COVID Federal Assistance e311

Helping cities claim and retain federal funding for recovery and response efforts.

Billions of dollars in federal funding have been made available—including through the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan (ARP)—to support COVID response and recovery in cities. The processes for claiming and retaining this federal funding are complex, difficult to navigate, and evolving. To successfully access and retain this funding, cities must understand the process and regulations for applying for funding, documenting expenses, and receiving reimbursement.

The COVID Federal Assistance e311 Program, a collaboration between Bloomberg Philanthropies and the U.S. Conference of Mayors, provides cities with expert assistance to help obtain and retain federal funding for efforts related to COVID response and recovery—including vaccine distribution, public health and safety staff, testing and contact tracing, utility supports, PPE, and more.

The e311 platform provides cities access to a range of resources related to the federal reimbursement process, including relevant updates from federal agencies, issue-specific briefs, frequently asked questions and lessons learned by cities, and links to relevant information, templates and tools.

Who is the program for?

Select cities were invited to submit specific technical questions and receive direct expert guidance to help navigate the federal reimbursement process and claim available funding.

How does it work?

Submit your inquiries related to the federal reimbursement process and receive a concise, easy-to-understand answer from our team of experts within days. 

Is there more?

The Q&A will be updated regularly and participating cities will soon have access to a peer-to-peer learning community to share knowledge and best practices.

Ask Our Experts

This is a growing library of timely, relevant, and needed insights from our experts. Still have questions?

American Rescue Plan (ARP) | General

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What can cities use ARP funds for, broadly speaking? How can my municipality determine how much money we are eligible for?

Some of the uses of ARP funds include covering lost revenue (during the pandemic, compared to the prior full fiscal year), addressing negative economic impact of COVID-19, and making necessary investments in water, sewer, or broadband infrastructure.   How much money a municipality is eligible for will depend on whether the municipality is a “metropolitan city” or a “non-entitlement unit of local government” as defined by the by the Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(4-5)).[1]

The ARP provides that the amounts allocated to each metropolitan city will be consistent with the formula under section 106(b) of the Housing and Community Development Act of 1974 (42 U.S.C. 5306(b)).[2] For non-entitlement cities, the law indicates that States shall distribute funding proportionately between the total population of all areas that are non-metropolitan cities by the total State population.[3] The total amount distributed to a non-entitlement unit of local government under this paragraph may not exceed the amount equal to 75 percent of the most recent budget for the non-entitlement unit of local government as of January 27, 2020.[4] The House Committee on the Budget released initial estimates which are subject to change. These estimates can be found in the House Committee on Oversight and Reform’s February 12, 2021 Press Release.[5] It bears emphasis that these estimates are initial and are subject to change: final distributions will be announced by the US Treasury.

 

[1] The term ‘metropolitan city’ is defined in section 102(a)(4) of the Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(4)) and includes cities that relinquish or defer their status as a metropolitan city for purposes of receiving allocations under section 106 of such Act (42 U.S.C. 5306) for fiscal year 2021. The term ‘nonentitlement unit of local government’ means a ‘city’, as that term is defined in section 102(a)(5) of the Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(5))), that is not a metropolitan city.

[2] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(1)(B))

[3] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(2)(B))

[4] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(1)(C)(iii))

[5] https://oversight.house.gov/news/press-releases/oversight-committee-passes-long-awaited-350-billion-aid-package-to-help-states

What steps should my municipality consider in developing a plan for use of the ARP funds?

While the needs of every municipality may differ as well as the stages of response and recovery differ, cities can consider the following non-exhaustive steps in developing a plan for use of ARP funds:

  • Conduct a comprehensive capacity assessment and unmet needs analysis;
  • Form a cross-sector recovery oversight committee;
  • Engage the served community;
  • Assess and catalog available funding to prioritize needs; and
  • Develop a short and long-term recovery strategy.

Can you outline some specific steps and best practices a municipality could consider taking prior to applying for funds from the ARP?

Below are a few non-exhaustive steps municipalities can take to prepare for the distribution of funds in advance of formal guidance: 

1). Assess your government’s potential uses for ARP funds:

  • Complete an Unmet Needs Assessment / Gap Analysis – Municipalities can consider identifying unmet needs in current COVID-19 response and recovery operations. Identify COVID-19 response and recovery costs that exceed operational budgets that cannot be covered through additional funding sources provided through previous COVID-19 legislation or FEMA Public Assistance. While the bill does specify that costs must exceed your current operational budgets, this recommendation is based on guidance distributed from previous COVID-19 legislation[1] and will allow governments to identify a preliminary conservative estimate for outstanding needs.
  • Identify Capital Improvement Priorities – Costs for water, sewer, and broadband infrastructure are included as allowable uses within the ARP.[2] Municipalities can consider identifying existing capital plans that could be expedited through ARP funding and would benefit the community’s recovery from the COVID-19 public health emergency.
  • Address Budget Impacts Through Revenue Loss Reimbursement – Municipalities can consider identifying anticipated loss of revenue projections that ARP funds can be applied towards. While the US Treasury has not released specific guidance on how governments should calculate loss of revenue for ARP fiscal recovery funds, funds may be used for the purpose of offsetting lost revenue.[3] In anticipation of specific guidance from the Treasury Department specifically addressing ARP, in preparation, municipalities can consider guidance previously released under the Higher Education Emergency Relief Fund or Provider Relief Fund programs that could be consulted as municipalities begin to build out potential revenue forecasting scenarios; however, such guidance ultimately may not be directly applicable to these scenarios.
  • Assess and catalog available funding to prioritize needs - State, Local, Tribal, and Territorial governments can identify all available funding to create a strategy that defines when and how funds should be used, from most to least restrictive, to maximize all resources. Short-term and long-term fiscal impact of how the funds are used may also be considered. Determining whether their fund deployment strategy will influence their credit rating, ability to finance new projects, and ability to refinance existing debt may help in bolstering the community's long term economic resiliency.

2). Engage stakeholders to identify priorities and additional unmet needs:

  • Coordinate with community partners - If your municipality currently works with community partners to respond to the COVID-19 public health emergency, you can reach out to receive additional feedback and strategic direction to identify ways they can support the community through ongoing recovery. ARP funding may be shared with subrecipients responding to the COVID-19 public health emergency, for both new and existing programs.[4]
  • Consider public engagement opportunities – Consider holding a public hearing to gain feedback from residents on ways to best serve your community in responding to and recovering from the COVID-19 pandemic.

3). Prepare to take Potential Certification Steps:

  • Certification for metropolitan cities – At this time, the ARP bill does not clearly identify a certification or application process required for metropolitan cities as direct recipients of the funds, although the Secretary of the Treasury has the authority to require one.[5] It is likely that the Secretary will release additional information on a certification process through the department’s official guidance.
  • Certification for non-entitlement cities - Non entitlement cities are subject to rules and regulations of their State and are expected to receive guidance and payment from their State within 30 days of the State’s receipt of ARP funds.[6]

[1]  Federal Registrar / Vol. 86, No. 10 / Friday, January 15, 2021.

[2] American Rescue Plan Act (HR 1319 Subtitle M Section 603(c)(1)(D)).

[3] American Rescue Plan Act (HR 1319 Subtitle M Section 603(c)(1)(C)).

[4] American Rescue Plan Act (HR 1319 Subtitle M Section 603(c)(1)(A)).

[5] American Rescue Plan Act (HR 1319 Subtitle M Section 603(d)(1)).

[6] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(2)(C)(ii)(I)).

What are the differences between ARP and FEMA Public Assistance (PA) funding? What can my municipality do to decide which funding is the best fit?

The FEMA Public Assistance (PA) program provides federal funding to help communities respond to and recover from federally declared disasters. COVID-19 related FEMA PA funding is limited to costs for Emergency Protective Measures (FEMA Category B) and operates on a reimbursement basis. Reimbursement amounts are based on actual incurred costs for eligible scopes of work rather than an allocation formula. Applicants apply through their respective state, tribal or territorial jurisdictions. Eligible work includes increasing medical capacity, non-congregate sheltering, and emergency feeding distribution, from the beginning of the pandemic in January 2020 to Sept. 30, 2021.[1] These costs may be reimbursed based on a 100% federal cost share.[2]  Eligible activities have been expanded generally to allow for reimbursement of costs used to support the safe re-opening and operation of eligible facilities, including schools, child-care facilities, healthcare facilities, non-congregate shelters, domestic violence shelters, transit systems, and other eligible activities.[3]

For additional information on the FEMA PA program, see:

The American Rescue Plan (ARP) allocated $1.9 trillion to a broad range of agencies and funds targeted toward individuals and households, states, territories, local and tribal governments, education, childcare, businesses, and others. Each fund has a distinct legislative intent and legal requirements that address the specific requirements of allowable fund use. The largest and most flexible of the funds available to municipalities is the Coronavirus Local Fiscal Recovery Fund (CLFRF), appropriated to the U.S. Treasury. The CLFRF funds are allocated to counties and cities based largely on population size and will be disbursed directly from the U.S. Treasury to metropolitan cities[4]. Nonentitlement cities will receive CLFRF funds through their respective state.[5] These funds are flexible in their use and remain available until December 31, 2024 for eligible expenses. Eligible expenses may include, but are not limited to, costs related to responding to the COVID-19 public health emergency, the negative economic impacts of the pandemic, and the provision of key government services as needed to cover the decline in cities’ revenues as a result of the pandemic (American Rescue Plan Act § 603.c).[6] 

The Treasury Department is expected to publish additional guidance on the administration of the ARP’s funds on or before May 11, 2021.  This guidance may assist municipalities in determining which federal funding source to rely on for the municipality’s eligible program or project.  As a general matter, when faced with a choice between multiple funding options, municipalities can start the selection process by evaluating the needs of the community— including assessing current finances—and understanding the allowable use of funds for the respective sources. There are many useful and informative summaries that can provide a survey of funds and their allowable uses as a starting point.  A few are linked below:

Before making a final determination as to the best funding source, municipalities should consider conducting a detailed analysis to determine which fund best fits a given project’s cost, timeline, and use category. Municipalities should rely on either internal or external individuals who have the appropriate expertise to assist them in determining which funds apply to their need and navigate a community-specific strategy for maximizing use of available funds.

As with all federal aid programs, municipalities must take care to not duplicate any benefits provided by other funding sources.

 

[4] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(1)(B))

[5] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(2)(B))

[6] See H.R. 1319, Subtitle M, Section 9901 (amending Title VI of the Social Security Act (42 U.S.C. 801 et seq.) to add Section 603: Coronavirus Local Fiscal Recovery Fund, https://www.congress.gov/bill/117th-congress/house-bill/1319/text

May cities expend ARP funds to support events aimed at economic recovery, including tourism or supporting small businesses, and what rules does the ARP establish for identifying allowable uses of funds?

The American Rescue Plan (“ARP”) Act’s Coronavirus Local Fiscal Recovery Funds (“CLFRF”) are designed to support municipalities responding to the COVID-19 public health emergency and assist municipalities in mitigating the economic impacts of the pandemic. This support can include assistance to households, small businesses, and nonprofits, as well as aid to impacted industries such as tourism, travel, and hospitality.[1]

Treasury has not yet published detailed guidance as to how CLFRF may be used.  For now, the only guidance is language found in the ARP Act itself. Pending issuance of Treasury’s guidance, municipalities can look to guidance previously issued for the Coronavirus Relief Fund (“CRF”) of the CARES Act as a reasonable, though not authoritative, indicator of the types of activities that may be covered by the CLFRF.  Further, municipalities can review economic recovery programs that have been deployed by other municipalities across the country under the CRF. However, municipalities should note that guidance for the ARP, once issued, may differ from the earlier guidance for other funding sources, including the CRF. The US Treasury is expected to release additional guidance consistent with the release of the first tranche of funding, by May 11, 2021 (60 days post-enactment).[2]

One way in which municipalities can support businesses is helping them to understand and access other ARP funds. For example, the ARP Act provides specialized funding through the Small Business Administration (“SBA”) targeting Shuttered Venue Operators, Restaurant Revitalization, and targeted Economic Injury Disaster Loans, in addition to expanding the Paycheck Protection Program and Employee Retention Tax Credit programs. Using a municipality’s ARP funds, if allowed by Treasury guidance, to perform outreach and communication regarding these opportunities may help support local businesses in accessing their own funding. 

In advance of formal Treasury guidance on the ARP, municipalities may consider reviewing select best practices drawn from the experiences of other municipalities in using CRF to assess and support economic development and revitalization programs.  Some resources for examining the experience of other municipalities include:

Municipalities may also look for funding to support economic development through the EDA, which received $3 billion in funding under the ARP Act specific to economic development and recovery programs. The EDA also features examples of programs funded through the $1.5 billion in CARES Act funding.

Municipalities can consider several steps when planning for the use of funds under the ARP for economic recovery, based on best practices and gleaned from the resources cited from economic development experts above as well as other federal awards that include economic development and economic recovery activities (i.e. EDA, Department of Housing and Urban Development Community Development Block Grant Disaster Recovery Program, etc.). These describe areas of focus when considering how a municipality can evaluate and design programs to mitigate the economic impact of the pandemic, included as an eligible activity in the ARP Act.

Based on these best practices, municipalities can consider undertaking an assessment of unmet needs and economic impact in order to plan for effective and efficient use of funding for economic recovery.  As part of that process, municipalities might consider the following factors when planning, designing, and prioritizing CLFRF-funded programs:

  • Stabilize industries or public services, focusing on immediate needs. Businesses, non-profits, and venues need immediate capital to fully re-open; halting continued negative economic impacts with immediate cash infusions may be an effective investment in long-term recovery.
  • Consider disproportionate impacts and equity in long-term recovery needs. Municipalities can look not only to industries or businesses that were significantly impacted, but also consider communities that may have been disproportionately affected by the economic impacts of COVID-19. For example, provisions of certain CARES Act programs, like the Paycheck Protection Program and the COVID-19 Economic Injury Disaster Loan, emphasized that smaller businesses, minority-owned businesses, and typically underserved communities may not have had the resources or information necessary to apply for or access CARES Act funding.
  • Invest in long-term economic development solutions. While allaying negative impacts, this infusion of federal money also provides an opportunity for municipalities to whom this is applicable to invest in long-term economic development programs such as job retraining and housing programs, and to leverage public-private partnerships that expand industries and enable them to focus on job creation. Depending on the findings of their respective assessments of unmet needs and negative impacts, municipalities may also look to diversify local industries and focus funding and support on new growth, such as launching business accelerators or start-up programs to attract new investment.

The Treasury has not yet issued fully defined rules or guidance as to the eligible use of CLFRF funds, and may ultimately differ from CRF.  However, examples of eligible uses for CRF funding may assist municipalities as they consider options and plan for ways to support economic recovery. Past examples of eligible use under CRF include: 

  • Establishing a grant or forgivable loan program for small businesses to defray COVID-19-related costs and provide working capital or payroll costs for new employees.
    • These programs can be targeted for specific industries, such as restaurants, hotels, travel, or arts and culture venues, or focus on businesses with documented adverse economic impacts.
    • Programs could also focus on adversely impacted community groups, such as minority- or women-owned businesses, veterans, or other groups who may have identified additional needs due to COVID-19.
  • Develop workforce development or short-term employment opportunities, such as apprenticeship programs or local service corps.
    • Funding apprenticeship opportunities through local businesses or institutions provides immediate relief for individuals who may be out of work due to COVID-19. Sponsoring an apprenticeship provides employment, job training, and supports local business by defraying costs for new hires and short-term payroll needs.
    • Funding a local service corps or temporary employees in partnership with a local non-profit or public service organization working on COVID-19 relief both immediately provides employment to individuals out of work, as well as supports the relief work already being performed, such as food banks, technical support for households seeking assistance, or workforce development programs.  
  • Develop appropriate partnerships to support economic recovery focused events, such as job fairs, industry fairs, or events promoting tourism and cultural activities.
    • Investing in providing safe operating environments for events focused on economic development or revitalization may be possible, such as screening and social distancing measures to mitigate the spread of COVID-19, may support large-scale events return safely.
    • Remarketing a local tourism industry may be eligible, based on CRF guidance,[3] though it is unclear if that will be expanded to include planning activities under ARP Programs.

[1] American Rescue Plan Act (HR1319), Section 9901, Section 602(c)(1)(a).

[2] American Rescue Plan Act (HR1319), Section 9901, Section 603(b)(7)(A).

[3] Treasury CRF FAQ #24

Are ARP funds "emergency" funds and, if so, do they therefore have the flexibility of emergency dollar disbursement protocols?

The American Rescue Plan (“ARP”) Act of 2021 was only recently passed and there are no compliance supplements from prior years for reference. Municipalities should thus exercise caution; a municipality that treats ARP funds as subject to emergency dollar disbursement protocols risks its ability to use the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) for those purposes. Treasury has not yet published guidance on the ARP and its various funding processes and has not yet addressed whether the ARP funds will have the flexibility of emergency dollar disbursement protocols.

The CLFRF created by the ARP is a form of federal financial assistance, making it subject to any provision of 2 CFR 200 that the Treasury deems applicable. [1]  

In general, in the absence of any specific “emergency dollar disbursement protocols” language from Treasury, municipalities should follow their usual procurement policies and practices.  If a municipality would not pursue a disbursement transaction with the funds of its own budget, the municipality should not be considering doing so with the CLFRF funds. 

At a minimum, we understand that the following provisions of the Uniform Guidance that apply to the Coronavirus Relief Funds (“CRF”) from the Coronavirus Aid, Relief, and Economic Security (CARES) Act are likely to also apply to the CLFRF funds, although there is still no definitive guidance: 

  • Subpart A-Definitions;  
  • Subpart B-General provisions except for 2 CFR sections 200.111–113;  
  • 2 CFR section 200.303 regarding internal controls;  
  • 2 CFR sections 200.330–332 regarding subrecipient monitoring and management; and  
  • Subpart F – Audit Requirements[2] 

This supplement highlights the five key areas of compliance, including:  (1) activities allowed/unallowed; (2) allowable cost principles; (3) period of performance; (4) reporting; and (5) sub-recipient monitoring.

 

[1] American Rescue Plan Act of 2021, H.R.1319, 117th Cong. § 9901 (2021). Modifying, The United States Code: Social Security Act 42 U.S.C § 301-1305, at § 603 (Suppl. 4 1934).

[2] 2020 OMB 2 CFR 200 Part 200, Appendix XI Compliance Add., at 44-45 (2020). https://www.whitehouse.gov/wp-content/uploads/2020/12/2020-Compliance-Supplement-Addendum_Final.pdf 

Will cities have to provide evidence or documentation that city expenditures of the ARP funds fall within the ambit of “the public health emergency with respect to COVID-19 or its negative economic impacts” as set forth in Section 603(c)(1)(A)?

The American Rescue Plan Act (“ARP”) of 2021 outlines broad, but not unlimited, discretion to local governments as to how they may use their allocation of funds. Specific eligibility and documentation requirements for expenditures using ARP funds have yet to be released by the U.S. Department of Treasury.

For the CARES Act’s Coronavirus Relief Fund (CRF), the requirement that expenditures be incurred ‘‘due to’’ the public health emergency refers to expenditures used for actions taken in response to the public health emergency.[1] This may include expenses incurred for governments to respond directly to the emergency, such as expenses that address medical or public health needs. This may also include expenditures incurred in response to second-order effects of the emergency, including providing economic support to those suffering from employment or business interruptions due to COVID–19-related business closures.[2]

It is possible that the above-mentioned examples of expenditures could be covered by the ARP Coronavirus State and Local Fiscal Recovery Funds (“CSFRF” and “CLFRF,” respectively). Additionally, other expenses that were not allowable under CRF might potentially be covered by the ARP’s added allowable uses to address negative economic impacts of the Coronavirus.[3] Treasury has yet to indicate how they will implement this provision but is expected to issue guidance on or before May 11, 2021.

As a reference, links to Treasury guidance and other resources pertaining to reporting and funding allocation for CRF are provided below.[4] However, the requirements related to documentation and eligibility for ARP are likely to differ from CRF.

Examples of general best practices regarding allowability and documentation include, but are not limited to:

Demonstration of compliance and validation that your municipality met the rules and requirements of the different programs.  Failure to meet documentation requirements, or documentation that does not adequately support a municipality’s claim under any given funding source may result in having to forgo eligible funding or de-obligation. Cities should be prepared to not only determine that a nexus to COVID exists but also be available to show documentation of this determination and any supporting materials. It would be helpful to record and save all documentation, invoices, proofs of payments, procurement methodologies, etc. To help prevent duplication of benefits (DOB), demonstrate a COVID nexus, and maximize additional funding, it may be helpful to maintain documentation that is:

  • detailed;
  • stored centrally and electronically; and
  • organized logically.

In addition to meeting the Federal program requirements, cities should be prepared to show that they also followed the same policies and procedures it uses for procurements from its non-Federal funds.[5]

Detailed tracking of costs is critical to avoid duplication of benefits. No two funding sources can provide funding for the same item, service, or scope.[6]  In some cases, multiple funding sources may be eligible to provide funding for the same item, so each municipality will have to identify and choose which funding source will best meet its needs.  For example, many COVID-19 funding sources may cover the cost of purchasing Personal Protective Equipment (PPE), but it is important to ensure that two or more funding sources are not used to reimburse the purchase of the same PPE, including donations.

 

What are some of the things my city can do to use ARP funds to help ensure the safety of students, teachers, and other staff inside of schools?

The U.S. Department of Education announced that the American Rescue Plan (ARP) includes $122 billion for Elementary and Secondary School Emergency Relief (ESSER) funding for each state to support efforts to reopen K-12 schools safely.[1] 

According to the U.S. Department of Education, the following are some uses of ESSER funds that are consistent with the permissible uses of ESSER funds under the CARES Act:[2]

  • Investing in resources to implement CDC’s K-12 operations strategy for in-person learning to keep educators, staff, and students safe; improving ventilation; purchasing personal protective equipment (PPE); and obtaining additional space to ensure social distancing in classrooms;
  • Hiring additional school personnel, such as nurses and custodial staff, to keep schools safe and healthy;
  • Providing for social distancing and safety protocols on school buses; and
  • Additional uses as allowed in the statute.

With regards to the last bullet above, ARP, Section 2001, d, (e), (2) (Q) authorizes the use of the funds for “developing strategies and implementing public health protocols including, to the greatest extent practicable, policies in line with guidance from the Center for Disease Control and Prevention for the reopening and operation of school facilities to effectively maintain the health and safety of students, educators, and other staff.”[3]

The Department of Health and Human Services (HHS) also announced that the Centers for Disease Control and Prevention (CDC) will provide $10 billion to states to support COVID-19 screening testing for K-12 teachers, staff, and students in schools.[4]  According to the Department of Health and Human Services (HHS), the “CDC’s Operational Strategy for K-12 Schools through Phased Mitigation, released in February 2021,[5] makes clear that screening testing is a tool schools can utilize to help reopen safely as part of a comprehensive COVID-19 mitigation approach. Using existing funding mechanisms, this funding will be able to be deployed quickly as part of a strategy to help get schools open in the remaining months of this school year. In addition to ensuring diagnostic testing of symptomatic and exposed individuals, serial screening testing will help schools identify infected individuals without symptoms who may be contagious so that prompt action can be taken to prevent further transmission. With this ARP funding, states can support the critical testing and testing supports schools need to implement screening testing programs.  Recognizing that establishing a testing program is new for many schools, CDC and state and local health departments will support technical assistance to assist states and schools in standing up and implementing these programs.”

The CDC’s Operational Strategy includes a section titled Prevention Strategies to Reduce Transmission of SARS-CoV-2 in Schools that references the following five key prevention strategies that are essential to safe delivery of in-person instruction and help to prevent COVID-19 transmission in schools:[6]

  1. Universal and correct use of masks
  2. Physical distancing
  3. Handwashing and respiratory etiquette
  4. Cleaning and maintaining healthy facilities
  5. Contact tracing in combination with isolation and quarantine

The CDC’s Operational Strategy also notes that schools providing in-person instruction should prioritize two prevention strategies:

  1. Universal and correct use of masks should be required
  2. Physical distancing should be maximized to the greatest extent possible.

There is also the CDC’s K-12 Schools COVID-19 Prevention Toolkit that includes resources, tools, and checklists to help school administrators and school officials prepare schools to open for in-person instruction and to manage ongoing operations. These tools and resources include considerations for addressing health equity, such as class sizes, internet connectivity, access to public transportation, etc.[7]

It is suggested that cities consult with their local school district representatives, as sub-recipients of these funds, to ensure that the ESSER funding received is adequate to support ongoing response and recovery efforts that ensure the safety of students, teachers, and other staff inside of schools.

 

May municipalities use ARP funds (including from the Coronavirus Local Fiscal Recovery Fund or other provisions of the Act) to invest in small businesses in the community or private sector start-up investment funds to support economic growth?

According to the legislative text of the American Rescue Plan Act, 2021 (ARP), an allowable use of Coronavirus Local Fiscal Recovery Funds (CLFRF) is “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.”[1] While specific guidance from the US Department of Treasury (Treasury) is still forthcoming, the legislation indicates that investments in small businesses within a municipality’s community will be considered eligible activities. Treasury’s rules will indicate the level of flexibility and regulatory structure regarding this funding.

The ARP is intended in part to assist with general economic recovery.[2] It is also intended to attempt to mitigate or offset the economic damage caused by COVID-19.  It is possible that the ARP will allow funds to support private sector start-up investment funds to support economic growth.  However, as the legislation does not specifically address the support of entrepreneurial ventures, municipalities may wish to consider awaiting further direction from Treasury on this matter.

 

When determining what constitutes the “negative economic impacts” of COVID-19, as stated in Title VI of the Social Security Act (42 U.S.C. 801 et seq.), Section 603(c)(1)(a), should municipalities look for comparison purposes to FY2020 or prior fiscal years?

On April 14, 2021, the U.S. Department of Treasury announced the creation of the Office of Recovery Programs.[1] This new office will be led by a Chief Recovery Officer and is intended to lead the Treasury’s administration of components of the American Rescue Plan Act of 2021 (“ARP”), including the Coronavirus Local Fiscal Recovery Fund (“CLFRF”).[2] As a result of this announcement, it is anticipated that the Treasury Department will release specific guidance for the implementation of CLFRF.

The exact definition under the ARP of “negative economic impacts” of COVID-19 is not yet known. However, guidance previously released for the Coronavirus Relief Fund (“CRF”) offered broad discretion in determining a nexus between economic impacts and COVID (thus triggering programmatic allowability).  

In analyzing certain losses, Section 601(c)(1)(c) of the ARP introduces the concept of fiscal year comparison: 

“(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” 

Section 601(c)(1)(c) of ARP on allowable use of funds is specific to the provision of government services and revenue loss.  Other types of beneficiaries, such as households or small businesses, which are identified in Section 601(c)(1)(a) would not necessarily follow a formal fiscal year; therefore, strict comparisons between fiscal years should not apply. When allocating funding, municipalities could consider a formal, documented, and consistent process to determine negative economic impacts related to COVID-19. One example of this approach is the Small Business Administration’s Shuttered Venue Operators Grant (“SVOG”) program, which allows applicants to use either calendar year or fiscal year revenues for award determinations: 

13. Will the SBA look to calendar year 2019 or fiscal year 2019 earned revenues as the basis for calculating award amounts? The SBA will permit applicants to use either their fiscal year 2019 or calendar year 2019 earned revenues as the basis for determining the award amount for both Initial Phase and Supplemental Phase SVOGs. Whichever option an applicant selects will apply to both award phases. Applicants cannot use their fiscal year 2019 for one award phase and the calendar year for the other.”[3] 

While the SVOG program also allows for quarter over quarter comparisons, and even month over month comparisons when necessary, for certain types of entities or unique cases, the ARP language at this point only references a full-fiscal year comparison.  It is not yet clear whether the eventual Treasury guidance for the ARP will allow for alternative types of revenue comparisons, but all forms of revenue comparison calculations need to be formally documented and adhere to consistent standards to avoid funding decisions that may be perceived as arbitrary or capricious.

 

[2] American Rescue Plan Act of 2021, H.R.1319, 117th Cong. § 9901 (2021). Modifying, The United States Code: Social Security Act 42 U.S.C § 301-1305, at § 603 (Suppl. 4 1934). https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H7C2075B5C62541F9A348BDF1DDBECEB6 

May municipalities use American Rescue Plan funds to promote increased home ownership among low-income residents or increase energy efficiency in homes?

The American Rescue Plan (“ARP”) Act of 2021[1] was signed into law on March 11, 2021, and includes numerous provisions directly related to increasing homeownership along with increased appropriations for several existing programs that address the energy efficiency of homes.  The Department of Housing and Urban Development (“HUD”) has released a fact sheet titled “Housing Provision in the American Rescue Plan Act of 2021”[2] which outlines housing-related opportunities contained within ARP.  One specific program to highlight is the newly created Homeowners Assistance Fund (“HAF”) Program, which the Department of Treasury (“Treasury”) will administer.   Created in Section 3206 of the ARP, the HAF program funds will be made available to state, territorial, and tribal governments or their designees and will make funds available for the following allowable purposes: 

“(1) ESTABLISHMENT; QUALIFIED EXPENSES.—There is established in the Department of the Treasury a Homeowner Assistance Fund to mitigate financial hardships associated with the coronavirus pandemic by providing such funds as are appropriated by subsection (a) to eligible entities for the purpose of preventing homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and displacements of homeowners experiencing financial hardship after January 21, 2020, through qualified expenses related to mortgages and housing, which include— 

(A) mortgage payment assistance; 

(B) financial assistance to allow a homeowner to reinstate a mortgage or to pay other housing related costs related to a period of forbearance, delinquency, or default; 

(C) principal reduction; 

(D) facilitating interest rate reductions; 

(E) payment assistance for— 

     (i) utilities, including electric, gas, home energy, and water; 

     (ii) internet service, including broadband internet access service, as defined in section 8.1(b) of title 47, Code of Federal Regulations (or any successor regulation); 

     (iii) homeowner’s insurance, flood insurance, and mortgage insurance; and 

     (iv) homeowner’s association, condominium association fees, or common charges; 

(F) reimbursement of funds expended by a State, local government, or designated entity under subsection (f) during the period beginning on January 21, 2020, and ending on the date that the first funds are disbursed by the eligible entity under the Homeowner Assistance Fund, for the purpose of providing housing or utility payment assistance to homeowners or otherwise providing funds to prevent foreclosure or post-foreclosure eviction of a homeowner or prevent mortgage delinquency or loss of housing or utilities as a response to the coronavirus disease (COVID) pandemic; and 

(G) any other assistance to promote housing stability for homeowners, including preventing mortgage delinquency, default, foreclosure, post-foreclosure eviction of a homeowner, or the loss of utility or home energy services, as determined by the Secretary.” 

As seen in the listing of allowable activities, the HAF program directly targets the issues and barriers to homeownership amongst low-income residents.  While municipalities are not eligible as direct recipients of HAF program funding, municipalities may consider coordinating with their state housing agency to inquire about potential partnership opportunities and the ability to leverage this funding in order to serve their local communities.   

The ARP does not include an exhaustive list of programs focused on increasing energy efficiency but does include additional appropriations for the Low-Income Home Energy Assistance Program (“LIHEAP”) along with Low-Income Household Water Assistance Program (“LIHWAP”).  LIHEAP, along with the U.S. Department of Energy’s Weatherization Assistance and State Energy Programs, have proven to be valuable tools in addressing residential energy efficiency and utility affordability issues.    

The major programmatic tool that municipalities will have at their disposal from the ARP to address these two issues is the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) program that will also be administered by Treasury.  The CLFRF program will provide municipalities with significant programmatic discretion in determining how to allocate these funds.  Section 603(c)(1) of the act outlines the allowable uses of funding:  

“USE OF FUNDS.—Subject to paragraph (2), and except as provided in paragraphs (3) and (4), a metropolitan city, nonentitlement unit of local government, or county shall only use the funds provided under a payment made under this section to cover costs incurred by the metropolitan city, nonentitlement unit of local government, or county, by December 31, 2024— 

“(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.”  

The additions of revenue replacement, capital investments, and the longer covered period until December 31, 2024, are key differences between the CLFRF and the previous Coronavirus Relief Funds provided through the CARES Act.  These additional flexibilities may provide municipalities with the tools needed to address these two critical issues. 

While Treasury guidance is needed to determine the allowability of specific programmatic ideas, municipalities may consider developing a high-level plan or framework on how they will utilize CLFRF program funds to address barriers to home ownership and residential energy efficiency.  The following is a non-exhaustive list of steps a municipality should take in developing this framework: 

  • Conduct a comprehensive capacity assessment and unmet needs analysis; 
  • Form a cross-sector recovery oversight committee; 
  • Engage with the served community to identify key needs; 
  • Assess and catalog available funding to prioritize needs; and 
  • Develop short and long-term strategies to implement ARP funds. 

ARP | Due Diligence Requirements

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What does the ARP outline regarding due diligence required of vendors, community groups, and individuals that receive COVID relief funds?

The ARP has not yet provided specific guidance regarding due diligence related requirements. However, it may be helpful for cities to study due diligence protocols and expectations based on lessons learned from other funding sources, including the Coronavirus Relief Fund (“CRF”). This could prove useful when a city is preparing to distribute COVID relief funds to vendors, community groups, and other entities or individuals.

Generally, with respect to all federal funding, recipients are expected to demonstrate that costs covered by federal awards are: (1) compliant with the terms and conditions of the award, (2) necessary and reasonable for the completion of the activity of the award, (3) clearly allocable to the award, and (4) clearly documented.[1] Due diligence in the selection, management, and oversight of vendors, community groups, or other entities and individuals fall under the general expectation of an entity’s role as a recipient of federal funding.

The due diligence efforts suggested below are based on prior experiences with the CRF, HUD funding, and other federal relief programs.

Cities might consider the value of the following programmatic and fiscal due diligence measures based on their individual circumstances and needs:  

  • Review lessons learned from any previous COVID and/or other federal award, including the review of audits applicable to Federal funding.
  • Establish internal controls, identify potential areas of risk, and perform duplication of benefits analysis prior to award and/or distribution of funds.
  • Ensure vendors and/or sub-recipients are eligible to receive federal funding by utilizing SAM.gov Exclusionary Search prior to award and/or distribution of funding.
  • Include a self-certification form for vendors and/or sub-recipients which certifies that, among other things, the vendor or sub-recipient is not barred from receiving funds and are eligible, capable, and responsible in the management of federal funds.
  • Perform a risk analysis, duplication of benefits analysis, and award justification (i.e., why a vendor or sub-recipient was selected and approved for distribution of COVID Relief funds).[2]
  • If awards to vendors or sub-recipients – including community groups, individuals, or other entities – are made in a competitive manner or establish requirements for vendors or sub-recipients as a condition to receive funding, establish specific policies or procedures to document that those condition(s) are met prior to award or distribution of funding.
  • For example, if an entity’s use of COVID Relief funds is designed to provide support to small businesses to mitigate the economic impact of COVID and a program identifies that economic hardship is a condition of award, be sure to establish a process to document that the requirement is met and is consistently applied to all awardees of that program.
  • Develop and adhere to policies and procedures and other programmatic documentation.
  • Work with partners and ensure processes and controls are in place, including invoicing, procurement, and any technology systems that will be used to carry out your program.
  • The recipient of COVID Relief funds is responsible for communicating the terms and conditions of funding to the relevant vendors and/or sub-recipients.[3] Roles, responsibilities, and expectations – including those pertaining to documentation, reporting, and compliance – should be clearly identified in the sub-recipient agreement, contract, and the organization’s policies and procedures.   Be sure to communicate any changes, clarifications, or additions to requirements for vendors and/or sub-recipients in writing.
  • Ensure costs and/or proposed budgets for vendors or sub-recipients are necessary and reasonable for the activity provided. (Cities can use previously approved contracts or general market standards to ensure that costs and/or budgets are reasonable. The general principle is that the cost, price, or budget is consistent with what a prudent person would pay for that item. This is a generally applicable standard for demonstrating due diligence before funds are awarded or distributed, or in the review of reported costs.)
  • Monitor programs, contractors, sub-recipients, etc. at an early stage, while preparing for an eventual monitoring or audit.
  • This includes but is not limited to desk reviews using the following guidance from the Department of the Treasury Office of the Inspector General, titled: Coronavirus Relief Fund Prime Recipient Desk Review Procedures OIG-CA-21-004R dated March 22, 2021.[4]

 

ARP | Employment of Consultants

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Must municipalities wait to receive Coronavirus Local Fiscal Recovery Fund (“CLFRF”) funds prior to hiring consultants and staff to support programs funded by ARP, in order for the costs related to hiring and paying these consultants to be eligible to be paid using the CLFRF funds?

Formal guidance from the Department of Treasury has not yet been released and is necessary to make an accurate determination regarding the eligibility surrounding costs to hire employees and consultants to administer CLFRF and related programs. For the CARES Act’s Coronavirus Relief Fund (“CRF”), which is structurally similar to CLFRF, funds were permitted to retroactively reimburse for such charges from the beginning of the covered period and before funding was received by the recipient. It is possible that the US Treasury will make a similar determination regarding CLFRF, for which the covered period begins on March 3, 2021.[1]

The US Treasury is expected to release additional guidance by May 11, 2021 (60 days post-enactment), which should provide specific details about how and for what timeframe governments can charge the costs of consultants and administrative staff.

 

[1] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Section 602(g)(1)(a)).

ARP | Infrastructure and Maintenance Investments

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What does the ARP say about capital projects that my municipality can pursue with the new treasury funding?  Additionally, The Act states that Fiscal Recovery Funds may be used “to make necessary investments in water, sewer, or broadband infrastructure.” How can local governments determine if these funds can be used for existing capital projects? Will my municipality need to conduct a benefit/cost analysis regarding impacts to COVID-19-related infrastructure needs? 

The ARP, and the new Coronavirus Local Fiscal Recovery Fund (the “CLFRF”) it established, have created an opportunity for municipalities to invest in capital projects that can result in more resilient communities.  As the Government Finance Officers Association (the “GFOA”) noted in its recent ARP Guiding Principles, “[i]nvestment in critical infrastructure is a particularly well-suited use of [ARP] funds because it is a non-recurring expenditure that can be targeted at strategically important long-term assets that provide benefits over many years.” However, “care should be taken to assess any on-going operating costs that may be associated with the project.”[1]

In particular, the ARP allows the use of the CLFRF “to make necessary investments in water, sewer, or broadband infrastructure.”[2] As of now, the U.S. Department of the Treasury has not issued specific guidance on the CLFRF and infrastructure investments, and thus it is possible that water, sewer, and broadband are merely representative samples of the categories of infrastructure projects that will ultimately be reimbursable. Once the guidance is published, we expect it will help inform the issue of whether existing capital projects are ultimately allowable for funding. Thus, communities should review and update their Capital Improvement Plans, along with IT and other operational needs, to be able to prioritize projects as soon as further guidance becomes available. 

Until further guidance becomes available for the ARP, it is also wise for municipalities to assume that they will need to demonstrate a nexus between their proposed infrastructure projects and the COVID-19 crisis. Subtitle M of the ARP[3] incorporates and amends Title VI of the Social Security Act (42 U.S.C. 801 et seq.), which itself requires that expenses be necessary and incurred due to COVID-19.  As such, although not explicitly stated in the provision related to infrastructure under Subtitle M of the ARP, the requirement is part of Title VI of the Social Security Act, which is incorporated into and amended by the ARP. Based on this analysis, it is presumed, without further guidance, that infrastructure project expenses must be necessary and incurred due to COVID-19.

In addition to a COVID-19 nexus, the GFOA recommends municipalities be cognizant of the following opportunities while planning potential capital investment projects:  

  • Other state and local infrastructure efforts that can either be leveraged or avoided so as not to duplicate efforts.
  • Regional initiatives that present opportunities for partnerships with other ARP recipients. Specifically, the GFOA notes that “there are many [possible] beneficiaries of ARP funding within your community, such as schools, transportation agencies and local economic development authorities. Be sure to understand what they are planning and augment their efforts; alternatively, creating cooperative spending plans to enhance the structural financial condition of your community.”[4] 

Lastly, in addition to the CFLRF for water, sewer, and broadband infrastructure investments, the ARP also included a $10 billion Coronavirus Capital Projects Fund (CCPF).  Funds from this program are intended “to carry out critical capital projects directly enabling work, education, and health monitoring, including remote options, in response to the public health emergency with respect to the Coronavirus Disease (COVID–19).”[5] More information about this funding is expected to be issued by Treasury on or before May 11, 2021. 

 

[1] GFOA, American Rescue Plan Spending: Recommended Guiding Principles, https://www.gfoa.org/american-rescue-plan-spending-guiding-principles (last accessed April 6, 2021)

[2] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 Sections 602(c)(1)(D) and 603(c)(1)(D)), available at https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H8801F49DD03D4C4C85CDFDF3582E2411  

[4] GFOA, American Rescue Plan Spending: Recommended Guiding Principles, https://www.gfoa.org/american-rescue-plan-spending-guiding-principles (last accessed April 6, 2021)

[5] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 Section 604), available at https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H4FEA448BE7AB4CE1B8306142D4EC5767

Can a municipality use ARP funds for sewer infrastructure and maintenance investments that predate the COVID-19 crisis?

According to the American Rescue Plan (ARP) Act of 2021, the covered period for the Coronavirus Local Fiscal Recovery Funds (CLFRF) begins March 3, 2021.[1] It is not yet clear whether a municipality will be able to use ARP funds for infrastructure projects that predate the COVID-19 public health emergency given that program-specific guidance from the U.S. Department of the Treasury (Treasury) is still forthcoming.

With respect to the CARES Act Coronavirus Relief Fund (CRF), the U.S. Department of the Treasury prohibited its use towards previously budgeted expenses and required that expenses were necessary due to the COVID-19 public health emergency.[2] While it is possible that the U.S. Department of the Treasury will take a similar path with the CLFRF, the ARP legislation suggests broader uses of the funds, including for “necessary investments in water, sewer, or broadband infrastructure”[3] and thus it is also possible that the U.S. Department of the Treasury’s guidance will reflect that broader intent. Alternatively, the U.S. Department of the Treasury may elect to define such infrastructure investments more narrowly as only those that are necessary to address the negative economic impact of COVID-19. As stated earlier, it remains to be seen how the U.S. Department of the Treasury will handle the eligibility of infrastructure and maintenance projects in terms of their timeline and date of inception.

Additional resources regarding the broader uses of funds:

 

[1] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Section 602(g)(1)(a)).

[2] Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021

[3] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Section 602(c)(D)).

May Cities use Coronavirus Local Fiscal Recovery Fund (CLFRF) disbursements provided pursuant to the ARP to pay off a previous infrastructure investment?

As the bill currently reads, the covered period for the Coronavirus Local Fiscal Recovery Funds (CLFRF) under the American Rescue Plan Act of 2021 (ARP) starts on March 3, 2021[1] and funds will remain available through December 31, 2024.[2] The bill does not currently specify if CLFRF can pay off previous infrastructure investments, including using funds towards debt service payments.  Thus, municipalities should wait until more details are provided through expected guidance released by the U.S. Department of the Treasury prior to committing funds. Under the existing covered period as defined by the legislation, municipalities will most likely only be able to pay back investments dated after March 3, 2021.

 

[1] American Rescue Plan Act (HR 1319 Subtitle M Section 603(g)(1)(A), available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5

[2] American Rescue Plan Act (HR 1319 Subtitle M Section 603(a)(1), available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H7C2075B5C62541F9A348BDF1DDBECEB6

May Cities use Coronavirus Local Fiscal Recovery Fund (CLFRF) disbursements for public-private partnership for infrastructure or economic recovery programs, such as community benefit agreements (CBAs)?

While the American Rescue Plan does not specifically state that the CLFRF can be used for a public-private partnership for infrastructure or economic recovery programs, it does state that funding can be used to combat the negative economic impacts of COVID-19 including assistance to small businesses and nonprofits.[1] Municipalities should consider waiting until the U.S. Department of the Treasury releases further guidance on allowable uses of the CLFRF before developing such a program. For reference, there is no mention of the use of funding for public-private partnerships or towards community benefit agreements in the U.S. Department of the Treasury’s guidance on the CARES Act’s Coronavirus Relief Funds, but the CLFRF is intended to expand eligibility coverage for a more fulsome economic recovery[2] and therefore could potentially be available to support public-private partnerships.

 

[1] American Rescue Plan Act (HR 1319 Subtitle M Section 603(c)(1)(A), available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HC028912924A04512A1F80BFA0F1C1051

[2] House Committee on Oversight and Reform, State, Local, Tribal, and Territorial Support: $350 billion, https://oversight.house.gov/sites/democrats.oversight.house.gov/files/COVID%20COR%20Provisions%20-%20One%20Pager%20updated.pdf (Last accessed: April 7, 2021)

How can municipalities maximize funding for modernizing their respective water systems, including lead pipe remediation? Are there funding sources that permit municipalities to upgrade water systems or otherwise remediate lead services on both municipality and customer-owned premises? What are some best practices to ensure all possible sources of funding are secured and efficiently disbursed?

I. American Rescue Plan (“ARP”)

Subtitle M, Section 9901 of the ARP amends the Social Security Act, 42 U.S.C. 801 et seq., adding Section 602 (the Coronavirus State Fiscal Recovery Fund (“CSFRF”) and Section 603, the Coronavirus Local Fiscal Recovery Fund (“CLFRF”).  42 U.S.C 801(d), which addressed the Coronavirus Relief Fund (“CRF”) established by the CARES Act of 2020, required that governments receiving CRF funds use them for “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019.”[1]  This language appears to be incorporated into Title VI of the Social Security Act and as such could arguably apply to funds provided from the federal government pursuant to the CLFRF and the CSFRF. However, the Department of the Treasury has not yet issued guidance to that effect.  Guidance from Treasury is expected on or before May 11, 2021, when the first tranche of payments is scheduled to be issued to state and local governments. When Treasury guidance is released, municipalities can expect further guidance about how to interpret “necessary investments in water, sewer, or broadband infrastructure.”[2]

II. Maximizing Funding Sources and Best Practices

In order to maximize funding sources, municipalities should focus on identifying the specific need(s) of a project.  There may be many facets to a project which could be parsed out and funded using various sources.  Because of this, municipalities should consider conducting thorough research and analysis of funding sources compared against identified needs in the process to ensure all available relevant funding has been contemplated.  Such funding sources may include (but are not limited to): federal funds, state funds, private funds, non-profit agency matches, and foundation grants. 

Municipalities can also consider conducting a duplication of benefits analysis from the earliest stages of the process to determine which costs have not been or will not be paid by another source. This duplication of benefits analysis should be completed before receiving or providing assistance and might include developing an overall budget that demonstrates the funding needed for the activity and the funding reasonably anticipated (similar to a “sources and uses” analysis for a housing or economic development project). Grantees are required to avoid a duplication of benefits when providing disaster assistance through federally funded programs.[3]

III. Potentially Applicable Funding Sources

In addition to the ARP funds regarding “necessary investments in water, sewer, or broadband infrastructure,” there are potentially numerous funding sources for water infrastructure projects and lead remediation.  For reference, some of the larger federal sources are outlined below with links for additional resourcing and information. 

Environmental Production Agency funds[4] including (but may not be limited to): 

  • Water Infrastructure Improvements for the Nation Act (“WIIN”) Grants;
  • Public Water System Supervision (“PWSS”) Grant Program;
  • Training and Technical Assistance for Small Systems Grants; and
  • Water Infrastructure Finance and Innovation Act (“WIFIA”) Program.

Department of Agriculture funds[5] including (but may not be limited to): 

Department of Housing and Urban Development Community Development Block Grant (“CDBG”)

The CDBG Program provides annual grants on a formula basis to states, municipalities, and counties to develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for low- and moderate-income persons. CDBG grants may include “costs associated with project-specific assessment or remediation of known or suspected environmental contamination.”[6]

 

[1] 42 U.S.C. 801(d)(1).

[2] American Rescue Plan Act (HR 1319 Subtitle M Section 9901 (amending 42 U.S.C. 801 Section 603(c)(1)(D)).

[3] See generally 42 U.S.C. § 5121 at § 312 (The Stafford Act); see also 44 CFR § 206.191 (regarding implementation of policies set forth in § 312 of the Stafford Act.)

[6] 24 CFR § 570.203; see also 24 CFR § 570.209 (a) for an overview of guidelines for these projects. Of note, CDBG funds should be not substituted for non-federal financial support and funds should be disbursed on a pro rata basis with other finances provided to the project.

In the course of conducting infrastructure updates under the ARP, my municipality may need to conduct related projects (e.g. digging the street, milling, and resurfacing in order to replace key infrastructure). May municipalities use stimulus funds to cover projects which are not directly covered under the infrastructure guidelines, but which are necessary to complete the project at hand?

The ARP specifically authorizes expenditures of monies through the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) “to make necessary investments in water, sewer, or broadband infrastructure.”[1]  Although the Department of the Treasury has not yet issued guidance regarding the CLFRF, under the Coronavirus Relief Fund (“CRF”) of the CARES Act, a nexus to COVID-19 was required to deem a project “necessary.”[2]

This language appears to be incorporated into Title VI of the Social Security Act and as such could arguably apply to funds provided from the federal government pursuant to the CLFRF.  However, the Treasury has not yet issued guidance to that effect, though it is expected on or before May 11, 2021, when the first tranche of federal disbursements is scheduled to issue to state and local governments.

Because “necessary investments” as indicated in ARP may require a nexus to COVID-19 as was mandatory under the CRF, until additional guidance explicitly defines eligible or ineligible infrastructure or related projects, municipalities should carefully consider whether the primary infrastructure project, and any projects related to the primary water, sewer, or broadband infrastructure project are “necessary expenditures incurred due to … COVID-19.”

 

[1] American Rescue Plan Act (HR 1319 Subtitle M Section 9901 (amending 42 U.S.C. 801 Section 603(c)(1)(D)).

[2] Subtitle M, Section 9901 of the ARP amends[2] the Social Security Act, 42 U.S.C. 801 et seq., adding Section 602. 42 U.S.C 801(d), which addressed the CRF, required that governments receiving CRF funds use them for “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019.”

42 U.S.C 801 (d) “Use of Funds” states:

“A State, Tribal government, and unit of local government shall use the funds provided under a payment made under this section to cover only those costs of the State, Tribal government, or unit of local government that:

(1) are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19)[;]…”

ARP | Labor, Employment, and Premium Pay

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Under the ARP, what are some best practices cities may implement to determine how and to whom to allocate federal funds for 'premium pay' pursuant to the ARP?

The U.S. Department of the Treasury will issue guidance detailing its interpretation and implementation of eligible uses of ARP funds, but the statutory language itself specifically indicates that the use of ARP funds for premium pay to workers performing essential services during the COVID-19 public health emergency will be authorized.[1] ARP defines eligible workers as “those workers needed to maintain continuity of operations of essential critical infrastructure sectors and additional sectors” that are designated as “critical to protect[ing] the health and well-being of the residents” by “each chief executive officer of a metropolitan city, nonentitlement unit of local government, or county” or by “each Governor of a State or territory, or each Tribal government,” depending on whether funds are disbursed pursuant to the Coronavirus State Fiscal Relief Fund or the Coronavirus Local Fiscal Relief Fund.[2] 

Factors a municipality may consider in assessing who to allocate these funds to may include: (i) whether the services provided by an employee could not cease for any time during the pandemic; (ii) whether the employee was required to work on site or was in a position where his/her potential exposure to COVID-19 might have been elevated; and/or (iii) whether the employee’s job description was significantly changed or broadened due to the pandemic.

 

[1] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Sections 602(c)(1)(B) and 603(c)(1)(B)).

[2] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq,, Sections 602 and 603).

Under the ARP, can cities offer the “premium pay to eligible workers” or “grants to employers that have eligible workers who perform essential work” identified in Section 603(c)(1)(B) in the form of a one-time payment?

The ARP allows local governments to provide up to $13 per hour above regular wages to eligible workers, capped at a maximum of $25,000 per worker.[1] It is yet to be determined by the U.S. Department of the Treasury whether that premium pay can be distributed in the form of a one-time payment.

 

[1] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Section 602(g)(3)).

May cities use federal funds provided pursuant to the American Rescue Plan Act of 2021 (ARP) to strengthen a city program under the Federal Workforce Investment and Opportunity Act to (1) develop new or existing infrastructure designed to assist new job seekers, or (2) hire additional staff members to support a city workforce program under the Investment and Opportunity Act program?

The ARP is the first step in recovering from the depths of this crisis, which means it will attempt to create millions of additional good-paying jobs, combat the climate crisis, advance racial equity, and build back better than before.[1]

As established in the language of the ARP in 42 U.S.C. 801 et seq., Sections 602 and 603, there are four general categories of allowable uses of the funds provided through the Coronavirus State Fiscal Recovery Fund (CSFRF) and the Coronavirus Local Fiscal Recovery Fund (CLFRF) for the recipient,[2] including:

  • To respond to the pandemic or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
  • For premium pay to eligible workers performing essential work (as designated by the recipient government entities identified in 42 U.S.C. 801 et seq., Sections 602(g)(2) and 603(g)(2) during the pandemic), providing up to $13 per hour above regular wages. Such amount may not exceed $25,000 with respect to any single eligible worker;
  • For the provision of government services to the extent of the reduction in revenue due to the pandemic (relative to revenues collected in the most recent full fiscal year prior to the emergency); and,
  • To make necessary investments in water, sewer, or broadband infrastructure.[3]

The U.S. Department of the Treasury has yet to issue guidance detailing its interpretation and implementation of these eligible uses.[4]

As noted above, the ARP allows for the use of funds “to respond to the pandemic or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.”[5] These examples are intended to clarify congressional intent that these activities are eligible. However, state and local governments are NOT limited only to these activities.[6] Additionally, the creation of new programs will undoubtedly cause state and local governments to hire additional staff or rehire staff that had been previously furloughed or laid off.

While the U.S. Department of the Treasury has not yet issued specific guidance on the allowable uses of funds, the language used in the ARP to describe economic recovery is extremely broad. Under the Coronavirus Aid, Relief, and Economic Securities Act (CARES), numerous states and local governments were permitted to use their federal funds for job training, employment assistance programs, and direct allocations to community colleges and workforce development programs.[7]

Lastly, in its recent ARP Guiding Principles article, the Government Finance Officers Association gave the following guidance for planning recovery initiatives:

  • Local jurisdictions should be cognizant of state-level ARP efforts, especially regarding infrastructure, potential enhancements of state funding resources, and existing or new state law requirements.
  • Consider regional initiatives, including partnering with other ARP recipients. It is possible there are many beneficiaries of ARP funding within your community, such as schools, transportation agencies, and local economic development authorities. Be sure to understand what they are planning and augment their efforts; alternatively, creating cooperative spending plans to enhance the structural financial condition of your community.[8]

We obviously will know the specific details of the allowable uses under the ARP in short order.  Until then, cities can prepare for these funding anticipated uses, while some may choose to be guided by the express language of the statute.

 

[1] The White House Briefing Room, President Biden Announces American Rescue Plan, https://www.whitehouse.gov/briefing-room/legislation/2021/01/20/president-biden-announces-american-rescue-plan/ (Last accessed April 6, 2021)

[2] H.R. 1319 — 117th Congress, American Rescue Plan Act of 2021: Coronavirus State and Local Fiscal Recovery Funds, https://www.congress.gov/bill/117th-congress/house-bill/1319/text (Last accessed April 6, 2021)

[3] H.R. 1319 — 117th Congress, American Rescue Plan Act of 2021: Coronavirus State and Local Fiscal Recovery Funds, https://www.congress.gov/bill/117th-congress/house-bill/1319/text (Last accessed April 6, 2021)

[4] U.S. Department of the Treasury, FACT SHEET: The American Rescue Plan Will Deliver Immediate Economic Relief to Families, https://home.treasury.gov/news/featured-stories/fact-sheet-the-american-rescue-plan-will-deliver-immediate-economic-relief-to-families (Last accessed April 6, 2021)

[5] H.R. 1319 — 117th Congress, American Rescue Plan Act: Coronavirus State and Local Fiscal Recovery Funds, https://www.congress.gov/bill/117th-congress/house-bill/1319/text (Last accessed April 6, 2021)

[6] The National Association of Counties, Legislative Analysis for Counties: American Rescue Plan Act of 2021, https://www.naco.org/resources/naco-analysis-american-rescue-plan-act (last accessed April 6, 2021)

[7] The National Association of Counties, Resources and Information Related to the Coronavirus Relief Fund, https://www.naco.org/covid19/crf (Last accessed April 6, 2021)

[8] GFOA, American Rescue Plan Spending: Recommended Guiding Principles, https://www.gfoa.org/american-rescue-plan-spending-guiding-principles (last accessed April 6, 2021)

With respect to the expected technical assistance set-aside of the ARP, when will staff time (whether for existing staff or staff specifically hired to augment capacity) be eligible to be charged against the expected award? For example, will we be able to charge time spent dating back to when the act was signed? Does this correlate with when the funding is received?

As the law currently reads, the covered period for the Coronavirus Local Fiscal Recovery Funds (“CLFRF”) under the American Rescue Plan (“ARP”) starts on March 3, 2021 and funds will remain available through December 31, 2024.[1] The US Treasury is expected to release additional guidance by May 11, 2021 (60 days post-enactment), which should provide specific details about how governments can charge time against the award. Because covered period for the CLFRF begins on March 3, 2021, it is possible that municipalities will be able to apply staff time towards the award from that date, depending on Treasury guidance.[2]

 

[1] American Rescue Plan Act (H.R. 1319 Subtitle M Section 603(a)(1))

[2] American Rescue Plan Act (H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Section 602(g)(1)(a)).

Is additional pay a permitted use of ARP funding? Does this include hazard pay, bonuses, etc.?

While the American Rescue Plan Act of 2021 (ARP) does not include dedicated federal funding for hazard pay, it allows governments to pay workers performing essential functions during the COVID-19 public health emergency by providing premium pay to eligible workers of the county or by providing grants to eligible employers that have eligible workers who perform essential work.[1],[2] The term “premium pay” is identified as an additional amount up to $13 per hour paid to an eligible worker for work during the COVID-19 pandemic. The ARP imposes a cap of $25,000 for any single eligible worker. [3],[4]

While the ARP identifies that “premium pay” is permissible, it does not explicitly address if bonuses are an applicable use of ARP funding for state and local government employees. While the U.S. Department of the Treasury has not yet issued specific guidance on the allowable uses of funds, the language used in the ARP to describe “premium pay” is a defined term in ARP’s text, as is the term “eligible worker.” Until further guidance is provided, the criteria or eligibility to provide bonuses appears open to interpretation by state and local governments within the constraints of ARP’s text.  Municipalities should consider awaiting further guidance from the Department of Treasury prior to making any “bonus” payments.

Models for hazard pay programs utilizing the Coronavirus Relief Funds under the CARES Act already exist in Pennsylvania, Vermont, Louisiana, Michigan, Virginia, and New Hampshire.[5]

 

[1] H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Section 603(c)(1)(b), https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H0FEF52A41C0F4000A71093B737C20320  (Last accessed April 15, 2021)

[2] The National Association of Counties, Legislative Analysis for Counties: American Rescue Plan Act of 2021, https://www.naco.org/resources/naco-analysis-american-rescue-plan-act (last accessed April 15, 2021)

[3] Specifically, ARP defines “eligible workers” as “those workers needed to maintain continuity of operations of essential critical infrastructure sectors and additional sectors as each chief executive officer of a metropolitan city, non-entitlement unit of local government, or county may designate as critical to protect the health and well-being of the residents of their metropolitan city, non-entitlement unit of local government, or county.”  H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Section 603(g)(2)), https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HDF7E995914834AD7ABAFC9FC21496EF6 (Last accessed April 15, 2021)

[4]H.R. 1319, Subtitle M, Section 9901 (amending 42 U.S.C. 801 et seq., Section 603(c)(3)(b)). https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HE25656956D0143CDBB71B05FF0EFF7F3 (Last accessed April 15, 2021)

[5] Brookings Institution, A policy manifesto for paying, protecting, and empowering essential workers, https://www.brookings.edu/research/a-policy-manifesto-for-paying-protecting-and-empowering-essential-workers/ (last accessed April 15, 2021)

ARP | Procurements

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Regarding the ARP, what can municipalities do to upgrade their procurement systems, including IT costs, even where such upgrades would outlast the pandemic and be used for COVID and non-COVID related contracts?

Current guidance regarding this specific issue with respect to the ARP is still not available. However, the Treasury Department’s Office of Inspector General (“OIG”) issued a report in 2020 that touches on this question. In the OIG report, which related to the CARES Act of 2020’s Coronavirus Relief Fund (“CRF”) involving the State of Iowa,[1] the OIG determined the project was unallowable due to: (1) the timeline extending beyond the covered period of the funding; and (2) the contract and budget pre-dated the COVID-19 public health emergency and the passage of the CARES Act.  

The new Coronavirus Local Fiscal Recovery (“CLFR”) Fund, established by the American Rescue Plan (“ARP”) Act of 2021, touches on these issues. The covered period for CLFR is from March 3, 2021 until December 31, 2024,[2] which will provide local governments almost four years to develop and implement projects and initiatives. Until Treasury guidance is issued, there is still ambiguity as to whether all work associated with these funds will need to be completed by the December 31, 2024 deadline, or if the projects only need to be paid for by that date.  By statute, the ARP allows for upgrades to infrastructure,[3] but currently there is not sufficient guidance as to the scope of what is allowable. As for the previously budgeted issue, the new CLFR Fund does not establish in statute[4] a baseline budget date as did the CRF funding. Additionally, CLFR allows for revenue replacement and other strategies that would free up local resources in addition to allowing for the direct programmatic use of CLFR funding for these projects. We are awaiting Treasury guidance for further clarity. 

 

[1] https://oig.treasury.gov/sites/oig/files/2021-01/OIG-CA-21-011.pdf

[2] American Rescue Plan Act (H.R. 1319 Subtitle M Section 602(a)(1))

[3] American Rescue Plan Act (H.R. 1319 Subtitle M Section 602(c)(1)(D))

[4] See American Rescue Plan Act (H.R. 1319 Subtitle M)

What does the ARP say about the costs pertaining to enhancing/incorporating procurement opportunities for minority business enterprises (“MBE”) to expand diversity and inclusion?

The statutory language of the ARP Act references disenfranchised populations in the context of several of the program descriptions. Subtitle B, Section 3204[1] and Subtitle C, Section 3301,[2] which detail appropriations for housing counseling and small business credits, respectively, are two examples where the ARP Act specifically discusses requirements to prioritize MBEs through programs and funding. Recently, the Office of Management and Budget released OMB Memorandum M-21-20. This memorandum, dated March 19, 2021 and titled: “Promoting Public Trust in the Federal Government through Effective Implementation of the American Rescue Plan Act and Stewardship of the Taxpayer Resources,”[3] speaks directly to this issue. In particular, the memorandum established the requirement for federal agencies, when implementing any new programs authorized and appropriated by the ARP, to submit their proposed implementation plans for approval before publishing. The OMB memo also recommends that agencies apply equity-oriented guidelines set forth in the Code of Federal Regulations, Grants and Agreements.[4]  

MBEs are often first-time or non-traditional recipients of federal funding and often lack experience with applying for and/or managing such funding. The ARP expressly identifies four broad categories of permissible uses of funds by state and local governments, and the Treasury Department is expected to issue guidance in the coming weeks that will further clarify the authorized uses of ARP funds. Pending Treasury’s issuance of this guidance, municipalities can consider leveraging their experiences with CARES Act funding to appropriately plan to resource ARP funding in support of MBEs going forward. Based on our experience with the CARES Act and other federal funding programs, this could include the enhancement or implementation of procurement systems that are intuitive and user friendly, making procurement opportunities available to the widest audiences possible. Other potential activities include the development of training and professional development resources to make accessible the information necessary for MBEs to successfully compete for and win contract and grant opportunities made available with ARP funds. Finally, municipalities may consider dedicating existing staffing resources to provide the appropriate levels of support necessary to realize the equity goals outlined in OMB Memorandum M-21-20. This is considering the CARES Act experience as an example of how the ARP guidance may play out which should allow the City to begin planning for how guidance might take shape.  As for implementation, we will get more certainty as guidance is released.

 

[1] American Rescue Plan Act (H.R. 1319 Subtitle B Section 3204)

[2] American Rescue Plan Act (H.R. 1319 Subtitle C Section 3301)

[4] See OMB memo at 2

Will municipalities be required to undertake formal procurement processes (with, for example, fair bidding rules) when determining how to expend funds provided pursuant to the ARP?

Guidance has not yet been issued related to the formal procurement process for funds provided by the ARP Act. However, municipalities may prepare based on general guidelines and past experiences.

Federal funding is generally subject to the federal procurement requirements outlined in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), found at Title 2 of the Code of Federal Regulations, Part 200.[1] These requirements outline the broad, general rules for the procurement of goods and services using federally awarded funds. Some federal awards may have additional requirements for procurement and contracts, generally identified in the terms and conditions or guidance for the specific award.

In select cases, federal funding may not be subject to the federal procurement requirements – such as funding classified as “other Federal assistance,”[2] including the Coronavirus Relief Fund (“CRF”) of the CARES Act.[3] However, since funds appropriated under the ARP Act may be structured as grants and include coverage of economic recovery and infrastructure projects depending on Treasury guidance, it is possible that ARP funds may in the future be subjected to (1) federal procurement requirements detailed in the Uniform Guidance or (2) other requirements specific to the ARP funds and set forth in the terms and conditions of the award or in published guidance from the Department of the Treasury.

Procurement and contracting requirements are in place as best practices to mitigate the risk of fraud, waste, or abuse of federal funds, and are designed to ensure that federally funded contracts are competitive[4] and fair.

A few select requirements drawn from the Uniform Guidance, which will apply to the ARP as a best practice unless Treasury guidance specifically states that Uniform Guidance is not applicable, include the following:

  • Adhering to local procurement and contracting policies, standards, or procedures, including applicable local or state laws. In cases where the federal requirements and local requirements conflict, a municipality typically should adhere to the more stringent requirement.[5] Auditors or oversight authorities will look to published policies and procedures governing procurement of federally funded contracts, as well as local laws, to ensure that both local and federal requirements were met.[6] 
  • Maintaining clear policies governing conflicts of interest for employees involved with developing solicitations, evaluating or awarding contracts, or managing or monitoring vendors.[7]
  • Publishing and documenting clear standards in procurement solicitations and evaluation criteria on how a municipality will determine a vendor is to be determined as “responsive and responsible.”[8]
  • Utilizing the appropriate procurement method based on the size of the proposed scope of services of volume of goods to ensure adequate competition.[9] For services under the simplified acquisition threshold ($250,000[10]), procurement may follow informal procurement methods,[11] for solicitations over the simplified acquisition threshold, procurement should follow formal procurement methods,[12] such as sealed bidding or competitive proposals.
    • If procurement is only possible through non-competitive methods, municipalities will need to justify use of a non-competitive procurement process.[13] Clearly documenting conditions surrounding the award or specialized circumstances will be critical to demonstrate compliance, especially if inability to follow competitive procurement is due to exigency or emergency of an imminent threat to public health, safety, or welfare.
    • Where feasible, municipalities should make all necessary efforts to make competition accessible to minority- or women-owned businesses.[14]
  • Justifying and documenting selection of vendors, including (1) that a vendor is responsive to the requirements outlined in the procurement, (2) responsible, (3) not debarred from doing business with the federal government, and (4) offering a reasonable, competitive cost, based on cost or price analysis completed by the municipality.[15]
  • Including appropriate federal requirements or language in the executed contract, including bonding provisions,[16] documentation and reporting requirements, or applicable contract provisions as identified in Appendix II: Contract Provisions for Non-Federal Entity Contracts Under Federal Awards.[17]

Municipalities may have existing contracts or working relationships with vendors for similar services that they may wish to use for ARP-funded work. To utilize a pre-existing contract, municipalities can consider the following requirements to assess whether the contract meets federal procurement requirements, which should be necessary unless the Treasury guidance does not mandate compliance:

  • Was the contract competitively procured, consistent with local procurement and contracting requirements and applicable laws? If so, are there differences between the local and federal requirements that may be in conflict?
  • Is the contract active and does it include the goods or services being sought?
    • For example, a municipality may have an existing contract for providing workforce development services that they wish to use starting July 1, 2021, but the contract expired in March 2021. Extending the contract to include additional time may be deemed noncompetitive, because the contract expired before services began.
    • For example, a municipality may have an engineering and construction firm contracted to build a new community center and wants to use the same firm to perform citywide water and sewer infrastructure projects as permitted by the ARP Local Fiscal Recovery Funds (“LFRF”). This scope is very different than what is included in the current contract, and may be considered noncompetitive.
  • Does the vendor have demonstrated capacity and financial responsibility to provide the goods or services being sought?
  • Are there other vendors or organizations that could also reasonably and responsibly provide the good and service that may object to the lack of competition available for federal funds?
  • Can the municipality clearly document and justify the reasoning to utilize an existing vendor relationship in lieu of following normal procurement and contracting processes? This may include justification of exigent or emergency circumstances, imminent threat to public health and safety, or substantive demonstration that no alternatives were feasible.

In some cases, existing relationships established through a Memorandum of Understanding (“MOU”) or a Memorandum of Agreement (“MOA”) can be expanded for the provision of services that may fall under the intended use of ARP funding, such as non-profits or other public entities, like local public school districts or institutions of higher education, which provide public services including housing support, healthcare, food distribution, or job training programs. Municipalities may explore utilizing existing MOUs or MOAs, or establishing new MOUs or MOAs, with non-profits or public entities to provide additional services utilizing ARP funding. MOUs and MOAs should still include the required contract provisions,[18] monitoring and oversight requirements,[19] and cost principles[20] as identified by federal or local requirements, though likely will not follow the same procurement process. Municipalities should also be prepared to justify and document the selection of the MOU or MOA as the most appropriate, reasonable, and cost-effective method to provide services utilizing ARP funds.

 

[1] 2 CFR 200.317-331

[2] 2 CFR 200.40

[4] 2 CFR 200.319(a)

[5] 2 CFR 200.318 and 2 CFR 200.319(c)

[6] 2 CFR 200.319(d)

[7] 2 CFR 200.318(c)

[8] 2 CFR 200.319(d)

[9] 2 CFR 200.320

[11] 2 CFR 200.320(a)

[12] 2 CFR 200.320(b)

[13] 2 CFR 200.320(c)

[14] 2 CFR 200.321

[15] 2 CFR 200.324-325

[16] 2 CFR 200.326

[17] 2 CFR 200.327

[18] 2 CFR 200.327

[19] 2 CFR 200.331-332

[20] 2 CFR 200.324-325, 2 CFR 200 Subpart E

ARP | Tax Credits

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Do COVID-19-related tax credits for paid leave align or correlate with Stafford Act/FEMA funding or the American Rescue Plan Act?

The American Rescue Plan Act of 2021 (“ARP”) extends several tax benefits to small businesses that are intended to help businesses stay open, recover, make payroll, and take steps to protect health outcomes for employees. 

ARP extends the availability of the Employee Retention Credit for small businesses through December 2021 and allows businesses to offset their current payroll tax liabilities by up to $7,000 per employee per quarter. This credit of up to $28,000 per employee for 2021 is available to small businesses who have seen their revenues decline or who have been temporarily shuttered due to COVID-19.[1]

The American Rescue Plan Act also extends the availability of Paid Leave Credits for small and midsize businesses that offer paid leave to employees who may take leave due to illness, quarantine, or caregiving.[2] This is extended through September 2021.[3] Businesses can take dollar-for-dollar tax credits equal to wages of up to $5,000 if they offer paid leave to employees who are sick or quarantining.[4] Paid Leave Credits are a powerful incentive to encourage the offer of paid sick and family leave to ensure sick employees are able to stay home.

The Emergency Paid Leave and Paid Leave Tax Credit extends the Families First Coronavirus Response Act (“FFCRA”) emergency paid leave program through September 30, 2021 and provides up to 12 weeks of paid sick and family medical leave related to the COVID-19 pandemic.[5] Notably, generally public sector employers, including counties, are now eligible to receive the FFCRA tax credit for wages or compensation paid to an employee who is unable to work due to the pandemic.[6] Under previous law, counties were not eligible to receive this credit, impacting already-strained county budgets.

Additionally, as previously authorized under the FFCRA, generally a local government employer that provides paid leave wages under the Emergency Paid Sick Leave Act (“EPSLA”) or Expanded Family Medical Leave Act (“EFMLA”) will not be required to pay the employer's share of social security tax on the paid leave wages. Counties employ 3.6 million individuals, and without this tax credit, the high costs of funding the enhanced paid leave benefits could harm counties’ ability to provide critical services that are necessary for a successful pandemic response.[7]

Under the EPSLA, eligible employers provide employees with paid sick leave if the employee is unable to work (including telework) due to any of the following:[8]

  • The employee is under a Federal, State, or local quarantine or isolation order related to COVID-19;
  • The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  • The employee is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is caring for the child of such employee if the school or place of care of the child has been closed, or the childcare provider of such child is unavailable, due to COVID–19 precautions; and
  • The employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.[9]

In addition, Section 3131 of the ARP has expanded the criteria for EPSLA to include the following:

  • A covered employee is absent from work because the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, provided that the employee has been exposed to COVID-19 or the employer has requested that the employee obtain such test or diagnosis;
  • An employee is obtaining immunization related to COVID-19; and
  • An employee is recovering from any injury, disability, illness, or condition related to an immunization for COVID-19.

 

[1] U.S. Department of the Treasury, FACT SHEET: The American Rescue Plan Will Delivery Immediate Economic Relief to Families, https://home.treasury.gov/news/featured-stories/fact-sheet-the-american-rescue-plan-will-deliver-immediate-economic-relief-to-families (Last accessed on April 6, 2021)

[2] Internal Revenue Service, COVID-19 Related Tax Credits for Paid leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-paid-leave-provided-by-small-and-midsize-businesses-faqs (Last accessed on April 6, 2021)

[3] Internal Revenue Service, COVID-19 Related Tax Credits for Paid leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-paid-leave-provided-by-small-and-midsize-businesses-faqs (Last accessed on April 6, 2021)

[4] U.S. Department of the Treasury, FACT SHEET: The American Rescue Plan Will Delivery Immediate Economic Relief to Families, https://home.treasury.gov/news/featured-stories/fact-sheet-the-american-rescue-plan-will-deliver-immediate-economic-relief-to-families (Last accessed on April 6, 2021)

[5] The National Association of Counties, Legislative Analysis for Counties: American Rescue Plan Act of 2021, https://www.naco.org/resources/naco-analysis-american-rescue-plan-act (last accessed April 6, 2021)

[6] The National Association of Counties, Legislative Analysis for Counties: American Rescue Plan Act of 2021, https://www.naco.org/resources/naco-analysis-american-rescue-plan-act (last accessed April 6, 2021)

[7] The National Association of Counties, Legislative Analysis for Counties: American Rescue Plan Act of 2021, https://www.naco.org/resources/naco-analysis-american-rescue-plan-act (last accessed April 6, 2021)

[8] Internal Revenue Service, COVID-19 Related Tax Credits for Paid leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-paid-leave-provided-by-small-and-midsize-businesses-faqs (Last accessed on April 6, 2021)

[9] Internal Revenue Service, COVID-19 Related Tax Credits for Paid leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-paid-leave-provided-by-small-and-midsize-businesses-faqs (Last accessed on April 6, 2021)

ARP | Timing and Use of Funds

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ARP Funds are expected to come in two tranches, the first within 60 days after the passage of the law, and the second one year after the passage of the law. Is there a set allocation on how much will be received per tranche? 50% and 50%, 25% and 75%, 33% and 66%?

While the US Treasury has not released specific guidance at this time, the ARP bill indicates that 50 percent will be allocated to municipalities in the first tranche[1] and an amount that shall not exceed 50 percent in the second tranche.[2] The Secretary of the Treasury has been given pro rata adjustment authority, meaning the Secretary may adjust allocations proportionally to ensure that all funds are allocated.[3]

 

[1] American Rescue Plan Act (HR 1319 Subtitle M Section 603(g)(3))

[2] American Rescue Plan Act (HR 1319 Subtitle M Section 603(g)(4))

[3] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(3)(C)(ii)(II))

Where can we look to find out when funds will be available for municipalities, Entitlement Communities, and Non-Entitlement Communities (who will receive their funding from their states)?

The U.S. Treasury has yet to release the official funding amounts but is anticipated to do so by early April 2021. In the interim, the Government Finance Officers Association (“GFOA”) posted allocation estimates that can be found by following the link in the “State and local fiscal aid  (CRF Augmented)” section on the GFOA’s American Rescue Plan analysis webpage: https://www.gfoa.org/flc-analysis-of-current-proposed-covid-19-relief-measures.

The U.S. Treasury has not yet released any requirement to request funds and it is still unknown if there will be any requirement for municipalities to do so.

Metropolitan cities will receive funds directly from the U.S. Treasury in two tranches.

Non-entitlement communities (generally cities with populations under 50,000) will receive fund disbursements through the states and will be capped at 75% of their budget as of 1/27/2020.

Disbursements will be distributed to metropolitan cities and states in two tranches:

First Tranche

  • Will be disbursed within 60 days of enactment of the bill (May 11, 2021)
  • Will equal 50% of the total allocation
  • States must disburse funds to recipient cities within 30 days of receipt unless granted an extension

Second Tranche

  • Will be disbursed no earlier than 12 months after the first disbursement (no sooner than May 11, 2022)
  • Will equal the remaining 50% allocation amount
  • There is currently no language that specifies a deadline for states to disburse funds to recipient cities

For longer term projects, what is the final date that ARP funds must be spent by, and are there exceptions for longer term projects which would allow the funds to be utilized after the final date?

The American Rescue Plan (ARP), and in particular the new Coronavirus Local Fiscal Recovery (CLFR) Fund, creates an exciting opportunity for communities to invest in longer-term projects and priorities than previously afforded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which created the Coronavirus Relief Fund (CRF). The new CLFR Funds are available to keep first responders, frontline health workers, teachers, and other providers of vital services safely on the job as states, local governments, Tribes, and territories roll out vaccines and fight to rebuild Main Street economies. Funds are available until December 31, 2024 to respond to the pandemic or its negative economic impacts. Potential uses include assistance to households and small businesses; premium pay for essential workers; water, sewer, or broadband infrastructure investments; and the replacement of revenue lost compared to the most recent full fiscal year prior to the pandemic. 

At the onset of the CRF program there was a great deal of confusion related to the covered period (3/1/2020 to 12/31/2020) and the requirement to fund projects that could be completed during that window. One of the central questions relating to this deadline was whether it was considered an obligation of funds deadline or a deadline to actually expend and liquidate the funding. This confusion, along with the abbreviated timeline of CRF, significantly impacted communities’ programmatic development and ultimately their ability to address significant local priorities.

The same challenge is presented with the new CLFR funding. As of March 25, 2021, the U.S. Department of the Treasury (Treasury) has not released any guidance related to the obligation or expenditure period of CLFR above and beyond what was outlined in the bill text: 

(1) USE OF FUNDS. —Subject to paragraph (2), and except as provided in paragraphs (3) and (4), a metropolitan city, nonentitlement unit of local government, or county shall only use the funds provided under a payment made under this section to cover costs incurred by the metropolitan city, nonentitlement unit of local government, or county, by December 31, 2024—[1] 

Based on the text of the Bill, the same fundamental question exists: if a local community enters into a contract that obligates the funding by December 31, 2024, can work continue beyond that date? The answer is not known at this time, but additional guidance will likely be available soon. Unlike the CRF program, the Secretary of Treasury has the authority to issue regulations necessary to implement this program and that process is currently underway. 

 While awaiting further guidance from the Treasury, below are some steps that local communities can consider taking in preparation for potential longer-term projects: 

  • Conducting stakeholder engagement activities and other planning efforts to ensure that these programs can be mobilized as soon as funding and guidance are available. 
  • Prioritizing capital and other projects that will fit within this time period, and also meet all of the allowability and federal flow-down requirements for use of the CLFR funding, thus freeing up bond proceeds and other more flexible funding sources for longer-term projects. 
  • Reviewing local government expenditures that may be supported through the CLFR funding that could create longer-term budget flexibility for the community. 

Updating procurement vehicles not only so they are ready to be used once the funding is available, but also so that all options such as pre-payment, front-loading, cost-share, etc. have been fully explored and can be compared to the CLFR regulations once released.

 

Can cities use funds provided pursuant to the ARP to establish a fund or endowment that will remain in place beyond December 31, 2024?

The legislative text of the American Rescue Plan Act (“ARP”) does not specifically address to what extent governments can utilize Coronavirus Local Fiscal Recovery Funds (“CLFRF”) beyond the covered period ending December 31, 2024.[1] Specific details will be released by the U.S. Treasury to address rules around establishing a fund or endowment for CLFRF; however, cities can look to the Coronavirus Relief Fund (“CRF”) created by the CARES Act of 2020 as an example of how the U.S. Treasury addressed similar questions.

According to CRF guidance, “To the extent a cost is incurred by December 31, 2021, for an eligible use consistent with section 601 of the Social Security Act and Treasury’s guidance, a necessary administrative compliance expense that relates to such underlying cost may be incurred after December 31, 2021.”[2] These costs may include expenses incurred to comply with the Single Audit Act, and reporting and recordkeeping requirements imposed by the Office of the Inspector General.[3]

Because the U.S. Treasury has yet to indicate how they will address this, we cannot currently draw the conclusion that the same standard will apply to the use of ARP CLFRF funds.

 

[1] American Rescue Plan Act (HR 1319 Subtitle M Section 603(a)(1)

[2] Federal Register, Vol. 86, No. 10.

[3] Federal Register, Vol. 86, No. 10.

ARP | Lost Revenue

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How can my municipality use stimulus funds to cover lost revenue? May municipalities use ARP funds to replenish fund balance which was used to cover lost revenue due to COVID-19?

The Coronavirus Local Fiscal Recovery Fund (“CLFRF”) established by the American Rescue Plan Act of 2021 (“ARP”) was established to help “mitigate the fiscal effects stemming from the public health emergency with respect to the Coronavirus Disease (COVID-19).”[1]  A major component of CLFRF is the ability of municipalities to address reductions in revenue due to COVID.  Section 603(c)(1)(C) of the ARP states that, among other purposes, funds may be used: 

(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…” 

It is important to note that the “provision of government services” language may refer to the delivery of an actual program or activity. The language in 603(c)(1) that discusses incurred costs is unclear in determining whether municipalities will simply be able to replenish fund balances. Instead, municipalities may have to use revenue replacement funds for specific programmatic purposes. We will have to await guidance before knowing definitely whether a city can replenish the fund balance.

While awaiting guidance from the U.S. Department of Treasury, municipalities should review what kinds of programmatic expenditures to which they can allocate CLFRF resources that will create the greatest amount of economic stability and financial flexibility for their jurisdiction.

 

[1] American Rescue Plan Act of 2021, H.R.1319, 117th Cong. § 9901 (2021) (amending 42 U.S.C § 301-1305, at § 603, available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H7C2075B5C62541F9A348BDF1DDBECEB6 

May municipalities use ARP funds to make up lost revenue from delinquent tax collections? If so, what are the requirements to provide relief to delinquent taxpayers?

Municipalities will have the opportunity to use resources from the American Rescue Plan Act of 2021 (“ARP”) funds, such as the Coronavirus Local Fiscal Recovery Fund (“CLFRF”), to support government services impacted by revenue loss.[1] It is unclear at this time whether municipalities will have greater flexibility related to tax reductions and outright tax relief than States and territories. Section 9901 of the ARP (amending 42 U.S.C. § 301-1305, at § 602(c)(2)(A)),[2] which applies only to the direct State and territory allocations, includes the following language around the restriction on use of funds: 

“(A) IN GENERAL.—A State or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.” 

While the early interpretations of this section have discussed formal tax breaks or credits, this section uses the phrase “reduces any tax” vaguely before clarifying that this can occur through numerous mechanisms and not just a formal legislative or appropriation action.  

Based on the guidance issued by the Department of the Treasury regarding the earlier Coronavirus Relief Fund of the CARES Act, general financial support to beneficiaries that has a secondary impact of allowing individuals and entities the financial capacity to pay outstanding tax and utility liabilities for things such as rental assistance, food insecurity, job training, and healthcare costs may be allowable under CLFRF. However, guidance from the Treasury has yet to indicate what is allowable under the ARP. This guidance will ultimately indicate whether regulatory language will extend the above-mentioned prohibition on state use to local governments. In the meantime, municipalities should approach this topic cautiously and consider other types of financial assistance to households, small businesses, and non-profits impacted by COVID that do not include the direct forgiveness or relief of outstanding tax obligations. 

 

[1] American Rescue Plan Act of 2021, H.R.1319, 117th Cong. § 9901 (2021). Modifying, The United States Code: Social Security Act 42 U.S.C § 301-1305, at § 603 (Suppl. 4 1934). https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H7C2075B5C62541F9A348BDF1DDBECEB6 

Where revenue streams, such as tourism, have been decreased due to the pandemic, may a municipality use federal stimulus funds to cover operational costs and capital improvements to facilities which generate their own revenue prior to the COVID-19 emergency?

Under the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) established by the American Rescue Plan Act of 2021 (“ARP”), municipalities will have broad discretion as to how to allocate the resources provided to them.[1] As detailed in Section 603 (c)(1), the allowable uses of the funds are: 

“(1) USE OF FUNDS.—Subject to paragraph (2), and except as provided in paragraphs (3) and (4), a metropolitan city, nonentitlement unit of local government, or county shall only use the funds provided under a payment made under this section to cover costs incurred by the metropolitan city, nonentitlement unit of local government, or county, by December 31, 2024— 

(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.” 

The uses outlined in the ARP will provide municipalities with different options in terms of supporting impacted industries and key segments of the local economy whether they are owned and operated by the private sector or a government entity. Because the U.S. Department of Treasury has yet to release guidance, it is unclear at this time how municipalities may address these projects.  

In the meantime, municipalities can take a few proactive steps such as, but not limited to:

  • collecting and analyzing revenue information from the last few fiscal years;
  • updating local Capital Improvement Plans;
  • refining project plans with up-to-date budget estimates and timelines;
  • reviewing available procurement options; and
  • engaging stakeholders as appropriate.  

These examples of pre-award actions may help to ensure that a municipality has all the relevant information necessary to make informed decisions once final Treasury guidance is released. 

 

[1] American Rescue Plan Act of 2021, H.R.1319, 117th Cong. § 9901 (amending 42 U.S.C § 301-1305, at § 603 (Suppl. 4 1934), available at:  https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H7C2075B5C62541F9A348BDF1DDBECEB6 

Where revenue streams, such as tourism, have been decreased due to the pandemic, may a municipality use stimulus funds to cover lost revenue to the government from ticket sales? May these funds be used to cover lost revenue for a third-party operator?

The Department of Treasury has not yet released guidance for the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) program established by the American Rescue Plan (“ARP”) Act of 2021.[1] However, municipalities will be given discretion to determine how to allocate these funds to mitigate the negative economic impact of the COVID-19 pandemic.  The degree of discretion  provided to municipalities will be borne out in the related guidance. 

A major component of CLFRF is the ability of municipalities to address reductions in revenue due to COVID.  Section 603(c)(1)(C) of ARP states that, among other purposes, funds may be used: 

(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…”

In particular, “provision of government services” appears to imply the delivery of an actual program or activity.  In addition, the language in 603(c)(1) appears to limit how municipalities may utilize funds:

“(1) USE OF FUNDS.—Subject to paragraph (2), and except as provided in paragraphs (3) and (4), a metropolitan city, nonentitlement unit of local government, or county shall only use the funds provided under a payment made under this section to cover costs incurred by the metropolitan city, nonentitlement unit of local government, or county, by December 31, 2024—"

As such, it is unlikely that municipalities or their third-party operators will simply be able to replace lost revenue and restore fund balances caused by declines in ticket sales.

Instead, it is possible that municipalities will have to use revenue replacement funds for specific programmatic purposes.  These programmatic purposes may address areas for which—historically—revenue from ticket sales may have been used, or for other programmatic activities that help to mitigate the loss.  

Broadly, municipalities will likely need to show both revenue lost and an obligation and actual costs incurred in order to comply with the covered period (beginning March 3, 2021) and other programmatic and compliance requirements of the CLFRF program.  

Until specific Treasury guidance is released, municipalities and their third-party venue operators may consider gathering information about lost revenues year-over-year negatively impacted by declines in ticket sales and other revenue streams.  Additionally, municipalities may consider looking at short and longer term operational and capital expenses that could potentially be directly supported by CLFRF.  In addition to CLFRF, municipalities may consider reviewing the Shuttered Venue Operators Grant (“SVOG”) Program[2] through the Small Business Administration as an additional source of support for government-owned entertainment venues. 

 

ARP Funding Allocation

According to 3/8/21 U.S. Senate Estimates

Other Federal Funding

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COVID-19 recovery has been ongoing for over a year. Our municipality has already submitted many costs for reimbursement through the Coronavirus Relief Fund (“CRF”) and other funding programs from previous legislation. We have also submitted many costs for reimbursement through FEMA. What guidance can you give to help us to maximize recovery across all sources without running afoul of one source?

A recommended strategy to improve your chances in maximizing multiple funding sources is positioning more restrictive funding to be prioritized and used first, before tapping into more flexible funding, where reasonable.  For example, utilizing FEMA Public Assistance (“PA”) funding for all eligible activities first, and then using the CRF funding for the expenditures that are ineligible for FEMA reimbursement may result in a more efficient and effective use of federal funding.  Additionally, FEMA PA funding should not be capped or competitive.  Therefore, prioritizing FEMA PA funding may help maximize overall federal funding by saving the finite funding programs for use after FEMA PA.

Many sub-recipients across the country are currently re-allocating funding across these two programs as a result of the extended timeline of CRF funding through December 31, 2021 and the retroactive increase of FEMA’s federal cost share from 75% to 100%.

For example, a municipality may have decided to use CRF funding to cover its 25% non-federal FEMA PA cost share.  Now that the federal cost share has been increased to 100%, the remaining 25% of CRF funding should be able to be utilized for programs such as business interruption grants, straight time force account labor, etc.  

It is also important to understand the specific documentation and eligibility requirements of each program as they may differ. Each program will likely require municipalities to demonstrate compliance and validate that they met its rules and requirements– which is often one of the most challenging aspects of disaster cost recovery.  Failure to meet documentation requirements, or documentation that does not adequately support your organization’s claim under any given funding source, could result in having to forgo eligible funding.  One way to improve your chances is to record and save all documentation, invoices, proofs of payments, procurement methodologies, etc.  Below are some points municipalities can follow which may help to minimize duplication of benefits and maximize additional funding:

  • Maintain detailed documentation;
  • Store documentation centrally and electronically; and
  • Organize documentation logically.

Leveraging Federal funding programs can be a complex puzzle.  Detailed tracking of costs may improve your chances of avoiding duplication of benefits – a requirement that no two funding sources can provide funding for the same item, service, or scope.  In some cases, multiple funding sources can provide funding for the same item, and your organization will have to identify which funding source will best meet your needs.  For example, many COVID-19 specific funding sources may cover the cost of purchasing Personal Protective Equipment (“PPE”), such as masks, gloves, and face shields, but your organization will have to ensure that you won’t have two or more funding sources reimbursing the purchase of the same PPE, including donations.

One possible approach to this would be to establish dedicated codes in your financial management or reporting systems to distinctly track different COVID-19 related costs. For example, a municipality could track vaccination-related costs separately from other COVID-19 response and planning costs.

What are the details and implications of the updated FEMA Medical Care Policy, Coronavirus (COVID-19) Pandemic: Medical Care Eligible for Public Assistance (Interim) (Version 2) FEMA Policy #104-21-0004, issued March 15, 2021?

The Federal Emergency Management Agency (“FEMA”) issued a new version of the COVID-19 Interim Medical Care Policy, Coronavirus (COVID-19) Pandemic: Medical Care Eligible for Public Assistance (Interim) (Version 2) FEMA Policy #104-21-0004, on March 16, 2021, which can be accessed on FEMA’s website here. This update supersedes the previous version of this policy, which was issued on May 9, 2020. General eligibility remains the same, as the policy is applicable to the COVID-19 pandemic incident periods beginning January 20, 2020. Eligible PA applicants include State, Local, Tribal, and Territorial (“SLTT”) government entities and Private Non-Profit (“PNP”) organizations that own or operate medical facilities. The following are some of the noteworthy changes and considerations in the policy:

  • The revised policy includes the update of the Federal cost share to 100 percent for eligible COVID-19 emergency protective measures performed from January 20, 2020 through September 30, 2021, consistent with the President’s January 21, 2021 Memorandum to Extend Federal Support to Governors’ Use of the National Guard to Respond to COVID-19 and to Increase Reimbursement and Other Assistance Provided to States available here.
  • The revised policy includes a detailed list of eligible vaccination scope; policy Section C.3 provides a list of scope items. The vaccination scope list included elaborates on FEMA’s earlier vaccination scope list in its November 19, 2020 Vaccination Planning FAQ. Newly-identified scope items include, but are not limited to, resources to support mobile COVID-19 vaccination in remote areas and/or transportation support for individuals with limited mobility or lack of access to transportation, Federally Qualified Health Center vaccine related costs, information technology costs “when reasonable and necessary,” and training related to COVID-19 vaccinations.
  • The revised policy includes a focus on equity, consistent with the President’s January 21, 2021 Executive Order on Ensuring an Equitable Pandemic Response and Recovery found here; refer to policy Section B.3. The policy states that applicants “must focus the use of FEMA funding on the highest-risk communities and underserved populations as determined by established measures of social and economic disadvantage (e.g., the CDC Social Vulnerability Index). Failure to adhere to this policy could result in funding reductions and/or delays.” 
  • In relation to equitable response, the revised policy includes requirements for vaccination sites to collect data on race, ethnicity, disability status, and other person-level information. The policy also includes requirements to demonstrate equitability in vaccination site locations and processes, which must be reported to FEMA every 30 days following project obligation. Refer to Section C.3.k for detailed reporting requirements. One step municipalities can take is to prioritize the review of these documentation requirements and move quickly to establish and initiate processes for collecting data, if not already in place.
  • The revised policy includes new language regarding expectations for applicants in medical care billing practices and fee collection. The revised policy notes it will not require applicants to create a new billing process at certain temporary medical facilities; however, the policy also states that all work conducted and costs incurred in Primary Medical Care Facilities should follow a facility’s standard billing practice. If a Primary Medical Care Facility did not follow its standard billing practice, the Applicant must demonstrate why following such practices would have increased an immediate threat to life and demonstrate that all costs not reimbursed by FEMA followed the same procedures. Refer to Section D.1.c for further language. As one method to protect municipalities in case of future audit, municipalities can consider taking the time now to prepare and retain robust documentation and justification of billing procedures taken.
  • The revised policy incorporates language regarding procurement requirements for COVID-19 declarations; refer to Section D.3. The language is consistent with FEMA’s previously released March 17, 2020 Procurement Under Grants Conducted Under Exigent or Emergency Circumstances for COVID-19 Memorandum and subsequent Fact Sheet found here

What are the differences between ARP and FEMA Public Assistance (PA) funding? What can my municipality do to decide which funding is the best fit?

The FEMA Public Assistance (PA) program provides federal funding to help communities respond to and recover from federally declared disasters. COVID-19 related FEMA PA funding is limited to costs for Emergency Protective Measures (FEMA Category B) and operates on a reimbursement basis. Reimbursement amounts are based on actual incurred costs for eligible scopes of work rather than an allocation formula. Applicants apply through their respective state, tribal or territorial jurisdictions. Eligible work includes increasing medical capacity, non-congregate sheltering, and emergency feeding distribution, from the beginning of the pandemic in January 2020 to Sept. 30, 2021.[1] These costs may be reimbursed based on a 100% federal cost share.[2]  Eligible activities have been expanded generally to allow for reimbursement of costs used to support the safe re-opening and operation of eligible facilities, including schools, child-care facilities, healthcare facilities, non-congregate shelters, domestic violence shelters, transit systems, and other eligible activities.[3]

For additional information on the FEMA PA program, see:

The American Rescue Plan (ARP) allocated $1.9 trillion to a broad range of agencies and funds targeted toward individuals and households, states, territories, local and tribal governments, education, childcare, businesses, and others. Each fund has a distinct legislative intent and legal requirements that address the specific requirements of allowable fund use. The largest and most flexible of the funds available to municipalities is the Coronavirus Local Fiscal Recovery Fund (CLFRF), appropriated to the U.S. Treasury. The CLFRF funds are allocated to counties and cities based largely on population size and will be disbursed directly from the U.S. Treasury to metropolitan cities[4]. Nonentitlement cities will receive CLFRF funds through their respective state.[5] These funds are flexible in their use and remain available until December 31, 2024 for eligible expenses. Eligible expenses may include, but are not limited to, costs related to responding to the COVID-19 public health emergency, the negative economic impacts of the pandemic, and the provision of key government services as needed to cover the decline in cities’ revenues as a result of the pandemic (American Rescue Plan Act § 603.c).[6]

The Treasury Department is expected to publish additional guidance on the administration of the ARP’s funds on or before May 11, 2021.  This guidance may assist municipalities in determining which federal funding source to rely on for the municipality’s eligible program or project.  As a general matter, when faced with a choice between multiple funding options, municipalities can start the selection process by evaluating the needs of the community— including assessing current finances—and understanding the allowable use of funds for the respective sources. There are many useful and informative summaries that can provide a survey of funds and their allowable uses as a starting point.  A few are linked below:

Before making a final determination as to the best funding source, municipalities should consider conducting a detailed analysis to determine which fund best fits a given project’s cost, timeline, and use category. Municipalities should rely on either internal or external individuals who have the appropriate expertise to assist them in determining which funds apply to their need and navigate a community-specific strategy for maximizing use of available funds.

As with all federal aid programs, municipalities must take care to not duplicate any benefits provided by other funding sources.

 

[4] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(1)(B))

[5] American Rescue Plan Act (HR 1319 Subtitle M Section 603(b)(2)(B))

[6] See H.R. 1319, Subtitle M, Section 9901 (amending Title VI of the Social Security Act (42 U.S.C. 801 et seq.) to add Section 603: Coronavirus Local Fiscal Recovery Fund, https://www.congress.gov/bill/117th-congress/house-bill/1319/text

Do COVID-19-related tax credits for paid leave align or correlate with Stafford Act/FEMA funding or the American Rescue Plan Act?

The American Rescue Plan Act of 2021 (“ARP”) extends several tax benefits to small businesses that are intended to help businesses stay open, recover, make payroll, and take steps to protect health outcomes for employees. 

ARP extends the availability of the Employee Retention Credit for small businesses through December 2021 and allows businesses to offset their current payroll tax liabilities by up to $7,000 per employee per quarter. This credit of up to $28,000 per employee for 2021 is available to small businesses who have seen their revenues decline or who have been temporarily shuttered due to COVID-19.[1]

The American Rescue Plan Act also extends the availability of Paid Leave Credits for small and midsize businesses that offer paid leave to employees who may take leave due to illness, quarantine, or caregiving.[2] This is extended through September 2021.[3] Businesses can take dollar-for-dollar tax credits equal to wages of up to $5,000 if they offer paid leave to employees who are sick or quarantining.[4] Paid Leave Credits are a powerful incentive to encourage the offer of paid sick and family leave to ensure sick employees are able to stay home.

The Emergency Paid Leave and Paid Leave Tax Credit extends the Families First Coronavirus Response Act (“FFCRA”) emergency paid leave program through September 30, 2021 and provides up to 12 weeks of paid sick and family medical leave related to the COVID-19 pandemic.[5] Notably, generally public sector employers, including counties, are now eligible to receive the FFCRA tax credit for wages or compensation paid to an employee who is unable to work due to the pandemic.[6] Under previous law, counties were not eligible to receive this credit, impacting already-strained county budgets.

Additionally, as previously authorized under the FFCRA, generally a local government employer that provides paid leave wages under the Emergency Paid Sick Leave Act (“EPSLA”) or Expanded Family Medical Leave Act (“EFMLA”) will not be required to pay the employer's share of social security tax on the paid leave wages. Counties employ 3.6 million individuals, and without this tax credit, the high costs of funding the enhanced paid leave benefits could harm counties’ ability to provide critical services that are necessary for a successful pandemic response.[7]

Under the EPSLA, eligible employers provide employees with paid sick leave if the employee is unable to work (including telework) due to any of the following:[8]

  • The employee is under a Federal, State, or local quarantine or isolation order related to COVID-19;
  • The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  • The employee is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is caring for the child of such employee if the school or place of care of the child has been closed, or the childcare provider of such child is unavailable, due to COVID–19 precautions; and
  • The employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.[9]

In addition, Section 3131 of the ARP has expanded the criteria for EPSLA to include the following:

  • A covered employee is absent from work because the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, provided that the employee has been exposed to COVID-19 or the employer has requested that the employee obtain such test or diagnosis;
  • An employee is obtaining immunization related to COVID-19; and
  • An employee is recovering from any injury, disability, illness, or condition related to an immunization for COVID-19.

 

[1] U.S. Department of the Treasury, FACT SHEET: The American Rescue Plan Will Delivery Immediate Economic Relief to Families, https://home.treasury.gov/news/featured-stories/fact-sheet-the-american-rescue-plan-will-deliver-immediate-economic-relief-to-families (Last accessed on April 6, 2021)

[2] Internal Revenue Service, COVID-19 Related Tax Credits for Paid leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-paid-leave-provided-by-small-and-midsize-businesses-faqs (Last accessed on April 6, 2021)

[3] Internal Revenue Service, COVID-19 Related Tax Credits for Paid leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-paid-leave-provided-by-small-and-midsize-businesses-faqs (Last accessed on April 6, 2021)

[4] U.S. Department of the Treasury, FACT SHEET: The American Rescue Plan Will Delivery Immediate Economic Relief to Families, https://home.treasury.gov/news/featured-stories/fact-sheet-the-american-rescue-plan-will-deliver-immediate-economic-relief-to-families (Last accessed on April 6, 2021)

[5] The National Association of Counties, Legislative Analysis for Counties: American Rescue Plan Act of 2021, https://www.naco.org/resources/naco-analysis-american-rescue-plan-act (last accessed April 6, 2021)

[6] The National Association of Counties, Legislative Analysis for Counties: American Rescue Plan Act of 2021, https://www.naco.org/resources/naco-analysis-american-rescue-plan-act (last accessed April 6, 2021)

[7] The National Association of Counties, Legislative Analysis for Counties: American Rescue Plan Act of 2021, https://www.naco.org/resources/naco-analysis-american-rescue-plan-act (last accessed April 6, 2021)

[8] Internal Revenue Service, COVID-19 Related Tax Credits for Paid leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-paid-leave-provided-by-small-and-midsize-businesses-faqs (Last accessed on April 6, 2021)

[9] Internal Revenue Service, COVID-19 Related Tax Credits for Paid leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-paid-leave-provided-by-small-and-midsize-businesses-faqs (Last accessed on April 6, 2021)

What are some ways my municipality can efficiently utilize the funding provided by the U.S. Department of Health and Human Services’ (“HHS”) Office of Minority Health (“OMH”) in the new program Advancing Health Literacy to Enhance Equitable Community Responses to COVID-19?

The Office of the Assistant Secretary for Health (OASH) and the Office of Minority Health (OMH) announced the availability of funds for Fiscal Year 2021 under the authority of 42 U.S.C. § 300u-6 (Section 1707 of the Public Health Service Act) and the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (P.L. 116-260).[1]

Eligibility for these funds is limited to legally recognized local municipalities (excluding States, Territories, Tribes, Tribal organizations, and non-profit urban Indian health organizations), such as cities, townships, boroughs, parish governments, as well as county governments across States and commonwealths of the United States. Other eligible applicants can also include water use cooperatives and even school districts.[2] Furthermore, there is no threshold or quota that determines eligibility; however, all eligible entities must submit applications which will go through a screening process to determine the communities with the greatest needs.[3]

More information may be found in the Department of Health and Human Services Office of the Assistant Secretary for Health Notice of Funding Opportunity: Advancing Health Literacy to Enhance Equitable Community Responses to COVID-19 Opportunity Number: MP-CPI-21-006 (“Notice of Funding Opportunity”).[4] Beginning on page 14 of the Notice of Funding Opportunity, applicants should prepare a Project Narrative, including the following topics: Statement of Need, Proposed Approach, and Organizational Capacity.

Furthermore, applicants should prepare the Narrative and implement their proposed health literacy program using the details below:

  • Demonstrate how health literacy strategies will be implemented to advance Healthy People 2030 objectives HC/HIT-01, HC/HIT-02 and HC/HIT-03, and improve adherence to COVID-19 public health practices with high-risk and underserved racial and ethnic minority populations in the geographic area of focus.
  • Provide a list, as an appendix, that identifies the types of partners and their role in developing and implementing the health literacy and sustainability plans.
  • Describe the quality improvement approach that will be used to refine health literacy strategies that support the access, use and outcomes of COVID-19 health information and services for the populations in the geographic area of focus.
  • Describe the evaluation approach that will be used to determine whether the health literacy intervention was implemented in adherence with the National CLAS Standards, whether it reached its target population described in the Disparity Impact Statement, and whether there were any changes in access, use and outcomes of program activities, especially COVID-19 testing, contact tracing, vaccination. Include a description of how data stratified by demographic characteristics will be used to advance Healthy People 2030 objectives HC/HIT-01, HC/HIT02, HC/HIT-03 and IID-D02.[5]

Once a municipality has determined whether it is indeed eligible, and has completed all the necessary actions related to funding utilization, it may follow the additional application steps found in the Notice of Funding Opportunity.

 

[1] https://www.grants.gov/web/grants/view-opportunity.html?oppId=330807

[3] See Id.

[4] Refer to the grants.gov link above (Link to Additional Information) and follow prompts to https://www.grantsolutions.gov/gs/preaward/previewPublicAnnouncement.do?id=92239.

[5] Refer to Pages 14 – 15 of Notice of Funding Opportunity: Advancing Health Literacy to Enhance Equitable Community Responses to COVID-19 Opportunity Number: MP-CPI-21-006.

Fraud Protection

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What are some of the best practices for our municipality when receiving complaints regarding fraud and waste? What are some of the appropriate investigatory steps that we should be taking when we receive them?

Best practices that municipalities should consider include establishing oversight programs and conducting audits of the municipality’s disbursements.  Audits and oversight are necessary components of the federal grant life cycle to ensure accountability for publicly funded programs and to mitigate the risk of fraud, waste, and abuse. Oversight authorities, including Federal Agencies’ Inspectors General, are independent reviewers charged with developing a risk framework to assess factors such as:

  • Was the funding used as intended?
  • Were resources used in a prudent, responsible, and reasonable manner?
  • Were the applicable laws and regulations followed, including local laws?
  • Is the use of funding clearly reported and documented?

When an audit or oversight inquiry happens, some things municipalities can consider include:

  • Identifying an Inquiry Response team. Clearly designate roles and responsibilities, including a team lead to respond to inquiries. Such an Inquiry Response Team could establish a clear process, direct action internally, collect and review documentation or responses, and communicate both internally and externally regarding the inquiry. A best practice would be to ensure that this team has the resources they need, including adequate time and bandwidth, to dedicate sufficient time to coordinate your municipality’s response. 
  • Understanding the scope and the breadth of the inquiry. Auditors, oversight bodies, or Freedom of Information Act requests are expected to communicate the goals, intent, subject, or framework they are using to perform their oversight role. Municipalities can consider whether the Inquiry Response Team clearly understands the questions being asked and responds directly to the questions. As a best practice, the Inquiry Response Team would also be able to identify and respond when a question is beyond the scope of the inquiry or inconsistent with the rules and requirements of the award.
  • Ensuring clear expectations for inquiry response. Municipalities can consider ways to communicate and work closely with the auditor or oversight body to establish clear expectations on timelines, methods of communication, and the format and content of responses.
  • Reviewing policy, guidance, and FAQs of the funding program. As a best practice, the Inquiry Response Team would be comfortable with the details of the guidance provided and be able to cite or reference that guidance in their response to the inquiry. For example, presenting a cost incurred in response to a question would also clearly identify how that cost was an eligible use of funding and cite the policy or guidance that permits it.
  • Ensuring response answers the question in a clear, concise, focused, and straightforward way. As a general best practice, municipalities can strive to present information as simply and as clearly as possible, and make sure it answers the question being asked. Auditors and oversight authorities may not understand the local context, and they will not assume how to connect information if it is not provided to them. For example, if presenting financial information to an auditor for costs that may have been proportionally allocated to a federal fund, municipalities can consider ways to make sure that the auditor understands the math and methodology behind the allocation and that the reasoning behind the response is spelled out for the auditor.

For municipalities managing disaster response and recovery funding, one of the ways to respond to an audit is to prepare for one before it arrives. Because auditors and oversight authorities often utilize a risk framework to assess when audit or inquiries should take place, documenting steps to mitigate risk are often times helpful in reducing the burden if and when an audit arrives. Some considerations municipalities can take into account include:

  • Documenting internal policies and procedures for the management of federal funding. Providing internal policies and procedures on how critical actions are taken, such as purchasing, spending, review and approval processes, will be helpful in demonstrating to an auditor that internal controls were in place. For most municipalities, those policies and procedures already exist, and may only need to be slightly expanded to account for additional processes specific to the federal funding. If your municipality developed a new process specific to the management of the fund, consider documenting that as well.
    • For example, auditors are often concerned with how goods or services funded by federal dollars are procured. An auditor may review a municipality’s existing procurement policy and process, conflict of interest policy, and contract management processes to ensure they were followed and are also compliant with the federal requirements or terms and conditions of the funding. To help prepare for an audit, collecting existing policies and adding in any specific additional processes put in place for the use of federal funds may help demonstrate the oversight and internal controls an auditor is looking for.
    • Example Case: A mid-size county used COVID-19 relief funding to establish a rental assistance and relief program for households that were severely financially impacted by COVID-19. The county documented how the program would be communicated and accessible to the public, application and documentation requirements, evaluation processes to determine compliance with program criteria and ensure no duplication of benefits, and the notification process to award or deny assistance. As the program was rolled out, the County identified that the process on approving release of funds to awardees, including who was responsible for the final approval and issuance of checks, was not captured in the existing process.  Updating their written policy with how that process actually occurred, including changes made to increase oversight of funding disbursement, will help an auditor understand how the program worked and the controls in place from the County to ensure it met the funding requirements.
  • Assessing and documenting if existing policies and processes were not followed. Often in the immediate aftermath of a disaster, or navigating the uncertainties of COVID-19, municipalities have had to make decisions and act quickly in order to protect public health and safety. In some cases, existing processes may have been amended to respond to immediate threats. Completing an after-action report, or mid-action report, could help to determine potential gaps or issues that an auditor may flag. Documenting what happened, including decision-making and processes, could be helpful in explaining these instances if questioned, as well as provide a framework to correct an issue.
    • For example, a municipality may have bypassed normal purchasing processes to requisition PPE for frontline workers responding to COVID-19 because the timeline to complete a full, competitive procurement may have put frontline workers in danger. Documenting  the context and justification for that decision in an internal memo, demonstrating that it was necessary, reasonable, and prudent, may help an auditor understand the process. It will also help if an audit or oversight inquiry happens months or years after the fact, where the individuals “in the room” may no longer be with the municipality, or able to support the audit or oversight response.
  • Keeping financial information and supporting documentation clear and organized. Maintaining financial information and supporting documentation is the baseline requirement of all federally funded programs. Keeping documentation organized, up to date, and centrally accessible will help your team quickly and effectively respond to an auditor or oversight authority. This will be especially helpful if audits come months or years later, when the original team managing the funding may not be available to search for documentation or support audit response. As part of your internal policies and procedures, it is helpful to clarify where documentation should be stored.
  • Consider ways to correct identified issues. Mistakes occur in disaster response and recovery, often without the direct intent of fraud, waste, or abuse. Entities that identify critical issues regarding use or management of funds, but do not take efforts to correct them, may face additional issues when audit or oversight arrives. Periodic internal assessment, updating policies and processes as needed to better meet the terms and conditions of your municipality’s allotted federal funds, and documenting efforts to resolve identified issues will likely help to demonstrate effective stewardship to an auditor or oversight authority.

Below are some resources that municipalities may find useful in understanding and preparing for federal audits of disaster recovery funding, including reviewing recent audits:

Additional steps that municipalities can consider taking include:

  • Having a database in place to document and track fraud complaints received.
  • Making it easier for workers, contractors and the public to report COVID-19 related fraud in your municipality by considering establishing a COVID-19 fraud hotline that allows individual to report matters anonymously.
  • If your municipality does not have resources in place to investigate fraud complaints, consider coordinating with your local, state and/or Federal prosecutors. Most prosecutors will have units in place to investigate allegations of fraud.
  • Municipalities can leverage Federal resources already in place to assist with handling COVID-19 related fraud complaints. Below are some Federal entities that have hotlines in place to receive fraud complaints:
  • If you do conduct an investigation and find violations of Federal law involving fraud, bribery, or gratuity violations you must notify the Federal agency that awarded the money to your municipality. 
  • When a municipality conducts an investigation regarding fraud it is generally a good practice to coordinate your efforts with your internal audit department if one exists.

What are some simple steps our municipality can take to help prevent fraud in the procurement process?

Some steps that cities may consider include, but are not limited to, the following:

  • Perform a check to ensure contractors and suppliers are not prohibited from work on federally funded contracts. A contract should not be granted to parties listed on the federal government-wide Excluded Parties List.[1] The federal government maintains a public database to identify companies and individuals who are excluded from working on federal projects. Cities should keep a record of the checks they make.  https://www.sam.gov/SAM/pages/public/searchRecords/advancedPIRSearch.jsf 
    • If awarding a new contract, this check should be included in your evaluation criteria prior to notification of award.
  • Many states and cities have their own debarment lists and these can be checked as well. The Office of the Inspector General for the U.S. General Services provides a helpful search tool that helps identify debarment lists by state.  Cities should keep a record of the checks they make. https://www.gsaig.gov/content/suspension-and-debarment-sites-state.
  • Non-Federal entities should award contracts only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. Consideration will be given to such matters as contractor integrity, compliance with public policy, record of past performance, financial and technical resources, and capacity to perform the proposed scope of services.[2] Even under emergency situations, basic due diligence steps can be taken, such as checking your state’s Secretary of State Business Registration Database to attempt to ensure the relevant company is duly registered to conduct business, performing an internet check to see if any red flags surface regarding the company and owner, and reviewing past performance evaluations if applicable.
  • Maintain oversight to ensure that contractors perform in accordance with terms, conditions, and specifications of their contracts or purchase orders.[3] Examples of some oversight tools are conducting regular audits, ensuring sufficient supervision and/or regular project spending and work completion reports from vendors, and having written standards of conduct in place covering conflicts of interest and governing the performance of employees engaged in the selection, award, and administration of contracts. Cities should keep records of all actions taken.
  • If time does not permit adequate acquisition planning and market research, an agency can consider limiting the value and length of a contract to address only its immediate needs. This approach allows the agency to plan strategically for ongoing requirements. Options may be included and exercised, if necessary, to allow continuous service.[4]
  • If utilizing pre-existing, competitively-bid contracts for emergency services, cities can ensure that the scope of work provided is consistent with the scope of work in the original contract. Change orders to substantially add new scope, services, or time not covered by the original contract and solicitation may be considered a “cardinal change,” making the contract non-competitive and non-compliant with federal procurement requirements.[5] Changes to the contract should follow the processes outlined in the contract itself.
  • If procuring new goods or services, cities should ensure that any solicitation is clear on the scope of services being sought, including any criteria used to evaluate a bidder’s responsiveness or responsibility. Awarded vendors will need to demonstrate both responsiveness – that they have met the criteria outlined in the solicitation – and responsibility – that they have the reputational, technical, and financial capacity to perform the services proposed for the contract.[6] Awarding a vendor who did not comply with the terms of the solicitation, or where evaluation criteria for the award was not consistently or clearly applied or documented, may raise concern on the validity of the award.
  • If sufficiently robust, follow your already established procurement processes, whether they are for emergency contracts or otherwise.  Maintain records sufficient to detail the history of the procurement, including but not limited to rationale for the method of procurement, the selection of the contractor/vendor, and the basis for the contract price.[7] Documentation is key to transparency and for preparing for future audits.
  • Immediately notify in writing the federal agency awarding the assistance of violations of federal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award.[8]
  • Require contractors/vendors to include a signed certification attesting to the accuracy of submitted invoices. Establish processes to review invoices against a vendor’s progress reports to ensure that the project is completing the scope as outlined by the contract, change order, or your direction, and that the timelines are consistent with the terms of the contract.
  • Establish and promote an anonymous COVID-19 Fraud whistleblower hotline for employees, the public and contractors. Hotline posters should be posted at government facilities, distributed to contractors/vendors, and placed in public areas that are most likely to be observed by the members of the community. Creating posters in multiple languages can be helpful. Contractors and vendors should be reminded in their contracts of their absolute responsibility to report any suspicion of fraud to the hotline.
  • If mistakes are made during the procurement process, document the issue and note the corrective action taken. [9]

 

[1] 2 CFR Section 200.521 Federal Award Administration

[2] 2 CFR Section 200.318 General Procurement Standards

[3] 2 CFR Section 200.318 General Procurement Standards

[5] 2 CFR Section 200.319 Competition, 200.320 Methods of Procurement to be followed

[6] 2 CFR Section 200.318 General Procurement Standards (h), (i) and 200.319 Competition (d)

[7] 2 CFR Section 200.318 General Procurement Standards

[8] 2 CFR Section 200.113 Mandatory Disclosures

[9] 2 CFR 200.24 Cooperative Audit Resolutions

Can you provide elements to a hypothetical audit checklist to best prepare my city for future audits by outside parties or governmental agencies?

In preparing for an audit, cities should consider on what areas government agencies may focus when auditing the municipality.  In a 2017 report[1] issued by the Office of the Inspector General (“OIG”) of the Department of Homeland Security, the OIG considered several factors to determine which activities to audit during disaster relief recovery periods, including:

  • The risk of fraud, waste, and abuse of federal funds;
  • Statutory and regulatory requirements;
  • The magnitude of current or potential dollar amounts;
  • Requests from congressional, FEMA, or state officials; and
  • Reports/allegations of impropriety or problems in implementing FEMA programs.

The Treasury Department has not yet issued guidance pertaining to potential state and federal oversight of the ARP Act. As such, please note that the recommendations below are informed by lessons learned from the administration of the Coronavirus Relief Fund (“CRF”) established by the CARES Act of 2020.  Audit frameworks and testing criteria may change depending on guidance issued or the funding source, such as Public Assistance provided by FEMA.  Cities should consult specific guidance promulgated by the relevant authorities when available.

CRF Compliance Requirements

With regards to the CRF, for direct payments offered and disbursed by the U.S. Department of the Treasury, governmental auditors are required to reference 2 CFR Part 200, Appendix XI Compliance Supplement Addendum[2] when developing audit procedures to test compliance with the requirements for this federal program. The Executive Office of the President Office of Management and Budget (“OMB”) has determined that auditors must a) determine which of the 12 types of compliance requirements (which have also been determined by the OMB) have been identified as subject to the audit, shown below, and b) determine which of the compliance requirements that are subject to the audit are likely to have a direct and material effect on the federal program from which the auditee received funds.  Of the 12 types of OMB compliance requirements, the following five compliance requirements are subject to audit for CRF:

  1. Activities Allowed or Unallowed[3]
  2. Allowable Costs / Cost Principles[4]
  3. Period of Performance[5]
  4. Reporting[6]
  5. Sub-recipient Monitoring[7]

For each such compliance requirement subject to the audit listed above, the auditor must reference Part 3 of the 2 CFR Part 200, Appendix XI Compliance Supplement (for which specific pages have been referenced) in conjunction with the addendum referenced in Footnote 2 in the section titled ”Department of the Treasury.”

Proper Documentation and Transparency

According to OIG-CA-21-004R[8] Coronavirus Relief Fund Prime Recipient Desk Review Procedures, each prime recipient or recipient of funds directly from the United States Department of the Treasury should report COVID-19 related costs incurred during the covered period (the period beginning on March 1, 2020, and ending on December 31, 2021) into the GrantSolutions portal, as outlined in the Coronavirus Relief Fund Reporting Requirements Update (OIG-CA-20-025[9], July 31, 2020) as follows:

  • Projects: the prime recipient must list all projects it plans to complete with CRF payments;
  • Expenditure Categories: The prime recipient must select the specific expenditure category from the available options from a dropdown menu (See Footnote 9 for dropdown menu categories).
  • Each prime recipient must also provide detailed obligation and expenditure information for any contracts and grants awarded, loans issued, transfers made to other government entities, and direct payments made by the prime recipient that are greater than or equal to $50,000 as follows:
    • Contracts Greater Than or Equal to $50,000
    • Grants Greater Than or Equal to $50,000
    • Loans Greater Than or Equal to $50,000
    • Transfers to Other Government Entities Greater Than or Equal to $50,000
    • Direct Payments Greater Than or Equal to $50,000
    • Aggregate reporting below $50,000 and for payments to individuals

In basic terms stated by the United States Department of Treasury in the Coronavirus Relief Fund Guidance (as published in the Federal Registrar on January 15, 2021)[10]: “A government should keep records sufficient to demonstrate that the amount of Fund payments to the government has been used in accordance with section 601(d) of the Social Security Act[11].”

According to OIG-CA-20-021[12] Memorandum for Coronavirus Relief Fund Recipients, records to support compliance with subsection 601(d) and provide accurate and complete documentation for the data requested for the GrantSolutions portal may include, but are not limited to, copies of the following:

  • General Ledger and subsidiary Ledgers used to account for:
    • The receipt of Coronavirus Relief Fund Payments; and
    • The disbursements of such payments to meet eligible expenses related to the public health emergency due to COVID-19.
  • 2019 and 2020 budget records;
  • Payroll, time records, human resource records to support costs incurred for payroll expenses related to addressing the public health emergency due to COVID-19;
  • Receipts of purchases related to addressing the public health emergency due to COVID-19;
  • Contracts and subcontracts entered into using Coronavirus Relief Fund payments and all documents related to such contracts;
  • Grant agreements and grant sub-award agreements entered into using Coronavirus Relief Fund payments and all documents related to such awards;
  • All documentation of reports, audits, and other monitoring of contractors, including subcontractors, and grant recipient and sub-recipients;
  • All documentation supporting the performance outcomes of contracts, subcontracts, grant awards, and grant recipient sub-awards;
  • All internal and external email/electronic communications related to use of CRF payments; and
  • All investigative files and inquiry reports involving CRF payments.

Audit Checklist

In preparing for an audit, it may help to understand the audit methodology that will be utilized, so that Cities can reverse engineer the audit to better prepare. Understanding what the auditors will be examining will allow cities to ensure that the proper documents and supporting data are available.

According to OIG-CA-21-004[13] Coronavirus Relief Fund Prime Recipient Desk Review Procedures, once the information is incorporated into GrantSolutions, the Office of the Inspector General of the Department of the United States Treasury (“Treasury OIG”) will perform a desk review which evaluates the prime recipient’s documentation supporting the uses of CFR proceeds as reported and assess the risk of unallowable fund uses.  Part of the desk review will include the use of other publicly available audits, such as a single audit or other State Auditor reports.  Desk audits may result in site visits to the prime recipient for a more in-depth review or recommendation for audit.  The review methodology includes but is not limited to the following;

  • Review the prime recipient’s quarterly GrantSolutions submission(s);
  • Review other audit reports (Single Audit, State Auditor, Government Accountability Office (GAO), and other applicable Federal agency OIG reports at Oversight.gov) for internal control or other deficiencies that may pose risk or impact the prime recipients uses of CRF proceeds;
  • Review the National Association of State Auditors, Comptrollers, and Treasurers newsletter for issues that may pose risk or impact the prime recipient’s use of CRF proceeds;
  • Select a judgmental sample of contracts, grants, loans, transfers to other governments, direct payments, and aggregate reporting (hereinafter referred to as payment types) based on risks identified in other audit reports, GrantSolutions reporting deficiencies identified by monitoring/approval team, and anomalies identified by the Data Analytics manager.  If necessary, consult with a statistician to identify a sampling methodology to determine the appropriate sample size for review of the prime recipient’s reporting obligations and expenditures;
  • Obtain and evaluate the prime recipient’s documentation and records used to support the quarterly submission(s);
  • Interview the prime recipient’s preparer(s) and certifier as deemed appropriate;
  • Interview State Auditors and other applicable oversight agency personnel as deemed necessary; and
  • Conduct site visits to the prime recipient, as deemed necessary.

The Office of the Inspector General will be using the following criteria to select a prime recipient for a CRF desk review so it is critical that cities prepare reports early and accurately, submit quarterly reports on time, and verify that all costs reported are eligible under guidance released by the US Treasury:

  • The prime recipient has exhibited a high degree of difficulty in the quarterly reporting process;
  • The prime recipient has submitted one or more late quarterly reports; or
  • The prime recipient has triggered a non-compliance status in one or more quarterly reports.

According to the Journal of Accountancy[14] (“the Journal”), the awards presented through the CRF are creating a challenge for single auditors because the terms and conditions surrounding their use are not always clear.  Auditors, much like municipalities, are awaiting guidance on key issues and adjusting based on the availability of such guidance. The Journal provides the below tips that help auditors face these challenges;

  • Do what you can and update your teams regularly;
  • Seek out regulators’ FAQs[15];
  • Document award timing;
  • Ensure that pandemic relief is separated on the Schedule of Expenditures and Federal Awards (“SEFA”);
  • Dig into major program determination;
  • Pay special attention to internal controls; and
  • Watch for “double dipping”.

 

[11] Subsection 601(d) of the Social Security Act, as amended, (42 U.S.C. 801(d)), requires that the payments from the Coronavirus Relief Fund only be used to cover expenses that—

  1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19);
  2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and
  3. were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021.

What are some of the things my municipality can be doing to protect against fraud related to ARP funds?

Understanding the risks for potential fraud can be critical for municipalities that are developing and administering assistance programs. Commitment to and implementation of an anti-fraud strategy that includes a continuous cycle of preventing, detecting, and responding to fraud may be an effective solution to prevent fraud. 

Protecting Individual Citizens from Fraud:  During the COVID-19 pandemic, there has been a rise in consumer fraud complaints across the country. In October 2020, the Federal Trade Commission (“FTC”) revealed a surge in reports from individuals claiming losses as a result of scams perpetrated via social media, including an increase in complaints in the spring of 2020 as COVID-19 spiked. Data released by the FTC indicates that the number of complaints about scams initiated via social media more than tripled in the last year. Reported losses resulting from this type of fraud totaled more than $117 million during the first six months of 2020, as compared to $134 million in losses during all of 2019.

Scam artists will use varying methods to reach potential victims including, but not limited to, creating fraudulent websites purporting to be government agencies, phishing emails, text messages, and phone calls. The following steps can be effective in reducing this type of consumer fraud:

  • Educating the public about potential schemes and the recommended responsive actions they can take if they believe they have been targeted; and
  • Utilizing community groups and non-profits to assist with messaging.

Protecting Government Agencies from Fraud: Not unlike individual consumers, government agencies can stay up-to-date on the latest trends in consumer fraud schemes. This can be achieved in part through collaboration with local government agencies and prosecutors. Reviewing the guidance put forth by the FTC, the Department of Health and Human Services, the Department of Justice, and other federal agencies mentioned below might also be helpful.

Furthermore, within your municipal government, maintaining an organizational culture and structure that is dedicated to fraud risk management may decrease the incidence of fraud. Regular fraud risk assessments may help municipalities ascertain their fraud risk profiles. Municipalities can design and implement specific control activities to mitigate identified fraud risks and collaborate throughout the organization to ensure the strategy is effectively implemented.

In order to mitigate the risk of fraud and mismanagement of funds, and eliminate waste and abuse, grantees should consider pursuing the following measures: 

  • Review and make suggestions for adequate management systems and policies and procedures (specifically those for prior federal grant awards); 
  • Collect and analyze data;
  • Conduct pre-award risk assessments and discuss monitoring plans to identify areas of weakness;
  • Discuss subrecipient monitoring responsibilities; 
  • Identify key personnel and discuss organizational structure to eliminate conflicts and support an environment that supports fraud risk management;
  • Initiate financial controls; 
  • Review existing internal controls for adequacy; 
  • Develop waste, fraud, and abuse prevention guides specific to the program; 
  • Evaluate outcomes of risk-based monitoring;
  • Train staff and subrecipients on key fraud indicators and encourage them to speak up when they detect suspicious activity; 
  • Establish e-mail accounts or other methods for reporting fraud, waste, and abuse of funds;
  • Document internal process for reviewing cases and making final determinations;
  • When awarding contracts to vendors or suppliers that have previously worked for your municipality, examine records of past purchases and evaluations to ensure the vendor or supplier has the capacity to deliver on the scale required.  If there is a significant discrepancy between past demonstrated capacity and the promised future capacity, municipalities may consider further due diligence to verify that the business has in fact increased capacity and capability to meet the current requirements;
  • Despite the more urgent timelines which may be involved, municipalities should consider taking basic due diligence steps prior to the award of emergency contracts, including, for example, requiring the submission of business incorporation papers, tax statements, bank accounts, and insurance policies. When the emergency subsides, consider revisiting the vetting process, and putting the vendor or supplier through the full scope of normal contract vetting procedures; and
  • Prior to the award of contracts, consider requesting that the awardee company certify that the company is legitimately operating as a business and that it has the capacity to perform the work required under the terms of the contract.

The following non-exhaustive resources may be helpful tools for municipalities to pursue in advance of specific guidance being issued regarding the ARP:

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

Cities shall periodically report detailed accounting for the use of their ARP funds[1] and may be subject to audits by the U.S. Office of Inspector General and potentially other regulators. Below are some measures that municipalities can consider taking to help prevent fraud related to the ARP funds:

  • Ensure that no costs under ARP programs are also being claimed or used by other federal, state, local, or private funding sources. Using a grants management software system can help delineate costs by attributing a funding source to a specific cost that can be reviewed for eligibility at the transactional level. Such a system will also make it easier to ensure that a cost is not unintentionally claimed under multiple funding sources.
  • If providing ARP funding to subrecipients, it will be the municipality’s responsibility to clearly communicate the rules, requirements, and expectations of the funding source to the subrecipient or vendor.[2] When drafting contract language and/or funding agreements for the distribution of ARP funds to subrecipients, municipalities should consider including language that, at a minimum:
    • Ensures subrecipients are not receiving other available funding for the same costs, or mechanisms to recoup funds that may have been duplicated by another source;
    • Establishes the expectation that subrecipients will document compliance with any terms and conditions set forth by the U.S. Department of the Treasury and the subrecipient’s contract or funding agreement with the City; and,
    • Requires subrecipients to report detailed costs and provide supporting documentation to confirm eligibility prior to final payment. Expectations regarding what documentation will be required should be clearly communicated to the subrecipient or vendor.
    • Requires subrecipient to cooperate with any local or Federal review, audit or investigation (e.g., cooperation clause). Such cooperation might include, but is not limited to, the production of documents and making individuals available for interviews during the life of the contract.
    • Requires subrecipients to allow access by local or Federal agencies to audit the books and records related to the funding provided during the life of the contract (e.g., right to audit clause).
  • Identify a policy subject matter expert(s) or point person to monitor and review guidance updates from the U.S. Department of the Treasury and answer eligibility questions to ensure that all costs are allowable under ARP requirements and to confer with the U.S. Department of the Treasury when costs do not clearly align with the program’s guidelines. This designated point person can coordinate your city’s efforts to comply with ARP guidelines in each step of its program implementation.
  • Document the use of funds and key decisions made by leadership on how ARP-funded programs will be designed, implemented, and reviewed for compliance with the terms and conditions of the funding source. This documentation may look different depending on the program, but documenting policies and procedures on critical processes such as procurement and contracting, evaluating and awarding ARP funds to subrecipients, financial controls, documentation management, and conflicts of interest will be critical in preventing fraud and abuse in the administration of ARP funding.[3] Equally critical will be maintaining an accurate narrative, including how the municipality can trace the use of funds back to the eligibility requirements, terms, and conditions of their funding.
  • Perform a risk assessment of your internal controls to identify areas where your organization is most vulnerable to fraud. Municipalities can then consider implementing a risk mitigation plan to address any fraud vulnerabilities identified in the assessment.
  • Ensure vendors are not prohibited from working on federally funded contracts prior to initiating contracts for services.  Municipalities can verify a vendor by using sources such as SAM.gov’s advanced database.[4]
  • Review and re-train employees on the municipality’s conflict of interest policies, including those related to the evaluation of potential contracts or awards for subrecipients funded by federal dollars.[5]

Below are some additional resources municipalities may find helpful to review:

 

[1] American Rescue Plan Act (HR 1319 Subtitle M Section 603(d)).  The U.S. Department of the Treasury has not yet issued guidance delineating the specifics of ARP’s reporting requirements.

[2] 2 CFR 200.331 Subrecipient and contractor determinations

[3] 2 CFR 200.303 Internal Controls

[5] 2 CFR 200.318 General Procurement Standards, Subsection C.

What are basic internal controls that can be used when receiving and distributing COVID funds? 

I.  Guiding Resources on Internal Controls

A. The Green Book

Standards for internal controls in the Federal Government are collectively known as the “Green Book,” which is a US Government Accountability Office (“GAO”) publication that sets forth standards for an effective internal control system for federal agencies.[1]   

B. COSO Framework

The Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) has created a framework to help​​ organizations design and implement internal controls.[2] COSO is a private sector organization and not part of the GAO.  COSO offers a framework that provides useful tools, advice and directions on how to create and apply internal controls in addressing operations and reporting objectives, and also clarifies the requirements for effective internal controls.  COSO has also issued Illustrative Tools for Assessing Effectiveness of a System of Internal Control and the Internal Control over External Financial Reporting (“ICEFR”): A Compendium of Approaches and Examples. The Illustrative Tools are intended to assist entities when assessing whether a system of internal control meets the requirements set forth in the framework.   

II.  The Uniform Administrative Guidance

A.  Generally

The Uniform Administrative Guidance (“UAG”), which is set forth in the Code of Federal Regulations at 2 CFR § 200 and issued by the Office of Management and Budget (“OMB”), includes provisions which lay out internal control requirements. 

The CARES Act and the CRF reference the UAG standards. The US Treasury sets out guidance and responses to FAQs, which include specific reference to internal controls and aspects of the UAG that apply to the CARES Act.  (A potentially useful resource may be found here: https://www.whitehouse.gov/wp-content/uploads/2020/12/2020-Compliance-Supplement-Addendum_Final.pdf ). 

The UAG provisions referenced above, which set forth guidance for internal controls over the use and distribution of CRF and CARES Act funds, may apply in a similar way to the ARP. However, explicit guidance on establishing and applying internal controls with respect to the ARP has not yet been decided or disseminated.

B. Potentially Relevant UAG Provisions[3]

Below are potentially relevant UAG provisions relative to internal controls.  The following include definitions, processes overview, and regulatory considerations.

2 CFR § 200.61 Internal Controls 

“Internal Controls means a process, implemented by a non-Federal entity, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:  

(a) effectiveness and efficiency of operations;  

(b) reliability of reporting for internal and external use; and  

(c) compliance with applicable laws and regulations.” 

2 CFR § 200.62 Internal control over compliance requirements for Federal awards.  

“Internal control over compliance requirements for Federal awards means a process implemented by a non-Federal entity designed to provide reasonable assurance regarding the achievement of the following objectives for Federal awards:  

(a) Transactions are properly recorded and accounted for, in order to:  

     (1) permit the preparation of reliable financial statements and Federal reports;  

     (2) maintain accountability over assets; and  

     (3) demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.

(b) Transactions are executed in compliance with:  

     (1) federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program;  

     (2) any other Federal statutes and regulations that are identified in the Compliance Supplement; and  

(c) funds, property, and other assets are safeguarded against loss from unauthorized use or disposition.”  

According to the Federal Registrar[4] issued by the U.S. Treasury dated January 15, 2021, fund payments are subject to the requirements in the Uniform Guidance 2 CFR 200.303 regarding internal controls.

2 CFR § 200.303 Internal Controls: 

“The non-Federal entity must:   

(a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  

(b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards. 

(c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. 

(d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings.  

(e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state, local, and tribal laws regarding privacy and obligations of confidentiality.” 

[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75883, Dec. 19, 2014]  

III. Conclusion

In addition to the potentially applicable UAG 2 CFR § 200 provisions summarized above, it is important to follow local jurisdictional rules and guidelines for internal controls.  Consideration of the guidance contained in the “Green Book” or the “Internal Control Integrated Framework” (COSO) would be prudent, as well as any guidance which may be forthcoming relative to internal controls and the ARP.

 

What is the definition of duplication of benefits?

A duplication of benefits (DOB) occurs when a person, household, business, government, or other entity receives financial assistance from multiple sources for the same purpose, and the total assistance received for that purpose is more than the total need for assistance.  Before paying a cost with, or requesting reimbursement for eligible federal disaster assistance, a Grantee must check to see that the assistance will not cause a duplication of benefits, meaning that the cost has not or will not be paid by another source. Grantees are also required to avoid the duplication of benefits when providing disaster assistance through federally funded programs.  See Generally, 42 U.S.C. § 5121 at § 312 (The Stafford Act) and also44 CFR § 206.191 (regarding implementation of policies set forth in § 312 of the Stafford Act.)

What guidance can you provide regarding the way in which we can avoid this issue?

Municipalities should consider conducting a duplication of benefits analysis from the earliest stages of the process.  This duplication of benefits analysis should be completed before receiving or providing federally funded assistance.

A municipality may complete a duplication of benefits analysis by developing an overall budget that demonstrates the funding needed for the activity and the funding reasonably anticipated (similar to a “sources and uses” analysis for a housing or economic development project). This budget should include all Federal and non-Federal funding, as well as in-kind donations, keeping in mind the specific requirements and restrictions of each funding source. If the budget shows that the need is equal to or greater than the funding sources, there is no duplication of benefits.

Municipalities can take other steps, including but not limited to requiring beneficiaries to disclose all other financial assistance they have applied for or received, provide a self-certification indicating that they have not received a duplicative benefit, or fill out a questionnaire listing potentially duplicative assistance that they have already received or reasonably anticipate receiving.   In addition, municipalities can consider requiring applicants to disclose any new grants approved or other applications for assistance submitted in the period between their application submission to your municipality and its ultimate approval.

Lastly, if your city has an overlapping jurisdiction with another municipality or county, both parties should consider coordinating efforts to avoid duplication of benefits before they start distributing benefits. For example, with rental assistance, a city, county or state might all have rental assistance programs that could potentially provide assistance to the same household for the same period of time.

What guidance can you supply regarding the interconnectedness of various aid packages?

Existing guidance indicates: “Recipients will need to consider the applicable restrictions and limitations of…other sources of funding.  In addition, expenses that have been or will be reimbursed under any federal program, such as the reimbursement by the federal government pursuant to the CARES Act of contributions by States to State unemployment funds, are not eligible uses of Fund payments.” (See 4188 Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021 / Notices (page 7 of 13)).  Given the Uniform Guidance at 2 CFR 200 is required for the ARP, this CARES Act guidance is also likely to be applicable to ARP.

What guidance can you provide regarding how our municipality should decide which funds to prioritize for use?

A municipality can engage in some general best practices to assist with the prioritization of funds. The following process is just one example of a way a municipality can approach this issue:

  • Assess relative need.
  • Determine the total assistance available for each need. Some funding sources can address a broad variety of needs, while others have a narrower field of allowable activities.  Aligning the funding with more specific use restrictions to projects addressing those eligible uses will allow the funding with a wider range of allowable uses to address other needs.    
  • Compare expenditure deadlines with project timing requirements. If a project will run 18 months and requires 3 funding sources (all with different expenditure deadlines), the municipality may need to coordinate the use of each funding source (utilizing the sources with most restrictive timelines first) to maximize the funding and not put the project at risk.  
  • Understand that Non-duplicative assistance is excluded from final benefit calculation. Examples of non-duplicative assistance include:funds used for a different purpose;
    • funds used for the same purpose, but a different eligible use;
    • funds not available to the applicant;
    • private loans; or
    • other assets or lines of credit.  
  • Match unmet needs with allowable uses to secure funding.

Housing and Rentals Reimbursements

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What are some of the best practices and considerations that our municipality should understand in developing our Emergency Rental Assistance Program (ERAP)?

Below are a few strategies for your municipality to consider when developing an Emergency Rental Assistance Program:

  • Set out with clear program policy and guidance.  Make the path from application intake to payment transparent to all stakeholders.
  • Make community and stakeholder outreach a priority.  A well-designed program may not meet necessary milestones or utilize all available funding if participation is low. 
  • Build a call center and case management teams that have clear directives.  If possible, let case managers focus on submitted applications while call center staff help people get applications to a submitted status.
  • Have clear criteria for prioritizing applications.  The volume of applications you receive might require you to triage.  Give programmatic direction on how staff should prioritize reviews.
  • Be mindful of data/document management and governance.  When possible, utilize a portal or some application to manage the data and documents required for the program.  With even a modest volume of applicants this can quickly become overwhelming and cumbersome.
  • Every interested party, including Treasury, will have reporting requirements.  Be mindful of how data is entered and stored to make reporting as low a level of effort activity as possible.
  • Your municipality may have many potential partners/organizations in this space already.  Take advantage of those who wish to partner with you but make sure their role in the program is well-defined.
  • Be mindful of vulnerable populations when developing documentation requirements.  Some applicants will have difficulty producing supporting documents that demonstrate eligibility criteria such as income or COVID-19 impact.  Stick to what you believe is essential and be flexible with this population.  Take advantage of the leniency Treasury provides for applicants that otherwise appear eligible but struggle to locate or upload supporting documents.
  • Security and protection of Personally Identifiable Information (PII) is of the utmost importance.  This program may require bank account numbers, addresses, social security numbers, etc. which must be protected.  Further, security protocols should include waste, fraud, and abuse protections through second-and-third-party verifications, IT security capabilities, comprehensive oversight, and monitoring techniques, etc.

A separate analysis is necessary to determine which, if any, of the above efforts will be reimbursable depending on individual municipality circumstances and considerations.

Additional Resources: U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions (March 16, 2021); The NYU Furman Center: Learning from Emergency Rental Assistance Programs, Lessons from Fifteen Case Studies (March 10, 2021).

How does the ARP impact deadlines for the Emergency Rental Assistance Program?

Both the Consolidated Appropriations Act, 2021 (“CAA”), enacted December 27, 2020, and the American Rescue Plan (“ARP”), enacted March 11, 2021, authorize funds for the Emergency Rental Assistance (“ERA”) Program. 

The CAA originally required grantees to expend ERA Program funds (“CAA-ERA”) by December 31, 2021, with a possible 90-day extension if requested and approved by the Treasury Secretary.[1]  The ARP extended the expenditure deadline for the CAA-ERA Program funds to September 30, 2022; there is no built-in provision for a 90-day extension past that deadline.[2]

Additionally, the CAA allows the Treasury Secretary to recapture ERA funds that are not obligated by grantees as of September 30, 2021, and to reallocate the funds to grantees who, as of that date, have obligated a minimum of 65 percent of their original grant amount.  The amount of ERA funds to be reallocated will be based on demonstrated need.  The ARP revised the date for the possible recapture and reallocation of unobligated CAA-ERA funds from September 30, 2021 to March 31, 2022.[3] The ARP also reduced the minimum threshold to be eligible for reallocated funds from 65 percent to 50 percent obligated from the original grant amount.[4] 

The ARP provided additional ERA funds for assistance, administration, and housing stability costs (“ARP-ERA”). Treasury will distribute 40 percent of the additional ARP-ERA funds no later than May 10, 2021.[5] The remaining ARP-ERA funds will be distributed to individual grantees after the grantee has expended 75 percent of the previously provided funds.[6] The remaining funds may be released in tranches to qualifying grantees; the timing and amount of which will be based on need, as determined by the Treasury Secretary.  The funds allocated in the ARP-ERA are available until September 30, 2025.[7]

Grantees may consider tracking all ERA expenditures based on the funding sources (CAA-ERA vs. ARP-ERA) to ensure compliance with the different expenditure deadlines and the eligible use requirements.

 

[1] Consolidated Appropriations Act (HR 133 Title V, Subtitle A, Section 501(e))

[2] American Rescue Plan Act (HR 1319 Title III, Subtitle B, Section 3201(h))

[3] American Rescue Plan Act (HR 1319 Title III, Subtitle B, Section 3201(e))

[4] American Rescue Plan Act (HR 1319 Title III, Subtitle B, Section 3201(e)(2))

[5] American Rescue Plan Act (HR 1319 Title III, Subtitle B, Section 3201(c)(1)

[6] American Rescue Plan Act (HR 1319 Title III, Subtitle B, Section 3201(d)(D)(ii))

[7] American Rescue Plan Act (HR 1319 Title III, Subtitle B, Section 3201(g))

May municipalities use American Rescue Plan funds to promote increased home ownership among low-income residents or increase energy efficiency in homes?

The American Rescue Plan (“ARP”) Act of 2021[1] was signed into law on March 11, 2021, and includes numerous provisions directly related to increasing homeownership along with increased appropriations for several existing programs that address the energy efficiency of homes.  The Department of Housing and Urban Development (“HUD”) has released a fact sheet titled “Housing Provision in the American Rescue Plan Act of 2021”[2] which outlines housing-related opportunities contained within ARP.  One specific program to highlight is the newly created Homeowners Assistance Fund (“HAF”) Program, which the Department of Treasury (“Treasury”) will administer.   Created in Section 3206 of the ARP, the HAF program funds will be made available to state, territorial, and tribal governments or their designees and will make funds available for the following allowable purposes: 

“(1) ESTABLISHMENT; QUALIFIED EXPENSES.—There is established in the Department of the Treasury a Homeowner Assistance Fund to mitigate financial hardships associated with the coronavirus pandemic by providing such funds as are appropriated by subsection (a) to eligible entities for the purpose of preventing homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and displacements of homeowners experiencing financial hardship after January 21, 2020, through qualified expenses related to mortgages and housing, which include— 

(A) mortgage payment assistance; 

(B) financial assistance to allow a homeowner to reinstate a mortgage or to pay other housing related costs related to a period of forbearance, delinquency, or default; 

(C) principal reduction; 

(D) facilitating interest rate reductions; 

(E) payment assistance for— 

(i) utilities, including electric, gas, home energy, and water; 

(ii) internet service, including broadband internet access service, as defined in section 8.1(b) of title 47, Code of Federal Regulations (or any successor regulation); 

(iii) homeowner’s insurance, flood insurance, and mortgage insurance; and 

(iv) homeowner’s association, condominium association fees, or common charges; 

(F) reimbursement of funds expended by a State, local government, or designated entity under subsection (f) during the period beginning on January 21, 2020, and ending on the date that the first funds are disbursed by the eligible entity under the Homeowner Assistance Fund, for the purpose of providing housing or utility payment assistance to homeowners or otherwise providing funds to prevent foreclosure or post-foreclosure eviction of a homeowner or prevent mortgage delinquency or loss of housing or utilities as a response to the coronavirus disease (COVID) pandemic; and 

(G) any other assistance to promote housing stability for homeowners, including preventing mortgage delinquency, default, foreclosure, post-foreclosure eviction of a homeowner, or the loss of utility or home energy services, as determined by the Secretary.” 

As seen in the listing of allowable activities, the HAF program directly targets the issues and barriers to homeownership amongst low-income residents.  While municipalities are not eligible as direct recipients of HAF program funding, municipalities may consider coordinating with their state housing agency to inquire about potential partnership opportunities and the ability to leverage this funding in order to serve their local communities.   

The ARP does not include an exhaustive list of programs focused on increasing energy efficiency but does include additional appropriations for the Low-Income Home Energy Assistance Program (“LIHEAP”) along with Low-Income Household Water Assistance Program (“LIHWAP”).  LIHEAP, along with the U.S. Department of Energy’s Weatherization Assistance and State Energy Programs, have proven to be valuable tools in addressing residential energy efficiency and utility affordability issues.   

The major programmatic tool that municipalities will have at their disposal from the ARP to address these two issues is the Coronavirus Local Fiscal Recovery Fund (“CLFRF”) program that will also be administered by Treasury.  The CLFRF program will provide municipalities with significant programmatic discretion in determining how to allocate these funds.  Section 603(c)(1) of the act outlines the allowable uses of funding:  

“USE OF FUNDS.—Subject to paragraph (2), and except as provided in paragraphs (3) and (4), a metropolitan city, nonentitlement unit of local government, or county shall only use the funds provided under a payment made under this section to cover costs incurred by the metropolitan city, nonentitlement unit of local government, or county, by December 31, 2024— 

“(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.”  

The additions of revenue replacement, capital investments, and the longer covered period until December 31, 2024, are key differences between the CLFRF and the previous Coronavirus Relief Funds provided through the CARES Act.  These additional flexibilities may provide municipalities with the tools needed to address these two critical issues. 

While Treasury guidance is needed to determine the allowability of specific programmatic ideas, municipalities may consider developing a high-level plan or framework on how they will utilize CLFRF program funds to address barriers to home ownership and residential energy efficiency.  The following is a non-exhaustive list of steps a municipality should take in developing this framework: 

  • Conduct a comprehensive capacity assessment and unmet needs analysis; 
  • Form a cross-sector recovery oversight committee; 
  • Engage with the served community to identify key needs; 
  • Assess and catalog available funding to prioritize needs; and 
  • Develop short and long-term strategies to implement ARP funds. 

 

Other

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Where can we find key components and information on the allowable uses of the COVID-19 relief packages?

Federal Agencies allocated funding under the COVID-19 relief packages have generally provided centralized locations to access policy, guidance, reporting and auditing requirements, and Frequently Asked Questions that are useful to determine how funding may or not be used by cities. Below is a list of some of the primary Federal Agencies managing the nearly $3 Trillion in COVID-19 relief funding, and links to where they are aggregating resources, guidance, and FAQs. Plan analysis webpage: https://www.gfoa.org/flc-analysis-of-current-proposed-covid-19-relief-measures.

These links should help track when guidance, funding, or additional information is updated related to COVID-19 relief funds:

Determining which is the right funding source to cover a cost that may be eligible under many funding sources may be challenging for cities. This is critical to (1) avoid duplication of benefits and (2) maximize coverage of costs associated with COVID-19 response and recovery. For example, both FEMA Public Assistance and Coronavirus Relief Funds may be used to purchase personal protective equipment (PPE) for first responders or individuals directly involved in COVID-19 response and recovery activities. However, Coronavirus Relief Funds may be used to provide PPE more broadly to essential staff performing necessary operations that FEMA may not consider emergency protective measures [FEMA Policy FP 104-009-19]. Because CRF does not make that additional distinction, cities may consider prioritizing the use of more restrictive FEMA funding in targeted areas, and then use the less restrictive CRF to cover other costs.

What are some best practices our municipality can undertake to help us recoup reimbursable costs traceable to COVID-19 oversight and compliance?

For most federal grants, allowances for administrative costs are generally eligible, but usually up to a capped percentage of the total award. This includes costs associated with ensuring compliance with the terms and conditions of the funding, including collecting and maintaining documentation, preparing and submitting required reporting, and establishing policies, procedures, and processes to manage the funding.

Administrative costs vary between funding sources, with some having specific requirements or additional conditions for recipients, for example:

  • FEMA Public Assistance can reimburse up to 5% of the total of an Applicant’s obligated funding for a given disaster, based on direct, documented costs. Submitted as a separate project, FEMA can cover documented costs at 100% federal cost share for contract, labor (including regular time and overtime for internal employees), supplies, or equipment used for specific activities to develop, manage, report on, and close out FEMA Public Assistance grants. However, FEMA will not cover indirect costs or costs that cannot be allocated to specific grant management activities.  [FEMA Policy FP 104-11-2]
  • Treasury’s Coronavirus Relief Fund (CRF) generally permits the funds to be used on administrative costs to cover the portion of payroll and benefits of employees’ time directly working on the administration of this fund – that includes developing policies and procedures related to the grant, managing distribution and use of funds, and collecting documentation to support the costs. CRF cannot be used to cover indirect costs. CRF may also be used to cover the direct, attributable costs of complying with the Single Audit Act of the CRF. [CRF Federal Register Publication Vol 86 No 10, Section “Supplemental Guidance on Use of Funds to Cover Administrative Costs”]
  • HUD’s Community Development Block Grants (CDBG) funding, including Disaster Recovery (DR) and COVID-19 (CV) programs, generally permit use of funds for administrative costs to include direct costs, indirect costs, and planning costs up to 20% of their CDBG allocation. HUD makes a distinction between Activity Delivery Costs – the actual costs necessary for the direct provision of a HUD funded program – and Program Administration Costs – eligible costs for the management of the funding overall, including developing policies and procedures, reporting and financial management, collecting and maintaining documentation, and monitoring compliance. [HUD, Basically CDBG for States (April 2013), Chapter 16: Financial Management]

In preparing to track and manage costs associated with oversight and compliance, some considerations municipalities should take into account include:

  • Reviewing the funding sources’ or grants’ terms and conditions, guidance, and FAQs provided by the funding agency for specific details on allowable management or program administration costs.
  • Developing and monitoring a budget specific for management costs for the fund, including staffing, additional resources, or technical assistance your municipality may need.
  • Updating local policies and procedures specific to the management of the federal funding to include policies, procedures, and processes to track, allocate, and document management costs, including directions to employees tracking or allocating their time to the management of the funds.
    • If a federal fund permits the allocation of indirect costs to the management of federal funds, check that the indirect cost rate is consistent with the permissions outlined by the terms and conditions of the grant or the Federal Agencies Negotiated Indirect Cost Rate and federal regulation on indirect cost calculation (2 CFR 200.414).
  • Establishing specific codes for timekeeping or purchasing specific to management of funds to help track and allocate costs.
  • Documenting costs clearly and with sufficient detail to demonstrate how it was related to the management of the federal fund. Management costs, like other federally funded costs, are generally subject to federal regulations on Cost Principles (2 CFR 200 Subpart E), must be justified as necessary and reasonable, and subject to audit.

What are some of the things my municipality can do to plan for additional requirements or initiatives in use of COVID-19 relief funding set out by the Executive Order on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government (dated January 20, 2021)?

Municipalities can consider taking the following actions to assess and improve equitable COVID-19 response and recovery in response to the President’s Executive Order: 

  • Assess equity across COVID-19 response and recovery measures to date, including, but not limited to, provision of healthcare, vaccination administration and outreach, and positioning programs to mitigate adverse economic impact of COVID-19. Municipalities may use pre-existing tools in helping to identify typically underserved or most-at-risk communities.
    • For example, municipalities could use the CDC’s Social Vulnerability Index to identify community needs or most-at-risk communities based on socioeconomic, demographic, and spatial information. Built on census data, this information may help to establish baselines and targets for outreach and/or support. 
  • Refer to FEMA’s Advisory Civil Rights Considerations During COVID-19 Vaccine Distribution Efforts for a checklist of considerations to plan for equitable vaccine distribution. Additionally, FEMA has included an Equity Job Aid in the COVID-19 Medical Care Policy that outlines expectations for addressing equity in vaccine administration programs, including required reporting and data collection. [FEMA Policy 104-21-004]
  • Consult the US Department of Housing and Urban Development (HUD)’s Disaster Impact and Unmet Needs Assessment Kit to identify and prioritize critical unmet needs for long-term community recovery. While this assessment is intended to be completed after a disaster, a similar framework can be argued to apply to communities or areas that qualify under HUD’s National Objectives.
  • Evaluate whether highest-risk communities and underserved populations are being reached and identify and address potential barriers for outreach and engagement by:
    • Assessing if common barriers to public information, such as access to technology or language may be impacting accessibility or engagement for highest-risk communities. If possible, explore feasible options to help expand points of communication or outreach, or assess primary language needs of highest-risk communities.
    • Determining if barriers to accessing services or resources, such as timing of available programs, location, or access to public transportation are limiting engagement for highest-risk communities. Municipalities may consider providing additional resources, or changing locations or times to help expand access for highest-risk communities.
  • Leverage existing relationships with community groups, non-profits, front-line workers, or community members to understand local concerns or issues in accessing information or resources.
  • Document efforts to incorporate equity or comply with non-discrimination requirements in recovery efforts and monitor additional requirements that may be put in place for federally funded programs.
  • Assess if equity concerns are captured in your response framework, operational plans, or after-action or mid-action reports. If they are not addressed, update them to include how your City addressed equity concerns to help demonstrate compliance. 
  • Document feedback collected through evaluation processes, including efforts to address potential barriers or adaptations to processes to better address equity concerns.
  • For federal funding sources with specific compliance requirements related to equity, like FEMA’s updated guidance for vaccination administration, assess potential gaps in data or information to be able to meet requirements both in data collection, data submission, and critical reporting timelines. Document efforts to close those gaps, as well.
  • Learn from other Cities and States on their approach to incorporating equity in COVID-19 response, or from organizations that focus on equity programming outside of disaster response.
  • Consult the National League of Cities’ Task Force Report on centering equity in economic development, that includes recommendations and case studies which may be useful for municipalities planning economic development or recovery programs with COVID-19 relief funding.
  • Refer to the NAACP’s published resources on incorporating equity concerns for disaster recovery efforts. While this resource is not specific to COVID-19 recovery, it does provide helpful resources and guides to both assess existing response activity, as well as centering equity in planning for future disasters.

Lastly, check out the Georgetown Climate Center’s published research, tools, and frameworks for communities to assess and plan for equitable disaster preparedness, response, and recovery. This resource is not COVID-19 specific, but does include tools specific to community engagement, data collection, and needs assessments, including in areas of public health, economic recovery, and infrastructure projects.

What are some things our municipality can do to help us prepare for potential future disasters, assess unmet needs in the community, address issues involving infrastructure, and promote long-term economic development and recovery?

The increasing frequency and magnitude of natural disasters, amidst a global pandemic, necessitate a shift in the collective approach to effectively maximize available resources.  Preparing for the future may include the following priorities:

  • Increased public health monitoring;
  • Renewed focus on business continuity and emergency operations support;
  • Dedication to and investments in infrastructure resilience;
  • Efforts to mitigate long-term economic impacts; and
  • Preparation of After-Action Reports or Mid-Action Assessments of the successes/challenges/opportunities for the next pandemic and/or disaster.

A community recovery plan could take the following approach:

  • Phase 1: Secure Surge Support for Ongoing COVID-19 Response and Recovery Operations.
  • Phase 2: Analyze Unmet Needs and Develop Long-Term Cost Recovery Strategy.
  • Phase 3: Design and Implement Programs.
  • Phase 4: Management, Reconciliation, and Audit.

Finally, the COVID-19 pandemic has revealed vulnerabilities in many communities’ local infrastructure, exposing issues ranging from essential water preservation to inadequate sewer systems. It has exposed inequitable barriers for millions without access to reliable internet access – often needed to work remotely, access financial and government services, and facilitate distanced learning for school-aged children. Below are some strategies to consider for strengthening community infrastructure:

  • Improve broadband access through capital infrastructure projects and expand free Wi-Fi to residents throughout your community;
  • Adapt infrastructure systems to preserve essential water, electric, and sewer service and meet changing demands; and
  • Bolster local food processing and delivery systems.

Resources from our program partner, United States Conference of Mayors 

Municipal Guide

CARES Act Resource Center

COVID-19 City Fiscal Tracking and Reimbursement

Fiscal Pain Tracker

Other links

Additional Resources

 

7 ways to build a culture_hero

 

National League of Cities: American Rescue Plan Act: What Georgia Cities Need to Know | National League of Cities presentation, in partnership with Georgia Municipal Association, on ARP relief funds, allowable uses, process for receiving funding (with some Georgia-specific guidance)

National League of Cities: American Rescue Plan Act of 2021, Coronavirus State and Local Fiscal Recovery Funds Fact Sheet | Summary and FAQ relating to use of relief allocations

National Association of Counties: Legislative Analysis for Counties: American Rescue Plan Act of 2021 | American Recuse Plan Act of 2021 summary document detailing allowable uses, reporting requirements, deadlines

MRSC Local Government Services: Coronavirus (COVID-19) FAQs for Local Governments | Resources for local governments in Washington State, including FAQ on emergency powers and an overview of fiscal impacts on local government (Washington State-specific)

January 20, 2021 Executive Order: Executive Order on Advancing Racial Equity and Support for Underserved Communities through the Federal Government

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