On February 28, the Department of Treasury released updated guidance and a new manual for local governments on their compliance and reporting responsibilities for the use of the American Rescue Plan Act’s Local Fiscal Recovery Funds (FRF).
ICMA hosted a webinar with a panel of experts from Hagerty Consulting on March 14 to provide insights on implementing ARPA-funded programs consistent with the compliance and reporting requirements (view the recording and presentation slides here). They walked through three scenarios to explain the program guidance: (1) a small business assistance program; (2) a capital expenditure for a facility; and (3) a water infrastructure project.
In his opening remarks, John Hageman, Hagerty’s senior manager of recovery programs, noted several key updates in the latest reporting guidance:
- Reporting timelines have shifted, again.
- Quarterly project and expenditure reports are required for all local governments receiving total allocations greater than $10 million. This includes both direct recipients and NEUs.
- Local governments with allocations less than $10 million, whether direct recipients or NEUs, will continue to submit annual project and expenditure reports.
- Expenditure categories have been restructured.
- Local governments that previously submitted expenditure reports will need to review and potentially reclassify spending consistent with these new categories.
- Treasury has promised, but not yet released, an updated project and expenditure report user guide, particularly for smaller municipalities (NEUs).
One requirement has not changed: compliance with the federal Uniform Guidance. This framework includes standards related to internal controls and management practices, procurement and contracting, risk-based assessment for subawards and monitoring of subrecipients, civil rights and promoting equal opportunity, programmatic and financial reporting, and closeout and audit requirements. While these requirements are familiar to any local government that routinely receives federal funding, many smaller local governments will need to identify and address any blind spots now.
Case study examples:
To illustrate specific compliance and reporting requirements of the FRF and Uniform Guidance, the Hagerty team facilitated three case studies around different spending scenarios: 1) providing assistance to small businesses impacted by the pandemic; 2) construction of a new facility to provide necessary community services (in this case, child care); and 3) procurement and contracting for water infrastructure replacement.
Based on their experience helping local governments implement these types of programs and projects, as well as questions raised from network participants, Hagerty’s experts offered several tips specific to each spending scenario:
Small business (or nonprofit) assistance:
- Create a project identification number at the outset so you can track expenditures, making it easier to create reports for Treasury.
- Develop eligibility criteria for any small business grant or loan programs.
- Target women and minority-owned microbusinesses with five or fewer employees.
- Ensure that funds provided are used to help organizations recover from COVID-19.
- Start by identifying a vendor with an existing contract used by the local government. If there are none, a good practice is to issue a competitive RFP.
- Organize a working group across governmental functions to streamline the review and approval process, i.e., procurement, budget, finance, legal, and auditor’s offices.
- When small businesses are beneficiaries of a local government grant program, a grant agreement is not needed unless more information will be needed later (i.e., the number of individuals hired). The award notification letter to the small business can identify specific data that is required.
Service facility construction:
- Focus on documentation, documentation, documentation. If rules change in subsequent guidance, documenting when decisions were made and what rules supported those decisions will help with audits and project closing.
- The capital expenditure needs to respond to a public health or negative impact of COVID-19 and examples could include a homeless shelter, childcare center, or an expansion of a hospital.
- Written justification for the project under this lens is essential and needs to document: the harm or need to be addressed, how a capital expenditure addressed and is proportional to that need created by the COVID-19 pandemic, and compare the project against two alternative capital expenditures that could achieve the same ends.
- In the project development phase, CSLFRF funds can be used for pre-project development costs, such as costs for planning and engineering.
- Entities claiming revenue loss for their entire allocation still need to go through the project development process and justification outlined in the final rule. As regulations continue to change, following the most restrictive eligibility requirements is a good practice to follow despite the lifted regulatory burden.
Water (or sewer) infrastructure:
- Answer the following questions to determine your projects eligibility and help create your written justification:
- Is the investment necessary?
- Does the investment meet the Drinking Water State Revolving Fund edibility criteria?
- Is the project cost-effective?
- To the extent that you’re a first-time recipient of federal funds, revisit your procurement policies and contract provisions to check that they adhere to federal requirements. When comparing your local v. state v. federal requirements, it is advisable to follow the strictest guidance of the three.
- CSLFRF funds claimed under lost revenue CAN be used as a non-federal match for other grant opportunities. When scoping out a project, look to see if you can take advantage of this flexibility to help layer additional federal funding into a project. An example would be using CSLFRF to meet the 25% local match requirement found in some grants offered in the infrastructure investment and jobs act.
ICMA's ARPA Coordinators Network
This event was part of ICMA's ARPA Coordinators Network: an effort to connect, support, and learn from local government professionals responsible for planning and management of these resources in communities.
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