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COVID-19 Federal Assistance e311

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Due Diligence & Fraud Protection

What are some of my city’s obligations and responsibilities to prevent fraud related to ARP funds?

Municipalities are responsible for ensuring that they and their subgrantees use federal funds provided under the American Rescue Plan Act of 2021 (“ARP”) for their intended purposes. Recipients of ARP funds should establish internal controls designed to provide reasonable assurance of compliance (by both themselves and any subgrantees) with applicable laws and regulations and with the terms of the federal awards.[1] Recipients must also safeguard protected personally identifiable information and other sensitive information.[2]

Federal funds may be at risk for several types of fraud, including embezzlement, bribery, and false statements. Recipients that establish and enforce strong control systems and increase awareness of common fraud schemes may reduce the risk of fraud.[3]

The U.S. Department of the Treasury (“Treasury”) has provided resources to help recipients understand their responsibilities to prevent fraud and abuse, including guidelines set forth in the Coronavirus State and Local Fiscal Recovery Fund (“CSLFRF”) Final Rule.[4] Most notably, Treasury has released the Compliance and Reporting Guidance to assist recipients with CSLFRF reporting requirements, compliance, and deadlines.[5] To clarify how and what to report, Treasury released the Project and Expenditure Report User Guide on January 24, 2022, which includes a section on Frequently Asked Questions (“FAQs”).[6]

Each recipient should develop policies and procedures that address the risks of fraud to which they are exposed, taking into consideration the municipality’s plans for using funds received under the ARP. Important resources include:

Last Revised: March 31, 2022

[1] 2 CFR 200.303, Internal Controls, available at: https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200#200.303.

[2] Id.

[3] U.S. Department of Justice, Office of the Inspector General, Grant Fraud Awareness, available at: https://oig.justice.gov/sites/default/files/2020-02/GrantFraudHandout.pdf.

[5] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as of February 28, 2022), Version: 3.0, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[6] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds Project and Expenditure Report User Guide (as of January 24, 2022), Version 1.1, available at: https://home.treasury.gov/system/files/136/Project-and-Expenditure-Report-User-Guide.pdf.

[8] U.S. Chief Financial Officers Council, Program Integrity: The Antifraud Playbook, available at: https://www.cfo.gov/wp-content/uploads/2018/10/Interactive-Treasury-Playbook.pdf.