Are subrecipients of ARP funds required to submit an official attestation form prior to award?

There is no official attestation form that subrecipients are required to complete before receiving an award of funds under the American Rescue Plan (“ARP”). However, to receive a subaward, subrecipients are required to obtain a unique entity identifier by registering with the System for Award Management (“SAM.gov”).[1] As part of the registration process, subrecipients are obligated to disclose details about their organization. Additionally, municipalities can require subrecipients to provide pre-award information to aid in the determination of a subrecipient’s ability to successfully carry out the subaward.

SAM.gov Registration

The U.S. Department of the Treasury’s (“Treasury”) Compliance and Reporting Guidance makes clear that it is the responsibility of the recipient of ARP funds to ensure that subrecipients are compliant with registering and maintaining an updated profile on SAM.gov.[2] As part of the registration process, subrecipients are required to disclose information about their organization, including but not limited to the following:

• Legal business name, address, date of incorporation, state of incorporation, taxpayer identification number, IRS consent form (taxpayer name and address), organizational factors (e.g., S corporation, LLC, etc.), entity structure (e.g., corporate entity, tax exempt, sole proprietorship, etc.), website, bank account information (account type, routing number, account number), size of the organization, name and title of person(s) responsible for determining prices offered in bids and proposals, and other company information.
• Additionally, as part of the SAM.gov registration, organizations must answer numerous questions about the following, if applicable:
  • criminal and civil cases resulting in judgments against the organization and principals;
  • delinquent federal taxes;
  • details about current federal contracts;
  • recent terminations for cause;
  • small disadvantaged business status; and,
  • compliance with the submission of Equal Employment Opportunity compliance reports.[3]

To view a complete list of the information that organizations are required to provide as part of their SAM.gov registration and all of the questions that organizations are required to answer, review the SAM.gov Entity Registration Checklist.[4] Not all registration information is publicly available. To view publicly available information, organizations must first create a SAM.gov account and then enter the subject of their query into the search tool.

Subrecipient Risk Assessments

The Uniform Guidance requires recipients to evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring.[5] The Uniform Guidance does not require any particular type or extent of risk assessment, which is left to the judgement of the pass-through entity. However, municipalities can use the required evaluation process as an opportunity to create a pre-award template that will solicit information about an organization’s operations and financial status helpful in assessing the risk of each subrecipient failing to comply with federal requirements. As an example, the United States Department of Justice (“DOJ”) Office of Justice Programs (“OJP”) created a questionnaire that can be used as a guide to obtain critical information from subrecipients in order to complete a pre-award risk assessment.[6] Specifically, the OJP prepared pre-award questions that seek to elicit information about accounting practices, written policies and procedures, internal controls, record retention policy, grant management expertise, and other organizational information.

Although there is no official attestation form that subrecipients must complete to receive ARP funds, recipients are not prohibited from creating their own risk assessment process that includes an attestation. Creating such a process could assist a municipality in its required pre-award risk assessment.

How can municipalities access planning grants and technical assistance?

There are a variety of federal, state, and local funding programs offering funding for planning activities, project scoping activities, and technical assistance for municipalities.

FEMA Hazard Mitigation Assistance Grants

1. Building Resilient Infrastructure and Communities (“BRIC”)

The Federal Emergency Management Agency (“FEMA”) manages the BRIC program. The BRIC program is administered by state governments. BRIC provides non-financial Direct Technical Assistance (“DTA”) and funding for Capability- and Capacity-Building (“C&CB”) activities, including for project scoping, mitigation planning, and planning-related activities, among others.

BRIC funding for C&CB activities is available as an allocation to each state and territory. In fiscal year (“FY”) 2021, the maximum allocation for a state or territory for these activities was $1,000,000.[1] The Notice of Funding Opportunity (“NOFO”) for FY2022 is expected to be released in August 2022 and may include an increase in funding for these activities. States set priorities and maintain discretion over the types of projects they submit to FEMA under this allocation. If a municipality wishes to submit a project for funding under the C&CB category, they are encouraged to contact their State Hazard Mitigation Officer (“SHMO”) to discuss if and how their project fits into the state’s strategy for use of these limited funds.

The BRIC Direct Technical Assistance opportunity is very limited. FEMA will provide non-financial Direct Technical Assistance for up to 20 selected communities across the country.[2] The goal of this technical assistance is to help improve the community’s resilience, identify viable mitigation projects, prepare mitigation applications, or implement projects. FEMA may prioritize Direct Technical Assistance for communities that: 

• Did not receive a project subaward under BRIC, the Pre-Disaster Mitigation (“PDM”) program, Flood Mitigation Assistance (“FMA”), or the Hazard Mitigation Grant Program (“HMGP”) within the past 5 years;
• Did not receive an Advance Assistance or C&CB subaward under BRIC, PDM, FMA, or HMGP within the past 5 years;[3]
• Are tribal entities;
• Are designated as economically disadvantaged rural communities (documentation to support this designation must be included with the letter of interest) or a disadvantaged community as defined by Executive Order 14008, Tacking the Climate Crisis at Home and Abroad, including tribal nations; or
• Demonstrate a compelling need (e.g., communities with significant disadvantaged populations, communities with multiple major disaster declarations within the past 5 years, etc.).[4]

If a municipality is interested in Direct Technical Assistance, they should contact their SHMO as soon as possible. Unlike C&CB and project activities, a sub-application is not required for Direct Technical Assistance, but an interested community must submit a letter of interest to their SHMO.

The application period for FY2022 is expected to open in late September 2022.[5]

For more information, municipalities may reference the BRIC NOFO for FY2021.[6]

2. Hazard Mitigation Grant Program (“HMGP”)

The HMPG is also managed by FEMA and administered by state governments. HMGP funding becomes available to states and territories when authorized under a Presidential major disaster declaration. States prioritize certain goals and funding timelines for HMGP funding. Municipalities can submit sub-applications for mitigation planning, planning-related activities, and project scoping activities under HMGP.[7] As with BRIC, states have discretion over if and how this funding category is used. Municipalities interested in funding for project scoping or planning activities should contact their SHMO to understand if this opportunity is available and if there are any project ideas that align with state prioritization and funding goals. As part of mitigation planning activities, HMGP may be used to fund the creation of a hazard mitigation plan, which is required to receive funding for any hazard mitigation project through BRIC, HMGP, and FMA.[8]

3. Flood Mitigation Assistance (“FMA”)

As is the case with the BRIC and HMGP programs, FMA is a FEMA-managed, state-administered program. This program specifically aims to reduce or eliminate repetitive flood damage to National Flood Insurance Program (“NFIP”) properties and communities. The planning dollars available through FMA are limited to $100,000 per state or territory and $25,000 for local flood mitigation plans. These funds can only be used for the creation of or updates to flood mitigation plans or flood-related sections of local mitigation plans.

Other Planning and Technical Assistance Grants

The following grants are available through the Department of Commerce (“DOC”) and support regional planning and local technical assistance. This list is non-exhaustive, as local agencies of commerce may have their own planning and technical assistance grants available to municipalities within their state. Although each location-specific opportunity below is administered by DOC, each grant awards funds to eligible recipients for the creation and implementation of regional economic development plans, designed to build capacity and guide the economic prosperity and resilience of an area or region. This program also supports feasibility studies, impact analyses, disaster resilience plans, and project planning. The award ceiling for each of the locations below is $300,000. Further, the following applications are accepted on a continuing basis and processed upon receipt. This Planning and Local Technical Assistance opportunity will remain in effect until superseded by a future announcement.

• Philadelphia FY2021 – FY2023 EDA Planning and Local Technical Assistance
• Seattle FY2021 – FY2023 EDA Planning and Local Technical Assistance
• Chicago FY2021 – FY2023 EDA Planning and Local Technical Assistance
• Denver FY2021 – FY2023 EDA Planning and Local Technical Assistance
• Austin FY2021 – FY2023 EDA Planning and Local Technical Assistance
• Atlanta FY2021 – FY2023 EDA Planning and Local Technical Assistance[9]

Infrastructure Investment and Jobs Act (“IIJA”) Funding Sources

Several of the funding sources in the IIJA can be used to help a municipality become more resilient.  To benefit from IIJA funding opportunities, municipalities must match their identified needs to potential funding streams.

1. Promoting Resilient Operations for Transformative, Efficient, and Cost-Saving Transportation (“PROTECT”) Grants - $8.7 billion

The PROTECT formula program will support planning, resilience improvements, community resilience and evacuation routes, and at-risk coastal infrastructure from natural disasters. There is a total of $7.3 billion available in formula funding through states for planning and $1.4 billion available in competitive grants. The PROTECT program requires communities to engage in comprehensive, cross-department planning.[10] Many of the programs contained in the IIJA support national objectives such as safety, climate mitigation, and equity.[11] Projects in the PROTECT program will be well-served by considering ways to promote equity for all.[12] Guidance for the PROTECT program has not yet been issued. More program information is needed to determine the funding cap per applicant and the application opening date.

2. Reconnecting Communities Pilot Program - $1 billion

The Reconnecting Communities Pilot Program will restore community connectivity by removing, retrofitting, or mitigating effects of highways or other transportation facilities that create barriers to community connectivity, including mobility, access, or economic development.¹⁰ The Reconnecting Communities Pilot Program is a discretionary grant program that “can support planning, capital construction, and technical assistance.”[13] Eligible facilities include those that create a barrier to mobility, access, or economic development as it relates to transportation.[14] Applications must be submitted by October 13, 2022.[15]  

Last Updated: July 5, 2022

What strategies exist for partnering on a funding opportunity when my municipality is not eligible to apply?

Understanding community needs and building and cultivating a network with mutual goals is an important aspect of fund seeking. Even when a municipality is not eligible for a funding opportunity, it can help advance community goals by sharing funding opportunities, collaborating with other fund seekers, and offering technical assistance and other needed support.

First, a municipality should confirm eligibility status with the funder. Sometimes, the funder may be aware of alternative funding avenues available to those who are otherwise ineligible and may be able to offer guidance regarding access to such opportunities. The funder may also be able to direct the city to eligible entities that have successfully received and administered funding in the past and that could serve as potential partners.

Successful partnerships rely on a municipality establishing strong rapport with eligible entities. This can be done by collaborating with potential partners such as regional planning councils, transportation planning organizations, economic development councils, chambers of commerce, community-based organizations, and nonprofit organizations. Often, boards and committees of these organizations will seek local government participation through one or more designated board positions. Because of this, municipalities should inquire about open roles and how to pursue an appointment.  Municipalities can consider which individuals in their respective organizations will be the best individual to serve. Some boards expect elected officials and/or executive level participation, while others may look for more technical expertise such as professionals specializing in engineering, utility, or finance.

As part of a comprehensive grant management strategy, a municipality must develop an inventory of critical community needs and match these needs to potential funding sources. Part of this exercise can include identifying potential partners whose goals align on a given topic.  Developing this understanding may require attendance at public meetings, informational Q&A sessions, council meetings and special sessions, or coordination with local planning forums. Participating in and planning events or meetings will further foster partnerships and communication, generally, and will help to establish a true understanding of community need. As a result, this will enhance cohesiveness in partnerships and help progress the network channels of communication. Investing the time and effort required to understand the community’s needs and engaging in regional planning efforts will ultimately help to facilitate multijurisdictional projects and partnerships.

Once relationships are established, municipalities should try to secure networking and maintain the lines of communication within regional partnerships and within known funded and prospective-funded initiatives. This is often accomplished through relationship building and establishing social capital by sharing opportunities with eligible entities. A municipality and its partners would benefit from conducting activities in collaboration with funded entities to support cohesiveness across programs, services, and infrastructure. This might include holding monthly meetings or assigning a designated contact through whom funded entities may communicate regularly with the municipality.

While a specific funding opportunity may provide a motivation of the initial development of this sort of relationship between a city and a potential partner, working to keep the relationship active beyond a single grant application could serve to advance the strategic goals of both the city and the partner. In particular, an ongoing relationship could serve as the basis for future efforts to braid funds from multiple sources in order to meet identified needs. 

Last Updated: July 8, 2022

What are the best ways to access my municipality’s expertise and capacity for managing a grant or how best to partner with other entities?

There is no one-size-fits-all in municipal grant administration. Each municipality is unique in its structure and capacity. It is also important to consider political will and interest.

A municipality’s ability to properly manage a grant requires the application of sound management principles including budgeting, communication, data collection, internal control, and reporting.  As part of the decision to seek out grant funding, municipalities must evaluate the status of their compliance infrastructure to determine their ability to manage any grants that they do receive.  Regardless of the funding source, grant awards are made with the understanding that funding will be used for intended purposes and in a responsible and accountable manner, which is a responsibility that not all municipalities have expertise with or capacity to handle. In particular, when the federal government is the funding source, municipalities may face significant compliance challenges related to the complexities of the Uniform Guidance (2 CFR Part 200 et seq.) or program-specific regulations and can generally expect to be held accountable through the Single Audit process. Additionally, certain private funding sources can have requirements that are just as complicated as federal requirements. As such, municipalities must develop strategies to build or reinforce their compliance infrastructure and general management capacity. These strategies include maximizing internal resources, partnering with other entities, and acquiring new support.

Maximizing Internal Resources

One of the best ways to understand a municipality’s expertise is to perform a situational analysis of the existing organization and structure to identify strengths, weaknesses, and needs, including staffing. This includes assessing the overall structure for managing grants, personnel involvement, and expertise, along with assessing existing grant programs and administration.  

Based on the results of the initial assessment, a municipality can establish teams and working groups to convene for specific purposes and phases in grant administration or project management. Having assessed strengths and areas of need during the initial phase, teams and working groups can be readily activated based on skill and capacity. This grant team can work collectively to share knowledge and cultivate opportunities and capacity. This process may uncover many resources that already exist within the organization that could be adapted to form a part of a larger compliance infrastructure. For example, a city’s housing department may already have developed detailed tools for risk assessment and subrecipient monitoring that are used in connection with administering U.S. Department of Housing and Urban Development Community Development Block Grant funds, or an emergency management department may have detailed time tracking protocols developed for tracking post-disaster Federal Emergency Management Agency Public Assistance, both of which could be more widely applied to general grants management.

Partnering with Other Entities

Once a municipality has examined its own internal expertise, capacity, and grant funding needs and has sought engagement, the municipality may then be able to reach out to other potential partners to serve as co-recipients or subrecipients or to provide technical assistance. This external relationship building could be accomplished by examining previous grant partnerships or engagements, or it could look to organizations that have similar goals. There is considerable grant management experience in the private sector, as well as in entities such as regional planning or transportation organizations. Even larger cities or state agencies could be potential partners for grant management. Identifying these potential partners prior to seeking funding is critical, because the grant application and budget will need to reflect the work that these partners will do to administer the program. In the case where an award has already been made and a partner is being brought in for administration (or a subrecipient is being contemplated), a revision to the award may need to be negotiated with the funding entity. For federal awards, careful consideration of the Uniform Guidance regulations (and any supplemental program-specific rules) related to direct and indirect administrative costs is critical when creating a program budget that includes support for grant administration.

Acquiring New Support

Many municipalities face unprecedented funding opportunities, including the CARES Act, American Rescue Plan Act (“ARP”) and Infrastructure Investment and Jobs Act (“IIJA”), so it may be necessary to acquire additional capacity to support grant management activities. This can be accomplished by including management costs in a proposed budget for a grant application and then contracting for services once the grant is awarded. However, this approach fails to provide the municipality with support for development of a holistic grant management program and development of a robust compliance infrastructure. In addition, the municipality would be without the services of that contractor for the application and contracting phases of that grant. Through the ARP’s Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), municipalities can access funding to enhance public sector capacity, including hiring internal grants management staff and/or contracting for consulting support for grants management. There are several CSLFRF eligibilities that would permit these expenditures, depending on the exact nature of the scope of the work being performed. While CSLFRF funds are temporary, using these funds in this way would allow municipalities to build significant capacity for grants management that could persist well beyond the CSLFRF period of performance.

Last Updated: July 7, 2022

Can my municipality use American Rescue Plan funds to pay civil service exam fees for specific populations?

It may be possible for municipalities to use Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) established through the American Rescue Plan Act of 2021 (“ARP”) to pay for civil service exam fees for certain populations.

CSLFRF provides a variety of opportunities to help mitigate the negative economic effects of the COVID-19 pandemic.[1] The use of CSLFRF for civil service exam fees for specific populations is not directly addressed within the U.S. Department of the Treasury’s (“Treasury”) Final Rule. However, it is likely that CSLFRF may be used in this regard, assuming certain conditions are met.

A municipality may presume that households that have experienced unemployment have faced negative economic impacts from the COVID-19 pandemic.[2] The Final Rule identifies assistance to unemployed workers as an enumerated eligible use.[3]

Treasury further clarified that eligible costs include:

Assistance to individuals who want and are available for work, including job training, public jobs programs and fairs, support for childcare and transportation to and from a jobsite or interview, incentives for newly employed workers, subsidized employment, grants to hire underserved workers, assistance to unemployed individuals to start small businesses & development of job and workforce training centers.[4]

Based on the above guidance, a municipality may be able to use CSLFRF to reimburse the cost of civil service exam fees for individuals affected by the pandemic as part of a job training or public jobs program, or as an incentive program for newly employed workers through which workers were reimbursed for civil service exam fees.

There is also a possibility of eligibility under the third statutory eligible use category for the provision of government services up to the amount of revenue lost due to the pandemic.[5] If covering the cost of civil service exam fees was part of a previously provided government service by the municipality, then utilizing CSLFRF in this regard may also be eligible.

Treasury states:

Government services generally include any service traditionally provided by a government, including construction of roads and other infrastructure, provision of public safety and other services, and health and educational services. Funds spent under government services are subject to streamlined reporting and compliance requirements.[6]

As an example, if a municipality were to provide educational services as a traditional government function, specifically by structuring a program that assists in covering required civil service exam fees as a condition of public service employment, then there may be some degree of eligibility per the Treasury guidance described above.

Per Treasury’s guidance, this utilization of funds might be considered direct assistance, which “may take the form of loans, grants, in-kind assistance, technical assistance, or other services that respond to the negative economic impacts of the COVID-19 public health emergency.”[7] Treasury further outlines that municipalities must adhere to all applicable local, state, and federal laws and regulations.[8]

Last Updated: July 8, 2022

How can municipalities access Building Resilient Infrastructure and Communities (“BRIC”) set-asides?

Building Resilient Infrastructure and Communities ("BRIC") funds are awarded by the Federal Emergency Management Agency (“FEMA”) to eligible applicants, which include states, tribes, and territories. Other types of entities wishing to apply for BRIC funds must submit sub-applications to their respective state, tribe, or territory to receive “pass-through” funding. These states, tribes, and territories must review, prioritize, and approve each sub-application and include them in their grant application to FEMA.

Applicants often determine mitigation priorities, which are generally aligned with the program's visions and goals. Contacting the State Hazard Mitigation Officer (SHMO), or equivalent representative for a respective Tribal government (federally recognized) or territory can be helpful in choosing which hazards pose the greatest threat and determining the best strategy for mitigation. From these broad mitigation strategies, sub applicants weigh public interest while targeting specific mitigation projects beneficial to their communities.

...For local governments, please contact your State Hazard Mitigation Officer to learn about the applicant’s priorities, deadlines, and additional requirements.[1]

Depending on the grant year’s Notice of Funding Opportunity (“NOFO”), set-aside priorities may be ranked by FEMA or by each individual state, tribe, or territory. An applicant’s hazard mitigation priorities are sometimes outlined in their Hazard Mitigation Administrative Plan and typically influence how applicants allocate their set-aside funding. Funding may be extremely competitive depending on the desired project type and number of applications received.

BRIC NOFOs are typically posted on the www.grants.gov website during the fall of each year. FEMA may decide to utilize features from a past year’s NOFO or redesign any portion of the grant requirements not specified in the statute. For information on past year’s NOFOs, see BRIC Notice of Funding Opportunity | FEMA.gov.[2]

Last Updated: July 8, 2022

Can an application for funding originally submitted via RAISE be repackaged and submitted via the Reconnecting Communities Pilot Program?

The Rebuilding American Infrastructure with Sustainability and Equity (“RAISE”) Grant Program (specifically, the Local and Regional Project Assistance Program) is a competitive grant program significantly expanded in the Infrastructure Investment and Jobs Act (“IIJA”).[1] The 2022 RAISE Notice of Funding Opportunity (“NOFO”) closed on April 14, 2022.[2] The Reconnecting Communities Pilot Program, also established under the IIJA, is a competitive grant program that will open for applications in Summer 2022.[3]

A review of the IIJA text, the program descriptions as listed in the Bipartisan Infrastructure Law Guidebook, the RAISE NOFO and amendment, and other program-specific guidance that has been published by the U.S. Department of Transportation does not explicitly indicate any prohibition on submitting applications for funding to both programs for a project that is substantially similar in nature.

However, while both programs offer various types of funding opportunities, including planning and construction grants, prospective grant applicants should note crucial differences in eligible uses, federal cost sharing restrictions, and other eligibility requirements. For example, RAISE permits various state, regional, and local governments to apply for both planning and construction projects,[4] while the Reconnecting Communities Pilot Program requires the applicant for construction projects to be the owner of the transportation facility in question, usually the state or local government agency with jurisdiction over transportation.[5]

For additional information on the similarities and differences in characteristics between the respective programs, refer to the IIJA Guidebook,[6] or original IIJA text.

Last Updated: July 10, 2022

My municipality is using CSLFRF for capital projects involving non-public facilities. How can we ensure that the projects remain affordable, or in their current state, long-term, without developers/business owners selling the property short-term?

It is incumbent on recipients and subrecipients to ensure that funding is used for eligible purposes. One mechanism to ensure compliance is to include enforceable contract or grant provisions in any subawards for capital projects that mandate how the funds may be used; for example, provisions that require the funds to be used for affordable housing or long-term projects.

The American Rescue Plan Act of 2021 (“ARP”) provides Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to alleviate the negative public health and economic impacts of the COVID-19 public health emergency on communities. The U.S. Department of the Treasury’s (“Treasury”) Final Rule clarifies that, under the Public Health and Negative Economic Impacts eligible use category,

recipients may use funds for capital expenditures that support an eligible COVID-19 public health or economic response. For example, recipients may build certain affordable housing, and other projects consistent with the requirements in this final rule and the Supplementary Information.[1]

Per the Final Rule, eligible uses include: “Development, repair, and operation of affordable housing and services or programs to increase long-term housing security.”[2]

Further, Treasury’s Frequently Asked Questions (“FAQ”) #2.14 includes guidance regarding the development of affordable housing:

Under the final rule, “Development, repair, and operation of affordable housing and

services or programs to increase long-term housing security” is an enumerated eligible use to respond to impacts of the pandemic on households and communities.

Affordable housing projects must be responsive and proportional to the harm identified. This test may be met by affordable housing development projects—which may involve large expenditures and capital investments—if the developments increase the supply of long-term affordable housing for low-income households. While there may be less costly (or non-capital) alternatives to affordable housing development, a comprehensive response to the widespread housing challenges underscored by the pandemic will require the production of additional affordable homes, and targeted affordable housing development is a cost-effective and proportional response to this need.[3]

This FAQ underscores the need to focus on long-term solutions to affordable housing needs in the use of the CSLFRF assistance. 

CSLFRF award recipients and subrecipients should pay particular attention to the Guidance on Recipient Compliance and Reporting Responsibilities (“Reporting Guidance”) to ensure that uses of funds are eligible and comply with all applicable statutes at each stage of project development:

The Award Terms and Conditions of the SLFRF financial assistance agreement sets forth the compliance obligations for recipients pursuant to the SLFRF statute, the Uniform Guidance, Treasury’s final rule, and applicable federal laws and regulations. Recipients should ensure they remain in compliance with all Award Terms and Conditions.[4]

For housing development projects executed through CSLFRF to be considered and remain eligible, they must continually meet the program terms and conditions set forth in the Final Rule, including increasing the long-term supply of affordable housing. The Reporting Guidance further details compliance requirements for award recipients and subrecipients as follows:

As outlined in the Uniform Guidance at 2 CFR Part 200, Subpart E regarding Cost Principles, allowable costs are based on the premise that a recipient is responsible for the effective administration of Federal awards, application of sound management practices, and administration of Federal funds in a manner consistent with the program objectives and terms and conditions of the award.[5]

In addition to affordable housing, Treasury’s enumerated eligible uses include rehabilitation of commercial properties, storefront improvements, and façade improvements for disproportionally impacted small business.[6] Municipalities may also fund capital expenditures beyond those enumerated by Treasury if supported by a written justification.[7]

In summary, recipients and subrecipients of CSLFRF assistance should ensure that the federal funding for capital expenditures is used to address the negative effects of the public health emergency. Therefore, it is incumbent on recipients to include enforceable contract or grant provisions that mandate the funds be used to address these long-term negative effects and that prohibit the beneficiary from disposing of the property in the short term.

Last Updated: June 15, 2022

If money is given to a nonprofit as beneficiary to compensate for lost income and the nonprofit spends that money on capital projects, must a municipality report on the expenditures as capital projects?

The U.S. Department of the Treasury (“Treasury”) does not explicitly require recipients or subrecipients that provide Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) direct assistance to beneficiaries to report on the beneficiaries’ use of funds—including capital expenditures—as beneficiaries are not subject to the monitoring and reporting requirements associated with CSLFRF.[1] Treasury provides recipients “substantial discretion”[2] regarding the distribution and use of CSLFRF.

Treasury has provided helpful guidance regarding the applicability of the CSLFRF reporting requirements to recipients’ respective subrecipients and beneficiaries. In particular, Treasury has explicitly stated:

The Uniform Guidance definitions for both subaward and subrecipient specify that payments to individuals or entities that are direct beneficiaries of a federal award are not considered subrecipients. The final rule adopts this definition of a beneficiary and outlines that households, communities, small businesses, nonprofits, and impacted industries are all potential beneficiaries of projects carried out with [C]SLFRF funds. Beneficiaries are not subject to the requirements placed on subrecipients in the Uniform Guidance, including audit pursuant to the Single Audit Act and 2 CFR Part 200, Subpart F or subrecipient reporting requirements.[3]

Moreover, Treasury has outlined reporting required of recipients and subrecipients in FAQ #1.20 of its Project and Expenditure Report User Guide in “Appendix 1 – Frequently Asked Questions.”[4] The reporting requirements outlined by Treasury’s Compliance and Reporting Guidance[5] only explicitly apply to recipients and subrecipients. Regarding the compliance and reporting requirements for CSLFRF and subrecipient monitoring, Treasury has explicitly stated:

[C]SLFRF recipients that are pass-through entities as described under 2 CFR 200.1 are required to manage and monitor their subrecipients to ensure compliance with requirements of the [C]SLFRF award pursuant to 2 CFR 200.332 regarding requirements for pass-through entities.

First, your organization must clearly identify to the subrecipient:

1.  that the award is a subaward of [C]SLFRF funds;
2. any and all compliance requirements for use of [C]SLFRF funds; and
3. any and all reporting requirements for expenditures of [C]SLFRF funds.[6]

A recipient or subrecipient must follow capital expenditure compliance and reporting requirements if the recipient’s or its respective subrecipient’s use of CSLFRF includes capital expenditures.[7] However, these requirements do not explicitly apply to beneficiaries.

Instead, Treasury provides that:

In addition to determining a given project’s eligibility, recipients are also responsible for determining subrecipient’s or beneficiaries’ eligibility, and must monitor subrecipients’ use of [C]SLFRF award funds.[8]

Accordingly, when providing CSLFRF funding to a beneficiary, recipients must ensure that:

1. the use of funds is eligible to provide to a beneficiary; and
2. the beneficiary is eligible to receive the funds.

For example, when a municipality provides direct assistance to a nonprofit organization, it must ensure that it addresses a public health or negative economic impact that the nonprofit has experienced due to the pandemic.[9] It also must ensure that there is a “reasonable connection between the assistance provided and an impact on the beneficiaries.”[10] Treasury goes on to provide the following scenario:

For example, if a nonprofit organization experienced impacts like decreased revenues or increased costs (e.g., through reduced contributions or uncompensated increases in service need), and a recipient provides funds to address that impact, then it is providing direct assistance to the nonprofit as a beneficiary under Subsection (c)(1) of Sections 602 and 603. Direct assistance may take the form of loans, grants, in-kind assistance, technical assistance, or other services that respond to the negative economic impacts of the COVID-19 public health emergency.[11]

Once the recipient or its subrecipient has provided this direct assistance to a nonprofit beneficiary to address the economic impact it has experienced, the beneficiary’s use of this direct assistance is not explicitly required to be monitored and reported to Treasury.

Last Updated: June 6, 2022

Are cities required to verify lawful presence when ARP funds are used for programs providing services to community members?

The American Rescue Plan Act of 2021 (“ARP”) provides Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to alleviate the negative public health and economic impacts of the COVID-19 public health emergency on communities. The U.S. Department of the Treasury’s (“Treasury”) Final Rule identifies populations considered to have been “impacted” or “disproportionately impacted” by the pandemic, allowing CSLFRF recipients to respond to a broad set of households and entities without requiring additional analysis.[1]

The Final Rule does not specify whether a municipality must verify the lawful presence of community members being served by CSLFRF-funded programs. Treasury allows for the broad use of CSLFRF funds, with a great deal of flexibility, as long as the funds are used to address the negative public health and economic impact of the COVID-19 public health emergency.

Although the Final Rule does not explicitly state that municipalities must verify recipients’ lawful presence, if a program serves members of an impacted or disproportionately impacted community and responds to the negative economic impact of the COVID-19 public health emergency, it is likely an allowable use of funds.

Last Updated: May 30, 2022

Do the federal procurement provisions in the Uniform Guidance apply to uses funded by interest earned on CSLFRF funds?

The U.S. Department of the Treasury (“Treasury”) administers the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”). According to Treasury’s CSLFRF Frequently Asked Questions document (“FAQ”):

[C]SLFRF payments made by Treasury to states, territories, and the District of Columbia are not subject to the requirement of the Cash Management Improvement Act and Treasury’s implementing regulations at 31 CFR Part 205 to remit interest to Treasury. [C]SLFRF payments made by Treasury to local governments and Tribes are not subject to the requirements of 2 CFR 200.305(b)(8) and (9) to maintain [C]SLFRF award funds in an interest-bearing account and remit interest earned above $500 on such payments to Treasury. Moreover, interest earned on [C]SLFRF award funds is not subject to program restrictions. Finally, states may retain interest on payments made by Treasury to the state for distribution to NEUs that is earned before funds are distributed to NEUs, provided that the state adheres to the statutory requirements and Treasury’s guidance regarding the distribution of funds to NEUs. Such interest is also not subject to program restrictions.[1]

In addition, Treasury’s CSLFRF Compliance and Reporting Guidance states:

[C]SLFRF payments made to recipients are not subject to the requirements of the Cash Management Improvement Act and Treasury’s implementing regulations at 31 CFR Part 205 or 2 CFR 200.305(b)(8)-(9). As such, recipients can place funds in interest-bearing accounts, do not need to remit interest to Treasury, and are not limited to using that interest for eligible uses under the [C]SLFRF award.[2]

However, Treasury has not advised as to whether or not the federal procurement provisions under 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the “Uniform Guidance”) apply to interest earned on CSLFRF award funds.  Furthermore, the federal procurement provisions outlined in the Uniform Guidance at 2 CFR Part 200.317 indicate that “all other non-Federal entities, including subrecipients of a State, must comply with procurement standards in §200.318 to 200.327.”[3]

Accordingly, to ensure compliance with local laws, rules, and regulations, municipalities should consider applying the Uniform Guidance’s federal procurement provisions, as well as their municipal guidelines on procurement requirements, to uses funded by interest earned on CSLFRF.

Last Updated: May 16, 2022

Can cities retroactively shift expenditures from ERA1 to ERA2? How can cities avoid recapture of ERA2 funds moving forward? If cities have been reallocated ERA funds initially allocated to states, may they request an expenditure extension?

The Emergency Rental Assistance Program (“ERA”) provides funding “to assist households that are unable to pay rent or utilities.”[1] There are two separately established ERA programs, each with its own respective award terms and conditions and associated guidance. The U.S. Department of the Treasury’s (“Treasury”) ERA webpage states:

Two separate programs have been established: ERA1 provides up to $25 billion under the Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020, and ERA2 provides up to $21.55 billion under the American Rescue Plan Act of 2021, which was enacted on March 11, 2021.[2]

1. Can municipalities retroactively shift expenditures from ERA1 to ERA2?

Treasury does not provide explicit guidance on shifting expenditures between ERA1 and ERA2. Treasury notes that:

While there are some differences in eligibility between ERA1 and ERA2, the eligibility requirements are very similar, and Treasury is seeking to implement ERA2 consistently with ERA1, to the extent possible, to reduce administrative burdens for grantees.[3]

Municipalities must comply with the respective funding source’s award terms and conditions. The ERA1 award terms and conditions can be found here, whereas the ERA2 award terms and conditions can be found here. Municipalities can reference Treasury’s provided reporting guidance on ERA (located here) for further guidance on expenditures.

There is no guidance from Treasury explicitly restricting retroactive accounting changes. Thus, the shifting of expenditures from ERA1 to ERA2 is likely allowable, assuming the municipality in question ensures it complies with all relevant terms and conditions. If the  municipality were to make such adjustments, the municipality should segregate ERA1 and ERA2 fiscal controls pertaining to ledger and voucher adjustments. Moreover, adjusted expenditures should pertain to the same reporting period and proper supporting documentation, including a memorandum to file explaining the adjustments made and how these adjustments are in compliance with program terms and conditions, is recommended to substantiate any adjustments made.

2. How can municipalities avoid recapture of ERA2 funds moving forward?

Municipalities must abide by Treasury’s “Emergency Rental Assistance Under the American Rescue Plan Act of 2021 (ERA2) Reallocation Guidance” to diminish the possibility of ERA2 fund recapture.[4] Municipalities should submit timely quarterly reports, monitor their expenditure ratio, and draw down funds in a timely manner.[5] Moreover, Treasury’s “Summary of Emergency Rental Assistance (ERA2) Reallocation Guidance”[6] states:

• The grantee can avoid reallocation if, based on data submitted to Treasury reflecting expenditures as of April 30, it has achieved an expenditure ratio [of] at least 20%. Otherwise, excess funds will be calculated based on the difference between its reported expenditures as of March 31 and the amount of expenditure needed to reach the 20% threshold.
• Further, grantees will avoid reallocation if they have made voluntary reallocations of ERA1 funds in at least the amount of 25% of their ERA1 allocation.[7]
• After the first assessment, Treasury will assess each grantee's expenditure ratio on a quarterly basis. The expenditure ratio threshold used to calculate excess funds will rise by 20 percentage points each quarter (for example, the threshold as of June 30 will be 40 percent). As of December 31, 2022, any unpaid funds may be designated as excess funds and be reallocated, helping to ensure that funding does not go unused and is appropriately used in the emergency context. Under the ERA2 statute, funds paid to a grantee (based on the grantee having achieved 75% obligation of funds disbursed to date) may not be reallocated.[8]

For further information on how Treasury calculates the ERA2 expenditure ratio, Treasury states that it:

will periodically determine a Grantee's "ERA2 Expenditure Ratio," which will be calculated as (i) the sum of the Grantee's total expenditure of ERA2 funds on assistance to eligible households and eligible costs for housing stability services (for purposes of the Quarter 3 and Quarter 4 assessments) divided by (ii) an amount equal to 75% (for purposes of the Quarter 1 and 2 Assessments, described below) or 85% (for subsequent assessments) of the Grantee's total ERA2 allocations, including any amounts reallocated to or from the Grantee, as of the date of the assessment. The 75% and 85% allowances both reflect the ERA2 statute's limitation that a maximum of 15% of the total amount of ERA2 funds paid to a Grantee may be used for administrative costs, and the 75% allowance also reflects the ability under the statute for Grantees to use up to 10% of their ERA2 funds to provide housing stability services. Treasury encourages Grantees to use ERA2 funds for such housing stability services.[9]

Additionally, Treasury notes:

For any Grantee that does not draw its first tranche of ERA2 funds, comprising 40% of its initial ERA2 allocation, by April 30, 2022, Treasury may deem all undrawn funds exceeding 40% of the Grantee's initial ERA2 allocation to be excess funds subject to reallocation.[10]

Regarding excess funds, Treasury further clarifies:

As noted above, excess funds are funds that Treasury determines are available for reallocation. For each Grantee whose ERA2 Expenditure Ratio is below the then-applicable minimum threshold at the time of the assessment[.]  Treasury will calculate the Grantee's excess funds as the difference between (i) the amount of expenditures needed for the Grantee to achieve the then-applicable minimum threshold at the time of that assessment and (ii) the Grantee's reported total assistance expenditures (i.e., the numerator of the ERA2 Expenditure Ratio calculation). As a result, the amount subject to reallocation will be less for Grantees whose Expenditure Ratios are closer to the minimum threshold.[11]

Lastly, Treasury indicates that:

Notwithstanding anything in this guidance to the contrary, if a Grantee fails to submit a required quarterly report by the applicable deadline, without having received an extension from Treasury, Treasury may deem all undrawn funds exceeding 40% of the Grantee's initial ERA2 allocation to be excess funds subject to reallocation.[12]

3. If municipalities have been reallocated ERA funds initially allocated to states, may they request an expenditure extension?

Under ERA1, Treasury explicitly provides:

Grantees are prohibited from obligating any funds from their initial allocations after the statutory deadline of September 30, 2022. Grantees may, however, request an extension through December 29, 2022 to continue obligating funds received through reallocation. The funding request form described in Section III.A. will enable such extension requests.

After June 30, 2022, Treasury intends to consider whether additional recapture of unobligated funds is appropriate to help ensure that ERA1 funds are used by the statutory deadline.[13]

The ERA1 “Request for Reallocated Funds”[14] form can be found here.

Treasury has not provided explicit guidance on expenditure extensions with respect to ERA2. But, notably, Treasury has indicated that “[t]he American Rescue Plan Act of 2021 requires Treasury to begin reallocating ERA2 funds not yet paid to eligible Grantees on March 31, 2022.”[15] And Treasury states that it “will begin accepting requests from Grantees for reallocated funds after March 31, 2022 on a form to be published by Treasury.”[16]

Last Updated: May 7, 2022