Treasury Addresses Improper Payments in ERA FAQ

The Department of the Treasury recently updated its Frequently Asked Questions (FAQ) pertaining to the Emergency Rental Assistance (ERA) programs to provide guidance on measures recipients should take in response to findings of improper payments with program funding.

Congress established two separate ERA programs in response to the COVID-19 pandemic. The ERA1 program, which was authorized by the Consolidated Appropriations Act of 2021 (Pub. L. 116-260) provided $25 billion to assist eligible households with financial assistance and housing stability services. The American Rescue Plan Act of 2021 (Pub. L. 117-2) authorized the ERA2 program, which provided $21.55 billion to assist eligible households with financial assistance, provide housing stability services, and as applicable, to cover the costs for other affordable rental housing and eviction prevention activities.

ERA1 funds were available through Sept. 30, 2022, while the period of performance for ERA2 funds ends on Sept. 30, 2025. Recipients may not incur any obligations to be paid with ERA2 funding after this date.

Treasury initially issued the FAQ in January 2021 to provide guidance in following the agency’s requirements under the programs. The FAQ, as of Dec. 4, now includes four new questions related to improper payments, stressing that recipients “are responsible for using ERA funds only for allowable purposes” and that “improper payments are not permissible under the ERA programs.”

The document explains that in cases where an ERA recipient made improper payments resulting from fraud or deliberate misrepresentations, it (1) should take appropriate steps to recover these funds paid inappropriately; (2) must timely report to Treasury on all violations of federal criminal law involving fraud, bribery or gratuity violations potentially affecting their awards (§200.113); and (3) must submit individual cases of fraud, waste or abuse related to their awards to Treasury’s Office of Inspector General and to the agency’s Office of Capital Access.

In response to a question asking whether grantees have additional flexibilities in cases where improper payments were not the result of fraud or deliberate misrepresentations, Treasury notes that it recognizes the unique emergency circumstances in which the ERA programs were implemented and that attempts to recoup nonfraudulent improper payments from ERA beneficiaries could undermine the purpose of the ERA program.

“While grantees are responsible for improper payments made with ERA funds, including those that were not the result of fraud or deliberate misrepresentations, our plan is to provide as much flexibility as possible consistent with our legal obligations,” the FAQ adds. “These options include alternative pathways that do not require recovering funds from tenants, landlords or utilities. Treasury will work with grantees to consider alternative pathways to replacing these funds.”

Alternative Pathways

The agency “strongly encourages” ERA recipients not to seek recoupment of nonfraudulent improper payments directly from beneficiaries when doing so could place tenants at risk of eviction or housing instability. The FAQ includes “alternative pathways” for recipients to consider as options to resolve improper payments. Under these options, a recipient may:

• consider either: (1) recharacterizing an improper payment made with ERA1 award funds as being made with ERA2 award funds provided the ERA1 improper payment was made during the ERA2 award period of performance; or (2) recharacterizing an equivalent amount of ERA2 payments made during the ERA1 award period of performance that are in compliance with ERA1 award requirements at the time they were made as ERA1 payments.
• identify instances in which it previously used its own non-ERA funds to provide assistance that complied with ERA requirements, and recharacterize those previous payments as ERA expenditures. However, payments made with the grantee’s own funds may be recharacterized in this manner only if they were made by the grantee during the period of performance of the relevant award (e.g., ERA1 or ERA2) in which the improper payment was made.
• use an equivalent amount of its own non-ERA funds to provide assistance that complies with ERA2 award requirements. To do this, the grantee should add its own non-ERA funds to its ongoing ERA2 program and follow the program’s applicable requirements and procedures.
• use an equivalent amount of its own non-ERA funds to return improper payments it made with its ERA1 and/or ERA2 awards to Treasury, if the options provided above are not feasible.

“Grantees should review these options against their specific situations and consult their leadership and legal counsel where appropriate,” the FAQ adds.

HAF Closeout Guidance

Related to guidance for another Treasury COVID-19 assistance program, the agency recently updated its Homeowner Assistance Fund (HAF): Closeout Reporting User Guide to include instructions about completing a new financial closeout confirmation module at Treasury’s reporting portal.

The confirmation module, discussed in a new Section V of the guide, provides a current record of the financial information related to the HAF participant’s award for closeout based on Treasury’s disbursements of the HAF award funds and the data reported by HAF recipients in their final quarterly report submission, which includes information about applications approved, applications received, homeowners assisted and details about HAF award obligations and expenditures.

In the module, HAF recipients must review each component of the formula used to calculate the total balance due to Treasury. This formula is based on the latest reported figures HAF recipients report to Treasury on unobligated award funds, program income and interest earned. Recipients are allowed to update their budget reporting, reported obligations and/or program income earned, and must provide the latest figures related to interest earned on their award.

HAF recipients also are required to certify in the module that the total balance due to Treasury is accurate and complete, and provide a point of contact as to who should receive communication from Treasury regarding the return of HAF award funds.

For More Information

The ERA FAQ is available at https://home.treasury.gov/system/files/136/ERA-FAQs-12042024.pdf.

The HAF closeout guide is available at https://home.treasury.gov/system/files/136/HAF_CloseoutReportingUserGuide.pdf.