Preparing for CARES Act audit, investigation, and enforcement

BY David A. Kaufman

Various U.S. government agencies and Congress have announced an aggressive push to review, audit, and even investigate organizations that have received funds provided by the federal government as a result of the COVID-19 pandemic. These include funds from the bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act—specifically, the Paycheck Protection Program (PPP) and Provider Relief Fund (PRF).

Nixon Peabody has already been representing clients involved in this process and is working with others who are preparing to respond to any inquiries. Also, in the rush to disburse funds, some agency actions are not authorized and may be challenged.

We absolutely recommend clients seek legal advice if they receive inquiries from the government, or their lender, regarding any pandemic relief funds. This is critical because there may be limited opportunities to include information, which clients need to use in their own defense, into the administrative record for consideration. In addition, NP helps clients create robust compliance systems and address any possible issues before an inquiry.

In a recent roundtable discussion, Nixon Peabody attorneys shared best practices for clients receiving CARES Act funds:

  • If you were denied aid, there could be some remedies under the Administrative Procedure Act (APA).
  • Appoint a federal aid compliance officer.
  • Segregate federal aid funds.
  • Suspend routine document destruction with respect to CARES Act funds.
  • Prepare for audits and reporting on the use of federal funds.
  • Memorialize interpretation of ambiguous regulatory language (e.g., the Small Business Administration's "credit elsewhere" requirement, the Department of Health and Human Services' FAQs on use of funds).
  • Train staff on federal aid requirements.
  • Develop a system to document ongoing training, and have employees certify they've been trained.
  • Pay attention to what's happening in your industry and all deadlines for reporting.
  • Develop (or promote) an internal fraud/waste/abuse reporting system.
  • Assure anonymity and protection from retaliation.
  • Involve legal counsel in the process.

For more information, I recommend watching our recent CARES Act compliance discussion.


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David A. Kaufman

Director of Global Strategies

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