What are common pitfalls in grant writing and planning? How can a municipality avoid those pitfalls and make grant applications more competitive?

Enhancing the competitive advantage of a grant application begins in the preparation and planning process. Below are common pitfalls of the grant planning process and suggested solutions to develop a strong grant application.

Lack of Investment in Opportunity Identification and Tracking
Problem: The lack of investment in opportunity identification and tracking can limit the amount of funding that can be applied for and awarded throughout the year. This can also affect the likelihood of finding a grant suitable for your organization.

Solution: Regularly tracking grant opportunities increases the potential for funding. Consider allocating internal resources to search for grants across various sources, including agency websites and public interest groups. To help identify grant opportunities and meaningful program outcomes from grant applications, municipalities should examine the awarding agency’s Notice of Funding Opportunity (“NOFO”) or contact the funding agency for project guidance and direction regarding acceptable and anticipated outcomes. It is also important to recognize which funding opportunities fit your organization’s mission and needs to maximize the potential of award.

Lack of Measurable Goals Within an Application

Problem: Setting goals that are immeasurable or unsupported by data can limit the application’s credibility.

Solution: Explain that the plan and goals outlined in the application are achievable, sustainable, and impactful. Use data points and graphics where appropriate to support your organization’s capacity. This will demonstrate a previous record of success and may designate your organization or municipality as lower risk.

Since many grant applications include a scoring rubric or scoring considerations to help applicants develop program outcome measures, municipalities should use the rubric to determine how likely a proposed project or program is to be funded. Self-scoring also allows applicants to reflect and make adjustments to programs, outcomes, or other project-related components.

Further, municipalities may refer to the funders’ websites to access specific award requirements and archives of past awards, applications, and project abstracts. Municipalities can also connect with past award recipients for advice and to better understand program outcome measures and lessons learned.

Lastly, municipalities should carefully review the funders’ compliance and reporting requirements to ensure all of the necessary criteria are met. In addition, municipalities may benefit from conducting research on comparable grant-funded programs and reviewing the applicable outcomes and other data measurement tools related to those programs. 

Using Complicated Grant Writing Language

Problem: Using complex language and industry jargon in the application can detract from the application.

Solution: Present information concisely for a successful application. When writing a grant application, it is helpful to write in the present tense and mirror the funder’s language where possible (i.e., when describing the project or the project’s budget). This can indicate your organization’s alignment with the funder’s priorities.

Lack of Attention to Detail

Problem: Not applying attention to detail in drafting an application can cause an applicant to miss deadlines and neglect critical application requirements.

Solution: Closely read the NOFO to identify key deadlines and requirements, including preferred method of delivery. Proofread all components of the application for grammar and spelling. In addition, confirm that the budget figures provided are correctly reflected wherever they appear in the application. To ensure the application is received on time, applicants should submit a few days before the deadline to allow time to resolve any technical difficulties.

Failing to Reflect on the Process

Problem: Failing to evaluate your organization’s strengths and weaknesses following the grant planning and writing process can result in a lack of future improvement.

Solution: Carefully and honestly evaluate internal capacity to develop and deliver complete, competitive, and timely applications. Throughout the process, if your organization notices that gaps exist in the process, seek assistance in addressing these gaps so that you are better prepared for future application cycles.  

Last Updated: January 31, 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, it is not permissible to report expenditures incurred by a subrecipient prior to the award date. The U.S. Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) reporting portal does not presently 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: February 15, 2023

What are strategies for ensuring grant-funded initiatives are inclusive and aligned with community needs?

A municipality should ensure that grant-funded programs and activities are compliant with grant requirements, including but not limited to civil rights laws, the Americans with Disabilities Act (“ADA”) regulations, and Fair Housing regulations. If a municipality monitors and conducts legislative analysis, it should incorporate any updates into its strategy for ensuring compliance, inclusivity, and equity relative to specific grant programming.  

An equity framework and public involvement plan should be considered from the outset through completion of municipal programs and projects. To consider equity considerations, it is important to have an open and transparent planning process that includes routine engagement with elected officials, stakeholders, and the public.

A key ongoing component is a public involvement plan (“Plan”) to address how it will engage with the community and engage diverse populations so there is equal access to program services.  The Plan should outline strategies to reach underserved populations with messaging regarding grant funded services to the broadest possible audience, including in locations where underserved populations live and socialize. Municipalities should hold public meetings and civic gatherings—and provide information and make targeted outreach to underserved populations—before and throughout the duration of the grant programming.

The Plan should consider how to provide meaningful access to limited English proficient (“LEP”) individuals. Municipalities should provide agency training to ensure staff comprehension of regulatory compliance requirements and inclusive approaches under any given grant program.

In developing the plan, a municipality should utilize in-house Geographic Information Services (“GIS”) to update demographic data and identify and meet program objectives for populations that are underserved or marginalized. If the municipality does not have a GIS resource, the municipality may use the analysis tools from the US Census Bureau’s website, including maps of underserved areas and identified Qualified Census Tracts (“QCTs”).[1]

Metropolitan Planning Organizations and regional or state municipalities may also have other demographic information resources.

Municipalities may also consider engaging with community-based organizations (“CBOs”), non-profits, and the public to help build an understanding of the community’s needs and to help facilitate impact. Such organizations may increase municipal awareness of local and national political, social, and economic events which impact community health and viability, such as employment rates, job availability, education and workforce training, food deserts, and public transportation, among other issues. It may also help foster ongoing and long-term collaboration between these stakeholders and the municipality.

Finally, municipalities should aim to garner trust within the community. An example of this can be to highlight community updates and advertise local opportunities for engagement and community input. This may be done on the municipality website but can also be shared through CBOs and media outlets. Fostering an inclusive environment for community members to voice concerns regarding inequities will help solidify trust and facilitate critical feedback. It will also become an invaluable resource for determining program needs more generally.

Last Updated: February 15, 2023 

What are good practices for engaging community stakeholders when planning to use Capital Projects funding?

Municipalities can deploy many strategies to incorporate community stakeholders in project planning for projects funded by the Coronavirus Capital Projects Fund (“Capital Projects”), including but not limited to:

• Hosting community engagement forums,
• Conducting needs and risks assessments,
• Analyzing empirical data, and
• Intensifying municipality responsiveness.

Municipalities can engage community stakeholders when planning how to use Capital Projects funds. Helpfully, costs associated with community engagement are considered ancillary costs to investments in capital assets and can likely be claimed as such, as per the Treasury.[1] Community stakeholders include but are not limited to, community leaders, nonprofit organizations, community residents, teachers, and other individuals and organizations invested in a community's economic and social development.

Community Engagement Forums

Municipalities can create public forums to channel a community's opinions on its infrastructure needs. Public forums should be accessible to all community members by having multiple engagement avenues, such as online and in-person forums.

For example, elderly community members or community members without broadband access may find it difficult to engage in an online forum. An in-person forum may better suit these residents' needs, allowing them to express concerns or present opportunities to community leaders. Conversely, working parents may not have time to attend an in-person forum and may find it easier to meet with their community leaders remotely.

Needs and Risk Assessments

Conducting an official needs and/or risk assessment in a community is another way to engage community stakeholders in Capital Projects planning. This strategy seeks to understand the needs, opinions, and concerns of community stakeholders and members who may not otherwise volunteer this information and allows for a focus on specific communities that may be under- represented. Municipalities should focus on the most under-resourced and at-risk populations in their communities for both needs and risk assessments.

Empirical Data

Where public forums and needs assessments can offer anecdotal evidence of a community’s needs, analyzing empirical data can offer generalized statistics on a community’s living conditions. This approach allows an empirical foundation for Capital Projects planning, potentially identifying opportunities municipalities can miss utilizing other strategies.

Looking at neighborhood-level or Census tract data, municipalities can find “hyperlocal” areas for Capital Projects funding opportunities. For example, Raj Chetty's Opportunity Atlas allows municipalities to trace the roots of today's affluence and poverty back to the neighborhoods where people grew up, see where and for whom opportunity is missing, and develop local solutions to help more children rise out of poverty.[2]

Intensifying Responsiveness

Municipalities should seek to respond to the concerns and recommendations of community stakeholders. When using an online forum for example, municipalities should respond to posts from community stakeholders. Failure to respond to or address concerns may result in community stakeholders becoming disengaged.

Any strategy by which a municipality chooses to engage with its community stakeholders should seek to keep the conversation flowing from community leaders to stakeholders. In addition to responding to posts on online forums, community leaders could personally follow up with community stakeholders after an in-person forum. These approaches will help to maintain community stakeholders' engagement in the planning and implementation of Capital Projects.

Conclusion

Seeking the opinions of all community stakeholders can help a municipality maximize its use of Capital Projects funding by addressing the most severe needs in a community using a combination of the above- strategies. For example, a municipality can use the Opportunity Atlas to discover the best location for an in-person public forum. Likewise, a needs assessment can uncover what a community thinks of its leadership's accessibility when the community desires to express its concerns, as well as leadership’s responsiveness to such concerns. It is also important to remember that the Project and Expenditure Reports submitted quarterly to Treasury should include data regarding community engagement efforts.[3]

Last Updated: February 14, 2023

Under PROTECT, are flooding risks from rivers and Great Lakes considered “coastal”?

Under the Promoting Resilient Operations for Transformative, Efficient, and Cost-Saving Transportation (“PROTECT”) Program established by the Infrastructure Investments and Jobs Act (“IIJA”), flooding risks from the Great Lakes are generally considered “coastal,” but flooding risks from rivers are not.  Municipalities should carefully consider the underlying statutes.   

The Great Lakes Coastal Barrier Study Act of 1987 amended the Coastal Barrier Resources Act of 1982 to include the coastal barriers of the Great Lakes in its definition of “coastal”.[1] Therefore, under the PROTECT Program, projects located in areas subject to flooding from the Great Lakes themselves would typically qualify for benefits made available under the “coastal” definition.[2]

Certain eligible projects include:

• Improving surface transportation assets like a tide gate to protect highways;
• Improving assets that protect and enhance ecosystem conditions that ensure adequate flows in rivers and estuarine systems (upsized culverts);
• Constructing or modifying storm surge, flood protection, or aquatic ecosystem restoration elements that are connected to a transportation improvement; and
• Protecting a public transportation or port facility.[3]

On the other hand, PROTECT generally does not consider rivers “coastal.”[4] PROTECT allows for certain funding for Special Flood Hazard Areas (as defined by 44 CFR § 206.251 (e)), which are areas at risk due to “riverine flooding.”[5] Under 44 CFR § 59.1, riverine flooding means “relating to, formed by, or resembling a river (including tributaries), stream, brook, etc.”[6] Thus, certain projects targeting Special Flood Hazard Areas may be eligible for funding under PROTECT, depending on the project type. Certain eligible projects include:

• Elevating a roadway to increase marsh health and the total area adjacent to a highway right-of-way to promote additional flood storage;
• Upgrading and installing culverts designed to withstand 100-year flood events;
• Upgrading and installing tide gates to protect highways;
• Upgrading and installing flood gates to protect tunnel entrances;
• Improving the functionality and resiliency of stormwater controls, including inventory inspections, and improving best management practices to protect surface transportation infrastructure.[7]

Last Updated: February 14, 2023

Can a reserve of operating funds for affordable housing be used past December 31, 2026?

Currently, there is no consideration in the American Rescue Plan Act (“ARPA”) to extend the use of funds passed the stated deadline of December 31, 2026 to cover eligible affordable housing operating costs. The U.S. Department of the Treasury (“Treasury”) states in its Final Rule on Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) that “[CSLFRF] funds must be obligated by December 31, 2024, and expended by December 31, 2026.”[1] Award recipients may expend funds after 2024 so long as the payment for the eligible cost occurs before December 31, 2026. Regardless of the intended use of funds, Treasury states that recipients “must return any funds not obligated by December 31, 2024. A recipient must also return funds obligated by December 31, 2024, but not expended by December 31, 2026.”[2]

While Treasury has explicitly stated that the deadline to expend all CSLFRF awards is December 31, 2026, it has also included language confirming the eligibility of using funds to cover operating costs of affordable housing developments. Treasury utilized the public comment process to develop the Final Rule to improve eligible uses of CSLFRF funds in line with recipients’ needs. With respect to operating costs for affordable housing, Treasury responded to public comments on the Final Rule, stating that:

Public Comment: Operating Expenses: Commenters specifically asked that Treasury allow the use of [C]SLFRF funds for operating expenses of affordable housing units, as operating subsidies are typically required to reach extremely low-income households, whose affordable rents may be lower than the ongoing cost of operating their unit.

Treasury Response: Operating expenses for eligible affordable housing were an eligible use of funds under the interim final rule and the final rule maintains this treatment. This may include capitalized operating reserves. Rehabilitation and repair of public housing will also be considered an eligible use of [C]SLFRF funds.[3]

Municipalities concerned with the long-term financial sustainability of proposed or in-progress affordable housing developments may consider leveraging alternative sources of funds, including Low-Income Housing Tax Credits (“LIHTC”),[4] Community Development Block Grants (“CDBG”),[5] Home Investment Partnerships Program (“HOME”),[6] or other eligible Housing and Urban Development (“HUD”) monies.

If a municipality decides to utilize multiple sources of funding to carry out an affordable housing project, federal requirements for “braided” funding would apply to the entirety of that project. Treasury explicitly states, “[C]SLFRF funds may not be used to fund an activity that is not, in its entirety, an eligible use under the [C]SLFRF program.”[7] Similarly, if a project is partially funded by CDBG funds and includes other sources of federal funding, the project must comply with all related federal regulatory requirements and policies.[8]

Although operating costs for affordable housing are an explicitly contemplated eligible use under CSLFRF, such use of funds must still adhere to the obligation deadline of December 31, 2024, and expenditure deadline of December 31, 2026.

Last Updated: February 14, 2023

If a project has multiple funding sources, which funding source governs protocol controls?

Although the Uniform Grant Guidance, 2 CFR 200, generally governs all federal grants, there is no universal governing protocol for projects with multiple federal funding sources. Every federal funding source has its unique award terms and conditions that govern the use of funds for recipients, which municipalities should analyze carefully in concert. Where funding overlap (known as “braiding” or “braided funding”) occurs, municipalities must abide by all the federal funding sources’ statutory and regulatory requirements and governing protocols. Municipalities should maintain documentation demonstrating that no duplication of benefits has occurred.

For example, responses to frequently asked questions regarding the combination of American Rescue Plan Act (“ARPA”) funds and Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), note that:

Funds may be used in conjunction with other funding sources, provided that the costs are eligible costs under each source program and are compliant with all other related statutory and regulatory requirements and policies. The recipient must comply with applicable reporting requirements for all sources of funds.[1]

Likewise, Community Development and Block Grants (“CDBG”) guidance makes clear that such grants can be leveraged with other Federal, state, local or private funds,[2] but municipalities must review the specific CDBG requirements to ensure compliance.[3]

Federal requirements for “braided funding” generally apply to the entirety of municipal projects. For municipalities considering funding sections of a project with different types of federal funding, the applicable federal requirements in each section apply to the entire project. For example, the U.S. Department of the Treasury (“Treasury”) requires that “[C]SLFRF funds may not be used to fund an activity that is not, in its entirety, an eligible use under the [C]SLFRF program.”[4]

As municipalities plan projects that may involve “braiding” funding sources, a critical step is to assess each federal statutory and regulatory requirement applicable to each funding source for the projects and to document compliance with the same. Municipalities should give considerable effort to understanding these requirements to ensure compliance with federal regulations, and to memorialize their efforts to do the same.

Last Updated: February 7, 2023

What measures should municipalities implement to ensure that vendor invoices comply with federal requirements?

Good Practices to Ensure Vendor Invoicing Compliance

Municipalities are “responsible for the efficient and effective administration of the federal award through the application of sound management practices,”[1] such as those embodied in Federal Uniform Guidance (“Uniform Guidance”) standards.[2]  Municipalities should provide adequate documentation to support (i) the costs charged to the federal award, (ii) financial management, and (iii) internal controls.

Key compliance measures for vendor invoicing include the following:

• Enumerate invoicing requirements and procedures in all procurement solicitations.
• Include invoicing procedures and policies in all contractual documents.
• Provide invoicing requirements in pre-bid, pre- and post-award communications, and meetings.
• Implement mandatory award training for award stakeholders, covering, at a minimum, invoicing systems, procedures, oversight, and regulatory requirements.
• Address deficiencies during the period of performance rather than at the monitoring or auditing stage.
• Document all invoicing exceptions or deficiencies, including corrective actions.
• Perform field audits in real time to confirm goods “provided” made it to the intended recipient and are accounted for.
• Document communications with the stated beneficiaries of the “provided services” to make sure they were delivered.
• Ensure separation of duties such that individuals ordering the goods and services are not approving those items.
• Perform due diligence on vendors and suppliers to ensure the goods and services being requested are items that the vendor/supplier has a history of providing.[3]

Municipalities should also consider the following when establishing invoicing requirements and procedures:

• Frequency, timing, and/or milestones for contractor and subcontractor invoices.
• Level of detail and logical organization of invoices for contractor and subcontractor invoices.
• Supporting documentation requirements for contractor and subcontractor invoices.[4]

Cost Principles and Financial Management

Uniform Guidance § 220.401 establishes how cost principles are applied to non-federal entities who receive federal awards.[5] These principles apply generally to federal awards with the exception of federal awards to hospitals or fixed amount awards.

Regarding financial management, Uniform Guidance § 200.302 establishes that non-federal entities must have systems in place “to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.”[6] § 200.302 also details guidance related to financial reporting (§ 200.328), monitoring and reporting program performance (§200.329), and requirements of the non-federal entity’s financial management system, which include: record retention, access to records, storage of information, and transfer of records (refer to §§ 200.334-200.337 for details).[7]

Internal Controls

Uniform Guidance § 200.303 details the responsibilities of the non-federal entity related to internal controls, including the need to “[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.”[8]

Last Updated: February 7, 2023

What is an Integrity Monitor? Are there good practices for demonstrating the cost-savings function of Integrity Monitors? Are there good practices for determining what percentage of a project’s budget should be dedicated to hiring an Integrity Monitor?

What is an Integrity Monitor?

Integrity Monitors are individuals or entities that provide integrated oversight services using professionals such as auditors, investigators, engineers, lawyers, compliance specialists, and other subject-matter experts. The oversight Integrity Monitors provide has helped prevent fraud, waste, and abuse on large infrastructure projects.

Below are key attributes of Integrity Monitors, who:

• Are integrated into infrastructure project teams and conduct proactive field and desk audits;
• Function independently from the project team contractors, vendors, and suppliers, and typically report directly to a municipality’s oversight agency.
• Often report to other appropriate agencies, such as a city’s Chief Financial Officer or General Counsel’s Office.

Integrity Monitors’ high visibility  creates a culture of integrity on municipal project teams and their contractors, vendors, and suppliers, resulting in cost-savings through the prevention of waste or criminal conduct. For example, the commissioner of the New York City Department of Investigation (“DOI”), who utilized Integrity Monitors to oversee the cleanup of the World Trade Center after the 9/11 attacks, stated that::

“[A]n intercepted conversation between two organized crime associates [revealed] that the on-site presence and close scrutiny of the [integrity] monitors at the World Trade Center [made] it impossible for anyone to overbill New York City using the usual scams.”[1]

Integrity Monitors have uncovered Criminal and wasteful practices that have resulted in tangible cost-savings. For example, the New York DOI noted that Integrity Monitors oversight resulted in cost-savings of approximately $30 million in potential waste and mismanagement from the federally funded repairs and cleanup efforts from Hurricane Sandy .[2]

What are good practices to demonstrate the cost-savings function of Integrity Monitors?

To demonstrate how Integrity Monitors can save costs, they should document their activities, including monitoring, audits, investigations, forensic reviews, and policy recommendations. The Integrity Monitor should highlight actions that resulted in cost-savings or where they uncovered improper practices that would have resulted in lost funds, including the amount of savings.

Any identified improper practices should be documented, supported by photographs, and summarized in monthly Integrity Monitor activity reports that are submitted to the overseeing municipal agency. The frequency of these reports can vary depending on the size and scope of the Integrity Monitor assignment.

What are good practices to determine what percentage of a project budget should be used to pay for Integrity Monitors?

An important factor in properly scoping an Integrity Monitor budget is the creation of a project risk assessment, which can be used to focus the efforts of the Integrity Monitors. Consideration should also be given to the amount of federally funded administrative and managements costs, if any, to ensure that the total costs for Integrity Monitoring services are reasonable in relation to the total amount of program funds being administered.[3]

Some government agencies in New York and New Jersey have used 0.5% to 1% of a project’s budget to estimate a baseline Integrity Monitor budget. This percentage range has only been used as a guideline in the past, as numerous other factors, including issues identified during a risk assessment and other issues uncovered during the Integrity Monitor’s monitorship, may also affect budget amounts.

Last Updated: February 7, 2023

Like direct award recipients, are sub-recipients under ARPA (SLFRF) required to obligate their funds, by contract or other means, by the end of 2024?

No. While direct recipients of a State and Local Fiscal Recovery Fund (“SLFRF”) award are required to obligate funds by the end of 2024, subrecipients of SLFRF funds are not subject to the same requirement.

In November 2023, The U.S. Department of Treasury (“Treasury”) issued an Obligation Interim Final Rule that provides definitions and guidance related to SLFRF obligations. The following excerpt from the Obligation Interim Final Rule relays that subrecipients are not subject to the December 31, 2024, obligation deadline:

Treasury is clarifying that subrecipients are not subject to this deadline. As stated in the SLFRF rule and as referenced above, Treasury defined obligation to include entry into a subaward. A cost is considered to have been incurred once a recipient enters into a subaward that obligates the recipient to cover that cost. Once a recipient has obligated funds, the requirement in the statute and Treasury’s rule to obligate funds by December 31, 2024, has been satisfied, such that subrecipients need not themselves also obligate funds received under a subaward by December 31, 2024. (Contractors also do not need to obligate funds received under a contract by December 31, 2024.) It remains the case that all SLFRF award funds must be expended by the recipient and any subrecipients by 2026, given the termination of the period of performance on December 31, 2026.[1]

While the obligation deadline does not apply to subrecipients, it is important to note that the expenditure deadline of December 31, 2026, applies to both direct recipients and subrecipients. Direct recipients of SLFRF awards must ensure that their subrecipients are on-track to expend all funding by the expenditure deadline.

What requirements must be met by subrecipients who improve real property with ARPA funds under 2 CFR 200.311? What is the federal interest in the property?

Property acquired using revenue loss funds likely is not subject to the applicable provisions of the Uniform Guidance regarding property standards.[1] Property acquired or improved under any of the other eligible use categories are subject to the Uniform Guidance provisions— particularly 2 CFR 200.311—as described below.

Treasury’s FAQ 13.16 indicates: 

After the period of performance, the property, supplies, or equipment must be used consistent with the purpose for which it was purchased or improved or for any other eligible purpose in the same category as the purpose reported to Treasury as of the final reporting period...[2]

Treasury makes clear that during the period of performance, the purpose of the property may be changed to another purpose as long as it continues to meet the eligible use requirements.

After the period of performance, the property may switch eligible purposes, but only if the new use of funds is in the same category as the original category reported to Treasury, as seen in the chart below. For example,

converting a hospital to a behavioral health facility would qualify as being used for the eligible purpose because both expenditures respond to the public health impacts of the public health emergency.[3]

Specifications of 2 CFR 200.311 and Federal Interest

When applicable to ARPA funded projects as indicated above, 2 CFR 200.311 outlines the title, use and disposition of real property. Specifically:

(a)Title. Subject to the requirements and conditions set forth in this section, title to real property acquired or improved under a Federal award will vest upon acquisition in the non-Federal entity.

(b) Use. Except as otherwise provided by Federal statutes or by the Federal awarding agency, real property will be used for the originally authorized purpose as long as needed for that purpose, during which time the non-Federal entity must not dispose of or encumber its title or other interests.

(c) Disposition. When real property is no longer needed for the originally authorized purpose, the non-Federal entity must obtain disposition instructions from the Federal awarding agency or pass-through entity.[4]

The Uniform Guidance provides three distinct, mandatory disposition options pursuant to 2 CFR 200.311(c1-3) relative to real property. This sets the parameters for the federal interest in and disposition of real property occurring if:

• the use of an asset (i.e., property) changes to an ineligible use;
• the asst is sold prior to the end of the period of performance; or
• the asset shifts outside the parameters of the eligible purpose after the period of performance according to the table above.[5]

Does the American Rescue Plan Act change any pre-existing requirements associated with providing IRS 1099 forms to grantees of funds? (e.g., a municipality that reimburses homeowners and business for the purchase of security cameras)

No, the American Rescue Plan Act (“ARPA”) likely does not change any pre-existing requirements associated with providing IRS 1099 forms to grantees of funds. While some uses of Coronavirus State and Local Fiscal Recovery Funds (SLFRF) may trigger tax consequences for grantees of funds requiring the issuance of a 1099, the use of SLFRF grants for the purchase of security cameras unrelated to the performance of a business service would likely not require a 1099 to be issued.[1]

In general, individuals must include in gross income any payment or accession to wealth from any source unless an exclusion applies. One exclusion is for qualified disaster relief payments under section 139 of the Internal Revenue Code (hereafter “Code”). Under section 139 of the Code, certain payments made by a state or local government to individuals in connection with the COVID-19 pandemic may be qualified disaster relief payments that are excluded from the recipient's gross income.[2]

“A payment by a state or local government generally will be treated as a qualified disaster relief payment under section 139 if the payment is made to or "for the benefit of" an individual to (1) reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster, or (2) promote the general welfare in connection with a qualified disaster.”[3]

“As a federally declared disaster, the COVID-19 pandemic is considered a qualified disaster for purposes of section 139.”[4]

“However, payments are not treated as qualified disaster relief payments if the payments are in the nature of compensation for services performed by the individual. Additionally, payments made to or for the benefit of an individual are not treated as qualified disaster relief payments to the extent the expense of the individual compensated by such payment is otherwise compensated for by insurance or otherwise.”[5]

Under the circumstances, if the individuals and/or businesses contemplated did not perform services but rather installed security equipment which contributed to their general welfare in an effort to mitigate impacts by the pandemic (i.e., increased crime), and these individuals also were not also likely not compensated for by insurance or otherwise, then reimbursements to such individuals and/or businesses would likely not be considered income. Therefore, 1099s would likely not need to be issued. Municipalities should seek the advice of their tax professionals to address the specific facts and circumstances regarding their tax obligations.