Are there ever legitimate reasons to contract an entity as a sole source without engaging in a competitive bidding process? What are good practices to avoid the appearance of procurement fraud in non-competitive procurement?

Under the Uniform Guidance, there are limited scenarios under which sole source (non-competitive) procurement may be permitted, but non-federal entities should carefully review all federal, state, and local internal regulations, policies and procedures. 2 CFR 200.320 details scenarios where non-competitive procurement may be permitted:

Non-competitive procurement can only be awarded if one or more of the following circumstances apply:
(1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section);
(2) The item is available only from a single source;
(3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation;
(4) The Federal awarding agency or pass-through entity expressly authorizes a non-competitive procurement in response to a written request from the non-Federal entity; or
(5) After solicitation of a number of sources, competition is determined inadequate.[1]

When procuring property, goods, or services under a federal award, non-federal entities such as cities, municipalities, and local governments (“non-federal entities”) must generally comply with three categories of authority: (1) their internal policies and procedures, (2) applicable state and local regulations, and (3) federal guidelines, most importantly the “Uniform Guidance,” 2 CFR 200.[2] Non-federal entities are required to comply with each category of authority, and if there are inconsistencies, they must follow the most stringent guidelines.

Micro-Purchase Awards

Per 2 CFR 200.320, micro-purchase awards may proceed without soliciting competitive price or rate quotations. The micro-purchase threshold is set by the municipality responsible for determining and documenting the appropriate micro-purchase threshold. This threshold is based on internal controls, an evaluation of risk, and documented procurement procedures. The micro-purchase threshold used by the non-federal entity must be authorized or not prohibited under state, local, or tribal laws or regulations.[3]

By default, the micro-purchase threshold is set at $20,000 with certain exceptions found within the Federal Acquisition Register, though non-federal entities should consult all applicable rules and regulations.[4] Non-federal entities may set and annually self-certify a threshold for micro-purchases of up to $50,000 while maintaining documentation which can be submitted to federal awarding agencies that demonstrates any of the following:

a) A qualification as a low-risk auditee, in accordance with the criteria in § 200.520 for the most recent audit;
b) An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or,
c) For public institutions, a higher threshold that is consistent with State law.[5]

For all micro-purchase thresholds of above $50,000 set by a non-federal entity, the non-federal entity must submit documentation to the federal awarding agency demonstrating any of the three criteria listed above.[6]

Non-federal entities must also comply with their own policies and procedures and any applicable state and local policies regarding micro-purchase thresholds. As discussed above, in cases of inconsistency amongst the three, non-federal entities must comply with the category which would require the most restrictive policies and procedures.

Single Source

2 CFR 200.320 allows sole source procurements when the item is only available from a single source.[7] These procurements may be permissible in certain circumstances but will always require detailed justifications. Procurement officers should ensure that in addition to having written procedures to govern procurement transactions, they do not draft procurement proposals unnecessarily limiting competition. Non-federal entities must comply with 2 CFR 200.319.[8] Under this section, the following non-exhaustive situations are considered restrictive of competition:

• Placing unreasonable requirements on firms to qualify to do business;
• Requiring unnecessary experience and excessive bonding (i.e., where the insurance requirements of the non-Federal entity are not deemed adequate to protect the interest of the Federal Government);
• Non-competitive pricing practices between firms or between affiliated companies;
• Non-competitive contracts with consultants that are on retainer contracts;
• Organizational conflicts of interest;
• Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement; and,
• Any arbitrary action in the procurement process.[9]

Sole source procurements are not considered restrictive of competition if the item is available only from a single source.

Relevant procurement procedures must be documented and must conform to the procurement standards in the Uniform Guidance.[10] The National Association of State Procurement Officers has published a list of state sole source requirements;[11] however, municipalities should contact their state’s procurement officer for the latest updates. In all cases where sole source procurement is allowed, 2 CFR 200 cost principles guidelines, such as those in §200.404 – Reasonable Costs, must be followed.[12]

Public Exigency or Emergency Circumstances

Non-competitive procurements due to emergency or exigent circumstances are those that require immediate action and typically involve a threat to life, public health or safety, or some other form of dangerous situation.[13] Procurements under these emergency circumstances are commonly undertaken immediately in the aftermath of a disaster (e.g., hurricane, fire, flood) and are only permissible during the actual emergency or exigent circumstances when a competitive procurement process would prevent the non-federal entity from taking immediate action.[14] Non-federal entities should carefully review all applicable federal, state, local and internal regulations, policies and procedures.

As noted above, awards made under non-competitive procurements due to emergency or exigent circumstances are only permissible during the actual emergency or exigent circumstances; non-federal entities undertaking non-competitive procurements for these reasons must re-procure the goods or services once the emergency circumstances that prevented a competitive process have passed.

It is also worth noting that emergency sole source procurements would not typically be allowable for funding through the American Rescue Plan Act of 2021 (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) as the Department of the Treasury (“Treasury”) is unlikely to consider the ongoing COVID-19 public health emergency a sufficient justification to bypass a competitive procurement process if otherwise required.

As discussed above, if a municipality’s internal policies and procedures are more restrictive regarding sole source procurements, the municipality must comply with its own policies and procedures.

Federal Awarding Agency or Pass-Through Entity Authorization

There may be instances when a sole source procurement is appropriate outside of the circumstances explicitly stated in 2 CFR 200.320. In some of these cases, a non-federal entity may submit a written request to the federal awarding agency or pass-through entity and proceed with a sole source procurement if the federal awarding agency or pass-through entity expressly authorizes a non-competitive procurement.[15]

Competition Deemed Inadequate

When conducting a competitive procurement process, there may be instances when competition is deemed inadequate. Examples may include lack of qualified or responsive bidders. In these circumstances, a sole source procurement may be pursued as long as the non-federal entity has complied with 2 CFR 200.318-327 and other applicable rules and regulations.[16] These procurements are typically subject to higher scrutiny, and non-federal entities should document the circumstances and detailed reasoning to justify the non-competitive procurement.

Good practices for Sole-Source Procurements Include:

• Maintain comprehensive documentation of the award of the contract under one of the above non-competitive criteria. 
• Institute a review process for all non-competitive source requests.
• Provide a standard template for written justifications. This template could include:
  • A description of why competition is not possible in the specific case, including research showing that the vendor is the only source for the goods or services;
  • Documentation of any timing issues requiring purchases under exigent circumstances; and,
  • Demonstration that pricing falls within the micro-purchase threshold.
• Limit the duration of any sole source contract.

Last Updated: March 6, 2023

Are cities permitted to include payroll expenses in the cost of an entire project? When reporting project expenditures, should labor expenses be separated into the "labor" expenditure category, or be included in the reporting for the project itself?

Treasury's Compliance and Reporting Guidance stipulates that a project “should be scoped to align to a single Expenditure Category.”  Likewise, each project must be refined and reported under one Expenditure Category (“EC”) to accurately illustrate its programmatic intent.  Note, however, that a project under any EC may potentially include costs necessary to achieve the intent of the project such as payroll. If payroll costs are an approved as a part of the project scope and necessary to achieve the intent of the project, it can likely be included within the overall project.

Related to the reporting of expenses across projects under the American Rescue Plan Act’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), municipalities must adhere to all compliance and reporting requirements outlined by the U.S. Department of the Treasury’s (“Treasury”) Compliance and Reporting Guidance for CSLFRF,[1]  Portal for Recipient Reporting: State and Local Fiscal Recovery Funds,[2]and Project and Expenditure Report User Guide,[3] which includes the guidelines for 2 CFR Part 200.[4]

However, if the intent of the project is to fund payroll costs for public health, safety, and other public sector staff responding to COVID-19, then the cost should likely be separated, limited to payroll, and reported under the appropriate EC under EC 3: Public Health-Negative Economic Impact: Public Sector Capacity.

2 CFR §200.1 defines “expenditures” as “charges made by a non-Federal entity to a project or program for which a federal award was received.”[5] As defined, expenditures tie directly to the project from which the federal award was obligated.

Treasury explicitly outlines in the Project and Expenditure Report User Guide that municipalities must report a project’s obligations and expenditures, including payroll, according to the corresponding Expenditure Category (“EC”).[6] Accordingly, for reporting purposes, an expense likely cannot correspond to multiple projects or expenditure categories. To remain compliant with 2 CFR §200.1,[7] municipalities should report project expenses for a single project within that project in Treasury’s Portal for Recipient Reporting: State and Local Fiscal Recovery Funds.[8]

Municipalities must follow the reporting procedure outlined in the Project and Expenditure Report User Guide.[9] For further details and specific guidance, recipients may refer to Treasury's CSLFRF Project and Expenditure Reporting User Guide[10] and the Portal for Compliance Reporting.[11]

Last Updated: March 3, 2023

What are good practices when implementing a FEMA Hazard Mitigation Assistance Grant Award?

A municipality can set up a project for successful implementation during the application phase by developing, among other things, an informed scope of work, project schedule, and cost estimate that reflects as accurately as possible all anticipated program activities and the true costs of project implementation. Some good practices for grant and project implementation include, but are not limited to:

• Documenting grant management costs and expenditures;
• Ensuring vendor procurement is compliant with federal, state, and local requirements;
• Monitoring project activities for compliance with the approved scope of work;
• Monitoring the Period of Performance (“POP”) to ensure the project will meet approved timelines, or timely requesting time extensions; 
• Monitoring project spend and reimbursement requests to ensure the project is on track to be completed within budget; and
• Preparing a project closeout packet that clearly documents all completed activities, includes all necessary environmental and historic documentation, and reconciles the actual costs to the approved budget.

Municipalities should of course carefully review the underlying rules and regulations governing FEMA Hazard Mitigation Assistance Grant Award process before proceeding. 

Grant Management Costs

Any municipality applying for FEMA mitigation grants such as Hazard Mitigation Grant Program (“HMGP”), Building Resilient Infrastructure and Communities (“BRIC”), Flood Mitigation Assistance (“FMA”), and Pre-Disaster Mitigation (“PDM”) may be eligible for grant management costs. The municipality must apply for these costs in its subapplication for funding. Under all four programs, subrecipients are potentially eligible to receive up to five percent of total project costs for the management and administration of the federal grant.[1][2] Grant management costs may be awarded on top of the project costs requested by the subrecipient. For example, for a $20 million project, the subrecipient may be awarded up to an additional $1 million (or 5%) to cover grant management costs. Grant management costs are reimbursed without a cost share.

Grant management costs may typically include costs related to the following:

• Development of the grant subapplication;
• Preparation and submission of reimbursement requests;
• Preparation of quarterly progress reports;
• Compliance activities associated with federal procurement requirements;
• Vendor payments;
• Closeout review and liquidation;
• Document management and records retention; and
• Indirect costs.[3]

Grant management tasks may be completed by either in-house staff or procured professional service providers, and the funds can be used to pay for staffing costs associated with either group.

A municipality should consider  setting up a reporting and accounting system to monitor grant management costs, including the amount of time staff spend on grant management activities. It is also a good practice to have a unique accounting cost code in place for grant management that is specifically tied to each individual grant—for both grant management costs and regular project costs. This documentation may assist in reimbursement preparation and cost tracking. Staff should also be informed on how to report their time and what qualifies as eligible work for grant management costs, as maintaining complete and clear records of timesheets and vendor invoices will help facilitate the reimbursement request process.

Procurement

FEMA mitigation awards are subject to the procurement standards required by the Office of Management and Budget (“OMB”) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, as defined by 2 CFR Part 200.[4] When procuring property and services under a federal award, all non-federal entities (e.g., municipalities, counties, tribes, non-profit organizations acting as subrecipients) must follow 2 CFR Section 200.318 through 200.327.[5] Key takeaways from these sections include, but are not limited to:

• Municipalities must ensure that they are compliant with the most stringent procurement standards between local, state, and federal regulations.
• Municipalities must maintain written standards of conduct regarding conflicts of interest and employee performance for employees engaged in the selection, award, and administration of contracts as required in 2 CFR Part 200.318. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a FEMA award if he or she has a real or apparent conflict of interest.
• Municipalities must utilize the most appropriate method of procurement based on the goods and services being requested. There are five methods of procurement outlined in 2 CFR Section 200.320:
  • Procurement by micro-purchases;
  • Procurement by small purchase procedures;
  • Procurement by sealed bids;
  • Procurement by competitive proposals; and,
  • Procurement by noncompetitive proposals.
• Municipalities must include the applicable contract provisions under Appendix II to Part 200 in vendor contracts for work performed as part of the approved scope of work.[6]

Procurement poses significant challenges, particularly for small municipalities or municipalities with little experience with federal funding. Municipalities are encouraged to familiarize themselves with the relevant sections discussed in this response and utilize their State Hazard Mitigation Officer (“SHMO”) as resources to navigate these regulations to avoid the de-obligation of funds.

Scope of Work

The activities completed during project implementation must be those approved in the subapplication. Any deviations from the approved scope of work must be submitted to the state and to FEMA for review and approval before work on these activities can proceed. Moving forward with modifications to the approved scope of work without prior approval from the state and FEMA may result in de-obligation of funds and may jeopardize the completion of a project. Scope modifications must first be reported to the state before they are implemented, per FEMA’s Environmental and Historic Preservation requirements.[7]

Environmental and Historic Preservation (“EHP”) Compliance

As part of the FEMA approval letter, the municipality will receive a Record of Environmental Considerations (“REC”). This record covers each of the environmental and historic laws that FEMA examined as part of their EHP review. FEMA makes EHP determinations (i.e., whether a project is compliant with an environmental law) and sets conditions based on the scope of work, project location, and design and construction specifications provided in the subapplication. For example, if a municipality determines through the final design process, that the project alignment, materials, or location must change, these changes must be reported to the state and FEMA so that they can evaluate whether another EHP review is necessary.[8]

Project Budget and Financial Monitoring

Setting up a proper accounting system and accounting team is a prerequisite to receiving federal funding. Municipalities are encouraged to understand their states’ processes for reimbursement requests and the type of documentation required to show incurred costs. A good practice is to set up a unique accounting code for each grant. This will help ensure only project costs are included in reimbursement requests. This practice also facilitates audit preparation if one is needed. Other financial good practices include, but are not limited to:

• Periodically preparing and submitting reimbursement requests to the state instead of waiting until project closeout (recommended on a quarterly basis).
• This provides the state an opportunity to provide feedback early in the project lifecycle and course correct as soon as possible, if necessary
• Periodic submissions will assist in managing the administrative burden associated with reimbursement requests and will also help the subrecipient discover potential cashflow hurdles early on.
• Maintain complete documentation to support all costs in the event of future state or federal audits or reviews.
  • This is a good practice even though the state may not request documentation to support all incurred costs included in the reimbursement request.

During the reimbursement preparation process—specifically with respect to contract costs—the municipality should review the vendor invoices and reconcile them to the costs agreed upon under the contract. Whether time and material or stipulated lump sum, the pricing in the contract should correspond to the charges within the vendor invoices.

Period of Performance

Another key tenet of the FEMA mitigation programs is timeliness of project completion. The Period of Performance (“POP”), or the time in which the grant subrecipient must complete all federal award activities and incur and expend approved funds, is approved along with the subapplication, as are the other subapplication components described above (scope and budget). HMGP and PDM have a maximum POP of 36 months.[9] Under FMA, municipalities with community flood mitigation projects may request up to 48 months to complete a project.[10] The BRIC program allows municipality to request a period of performance longer than 36 months as long as the request is reasonable and justified.[11] The state will often recommend that its subrecipients request the maximum period of performance to avoid the need for extension requests during project implementation.

Extensions

States must submit a request for an extension of the POP to FEMA at least 60 days prior to the expiration of the award, and justification must be submitted in writing. Because of this time requirement, states often request that a municipality submit their extension requests at least 90 days before the expiration of their period of performance.[12]

Quarterly Progress Reports

A subrecipient must prepare quarterly progress reports to document how well a project is meeting milestones and to alert the state if a time extension may be needed. Thorough quarterly progress reports show all completed work and provide reasons for delays. These quarterly reports can also be used as reliable documentation in support of request for an extension of time.[13]

Project Closeout

During project implementation, the municipality should keep project closeout in mind. If the subrecipient has set up their reporting and accounting systems as described above, the project closeout process should be less challenging.  

Robust document management throughout the project lifecycle is also critical for a smooth project closeout. Proper closeout will demonstrate that the municipality fully and properly utilized the federal award. A complete closeout packet includes, among other things:

• Verification that all costs were incurred in the performance of eligible work;
• Confirmation that the approved work was completed, and that the mitigation measures comply with the state/FEMA contract agreement;
• Verification that any program income has been deducted from total project costs as specified in 2 CFR Section 200.307;
• Final site inspection report that includes photographs of the completed project;
• Final project costs, including federal share, non-federal share, and cost underruns or overruns;
• Final geospatial coordinates for the project locations; and
• Certification that the project was completed in compliance with environmental conditions, permit requirements, and applicable building codes. Any documentation supporting this certification should be included.[14]   

Last Updated: March 2, 2023

What are good practices for municipalities to put in place after completing a federal audit to better position them for future federal audits?

A municipality may be subject to various audits by federal and/or local oversight agencies including a city comptroller and federal Offices of the Inspector General (“OIG”). If a municipality receives federal grant funds from multiple sources of funding, more than one federal OIG might audit the grant funds.

Depending on the amount of federal grant money received, municipalities might also be subject to a single or programmatic audit. For example, the Code of Federal Regulations, 2 CFR § 200.501(a), requires single audits when:

A non-federal entity that expends $750,000 or more during the non-federal entity’s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part.[1]

When the single audit threshold is met, and if all federal funds received are from one program, a municipality may elect to have a program-specific audit conducted instead of a single audit:

When an auditee expends Federal awards under only one Federal program (excluding [Research & Development (“R&D”)]) and the Federal program's statutes, regulations, or the terms and conditions of the Federal award do not require a financial statement audit of the auditee, the auditee may elect to have a program-specific audit conducted in accordance with § 200.507. A program-specific audit may not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency, or the same Federal agency and the same pass-through entity, and that Federal agency, or pass-through entity in the case of a subrecipient, approves in advance a program-specific audit.[2]

For the full list of audit requirements, review 2 CFR § 200.501(a) – (h).[3]  

The Code of Federal Regulations also provides guidance to an auditee on any follow up and corrective action the auditee may need to take following a federal audit:

[T]he auditee must prepare, in a document separate from the auditor's findings described in § 200.516, a corrective action plan to address each audit finding included in the current year auditor’s reports. The corrective action plan must provide the name(s) of the contact person(s) responsible for corrective action, the corrective action planned, and the anticipated completion date. If the auditee does not agree with the audit findings or believes corrective action is not required, then the corrective action plan must include an explanation and specific reasons.[4]

Regardless of the audit requirements or which oversight entity is performing the audit, it is a good practice to establish a corrective action plan after an audit is completed. A corrective action plan memorializes how the municipality addressed the findings and recommendations of the audit. In addition, it is a good practice for municipalities to review all of the internal oversight deficiencies and any material weaknesses identified through the audit to determine if they exist in other grant programs. This will allow the municipality to implement the relevant enhancements in other grant programs to address internal oversight shortcomings uniformly.

Additionally, the municipality may find it useful to prepare a Schedule of Expenditures of Federal Awards,[5] identify major programs likely to be audited based on the dollar amount expended and the audit risk associated with any of its major grant programs and review applicable Single Audit Compliance Supplements for those programs.[6]

Lastly, the municipality may also find it beneficial to visit the websites of various OIGs to identify program audits of areas of interest or concern to the municipality. Collectively, during future audits, this will demonstrate to oversight entities how the municipality was proactively engaged in the audit process and improved across all grant programs. 

How can municipalities fund resilience hubs?

Resilience hubs are community serving facilities (such as libraries, civic centers, and places of worship) designed to support residents and coordinate resource distribution before, during, or after a natural hazard event. Subject to the governing regulations, municipalities may fund resilience hubs through the Federal Emergency Management Agency’s (“FEMA”) Hazard Mitigation Assistance (“HMA”) programs, including but not limited to the Building Resilient Infrastructure and Communities (“BRIC”) program and the Hazard Mitigation Grant Program (“HMGP”). The HMA programs should be used to reduce hazard risk to people, structures, and infrastructure.[1] For example, all programs related to “resilience hubs” should reduce hazard risk to hub residents and/or to the structures in which the hubs are housed.

1. The BRIC Program

The BRIC program provides funding to support capability-and-capacity-building (“C&CB”) activities.[2] These C&CB activities can include project scoping activities for resilience hub projects. For example, in Fiscal Year (“FY”) 2021, the New York City Housing Authority submitted a sub-application to the state and FEMA for funding a project scoping activity aimed at identifying needs related to establishing resilience hubs. The New York City Housing Authority’s application was selected for further review for FY 2021 funding.[3]

C&CB activities funding under BRIC can support communities in all aspects of the project scoping and application development process, including but not limited to:

• Identifying which community centers are best positioned to serve as resilience hubs;
• Identifying and designing mitigation measures to be implemented so that the resilience hub can serve the community in times of disaster. This could include:
  • equipping hubs with cooling equipment for times of extreme heat;
  • retrofitting hubs with back-up emergency power, including generators or microgrids; and
  • retrofitting facilities to be used as resilience hubs against seismic activity, wildfires, floods, or other natural hazards.
• Developing a FEMA-ready sub-application, including a Benefit-Cost Analysis (“BCA”). The BCA can be one of the more challenging components of developing a FEMA BRIC application. Sub-applicants can use C&CB activities funding under BRIC to collect the data and develop the methodologies needed to conduct a FEMA BCA.[4]

BRIC funding for C&CB activities is provided as an allocation to states and territories, which have discretion over the types of projects they submit to FEMA under their mitigation plans. In FY 2022, the maximum allocation to states or territories for these activities was $1 million per applicant.[5] If a municipality is interested in project scoping funding for resilience hub development, it is encouraged to contact its State Hazard Mitigation Officer (“SHMO”).[6] In FY 2022, the BRIC National Competition, which awards funds not allocated to states and territories on a competitive basis, made approximately $2.133 billion available for eligible project applications.[7] Eligible mitigation measures and activities relating to resilience hubs include, but are not limited to:

• Purchasing and installing back-up power equipment, including generators, microgrids, and associated equipment;
• Implementing structural and non-structural retrofits to buildings that house resilience hubs;
• Implementing wildfire mitigation measures, including defensible space and ignition resistant construction activities for resilience hub buildings;
• Implementing flood mitigation measures to increase protection to facilities that serve as resilience hubs; and 
• Installing tornado shelters or other wind protective measures for resilience hubs.[8]

Note that all project applications must be eligible, technically feasible, and cost-effective, as determined using FEMA-approved BCA methodologies. Projects are also subject to federal, state, and local environmental and historic preservation laws and regulations. Municipalities should seek to align projects submitted for BRIC funding with the applicable technical and qualitative criteria so that the projects are competitive for funding.[9]

2. The HMGP Program

Like the BRIC program, the HMGP also provides funding to scope resilience hub projects through Advance Assistance funding.[10] Advance Assistance funding should be used in support of project development activities such as engineering, feasibility studies, design plans, environmental and historical surveys, and data collection.

HMGP funding may become available to states and territories when authorized under a presidential Major Disaster Declaration. Recipients are responsible for setting their individual prioritization goals and funding timelines for HMGP funding. As with BRIC, recipients exert certain discretion regarding the use of HMGP funding, though some recipients choose not to utilize Advance Assistance funding at all. Accordingly, municipalities interested in funding for project scoping should contact their SHMO to understand if this opportunity is available and whether a specific project idea aligns with state prioritization and funding goals.

With respect to resilience hub project ideas, HMGP Advance Assistance can generally fund the same activities identified as eligible for BRIC project scoping, as discussed above. The HMGP and BRIC programs also share similar eligibility, feasibility, cost-effectiveness, environmental, and compliance requirements.

One potential benefit of HMGP is that an applicant only competes with other applicants within their own state and not nationally, as is the case with BRIC funding applications. The national competitive criteria generally does not apply to HMGP funding, but many states set state prioritization criteria that municipalities should consider when developing a project application.[11] Because resilience hubs are a novel project type under the FEMA HMA programs, municipalities are highly encouraged to engage their SHMO as early in the application process as possible to clarify any questions or concerns that may arise.

Last Updated: March 2, 2023

What good practices should municipalities follow in identifying applicable federal code provisions that they would be required to comply with when allocating and using federal transportation infrastructure funding?

Municipalities planning to allocate and use federal grant funding for transportation infrastructure projects should adhere to all applicable federal laws, codes, and regulations. Municipalities may consider the following non-exhaustive good practices and sources of information for evaluating compliance with federal transportation infrastructure grant funding.

1. Comply with All Applicable Laws, Codes, and Regulations

The U.S. Department of Transportation (the “USDOT”) is a primary funder of federal transportation infrastructure projects. The USDOT website outlines a non-exhaustive list of public laws, U.S. Codes, and federal regulations with which municipalities should comply.[1] Municipalities should also, where applicable, comply with any other relevant laws, codes, and regulations that other (non-USDOT) U.S. federal departments may require.

2. Comply with the Uniform Guidance

Municipalities seeking federal grant funding should also comply with the Uniform Guidance outlined by the Office of Management and Budget (“OMB”).[2] The Uniform Guidance is defined as a “government-wide framework for grants management” and is an authoritative set of rules and requirements for federal awards which synthesizes and supersedes guidance from earlier OMB circulars.[3] The Uniform Guidance can be found here.[4]

Municipalities may find sam.gov (“System for Award Management”) helpful for identifying compliance requirements specific to individual grant programs. Sam.gov provides an Assistance Listing Number (“ALN”) for each individual grant. Each ALN references specific compliance requirements such as Code of Federal Regulation (“CFR”) requirements specific to individual grants. For example, the Infrastructure Investments and Jobs Act (“IIJA”) provides funding for Rebuilding American Infrastructure with Sustainability and Equity (“RAISE”) discretionary grants. The ALN for RAISE is 20.933 and it informs the grantee of specific compliance requirements provided in CFR requirements.[5] 

3. Comply with Conditions of a Notice of Funding Opportunity

Generally, if a municipality anticipates applying for federal award funding, they should review each funding opportunity’s accompanying Notice of Funding Opportunity (“NOFO”), which will likely be provided for any federal transportation infrastructure grant funding opportunity. For further reference, municipalities are encouraged to review exemplar NOFOs related to the IIJA.[6]

NOFOs typically outline award terms and any unique conditions required for federal funding opportunities, including applicable laws, codes, and regulations municipalities will be required to comply with. 

4. Communicate with Stakeholders

To better prepare themselves to use transportation infrastructure funding in a compliant manner, municipalities should coordinate and communicate with their respective regional planning councils (“RPCs”), Metropolitan Planning Organizations (“MPOs”), or other planning organizations that seek to utilize and pass through federal transportation infrastructure funding. Oftentimes, these stakeholders can help municipalities identify and better understand the applicability of key federal code provisions and other laws and regulations associated with given funding opportunities.

Another resource that can be leveraged for executing infrastructure projects is Unified Planning Work Programs (“UPWPs”). In discussing UPWPs, the Federal Transit Administration (“FTA”) has explicitly stated:

A Unified Planning Work Program . . . is an annual or biennial statement of work identifying the planning priorities and activities to be carried out within a metropolitan planning area. At a minimum, a UPWP includes a description of the planning work and resulting products, who will perform the work, time frames for completing the work, the cost of the work, and the source(s) of funds. Metropolitan Planning Organizations . . .  are required to develop UPWPs to govern work programs for the expenditure of [Federal Highway Administration] . . . and FTA planning funds. [23 CFR 450.308)(b)][7]

Finally, a municipality should review its state’s transportation improvement plan (“TIP”). A TIP can provide helpful insight into federal transportation infrastructure funding opportunities available to municipalities. A TIP may also include other relevant guidance municipalities may consider as they work to understand applicable federal code provisions and general compliance requirements for transportation infrastructure funding.

Last Updated: March 1, 2023

Are there best practices for effective monitoring of fund usage?

While each program has its specific requirements, certain general guidelines for monitoring fund usage can be considered across programs. The Office of Management and Budget (“OMB”) implementation guidance for the Infrastructure Investment and Jobs Act (“IIJA”), directs agencies to build “on effective practices from the Administration’s implementation of the American Rescue Plan (“ARP”), as well as existing financial management and reporting requirements set forth in the statute and in prior OMB guidance.”[1] OMB will provide new guidance as needed for topics that require further direction.

The Uniform Guidance for Federal Awards, 2 CFR Part 200, contains requirements for administering all federal awards, including federal grant programs under the IIJA,[2] and sets out the responsibilities and requirements for Subrecipient Monitoring and Management of federal awards.[3]  

Section 200.332 (d-h) of the Uniform Guidance also contains further details on subrecipient monitoring requirements. Specifically, the Uniform Guidance at 2 CFR § 200.332(d) outlines the following requirements for subrecipient monitoring:

Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include:

(1) Reviewing financial and performance reports required by the pass-through entity.

(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward.

(3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521.[4]

Further, Section §200.329 of the Uniform Guidance outlines the following responsibilities regarding monitoring and reporting program performance:

Monitoring by the non-Federal entity. The non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See also § 200.332.[5]

The Federal Highway Administration (“FHWA”) previously released a Project Funds Management Guide for State Grants.[6] While it is important to refer to the funding agency’s specific guidelines regarding new IIJA projects, general lessons can be drawn from previous guidelines.

These FHWA guidelines integrate monitoring and project performance schedules to allow for ongoing monitoring of compliance with grant program requirements as well as the prevention of waste, fraud, and abuse.

FWHA guidelines also recommend that project performance “monitoring” include the following:

• Understanding a project’s performance schedule to ensure the project is progressing appropriately;
• Regularly billing on a project to expend obligations;
• Consistently updating project agreements to align with the current cost estimate; and
• Periodic reviews by the State Department of Transportation to adjust or modify the project agreement to reasonably reflect the current cost estimate.[7]

The IIJA, like the ARP, prioritizes reducing administrative burdens. Recipients can work with OMB to establish effective practices for reducing such burdens.

On this point, OMB guidance explains: 

In instances where agencies are administering more than one closely related program, agencies can work with OMB to determine if an implementation plan should be developed for the program group rather than for each separate program, to facilitate concurrent consideration of program design and implementation plans.[8]

In all situations, it is recommended to work directly with the granting agency to ensure all requirements are met.[9]

Last Updated: March 1, 2023

What mechanisms are used to allocate the various grant funds available under the Infrastructure Investment and Jobs Act (e.g., Are funds allocated on a competitive basis, through a formula, etc.)?

The Infrastructure Investment and Jobs Act (“IIJA”) contains hundreds of existing, revised, and new programs, each with their own funding mechanisms. Some IIJA programs combine multiple funding mechanisms. A brief survey of some of those mechanisms is set forth below

Funding Mechanisms under the IIJA

1. Formula Grants  

The IIJA provides over US $350 billion in formula funding to states for transportation projects focused on:

• improving roads, bridges, and railways;
• public transportation infrastructure and aviation facilities;
• ports and waterways;
• traffic safety; and
• electric vehicles, buses, and ferries.[1]

In many cases, formula grants will follow existing mechanisms for distribution of transportation funds. This funding often flows from federal agencies to states’ departments of transportation, and, in certain instances, through Metropolitan Planning Organizations (“MPOs”) which represent the interests of municipalities. For example, of the $40 billion in dedicated federal funding for bridges, the Bridge Formula Program provides formula funding to states to replace, rehabilitate, preserve, protect, and construct bridges on public roads.[2] Project sponsors are encouraged to contact their states’ department of transportation for additional information about accessing formula funding for this and other transportation projects.[3]

MPOs can also be direct recipients of several formula funding opportunities.[4] As an example, the Metropolitan Planning Program (“MPP”) makes over $2.2 billion in formula grants available to MPOs for multimodal transportation planning and programming. Formula funds are distributed after appropriations are received. Notably, portions of each IIJA program may have different funding streams available for planning, designing, engineering, or construction activities.[5]  

2. Competitive Grants

The IIJA authorized over $100 billion in competitive grants for transportation-related projects.[6] Eligible recipients vary, but generally include states, counties, municipalities, special districts, federally recognized tribal governments, and MPOs.

A single competitive grant program may offer multiple funding streams. For example, the Safe Streets and Roads for All (“SS4A”) grant program provides $5 billion in competitive grants to support local initiatives in preventing death and severe injury on roads.[7] Under SS4A, eligible recipients, including Metropolitan Planning Organizations, counties, cities, towns, transit agencies, federally recognized tribal governments, and multijurisdictional groups comprised of these entities can either apply for an “Action Plan Grant” or an “Implementation Grant”, depending on whether the recipient has already developed a safety action plan.[8]

Similarly, the $1 billion allocated as part of the Reconnecting Communities Pilot Program supports planning grants and capital construction grants, and it also provides technical assistance. This program’s objective is to reconnect communities that were previously cut off from economic opportunities by transportation infrastructure[9] by removing, retrofitting, mitigating, or replacing eligible transportation infrastructure facilities.[10]

There are other IIJA programs which also offer multiple funding mechanisms. For example, the Promoting Resilient Operations for Transformative, Efficient, and Cost-saving Transportation (“PROTECT”) Program includes $7.3 billion in formula funding that will be distributed to each state’s department of transportation. Municipalities will have the opportunity to apply for the remaining $1.4 billion in competitive PROTECT grants to plan or improve the resilience of transportation infrastructure.[11] Specific PROTECT grants will include resilience improvement grants, community resilience and evacuation route grants, and at-risk coastal infrastructure grants. Program details are forthcoming, pending resolution of federal appropriations legislation.[12]

To prepare for application openings, potential recipients should begin to work with stakeholders to develop a list of priority projects suitable for applications for competitive grant funding programs.

3. Combination Grants

Other funding mechanisms within the IIJA present a combination of opportunities for competitive and non-competitive grants, cooperative agreements, contracts, and loans. For example, the  DOT offers loans through programs such as the Transportation Infrastructure Finance and Innovation Act to support surface transportation projects undertaken by states, localities, public authorities, and eligible private entities.[13]

The IIJA also provides $50 million in competitive grants and a direct allocation to states for the On-the-Job Training Supportive Services Program.[14] This program aims to increase the capacity of the United States’ current and future highway construction workforce by providing the development and diversification of skilled laborers. This program also strives to move minorities, women, and disadvantaged individuals into “journey-level positions”, or positions in which such persons have been gainfully employed by virtue of on-the-job training, to ensure that a skilled workforce is available to meet highway construction needs.

4. Federal Funding to Agencies

Federal agencies have also received direct allocations from the IIJA, especially related to transportation infrastructure. The National Park Services, U.S. Fish and Wildlife Service, and the U.S Forest Service received a combined $2.04 billion to promote access to national parks, forests, wildlife refuges, recreation areas, and other federal public lands.[15] Although eligible uses of these direct allocations are largely tied to improving public lands managed by the federal government, this funding is more broadly designed to enable these agencies to engage with state, local, territorial and federally recognized tribal governments and complete planning and construction activities in furtherance of joint goals.

Last Updated: March 1, 2023

How should a municipality prepare for an audit by an Office of the Inspector General (“OIG”) for a program administered by a prior administration that focuses on due diligence and proper record keeping?

A municipality’s audit approach should not be impacted by the administration carrying out the audit. The audit approach should focus on cooperation with the Office of the Inspector General (“OIG”) auditors and transparency of past and current program activities. Consider the following good practices in preparation for an audit: 

• Maintain and organize project files in a central location prior to the arrival of the OIG;
• Provide office space for the audit teams to meet and conduct interviews;
• Assign a point person who will be available for the duration of the audit to assist the OIG with coordinating activities and any other needs of the audit team;
• Provide access to staff including employees from the previous administration that worked on the project being audited and personnel assigned to the project as a result of turnover;
• Be prepared to respond to the draft audit report promptly, so that your feedback can be considered prior to the audit report being finalized; and,
• Proactively demonstrate the steps your municipality took to enhance due diligence and record keeping.
• Review laws and regulations pertaining to the grant program.

In demonstrating a sufficient due diligence process in your grant program, municipalities can highlight the following good practices:

• Background checks on vendors and/or subrecipients to ensure they are not on the federal government excluded party list by running entities and individuals through the Sam.gov Exclusionary Search prior to award/or distribution of funding;[1]

• Due diligence of beneficiaries to ensure eligibility for the financial aid being provided;
• Risk assessments on contractors, vendors and subrecipients to show they possess the necessary capacity and level of integrity to carry out the scope of services;
• Self-certification requirements for vendors and/or subrecipients certifying that, among other things, they are not barred from receiving funds and are eligible, capable, and responsible in the management of federal funds; and
• Regular proactive program audits to ensure compliance with established due diligence practices and procedures.

To demonstrate good record keeping practices in grant programs, municipalities can highlight documentation that demonstrates:

• The decision-making process for providing grant funds, including determining the eligible use of funds;
• Grant agreements and subgrant agreements which include grant program requirements, terms and conditions, specifically with Federal regulations applicable to the grant;
• Project timelines, deliverables, and milestones, and key performance indicators;
• Detailed supporting documentation for invoices and proof of payments, or contracts;
• Procurement methodologies, including compliance with the Uniform Guidance;
• Risk assessments and supporting documentation for all subrecipients use of funds; and,
• Description of the central platform used for the electronic storage of all program documentation.
• Policy and procedure manuals relating to grant management, including procurement, payroll, and inventory control, as applicable.

Last Updated: March 1, 2023

Is it appropriate for a consultant or other entity who offered free grant application assistance to later be considered in a competitive bidding process? What steps should a municipality take to mitigate the risk or appearance of misconduct?

A consultant or other entity who provided free assistance with a grant application may be able to seek consideration in a competitive bidding process. The feasibility and process of hiring such a consultant is highly dependent on the type of grant in question, as well as the federal agency that is offering the grant.

The applicant must review the rules and regulations surrounding the grant, specifically the procurement guidelines from the Uniform Guidance §200.318 – §200.320 when procuring services under a federal award.[1] The procurement guidelines include, but are not limited to, the following:

• An applicant must have and use their own documented procurement procedures that comply with state and local laws and regulations, and with Uniform Guidance §200.318 – §200.327.
• An applicant must ensure the procurement is conducted in a manner providing full and open competition.
• An applicant must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase order.
• An applicant must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts.

It is also important to consider and follow any relevant procurement and conflict of interest policies, both from the granting agency and the applicant. An applicant should also consult its legal department to ensure compliance with all established policies and procedures.

Last Updated: March 1, 2023

Is expenditure reporting guidance regarding housing expected to change given the new housing guidance?

There is no indication whether Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) expenditure categories will change with respect to upcoming reports. CSLFRF recipients should be prepared and on the lookout for newly issued guidance, however.

Treasury has not updated its list of expenditure categories since the Compliance and Reporting Guidance was updated prior to the April 2022 reporting deadline, which reflects the most recent updated guidance from the Final Rule. While Treasury has not stated if expenditure categories will be updated again in the future, municipalities should regularly monitor Treasury guidance in the event that expenditure category updates are made.

Treasury has released updated User Guides prior to each reporting deadline, and the most recent User Guide, for the July 2022 reporting deadline, indicates that an updated User Guide should accompany the upcoming October 2022 deadline.[1] Any updates to expenditure categories could be released in an updated Compliance and Reporting Guidance document or an upcoming User Guide. Recipients should regularly consult Treasury’s CSLFRF Recipient Compliance and Reporting Responsibilities page for any updates.[2]

Currently, the primary expenditure category relating to Affordable Housing is 2.15 – Long-term Housing Security: Affordable Housing. Other related expenditure categories include 2.2 – Household Assistance: Rent, Mortgage, and Utility Aid; 2.16 – Long-term Housing Security: Services for Unhoused Persons; 2.17 – Housing Support: Housing Vouchers and Relocation Assistance for Disproportionately Impacted Communities; and 2.18 – Housing Support: Other Housing Assistance.[3]

For more information on utilizing CSLFRF to boost affordable housing, please review Treasury’s July 2022 “Affordable Housing How-To Guide: How to Use State and Local Fiscal Recovery Funds For Affordable Housing Production and Preservation.”[4]  Any interested parties should check that the guidance remains current and should review the sources above for any updates over time.

Last Updated: March 1, 2023

Is it permissible to report expenditures incurred by a sub-recipient prior to the award date? If so, how should "term-start date" be defined?

At present and subject to future modifications, the U.S. Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) reporting portal does not allow recipients to enter subrecipient expenditures incurred prior to the Subaward Award Date. The “Expenditure Start Date,” as utilized in the CSLFRF reporting portal, must occur after the Subaward Award Date, or the system will reject the entry. Treasury defines the Expenditure Start Date as the “start date for the range of time when the expenditure(s) occurred.”[1] Additionally, Treasury defines the Subaward Award Date as the “date the Recipient obligated funds to a Subrecipient.”[2] These dates may not necessarily be the same date.

Last Updated: March 3, 2023