Do the provisions of 2 CFR § 200.316 apply in the case of real property purchased with a federal award, regardless of whether the city or a third party purchases the property?

Yes, a municipality that receives funding pursuant to the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), must, along with any subrecipients of those funds, follow the provisions of Title 2, Code of Federal Regulations, Section 200.316 (“2 CFR § 200.316”), regardless of whether the municipality or a subrecipient uses those funds to purchase real property.

The U.S. Department of the Treasury’s (“Treasury”) Final Rule states:

the Uniform Guidance at 2 C.F.R. 200 applies to capital expenditures unless stated otherwise. Importantly, this includes 2 C.F.R. 200 Subpart D on post-federal award requirements, including property standards pertaining to insurance coverage, real property, and equipment; procurement standards; sub-recipient monitoring and management; and record retention and access.[1]  

Treasury also makes clear that the municipality is responsible for monitoring its subrecipients’ use of CSLFRF funds[2]  and must provide quarterly and annual reports to Treasury.[3]

According to 2 CFR § 200.316:

Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The Federal awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property.[4], [5]

Moreover, according to 2 CFR § 200.311:

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 and 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.[6]

Last Updated: April 25, 2022

May governments utilize funds to hire staff back to pre-pandemic levels? If so, what documentation will be needed to support this spending?

Yes, the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule identifies restoring pre-pandemic employment levels as an eligible use of funds.[1] The Final Rule allows municipalities to choose between two options to use CSLFRF funding to restore pre-pandemic employment. Municipalities cannot use both options.[2] Municipalities must allocate their payroll and/or covered benefit costs by December 31, 2024 and spend such funds by December 31, 2026.[3]

Option One: The first option allows municipalities to hire public sector employees for the same positions that existed on January 27, 2020, but that were unfilled or eliminated as of March 3, 2021.[4]

Option Two: The second option allows municipalities to increase their number of budgeted employees up to 7.5% above pre-pandemic levels. Under this option, municipalities must document and complete the following steps: [5]

• Identify the municipality’s budgeted full-time equivalent (“FTE”) level on January 27, 2020 (“Pre-Pandemic Baseline”).
• Multiply the Pre-Pandemic Baseline by 1.075 (“Adjusted Pre-Pandemic Baseline”).
• Identify the municipality’s budgeted FTE level on March 3, 2021 (“Actual Number of FTEs”).
• Subtract the Actual Number of FTEs from the Adjusted Pre-Pandemic Baseline to determine the number of FTEs that can be covered by CSLFRF funds.

Under option two, municipalities do not have to hire for the same role that existed pre-pandemic. However, the additional FTEs to be funded by CSLFRF must have started working on or after March 31, 2021.[6]

Under either option, municipalities should maintain documentation sufficient to demonstrate that the costs incurred are consistent with the Uniform Guidance’s Cost Principles at 200 CFR Part 200 Subpart E.[7]

Cities will be entering into contracts to spend funds provided pursuant to the American Rescue Plan Act (“ARP”). Will there be specific rules/goals that pertain to the use of those funds with respect to diverse businesses?

One of the statutory uses of the American Rescue Plan Act of 2021 (“ARP”) is to alleviate the negative public health and economic impacts of the COVID-19 public health emergency on communities.[1] The U.S. Department of the Treasury’s (“Treasury”) Final Rule on the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) 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.[2]

In addition to Treasury’s expressly identified populations, a recipient may identify classes of households, communities, small businesses, nonprofits, or populations that have experienced a disproportionate impact based on academic research or government research publications, through analysis of their own data, or through analysis of other existing data sources.[3] To augment their analysis, or when quantitative data is not readily available, a recipient may also consider qualitative sources like resident interviews or feedback from relevant state and local agencies, such as public health departments or social services departments.[4] In either case, a recipient should consider the quality of the research, data, and applicability of analysis to their determination.[5]  

Moreover, the Final Rule indicates the following:

Recipients may also designate a class of small businesses that experienced a negative economic impact or disproportionate negative economic impact (e.g., microbusinesses, small businesses in certain economic sectors), design an intervention to fit the impact, and document that the individual entity is a member of the class.[6]

For example, a recipient could consider designating businesses qualifying as Minority Business Enterprises (“MBE”) within a disproportionately impacted class, so long as the recipient tailors the intervention to address the negative impact of the pandemic and documents the subrecipient as a member of the designated MBE class.

In addition, CSLFRF funds are subject to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200 or “Uniform Guidance”).[7] Under the Uniform Guidance, a recipient must take all necessary affirmative steps to assure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible.[8] The Uniform Guidance also requires recipients to comply with their state and local laws and regulations.[9]

How can municipalities access funds to address deferred maintenance on residential and local roads?

The Infrastructure Investment & Jobs Act (“IIJA”) provides funding to many different grant programs, both old and new.[1] There are 40 different grant programs that support projects pertaining to roads, bridges, and similar major projects.[2] The IIJA includes over $45 billion in new, competitive grant programs to which local governments can apply. Examples include:

• Safe Streets and Roads for All;
• Bridge Investment Program;
• Railroad Crossing Elimination;
• Reconnecting Communities;
• National Culvert Removal, Replacement and Restoration;
• Healthy Streets;
• Rural Surface Transportation Program (“Rural”); and
• National Infrastructure Project Assistance (“Megaprojects” or “MEGA”).[3]

Each of these programs may have different requirements, application periods, and selection criteria.[4] Municipalities should consult subsequent versions of the White House’s Bipartisan Infrastructure Law Guidebook for updates regarding deadlines and application submission information.[5]

The U.S. Department of Transportation requires applicants to submit their applications for the Infrastructure for Rebuilding America (“INFRA”), MEGA, and Rural grant programs, which are now combined under the Multimodal Project Discretionary Grant opportunity, through the web-based platform Grants.gov.[6] Municipalities should consider completing the one-time registration with Grants.gov as early as possible, because the registration process may take two to four weeks to complete.[7]

Additionally, to prepare for the variety of grant opportunities, the White House recommends that municipalities take the following steps:

1. Prioritize your community’s capital needs and develop a project pipeline – taking time to think about the projects previously considered impossible due to lack of funding or regional coordination. This is a once-in-a-generation funding opportunity that will require bold, inclusive thinking;
2. Use the Bipartisan Infrastructure Law Guidebook to identify federal funding streams to target;[8]
3. Ensure all transit, railway, road, highway, and bridge projects are a part of your [metropolitan planning organization]’s Transportation Improvement Plan;
4. Begin mapping sites for electric vehicle and alternative fuel charging stations (if applicable);
5. Inventory and map the lead pipes in your city (if applicable);
6. Work with your state’s broadband agency to ensure your city or region’s needs are appropriately mapped and inventoried; and
7. Establish relationships with the regional offices for key federal agencies, who can help direct you to resources and provide technical assistance.[9]

Last Updated: April 20, 2022

Will National Infrastructure Project Assistance Notice of Funding Opportunities be available for future projects?

The Infrastructure Investment and Jobs Act (“IIJA”) includes funding for the National Infrastructure Project Assistance (“MEGA”) grant program. MEGA is a $5 billion competitive grant program that supports multi-modal, multi-jurisdictional projects of regional or national significance.

The Multimodal Project Discretionary Grant Opportunity (“MPDG”) combined Notice of Funding Opportunity (“NOFO”) will allow applicants to use one application to apply for up to three separate discretionary grants, including MEGA.[1] The deadline for MPDG applications is approaching quickly: applicants must submit MPDG applications by 11:59 p.m. ET on May 23, 2022.[2]

The following are guidelines for applicant and project eligibility under MEGA:

Eligible applicants include:

• (A) a state or a group of states;
• (B) a metropolitan planning organization;
• (C) a unit of local government;
• (D) a political subdivision of a state;
• (E) a special-purpose district or public authority with a transportation function, including a port authority;
• (F) a Tribal government or a consortium of Tribal governments;
• (G) a partnership between Amtrak and one or more entities described in subparagraphs (A) through (F) above; and
• (H) a group of entities described in any subparagraph (A) through (G).[3]

Eligible uses for MEGA-funded projects include highway or bridge projects implemented via:

• the National Multimodal Freight Network under 49 U.S.C. § 701013;
• the National Highway Freight Network under 23 U.S.C. § 167;
• the National Highway System under 23 U.S.C. § 103;
• a freight intermodal (including public ports) or freight rail project that provides a public benefit;
• a railway-highway grade separation or elimination project;
• an intercity passenger rail project; and
• public transportation projects eligible for Federal Transit Administration funding under 49 U.S.C.[4]

Last Updated: April 20, 2022

Can municipalities receive funds to plan or create a sustainable electric vehicle infrastructure?

The Infrastructure Investment and Jobs Act (“IIJA”) provides ~$5 billion under the National Electric Vehicle Infrastructure Formula Program for electric vehicle (“EV”) charging infrastructure programs that provide:[1]

1. nonproprietary charging connectors that meet applicable industry safety standards; and
2. open access to payment methods that are available to all members of the public to ensure secure, convenient, and equal access to the electric vehicle charging infrastructure that shall not be limited by membership to a particular payment provider.[2]

Municipalities should consider working with their states to implement a sustainable EV infrastructure that is eligible for funding under the IIJA.

Municipalities may also apply to the Community Charging and Corridor Charging programs, which are discretionary grant programs authorized by the USDOT, for EV charging infrastructure funding.[3]

Municipalities can consult the USDOT’s Grant Programs website[4] and A Toolkit for Planning and Funding Rural Electric Mobility Infrastructure[5] for additional information on grant opportunities, resources, and partnerships available to build out EV infrastructure programs.

Last Updated: April 20, 2022

What are some factors that tend to establish a project as qualified for MEGA funding? Can projects receive funding from multiple grant sources, such as MEGA and RAISE?

The Infrastructure Investment and Jobs Act (“IIJA”) will provide numerous opportunities for applicants seeking to fund infrastructure projects, including via the National Infrastructure Project Assistance program (“Megaprojects” or “MEGA”). MEGA funds “support large, complex projects that are difficult to fund by other means and likely to generate national or regional economic, mobility, or safety benefits.”[1] To date, the U.S. Department of Transportation (“USDOT”) has identified at least seven different MEGA-eligible project types:

1. A highway or bridge project on the National Multimodal Freight Network [under 49 U.S.C. § 701013];
2. A highway or bridge project on the National Highway Freight Network [under 23 U.S.C. § 167];
3. A highway or bridge project on the National Highway System [under 23 U.S.C. § 103];
4. A freight intermodal (including public ports) or freight rail project that provides public benefit;
5. A railway highway grade separation or elimination project;
6. An intercity passenger rail project; or
7. A public transportation project that is eligible [for] assistance under Chapter 53 of title 49 or is a part of any of the project types described above.[2]

Additionally, USDOT has established five specific requirements for MEGA projects to date:

1. The project is likely to generate national or regional economic, mobility, or safety benefits;
2. The project is in significant need of federal funding;
3. The project will be cost effective;
4. With respect to related non-Federal financial commitments, one or more stable and dependable funding or financing sources are available to construct, maintain, and operate the project, and to cover cost increases; and
5. The applicant has, or will have, sufficient legal, financial, and technical capacity to carry out the project.[3]

For competitive grant programs under the IIJA, whether projects can utilize multiple funding sources depends on the eligibility requirements of a respective grant program.

Under the Multimodal Project Discretionary Grant Opportunity notice, which includes MEGA,[4] Infrastructure for Rebuilding America (“INFRA”),[5] and Rural Surface Transportation Program (“Rural”)[6] grant programs, applicants should submit one application to be considered for all three programs.[7] The federal cost share for MEGA and INFRA grant programs is 60%, with total allowable federal assistance up to 80% of the project cost:[8]

Federal Cost Share:

• MEGA: 60%
• INFRA: 60%
• RURAL: 80% (100% for certain projects)

Total Federal Assistance Allowed:

• MEGA: 80%
• INFRA: 80%
• RURAL: 80% (100% for certain projects)

Further, although the IIJA has not provided its own definition of duplication of benefits, the Federal Register notes:At the time of this writing, the government has not promulgated a specific policy expressly prohibiting the receipt of funding from multiple grant sources for IIJA programs.[9] Recipients should refer to the policy and guidance issued with the respective notice of funding opportunity to confirm if a grant program allows other federal assistance to cover project costs.

Federal agencies providing disaster assistance under the Act or under their own authorities triggered by the Act, shall cooperate to prevent and rectify duplication of benefits, according to the general policy guidance of the Federal Emergency Management Agency.[10]

The Federal Emergency Management Agency’s policy guidance provides that:

Section 312 of the Stafford Act prohibits all federal agencies from duplicating benefits for disaster relief. Multiple agencies having authority to expend funds for the same purpose is not, by itself, a duplication of benefits under Section 312. However, all federal agencies are prohibited by Section 312 from paying [state, local, Tribal, and territorial government entities, “SLTTs”)] SLTTs for the same work twice.[11]

As a good practice, and consistent with similar projects utilizing federal assistance, recipients of IIJA program grants should perform thorough due diligence to prevent duplication of benefits between funding sources for the same project costs. Applicants should also be aware of caps on total federal participation for a given project (e.g., no greater than 80% for certain highway projects).[12] Municipalities should also track the details of their costs. Finally, recipients of IIJA grants should document within their project plans any instance where they intend to apply funding from multiple grants or funding sources to cover all project costs.

Last Updated: April 20, 2022

Is IIJA funding available to train and prepare the workforce necessary for IIJA projects?

The Infrastructure Investment and Jobs Act (“IIJA”) introduces over 350 funding programs across more than a dozen federal departments and agencies.[1]

In many circumstances, IIJA funding is available to train and prepare the workforce for infrastructure-related work and IIJA projects. The White House has identified workforce development as an eligible use for the following funding opportunities:

1. On-the-Job Training Program;[2]
2. Consolidated Rail Infrastructure and Safety Improvement Grants;[3]
3. Low or No Emission (Bus) Grants;[4]
4. Public Transportation Technical Assistance and Workforce Development;[5]
5. Solar Improvement Research & Development;[6]
6. Energy Auditor Training Grant Program;[7]
7. Building Resilient Infrastructure and Communities (Robert T. Stafford Act Section 203(i));[8]
8. Federal Wildland Firefighter Salaries and Expenses;[9]
9. Department of Interior Wildfire Management – Preparedness;[10]
10. Preplanning Fire Response Workshops and Workforce Training;[11]
11. Tribal Broadband Connectivity Program;[12]
12. State Digital Equity Competitive Grant;[13]
13. Appalachian Regional Commission Funds;[14]
14. Appalachian Area Development: Allocations to ARC States;[15]
15. Appalachian Area Development: Regional Multistate Initiative;[16]
16. Appalachian Area Development: Community Capacity Initiative;[17]
17. Delta Regional Authority;[18]
18. Denali Commission: Workforce Development;[19]
19. Denali Commission: Village Infrastructure Protection ;[20]
20. Training & Education;[21] and
21. Technical Assistance and Workforce Development Grants.[22]

Municipalities can reference the White House Bipartisan Infrastructure Law Guidebook for more information on these funding opportunities.[23]

It is important to note that these programs have different eligible recipients, and their funding mechanisms may vary. The White House Guidebook Data Set can help municipalities identify funding opportunities based on specific criteria.[24]

Is a municipality required to go through a competitive procurement process in order to transfer CSLFRF funds to its economic development agency (a 501(c)(3)) for ARP-eligible programming?

Transfers of CSLFRF to Nonprofit Subrecipients

A municipality is not required to competitively bid transfers of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to a 501(c)(3). The U.S. Department of the Treasury’s (“Treasury”) Final Rule recognizes that a nonprofit may be a subrecipient providing services on behalf of the recipient and states:

[T]he Final Rule maintains [] the ability for the recipient to transfer, e.g., via grant or contract, funds to nonprofit entities to carry out an eligible use on behalf of the recipient. Treasury notes that recipients may award [C]SLFRF to many different types of organizations to carry out eligible uses of funds and serve beneficiaries on behalf of a recipient government (e.g., assisting in a vaccination campaign, operating a job training program, developing affordable housing). When a recipient provides funds to an organization to carry out eligible uses of funds and serve beneficiaries, the organization becomes a subrecipient. In this case, a nonprofit need not have experienced a negative economic impact in order to serve as a subrecipient.

In the context of [C]SLFRF, nonprofits of all types may be subrecipients. Treasury is not restricting the types of nonprofits that can operate as subrecipients, rather allowing recipients to decide what form best meets the needs of their community. Therefore, a “nonprofit” that is acting as subrecipient could include, but is not limited to, a nonprofit as that term is defined in paragraph (17) of section 401 of the McKinney-Vento Homeless Assistance [Act].

Recipients may transfer funds to subrecipients in several ways, including advance payments and on a reimbursement basis. Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries.[1]

The Final Rule includes 501(c)(3) organizations within its definition of nonprofits, thereby encompassing a wide range of organizations with varying charitable or public service-oriented goals (e.g., housing, food assistance, job training).[2]

Since a nonprofit entity that receives a transfer from a recipient is a subrecipient, the Uniform Guidance requires that the nonprofit adhere to the same requirements as a recipient.[3] Specifically, the Final Rule states:

• nonprofit subrecipient may only receive funds to carry out an eligible use of [C]SLFRF funds and must comply with any reporting and compliance requirements. Note that recipients are ultimately responsible for reporting information to Treasury and must collect any necessary information from their subrecipients to complete required reporting.[4] However, if a municipality provides funds to a “contractor” instead of a subrecipient, a competitive bid process is generally required as outlined in the Uniform Guidance CFR §200.319.[5] In addition, the Uniform Guidance CFR §200.331 provides information to help determine whether an entity is a subrecipient or contractor:
  • Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity:
    • Determines who is eligible to receive what Federal assistance;
    • Has its performance measured in relation to whether objectives of a Federal program were met;
    • Has responsibility for programmatic decision-making;
    • Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
    • In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.
  • Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity's own use and creates a procurement relationship with the contractor. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor:
    • Provides the goods and services within normal business operations;
    • Provides similar goods or services to many different purchasers;
    • Normally operates in a competitive environment;
    • Provides goods or services that are ancillary to the operation of the Federal program; and
    • Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.[6]

The United States Department of Justice, Office of Justice Programs, has prepared a checklist that can be used by recipients to help determine whether the subrecipient or contractor classification applies.[7]

Eligible Use Limitations

It is important to note that Treasury does restrict the ability of a municipality to fund economic development with CSLFRF in some cases.[8] Municipalities are not permitted to use CSLFRF for general economic or workplace development; funding must be used to address the negative economic impacts of the COVID-19 pandemic, not simply to improve a municipality’s overall business climate.[9] The Final Rule further describes this restriction starting on page 218:

In the final rule, Treasury maintains the interim final rule’s approach that general economic development or workforce development, meaning activities that do not respond to negative economic impacts of the pandemic and rather seek to more generally enhance the jurisdiction’s business climate, would generally not be eligible under this eligible use category. As noted above, to identify an eligible use of funds under this category, a recipient must identify a beneficiary or class of beneficiaries that experienced a harm or impact due to the pandemic, and eligible uses of funds must be reasonably designed to respond to the harm, benefit the beneficiaries that experienced it, and be related and reasonably proportional to that harm or impact…

[R]ecipients should analyze eligible uses based on the beneficiary of the assistance, and recipients may not provide assistance to small businesses or impacted industries that did not experience a negative economic impact. Provision of assistance to a business that did not experience a negative economic impact, under the theory that such assistance would generally grow the economy and therefore enhance opportunities for workers, would not be an eligible use, because such assistance is not reasonably designed to impact individuals or classes that have been identified as having experienced a negative economic impact. In other words, there is not a reasonable connection between the assistance provided and an impact on the beneficiaries. Such an activity would be attenuated from and thus not reasonably designed to benefit the households that experienced the negative economic impact.[10]

Thus, it is crucial that a municipality considering such a transfer carefully review the Final Rule and assess whether the proposed use of funds by an economic development agency complies with all Treasury guidance.

Further, the Uniform Guidance CFR §200.332 outlines requirements for subawards to any subrecipient. All recipients must:

1. Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward [].
2. 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 described in paragraphs (d) and (e)[].
3. Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in § 200.208.
4. 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.[]. 
5. Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals [].
6. Verify that every subrecipient is audited as required by Subpart F [] when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501.
7. Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records.
8. Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 [] and in program regulations.[11]

Example Jurisdictions That Have Transferred CSLFRF Without Competitive Bids

Below are four examples where ARP funds have been provided by local governments to nonprofits via mechanisms that do not include a competitive bidding process.

1. Buffalo, New York

Buffalo has allocated $1.2 million in ARP funds to the Buffalo Urban Development Corporation (“BUDC”), a 501(c)(3) nonprofit. See here for Buffalo’s Spending Proposal, which states in part:

$1.2 million will be allocated for BUDC. Over the course of the pandemic, BUDC provided small business assistance to private entities impacted by the public health safety measures intended to slow the spread of COVID-19. It also continued to provide critical economic development planning work necessary to ensure a speedy recovery for people once people got vaccinated and the economy began to resume its upwards growth trend. This funding will cover the operational costs BUDC incurred as a result of this work and help maintain this higher level of service during the course of our recovery period.[12]

Buffalo will award funds to the BUDC through a Memorandum of Understanding.[13]

2. Clallam County, Washington

Clallam County’s Chief Financial Officer approved the granting of $3 million in ARP funds to the Clallam Economic Development Council (“EDC”), a 501(c)(6) nonprofit, in order to administer a program focused on assisting small businesses and nonprofits.

The draft Subrecipient Agreement entered into by Clallam County and EDC can be found at this link. This draft Subrecipient Agreement captures the terms of the granting of funds to EDC, including allowable uses of funds, the manner in which funds will be released to EDC, and rules and regulations that must be followed during the administration of funds.[14]

3. Syracuse, New York

Syracuse will provide $4 million in ARP funds to the Syracuse Economic Development Corporation (“SEDCO”), a 501(c)(3) nonprofit. SEDCO is a city-affiliated nonprofit economic development organization that provided grants to businesses during the COVID-19 pandemic. SEDCO will use the ARP funds to “[r]ecapitalize SEDCO for COVID-19 relief programs and enable support for commercial redevelopment projects, with special focus on economically underinvested neighborhoods and minority owned businesses.”[15]

4. Pittsburgh, Pennsylvania

Pittsburgh transferred $2.5 million to OnePGH Fund, a 501(c)(3) nonprofit, to provide guaranteed monthly income payments to low-income residents.[16]

Are there reporting requirements associated with the transportation infrastructure funding?

The White House indicated that it would, in conjunction with the U.S. Office of Management and Budget (“OMB”), release formal guidance to agencies in January 2022 on a number of topics including financial oversight and reporting.[1] However, at the time of this writing, the White House has yet to release this guidance.

The Infrastructure Investment and Jobs Act (the “IIJA”) does provide some general reporting requirements associated with the transportation funding outlined below. These requirements are for the federal government, but municipalities should document and be prepared to provide such data to the U.S. Department of Transportation or other federal agencies for reporting purposes upon request. To the extent that the federal government issues reporting requirements to IIJA funding recipients, the requirements will likely differ among programs. In anticipation of further guidance from the government, municipalities should review the IIJA closely for specific requirements that trigger documentation and reporting to comply with any federal reporting requests.

Some good practices municipalities may wish to keep in mind relating to reporting requirements include documenting the use of funds and key decisions made by leadership on how IIJA-funded programs will be designed, implemented, and reviewed for compliance with the terms and conditions of the funding source. Municipalities should also document policies and procedures regarding procurement and contracting, the methodology for evaluating and awarding IIJA funds to subrecipients, financial controls, documentation management systems and processes, and evaluations of potential conflicts of interest.

The reporting requirements outlined for the federal government are:

Annual Reporting by the U.S. Department of Transportation

Per Section 11319 – Annual Report of the IIJA, the U.S. Department of Transportation must submit an annual report to Congress on all projects or activities carried out with U.S. Department of Transportation funds that are more than five years behind schedule, or for which the total amount spent on the project is at least $1 billion more than the original cost estimate. The Annual Report should include:

1. a brief description of the covered project. A covered project means a project or activity carried out with funds provided by the U.S. Department of Transportation, including a project carried out under title 23 or 49.
   1. the purpose of the covered project;
   2. each location in which the covered project is carried out;
   3. the contract or award number of the covered project, if applicable;
   4. the year in which the covered project was initiated;
   5. the Federal share of the total cost of the covered project; and
   6. each primary contractor, subcontractor, grant recipient, and subgrantee recipient of the covered project;
2. an explanation of any change to the original scope of the covered project, including by the addition or narrowing of the initial requirements of the covered project;
3. the original expected date for completion of the covered project;
4. the current expected date for completion of the covered project;
5. the original cost estimate for the covered project, as adjusted to reflect increases in the Consumer Price Index for All Urban Consumers, as published by the Bureau of Labor Statistics;
6. the current cost estimate for the covered project, as adjusted to reflect increases in the Consumer Price Index for All Urban Consumers, as published by the Bureau of Labor Statistics;
7. an explanation for a delay in completion, or an increase in the original cost estimate, for the covered project, including, where applicable, any impact of insufficient or delayed appropriations; and
8. the amount of and rationale for any award, incentive fee, or other type of bonus, if any, awarded for the covered project.[2]

Periodic Updates to Highway-Rail Crossing Reports and Plans

In Section 22403 – Periodic Updates to Highway-Rail Crossing Reports and Plans, the IIJA states that:

(a) Reports – Not later than 4 years after the date by which States are required to submit State highway-rail grade crossing action plans under section 11401(b) of the Fixing America’s Surface Transportation Act (49 U.S.C. 22907 note), the Administrator of the Federal Railroad Administration, in consultation with the Administrator of the Federal Highway Administration, shall submit a report to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure of the House of Representatives that summarizes the State high-rail grade crossing action plans, including:

1. an analysis and evaluation of each State railway-highway crossings program under section 130 of title 23, including:
   1. compliance with section 11401 of the Fixing America’s Surface Transportation Act and section 130(g) of title 23; and
   2. the specific strategies identified by each State to improve safety at highway-rail grade crossings, including crossing with multiple accidents or incidents;
2. the progress of each State in implementing its State highway-rail grade crossings action plan;
3. the number of highway-rail grade crossing projects undertaken pursuant to section 130 of title 23, including the distribution of such projects by cost range, road system, nature of treatment, and subsequent accident experience at improved locations;
4. which States are not in compliance with their schedule of projects under section 130(d) of title 23; and
5. any recommendations for future implementation of the railway-highway crossings program under section 130 of title 23.

(b) Updates – Not later than 5 years after the submission of the report required under subsection (a), the Administrator of the Federal Railroad Administration, in consultation with the Administrator of the Federal Highway Administration, shall include:

1. update the report based on the State annual reports submitted pursuant to section 130(g) of title 23 and any other information obtained by, or available to, the Administrator of the Federal Railroad Administration; and
2. submit the updated report to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure of the House of Representatives.[3]

Quarterly Reports on Positive Train Control System Performance

Section 22414 of the IIJA outlines Quarterly Reports on Positive Train Control (“PTC”) System Performance and states that:

[e]ach host railroad subject to this section or subpart I or part 236 of title 49, Code of Federal Regulations, shall electronically submit to the Secretary of Transportation a Report of PTC system performance on form FRA F 6180.152, which shall be submitted on or before the applicable due date . . . , which shall be separated by the host railroad, each applicable tenant railroad, and each positive train control governed track segment, consistent with the railroad’s positive train control Implementation Plan . . . .[4]

Each report submitted shall include:

1. The number of positive train control system initialization failures, disaggregated by the number of initialization failures for which the source or cause was the onboard subsystem, the wayside subsystem, the communications subsystem, the back-office subsystem, or a non-positive train control component;
2. The number of positive train control system cut outs, disaggregated by each component listed in subparagraph (A) that was the source or cause of such cut outs;
3. The number of positive train control system malfunctions, disaggregated by each component listed in subparagraph (A) that was the source or cause of such malfunctions;
4. The number of enforcements by the positive train control system;
5. The number of enforcements by the positive train control system in which it is reasonable to assume an accident or incident was prevented;
6. The number of scheduled attempts at initialization of the positive train control system;
7. The number of train miles governed by the positive train control system; and
8. A summary of any actions the host railroad and its tenant railroads are taking to reduce the frequency and rate of initialization failures, cut outs, and malfunctions, such as any actions to correct or eliminate systemic issues and specific problems.
9. Due Dates
   1. Each host railroad shall electronically submit the report requested no later than the following:
      1. April 30, for the period from January 1 through March 31;
      2. July 31, for the period from April 1 through June 30;
      3. October 31, for the period from July 1 through September 30; and
      4. January 31, for the period from October 1 through December 31 of the prior calendar year.
   2. Beginning on the date that is 3 years after the date of enactment of the Passenger Rail Expansion and Rail Safety Act of 2021, the Secretary shall reduce the frequency with which host railroads are required to submit the report not less frequently than twice per year, unless the Secretary:
      1. determines that quarterly reporting is in the public interest; and
      2. publishes a justification for such determination in the Federal Register.[5]

Federal Railroad Administration Reporting Requirements

Section 22421 – Federal Railroad Administration Reporting Requirements of the IIJA indicates for safety reporting that:

Not later than 1 year after the date of enactment of this Act, and annually thereafter for the following 4 years, the Secretary shall update Special Study Block 49 on Form FRA F 6180.54 (Rail Equipment Accident/Incident Report) to collect, with respect to trains involved in accidents…

1. The number of cars and length of the involved trains; and
2. The number of crew members who were aboard a controlling locomotive involved in an accident at the time of such accident.[6]

Workforce Diversity Report

Section 25019(b) – Workforce Diversity Report of the IIJA requires the U.S. Department of Transportation to submit a Workforce Diversity Report to Congress followed by a model plan for states, local governments, and private sector entities to use. The report and model plan must address methods to enhance pre-apprenticeship programs, improve transportation workforce diversity, and encourage subrecipients to establish outreach and support programs.[7]

Buy America

Section 11513 – Buy America of the IIJA indicates that Buy America waivers for Title 23 projects require public notice of proposed waivers, public comment, and annual reporting to Congress.[8]

Reporting requirements will differ among programs. In anticipation of further guidance from the White House and OMB on reporting on financial oversight and reporting, labor, Made in America/Buy America, environmental and the like, municipalities should review the IIJA closely for major requirements that trigger documenting and reporting to ensure compliance with any federal reporting requests.

Are there good practices to mitigate the risk of fraud, waste, and abuse on infrastructure projects?

Municipalities are responsible for ensuring that federal funds are used for their intended purposes and should assess and establish internal controls to provide reasonable assurance regarding the:

• effectiveness and efficiency of operations;
• reliability of reporting for internal and external use; and
• compliance with applicable laws and regulations.[1]

Recipients must establish and enforce strong control systems and increase awareness among relevant people of common fraud schemes.[2] Assessing internal controls is not only a good practice in grant management, but also something that the federal government expects municipalities to do. Specifically, 2 CFR § 200.303, “Internal Controls,” states that:   

The non-federal entity must . . . [e]stablish and maintain effective 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.[3]

In preparation for work that will be carried out by local and state governments as a result of the passage of the Infrastructure Investment and Jobs Act (“IIJA”),[4] the Coalition for Integrity (the “Coalition”)[5] prepared a report titled “Oversight of Infrastructure Spending.”[6] The report noted that:

Because of the scope, complexity, and cost of infrastructure legislation, clear and robust oversight provisions are critical to ensure that infrastructure projects are carried out in a faithful and fiscally responsible manner. Without such oversight, infrastructure projects at the federal, state and local level risk falling victim to waste, fraud and other abuses.[7]

The report identified and provided details on four common corruption schemes found in infrastructure projects:

1. Bribery, which generally involves payments made to gain an advantage or to avoid a disadvantage.
2. Fraud Schemes, which tend to involve theft by deceit.
3. Collusion Schemes, which typically implicate agreements between two or more parties to achieve an improper purpose—in the infrastructure context, usually to prevent competition or otherwise secure an unfair advantage.
4. Coercion Schemes, which often involve the use of intimidation to improperly influence another’s actions.[8]

The Coalition recommended the following oversight measures at the federal, state, and local levels, which may be helpful to municipalities:

• Formalize collaboration amongst Inspectors General. For municipalities, collaboration can take place with local Inspectors General, the Comptroller, or other relevant oversight agencies.
• Provide adequate funding for oversight and enforcement functions. Robust oversight and enforcement measures cannot succeed without adequate funding.
• Conduct up-front risk assessments so that issues can be identified and resolved before funds are distributed.
• Provide “real time” oversight of federally-funded programs. In addition to upfront risk assessments, real time oversight, such as proactive audits, is important to provide ongoing assessments of infrastructure projects.
• Protect whistleblowers. Create provisions that protect whistleblowers who come forward with information relating to misuse of funds or other non-compliance activities.[9]

The U.S. Chief Financial Officers Council and the U.S. Department of the Treasury published a document titled “Program Integrity: The Antifraud Playbook,” that provides guidance on creating an antifraud program that may be helpful to municipalities in establishing oversight mechanisms for infrastructure projects.[10] The playbook may also help municipalities assess and strengthen the current state of their antifraud program. The playbook focuses on four critical phases to the establishment of a successful program:

1. Create a Culture—Build a culture that is conducive to both integrity efforts and furthering antifraud measures at your agency.
2. Identify and Assess—Identify your fraud risks and develop a path forward for executing, repeating, and expanding a fraud risk assessment that is unique and customizable for your agency.
3. Prevent and Detect—Develop or strengthen antifraud controls that mitigate your highest risk areas and start or advance your fraud analytics program.
4. Insight into Actions—Use available information, either within your agency, or from external sources, and turn that insight into actionable tasks.[11]

Each municipality should develop policies and procedures that address the unique risks of fraud to which they are exposed, taking into consideration their plans for using funds received under the IIJA.

Lessons learned from federal funds provided to New York after the September 11^th attacks.

A Homeland Security Subcommittee on Management, Intelligence, and Oversight (“the Subcommittee”) issued a report after it reviewed the oversight of federal aid provided to New York after the 9/11 terrorist attacks. The report, “An Examination of Federal 9/11 Assistance to New York: Lessons Learned in Preventing Waste, Fraud, Abuse, and Lax Management,”[12] reviewed approximately $20 billion in federal funds provided to New York City to clean up and rebuild transportation, communication, and utility infrastructure after the 9/11 attacks.[13] The Subcommittee identified ten good practices used in the aftermath of the September 11^th attacks, and urged their use in future events:

• private integrity monitors (“IMs”) (explained below);
• database searches to screen contractors;
• mandatory regular audits;
• dedicated temporary oversight office;
• full-time Independent Coordination Agency that prevents fraud;
• temporary Fraud Prevention Task Force;
• fraud awareness training;
• fraud tip lines;
• controlled electronic access to disaster sites (construction sites); and
• contractor employee screening.[14]

New York City utilized private IMs, also known as Independent Private Sector Inspectors General (“IPSIGs”),[15] to monitor the field activities and financial records of the construction management companies hired to assist with the cleanup of the World Trade Center. Working with government agencies, the IPSIGs used forensic auditing, surveillance, interviews, informants, background checks, and other investigative techniques to screen subcontractors and ensure they were using the appropriate equipment and workers, accurately billing the government, and hauling debris to the appropriate destinations.[16]

The World Trade Center Integrity Compliance Monitorship Program was effective in large part because it was preventive. By embedding private integrity monitors with the individual contractors, the monitoring program prevented fraud and abuse by contractors that were unscrupulous or careless in their accounting. In addition, the monitoring ensured proper record keeping and established internal controls, which created a culture of compliance within each contractor’s operations and ensured accountability to New York City.[17]

The Subcommittee report captured how valuable a visible oversight mechanism can be on an infrastructure project when they provided details of a recorded conversation that took place between two organized crime associates. It was reported that the two individuals lamented how the IMs at the World Trade Center were making it impossible for anyone to overbill New York City using the usual scams.[18]

Further details on the role IMs played in monitoring and deterring fraud, and on the $47 million in cost recoveries attributed to the IMs, can be found throughout the report, including on the Subcommittee’s discussion of “Best practice: Private integrity monitoring caught and deterred fraud.”[19]

What are the competitive grant opportunities available to municipalities for transportation infrastructure?

The Infrastructure Investment and Jobs Act (the “IIJA”), referred to by the White House as the Bipartisan Infrastructure Law (the “BIL”) and signed by President Biden on November 15, 2021, allocates funds to various sectors of transportation infrastructure in both competitive and formula grant programs. These sectors include:

• Roads, bridges, and major projects;
• Passenger and freight rail;
• Public transportation;
• Airports and federal aviation administration facilities;
• Ports and waterways;
• Safety; and,
• Electric vehicles, buses, and ferries.[1]

The White House has published the BIL Guidebook (the "Guidebook") to aid applicants in identifying the appropriate program, whether competitive or formula grant, for various infrastructure project types.[2] The Guidebook discusses the funding amount, period of availability, funding mechanism, eligible recipients, program description, eligible uses, and next milestone for each available program. Using this framework, municipalities can find the most suitable opportunity for their application.

Another available resource is The White House’s Fact Sheet on Competitive Infrastructure Funding Opportunities for Local Governments.[3] This document, published in January 2022, lists 25 competitive infrastructure funding opportunities for local governments broken down into the following categories:

• Transportation;
• Climate, energy, and environment; and,
• Broadband, cyber, and other programs.

The White House Infrastructure Implementation Coordinator has identified a list of programs that are either currently available or will be available soon. Ten of the programs fall under the transportation category. Most include links to the agency websites where applicants can find a Notice of Funding Opportunity (“NOFO”) if one has been released, or other information pertaining to the program.[4] These programs include:

• Rebuilding American Infrastructure Sustainably and Equitably (“RAISE”) Grants;[5]
• Port Infrastructure Development Program Grants;[6]
• Bus & Bus Facilities Competitive Grants;[7]
• National Infrastructure Project Assistance (“Mega”);[8]
• Infrastructure for Rebuilding America (“INFRA”) Grants;[9]
• Safe Streets and Roads for All - Applications are expected to open in May 2022;
• Charging and Fueling Infrastructure Grants - The U.S. Department of Transportation is seeking comments on program design for Charging and Fueling Infrastructure Grants at the cited link;[10]
• Clean School Bus Program - Applications for funding will be made available in Spring 2022 on the EPA’s Clean School Bus Program website;[11]
• Reconnecting Communities - Applications will open in the second quarter of 2022; and,
• Rural Surface Transportation (“Rural”) Grants.[12]

Three of these programs are included in the Multimodal Projects Discretionary Grant opportunity to reduce the burden on state and local applicants. This allows applicants to apply for any combination of these three programs with one application as explained in the NOFO summary, which can be found on the first page of the combined NOFO.[13] The three programs are the Mega, INFRA, and Rural.