Finance committee hears city staff warn of federal grant volatility, outlines risk steps

Lee's Summit finance staff told the city's Finance and Budget Committee on Oct. 6 that recent federal policy changes and a series of executive orders have created uncertainty around timing, compliance and the potential clawback of federal grant funds.

"We will be navigating the federal, grants landscape together this afternoon," Brianna Burektor, director of finance, told the committee as she opened a staff presentation on federal grants and how the city is managing changing rules.

Burektor said the city has seen a wave of federal actions this year, including agency pauses on draws for awarded funds, Department of Justice memoranda on nondiscrimination, and the Office of Management and Budget's potential revisions to the uniform guidance. "The current landscape is that we've really seen a rapidly changing federal policy environment for us," she said.

Matthew Yance, grant specialist in Development Services, summarized how the city's Community Development Block Grant program works and who receives aid. He said Lee's Summit received $385,000 in CDBG funds for the year, of which about $58,000 (15%) went to four public-service organizations: Coldwater (weekend snack packs), Hope House (court advocacy for survivors of domestic violence), Lee's Summit Social Services (emergency assistance), and Hillcrest Ministries (transitional housing). Yance said the city continues to connect partners with other funding sources when CDBG dollars are already allocated.

George Binger, city engineer, described $37 million in active grant awards the public works department is managing, of which $29 million is obligated and under construction. He said most of those awards come through state suballocation processes with agencies such as the Missouri Department of Transportation and the Federal Aviation Administration. Binger mentioned specific transportation projects (Third Street, Pryor Road, Colburn Road and Ward Road phase 1) and noted right-of-way issues have delayed at least one project unrelated to federal funding policy.

Legal counsel Ed Rucker told the committee that, while cities and lawyers are studying the executive orders closely, there is no settled case law defining how the federal government will enforce the new directives. "We can do lots of analysis... and the answer is gonna be we don't know what the administration will do, and we don't know what the courts will do," he said. Rucker described possible legal theories challengers are using — void-for-vagueness, viewpoint discrimination and separation-of-powers claims — and said large municipalities are already pursuing litigation in some jurisdictions.

City staff described near-term risk steps the city will take: adding a written city risk assessment to awards brought to council; tightening application strategies to favor projects with secured local funding and minimal schedule risk; strengthening subrecipient agreements to pass federal terms to partners; and increasing monitoring and legal review of subrecipient compliance. Jessica Vandevoort de Monteil, assistant director of grants and administration, said HUD provided an addendum to this year's CDBG agreement and the city is incorporating required language into subrecipient agreements while awaiting further guidance.

Burektor and staff told the committee their internal review categorized most of the city's portfolio as low risk, with a small number of higher‑risk direct awards (the Department of Justice VAWA award and certain Department of Energy awards were highlighted as items the city does not expect to pursue). "Vast majority of our federal awards that we receive are indirect... and we feel very secure with those awards," Burektor said.

Committee members asked how the city can mitigate liability from nonalignment by subrecipients. Rucker said indemnification can focus a subrecipient's attention but is not a cure because small nonprofit partners may lack the resources to make indemnity hold up in the event of large federal enforcement actions. He said the city's legal team will continue to advise but needs concrete enforcement actions to develop a predictable legal trail.

Staff closed by outlining next steps: implement an updated grants management policy and procedures, include a concise city risk assessment on new award acceptances, and use the grant manager to better align applications to notice-of-funding-opportunity language. Burektor said staff will return with follow-ups as federal guidance becomes clearer.

The presentation drew questions from committee members and did not include a committee motion or vote; it was an informational briefing and direction to staff to continue the described risk-management work.