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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]

Last Updated: April 12, 2022

[1] Treas. Reg. 31 CFR Part 35 at 5-6, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[2] Treas. Reg. 31 CFR Part 35 at 6, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf; see also id., at 37-42 (identifying specific programs and factors giving rise to a presumption of disproportionate impact).

[3] Id., at 43-45.

[4] Id., at 45.

[5] Id.

[6] Id., at 148.

[7] Id., at 373.