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Compliance & Reporting, Due Diligence & Fraud Protection

How should cities document use of ARP and other federal funds?

Part I: Basic Documentation Requirements 

There are several requirements for appropriate and accurate reporting with respect to the American Rescue Plan Act of 2021 (“ARP”) for state and local governments. Municipalities must consider reporting requirements in three areas: (i) procurement processes, (ii) written policies, and (iii) documentation, each of which is addressed below. Municipalities should also review the Reporting User Guide[1] and Recovery Plan Template found in the U.S. Department of the Treasury’s (“Treasury”) guidance of August 9, 2021.[2]  

Municipalities may choose to designate representatives to track deadlines, monitor newly-published guidance and regulations, and share those with internal representatives and external stakeholders. Municipalities should also consider local needs when evaluating projects and handling procurement, and must document all expenditures accurately and diligently.

Procurement Processes

First, recipients of federal funding generally should follow the guidance laid out in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the “Super Circular”).[3] The high-level guidance provided by the Super Circular applies to all federal programs. It is applicable along with program-specific documents. In addition, the Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance,[4] updated November 15, 2021, requires recipients to follow Uniform Guidance at 2 CFR 200.317 through 2 CFR 200.327 for procurement standards.

The Federal Emergency Management Agency’s (“FEMA”) “Top 10 Procurement under Grants Mistakes” contains more important guidance. It highlights key risks applicable to all federal grant opportunities.[5]

Treasury’s May 10, 2021 Fact Sheet includes critical principles municipalities must follow. This Fact Sheet contains a brief summary of eligible uses of ARP funds that may guide appropriate activities that may need procurement activities.[6] In addition, Treasury’s Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Frequently Asked Questions (“FAQs”) provides details about eligible uses where procurement may be needed to fulfill delivery of services to a community.[7]

The FEMA Audit-Related Guidance for Entities Receiving FEMA Public Assistance Funds Fact Sheet contains information on appropriate preparatory steps and good practices.[8]

Written Policies

Each municipality should consider employing a written policy that delineates requirements when applying ARP funds to expenditures. In some cases, municipalities may find it prudent to mirror state processes that already follow federal procurement rules. If there are no local standardized or written procurement policies in place, municipalities can look to the state rules to help them access ARP funding; Coronavirus Aid, Relief, and Economic Security (“CARES”) funding; and disaster-related awards such as FEMA Public Assistance (“FEMA PA”) or FEMA Hazard Mitigation Grant Program (“HMPG”) funding, all of which could become necessary in the future.

To facilitate accurate documentation, municipalities should implement a robust policy and/or decision checklists to ensure the expenses meet the definitions of eligible use under the particular grant/award. Designating multiple personnel to participate in the evaluation process using the same criteria provided by each funding type can help ensure that the expenses meet the outlined priorities for each funding stream.

Documentation

Reporting requirements for federal grants have many similarities, such as quarterly expenditure reports and detailed procurement processes as described above. Specific ARP documentation obligations are reported in Treasury’s CSLFRF Interim Final Rule (the “Rule”),[9] the FAQs[10] as previously referenced for eligible use definitions, and the CSLFRF Compliance and Reporting Guidance.[11]

The Compliance and Reporting Guidance describes the three types of reports that must be submitted to Treasury for CSLFRF: Interim Report, Project and Expenditure Report, and the Recovery Plan Performance Report.

  • The Interim Report “is a one-time interim report with expenditures by Expenditure Category covering the period from March 3rd to July 31, 2021, [submitted] by August 31, 2021 or sixty (60) days after first receiving funding if the recipient’s date of award is between July 15, 2021 and October 15, 2021.”[12] The Interim Report is not a requirement for NEUs.
  • The second type of report, the Project and Expenditure Report, is explained in detail to include the different documentation requirements for each expenditure category. Based on the type of entity, the initial Project and Expenditure Report is either due to Treasury by January 31, 2022 and then quarterly or due to Treasury April 30, 2022 and only required annually. [13]  
  • The third type of report is the Recovery Plan Performance Report required for States, U.S. territories, metropolitan cities and counties with a population that exceeds 250,000 residents. “The Recovery Plan will provide the public and Treasury information on the projects recipients are undertaking with program funding and how they are planning to ensure program outcomes are achieved in an effective, efficient, and equitable manner.”[14] The initial Recovery Plan should have been submitted to Treasury by August 31, 2021 or 60 days after receiving funding.

Some additional federal guidance on documentation for ARP funds includes:

  • April 19, 2021, Treasury OIG Coronavirus Relief Fund Prime Recipient Quarterly Grant Solutions Submissions Monitoring and Review Procedures Guide.[15]
  • March 2, 2021, Treasury OIG Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised).[16]
  • July 2, 2020, Treasury OIG Coronavirus Relief Fund Reporting and Record Retention Requirements.[17]
  • December 2020, Treasury Coronavirus Relief Fund Compliance Addendum.[18]

Part II:  Linking COVID-19 Impact to Potential Municipal Projects

The Recovery Plan Performance Report includes a section, Uses of Funds, that describes how the specific needs of the jurisdiction are being addressed. The CSLFRF Compliance and Reporting Guidance explains how this should relate to a recovery from the COVID-19 pandemic and economic impacts.[19] The Compliance and Reporting Guidance also provides required performance indicators and programmatic data for each expenditure category to be included in the Recovery Plan Performance Report. The recipient is given flexibility on additional key performance indicators and how they are presented. “While the initial report will focus heavily on early output goals, recipients must include the related outcome goal for each project and provide updated information on achieving these outcome goals in annual reports.”[20]

Certain uses of ARP funds require a specific connection to the impacts of the COVID-19 pandemic, but FAQ guidance states that “funds made available for the provision of governmental services (to the extent of reduction in revenue) are intended to support direct provision of services to citizens and may allow for activities that conform to the August 9, 2021, Treasury Compliance and Reporting Guide and Recovery Plan Template.[21]

CSLFRF guidance, including the Final Quick Reference Guide, contains information on programmatic eligibility. The section of the Reference Guide entitled “Example Uses of Funds,” lists “[b]ehavorial healthcare services, including mental health or substance abuse treatment, crisis intervention, and related services” as examples of fund usages that support a public health response.[22] In addition, the FAQs describe eligible uses within the health infrastructure and incorporate an expanded definition of medical staff and public health employees[23] as well as public safety projects.[24]

The FAQs expand upon eligible uses of funds relating to social distancing investments for small businesses and non-profits.[25] They discuss the definition of public safety employees[26] and expand upon the housing and equity-focused educational disparities discussed in the Final Quick Reference Guide,[27] as further explained in the FAQs.[28]

For municipal projects that do not have a clear eligible use category that ties to the COVID-19 public health emergency, consult the Treasury Recovery Plan Template Table of Expenses.[29] It is recommended that the municipality seek clarification from Treasury for the program it proposes to implement and wait until the Final Rule is published to initiate programs around that activity.

Last Revised: November 17, 2021

[1] U.S. Department of the Treasury, Treasury’s Portal for Recipient Reporting, State and Local Fiscal Recovery Funds, available at: https://home.treasury.gov/system/files/136/SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf.

[2] U.S. Department of the Treasury, Recovery Plan State and Local Fiscal Recovery Funds 202x Report, available at: https://home.treasury.gov/system/files/136/SLFRF-Recovery-Plan-Performance-Report-Template.docx.

[4] Department of Treasury, Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as of November 15, 2021), available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf

[5] FEMA, “Top Ten Procurement under Grants Mistakes.”, available at: https://www.fema.gov/sites/default/files/2020-08/fema_top-10-mistakes_flyer.pdf.

[6] Department of the Treasury, Fact Sheet: “The Coronavirus State and Local Fiscal Recovery Funds Will Deliver $350 Billion for State, Local, Territorial, and Tribal Governments to Respond to the COVID-19 Emergency and Bring Back Jobs,” May 10, 2021, at 2, available at: https://home.treasury.gov/system/files/136/SLFRP-Fact-Sheet-FINAL1-508A.pdf.

[7] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of November 15, 2021) – Section 2, at 4-13, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[8] FEMA, Audit-Related Guidance for Entities Receiving FEMA Public Assistance Funds (as of April 6, 2021), available at: https://www.fema.gov/sites/default/files/documents/fema_audit-related-guidance-entities-receiving_public-assistance_4-6-2021.pdf.

[10] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of November 15, 2021), available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[11] Department of Treasury Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as of November 15, 2021), available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf

[12] Id., at 14.

[13] Id., at 23.

[14] Department of Treasury Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as of November 15, 2021), at 23, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf

[15] Department of the Treasury Office of Inspector General Coronavirus Relief Fund Prime Recipient Quarterly Grant Solutions Submissions Monitoring and Review Procedure Guide (as of April 19, 2021), at 1-10, available at: https://oig.treasury.gov/sites/oig/files/2021-04/OIG-CA-20-029R.pdf.

[16] Department of the Treasury Office of Inspector General, Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (as of March 2, 2021), at 9-24, available at: https://bfm.sd.gov/covid/OIG_CRF_FAQ_20210302.pdf.

[17] Department of the Treasury Office of Inspector General, Coronavirus Relief Fund Reporting and Record Retention Requirements (as of July 2, 2020), at 1-3, available at: https://oig.treasury.gov/sites/oig/files/2021-01/OIG-CA-20-021.pdf.

[18] Department of the Treasury, Coronavirus Relief Fund Compliance Supplement Addendum, at 21.019-1 – 21.019-7, available at: https://www.whitehouse.gov/wp-content/uploads/2020/12/2020-Compliance-Supplement-Addendum_Final.pdf.

[19] Id., at 27.

[20] Department of Treasury Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as of November 15, 2021), at 27, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf

[21] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of November 15, 2021) - FAQ #4.1, at 19, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf

[22] Department of the Treasury, Coronavirus Relief Fund Reporting and Record Retention Requirements, Quick Reference Guide, at 2, available at: https://home.treasury.gov/system/files/136/SLFRP-Quick-Reference-Guide-FINAL-508a.pdf.

[23] Id., at FAQ #2.14, at 8.

[24] Id., at FAQ #4.8, at 21-24.

[25] Id., at FAQ #2.5, at 5.

[26] Id., at FAQ #2.15, at 9.

[27] Department of the Treasury, Coronavirus Relief Fund Reporting and Record Retention Requirements, Quick Reference Guide, available at: https://home.treasury.gov/system/files/136/SLFRP-Quick-Reference-Guide-FINAL-508a.pdf.

[28] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of November 15, 2021) – FAQ #2.11, at 7, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[29] U.S. Department of the Treasury, Recovery Plan State and Local Fiscal Recovery Funds 202x Report, as of August 9, 2021, at 6-8, available at: https://home.treasury.gov/system/files/136/SLFRF-Recovery-Plan-Performance-Report-Template.docx.