Can ARP or other federal funds be used to hire a third-party vendor to help ensure proper documentation, tracking, and accountability?

ARP or other federal funds may be used to hire a third-party vendor to help ensure proper documentation, tracking, and accountability. The U.S. Department of Treasury (“Treasury”) has made clear that American Rescue Plan (“ARP”) funds can be used to hire a third-party vendor to help ensure proper documentation, tracking, and accountability. As of June 8, 2021, Treasury’s frequently asked questions (“FAQs”) regarding the Coronavirus Local Fiscal Recovery Funds (“CLFRF”) noted that “[r]ecipients may use funds for administering the [CLFRF] program, including costs of consultants to support effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements.[1]

The FAQs further note that “[r]ecipients may use funds to cover the portion of payroll and benefits of employees corresponding to time spent on administrative work necessary due to the COVID–19 public health emergency and its negative economic impacts. This includes, but is not limited to, costs related to disbursing payments of Fiscal Recovery Funds and managing new grant programs established using Fiscal Recovery Funds.”^[2]

In addition, the Code of Federal Regulations permits recipients to provide administrative services for a one-time program by individuals or entities other than municipal employees.^[3] Municipalities may also consult state and local procurement standards which dictate the utilization of federal grant allowances.  Each municipality should consider consulting the specific Award Terms and Conditions[4] which it will receive from Treasury. Item 6 of that document, titled “Administrative Costs,” authorizes the municipality to use funds provided to cover both direct and indirect administrative costs. 

Finally, Treasury has indicated that it will provide additional guidance. If the municipality determines that it can procure third-party vendors, it should follow its local procurement code which must meet or exceed the standards outlined in the Federal Uniform Guidance, 2 CFR Part 200.[5]

Last Updated: June 9, 2021