With the U.S. Environmental Protection Agency's groundbreaking $27 billion investment aimed at reducing greenhouse gas emissions, our recent webinar dissected three crucial initiatives propelling the adoption of clean technology through the Greenhouse Gas Reduction Fund. Each initiative poses distinct compliance hurdles, from the National Clean Investment Fund to the Clean Community Investment Accelerator and Solar for All programs. In this recap, we unpack the webinar's most essential points, focusing on compliance guidelines, practical tips, and pathways for success. 

Driving green solutions: Greenhouse Gas Reduction Fund 

The GGRF (Greenhouse Gas Reduction Fund) program, administered by the U.S. Environmental Protection Agency (EPA), is pivotal in driving greenhouse gas reductions. 

This was facilitated through three significant grant competitions that aim to support clean technology deployment nationally, with emphasis on low-income and disadvantaged communities:

• The $14 billion National Clean Investment Fund
• The $6 billion Clean Communities Investment Accelerator Fund
• The $7 billion Solar for All Fund

Financial assistance provided through the NCIF and CCIA programs include various options such as debt, equity, hybrid financial products, and credit enhancements, with community lenders offering flexible project support. The application process, since awarded, for these grant competitions entailed specific timelines, from opening applications to submission deadlines, and subsequent selections and notifications by the EPA. Prospective grant recipients and subrecipients were encouraged to proactively prepare for these funding opportunities by establishing projects, processes, and controls with a clear understanding of the compliance requirements for administering GGRF funds and ensuring successful participation.

Upholding compliance With EPA grant programs

Organizations receiving grant awards from federal agencies or pass-through entities must establish robust compliance frameworks. Experts stress the necessity of meeting stringent requirements, such as those in the NCIF and CCIA programs, to maintain program integrity. Non-compliance can lead to severe consequences, including cost recoupment and suspension or debarment from future federal grants, loans, contracts, or other federal assistance. Maintaining compliance helps ensure current funding and enhances eligibility for future grants and partnerships. Compliance frameworks mitigate fraud, waste, and abuse, and also advance program goals and bolster program integrity.

Facing compliance challenges

Participants in programs like NCIF and CCIA encounter diverse compliance hurdles, including navigating regulations outlined in 2 CFR 200. Addressing specific focus areas – such as conflict of interest considerations and complying with financial management, audit, reporting, and procurement requirements outlined in the Uniform Guidance for Federal Awards – is essential for structuring agreements and partnerships effectively.

Procurement best practices

As outlined in 2 CFR Part 200, compliance with procurement regulations helps to mitigate questioned costs, and ensures fair and transparent procurement practices. Careful attention should be paid towards the magnitude of purchases, as certain purchasing thresholds require different levels of grant compliance. For example, purchases below the Simplified Acquisition threshold require solicitations be made from an adequate number of qualified offers with outreach documented to demonstrate compliance to the EPA. Organizations must conduct due diligence to make sure they are compliant and engage in good faith efforts to solicit services from minority and disadvantaged businesses. Establishing compliant financial management systems – including accurate tracking and reporting of expenditures – enhances transparency and accountability in financial transactions. Verifying that potential bidders are not on the suspended or debarred list is one of many best practices. However, note that while many requirements may flow down, in many cases subrecipients of GGRF funds may not be subject to all of the compliance requirements which would apply to prime recipients.

Essential requirements and considerations for EPA programs

The EPA's programs, such as the GGRF, are subject to specific requirements in the terms and conditions of the grant agreement. These requirements aim to ensure compliance with overarching federal and agency regulations to enhance program effectiveness by requiring that the grant recipients achieve certain goals and objectives, including creating accountability for any grant subrecipients.

For example, NCIF has three specific program objectives to advance; and entities will have to deliver projects to meet these objectives. Entities will need to track, report, and ensure compliance requirements to demonstrate how those projects will: 

• Reduce emissions of greenhouse gases and other air pollutants
• Deliver benefits of greenhouse gas- and air pollution-reducing projects to American communities, particularly low-income and disadvantaged communities
• Mobilize financing and private capital to stimulate additional deployment of greenhouse gas- and air pollution-reducing projects   

Factors affecting compliance on program costs

The design of funding programs by grant recipients will inform the related eligible program costs. Factors affecting eligibility of program costs include whether they are allowable, reasonable, and allocable. For example, evaluating whether costs are prudent, deviate from historical or local costs, or are properly allocated will be important considerations for determining whether program costs are eligible or questioned by the EPA.

Federal cross-cutting items and funding opportunities

Programs like the GGRF may involve blended or braided financing with other funds and enhancements from the Inflation Reduction Act including all of the various income tax credits created by that legislation. For example, under CCIA, a community lender may receive a maximum of $10 million in total capitalization funding from all grantees under this competition. This blending can add complexity but provides an opportunity for more meaningful projects to be the beneficiaries of GGRF funding.

Key considerations include the Build America Buy America Act, the Davis Bacon Act, the Uniform Relocation and Real Property Acquisition Act (URA), the National Historic Preservation Act, and the Justice40 Initiative. 

The Justice40 Initiative targets funding to assist low-income and disadvantaged communities. Maximizing these funds through climate and economic justice screening tools and ensuring project benefits align with community needs are vital within the NCIF and CCIA programs. Organizations must also familiarize themselves with specific provisions such as the Buy America Preference, prevailing wage standards under the Davis Bacon Act, and real property acquisition and historic preservation procedures.

Domestic content compliance requirements

We anticipate that many projects that will be funded with GGRF monies will be applying for what is commonly called direct pay. Those underwriting these projects should be aware that various rules may cause reductions in the amount of the tax credits, including the complex domestic content requirements if these projects are financed with tax exempt bonds. In addition, the excessive payment rule may cause a reduction in the tax credits. 

Excessive benefit rule 

The excessive benefit rule for direct payments applies when an applicable entity receives restricted grants, forgivable loans or other income exempt from tax specifically to purchase, construct, reconstruct, erect, or otherwise acquire investment property. The rule mandates that if an entity gets any of these restricted funds, the entity will be required to reduce the credits if the total amount of restricted funds exceeds the cost of the energy property. 

Excessive payment penalties and mitigating their risk

Penalties will be imposed if an excessive payment is discovered during an IRS audit. Applicable entities can mitigate excessive payment penalties by demonstrating reasonable cause to the IRS and showing sufficient due diligence in supporting the requested elective payment amount. Early detection and correction of excess claims before an IRS audit can also prevent the application of excessive payment provisions. 

Go deeper

Delve deeper into these topics, get personalized answers to your questions, and gain the clarity needed to steer your organization toward success in securing grants and advancing clean technology deployment by watching the webinar.