that my response has provided some insight.

Best,

Jerry