How can a municipality partner with local agencies that have received ARP funding?

It may be advisable for municipalities to partner with local agencies and Community-Based Organizations to maximize funding streams. If such a partnership is formed, each recipient of funds must do its own diligence to ensure compliance with all federal and applicable guidance. It is important to ensure that proper controls are in place to avoid duplication of benefits (DOB); proper documentation of compliance with procurement policies; and delineate between primary recipients, subrecipients, and contractors.

Grantees are required to avoid DOB.^[1] Municipalities should consider conducting a DOB analysis before receiving or providing any federally funded assistance. This analysis can be completed by developing an overall budget that demonstrates the funding need for the activity and the funding reasonably anticipated from all sources. The budget should include all federal and non-federal funding, partnership arrangements, and in-kind donations. Municipalities must of course comply with the specific requirements and restrictions of each funding source. If the budget shows that the need is greater than the funding sources available to the municipality for that purpose, there is no DOB.

Additional steps to avoid DOB include but are not limited to requiring beneficiaries to: (i) provide a self-certification indicating that they have not received a duplicative benefit; and (ii) fill out a questionnaire listing potentially duplicative assistance that they have already received or reasonably anticipate receiving. Among others, all parties must comply with 2 CFR §200.318, which details general procurement standards to which recipients must adhere when utilizing federal funds:^[2]

a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward…

b) Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.

It is essential that all parties follow relevant procurement policies and have all documentation in writing, appropriately filed for future access.

Municipalities that partner with local agencies must also determine if such an agency will operate as a contractor or a subrecipient. The regulatory process for determining which designation is appropriate is outlined in 2 CFR §200.331,^[3] which states:

a) 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. See definition for Subaward in § 200.1 of this part. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity:

1. Determines who is eligible to receive what Federal assistance;
2. Has its performance measured in relation to whether objectives of a Federal program were met;
3. Has responsibility for programmatic decision-making;
4. Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
5. 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.

b) 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. See the definition of contract in § 200.1 of this part. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor:

1. Provides the goods and services within normal business operations;
2. Provides similar goods or services to many different purchasers;
3. Normally operates in a competitive environment
4. Provides goods or services that are ancillary to the operation of the Federal program; and
5. Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.

There are many potential funding streams within the American Rescue Plan (ARP) Act through which agencies could receive funding, and recipients should use funding for its intended purposes. For example, when utilizing funding from the Coronavirus Local Fiscal Recovery Fund (CLFRF) and entering into partnerships with local agencies, it is necessary for metropolitan cities to ensure that any programmatic activities are compliant with the allocated use of funds outlined in Section 603 (c)(1)(a-d) of the ARP, which states that acceptable uses of funds are:^[4]

a) to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;

b) to respond to workers performing essential work during the COVID–19 public health emergency by providing premium pay to eligible workers of the metropolitan city, nonentitlement unit of local government, or county that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work;

c) for the provision of government services to the extent of the reduction in revenue of such metropolitan city, nonentitlement unit of local government, or county due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, nonentitlement unit of local government, or county prior to the emergency; or

d) to make necessary investments in water, sewer, or broadband infrastructure.

Ultimately, it is the responsibility of the prime recipient of federal funds to determine if a partnership will be formed between the prime recipient and a local or community based agency, what the partnership will look like, and what contingencies are associated with the agreement. The prime recipient is ultimately responsible for monitoring subrecipients and contractors to ensure they are maintaining compliance with requirements for use of federal funds^.[5]

Last Revised: May 4, 2021