ITEM NO. 16
COUNCIL AGENDA ITEM
AUGUST 20, 2024
PREPARED BY: Soknirorn Than, City Manager
SUBJECT: Response to the Merced County Civil Grand Jury for The American Rescue Plan Act of 2021- Where the Money Went
BACKGROUND
On June 28, 2024, the City received the official release of the 2023-2024 Merced County Civil Grand Jury Report. The report is presented to the Merced County Superior Court and the people of Merced County in accordance with the California Penal Code Section 933. For 2023-2024, the Merced County Civil Grand Jury (Grand Jury) received forty-seven citizen complaints, and six were thoroughly investigated. Of the six, one applied to all cities within Merced County. This investigation is related to the American Rescue Plan Act of 2021 (ARPA) and how the money was allocated and spent.
Initially, the Grand Jury received a citizen complaint which questioned the allocation of Small Business Grants with funds provided through ARPA. During this investigation, the Grand Jury broadened its scope to review how Merced County and its incorporated cities used ARPA funds. This investigation focused specifically on whether the County and cities followed their own policies and procedures and how transparent the process was.
Signed into law on March 21, 2021, ARPA provided $350 billion in additional funding for state and local governments. This funding was created to provide an immediate pandemic response, bring back jobs, and lay the groundwork for a strong and equitable economic recovery. The state funding portion is approximately $195 billion with $25.5 billion distributed equally among the 50 states and the District of Columbia and the remaining amount distributed according to a formula based on unemployment.
The local funding portion is approximately $130 billion, equally divided between cities and counties. Localities received the funds in two tranches-the first after the U.S.
Treasury certified the proceeds to each jurisdiction (May, 2021) and the second one year later. The City of Gustine received a total of $1,407,099.00. Below is a table identifying the funds received by each jurisdiction in Merced County. [i@red_Cons[ Atste [ [os_Palos [ Gustine [ Lngsign [ [ssEaos[Mece_tj] ARPA DEPOSIT 2021 $26.968.042 $3.535.571 $66 1.088 $570.227 $1.781.720 $4,908.432 $13.713.941 ARPA DEPOSIT 2022 $526.968.043 S3.535.571 $66 1.088 $570.228 $1.781.7 20 $4.908.432 $13.713.9341 literestalr $17.108
Re±ad ram RAD Cd $35.066
[@ii Tsg[ sie[sis[ sis s@i s@ig@ [si@@]
*Gustine total ARPA fund received is $1,407,099.00
As part of the investigation, the Grand Jury conducted in-person interviews to discuss the receipt, accounting, disbursement and transparency of the ARPA funds with various finance directors, city managers, elected officials, and staff. Based on the data provided, below is the table generated by the Grand Jury for Gustine summarizing our expenditures of the ARPA funds received.
GUSTINE - ARPA Funds Summary
Amountreceved $1.140,445
ARPA DE POSIT 2021 $570.227
ARPA DEPOSIT 2022 $570.228
1.PubUc Health $0
2. Negattve Economic imnpact $141,176
209 Multi Meda Corporation $70.000
Kenny Pham (MsNats and Spa $2.500
Hat's the Pace (ioyce M Caetanol $3.905
Monica M Barnes (Cornerstone Dance) $4.971
Vance L Woltsen [Wotsen Met & Susa'e $2.500
Jennte McDonid [Gune Club/ $2.500
Patnca A Test Pat's House of Beauty $5,000
Pastime Club LLC (wuuiam R. Mars+gu) $5.000
Ate to erection [ShernM Marsagt) $3s.000
Salvador Lupan Manzo (£tPiscost0) $7.500
Jenn4er Suzanne Villalobos [ACrafter s Pa6ad.se) $5.000 Bal Ab Thabt Teas Bu'ger Dove LLC) $2.500
Megan Ventura Ventura fitness &1rain2 $2.500
James D Frets(Perry s More than Ptzl $5.000
Mikay La Parreita (MK Salon & Boutique $5.000
Kenneth M Lopes [Ken s Cobb.eryl $4.800
Mrtn Godinez Martin Godinez Carmona db MG Bakery $5.000 Jonathan Robert Ftanan {Fout of Hearts Screen Punting $2.500
3. Pubulc Health - Negatve Economic impact so
4.Premium Pay $37,060
Payroll-Workers Pay $30.127
Payrou Workers Taxes $6.932
5. Infrastructure $200,000
Water Seer Line Mapping $200.000
6. Revenue Replacement $183.863
7.Administr at ve $0
Totals $562,099
Unencumbered Funds $578,346
Non ARPA Funds
Currently, the City has unencumbered ARPA funds of $578,346. If City Council adopts the expenditure plan per staff's recommendation in the prior administrative item, the ARPA Fund will be fully obligated and an updated report and resolution will be provided as a formal response back to the Grand Jury.
At the end of the investigation, the Grand Jury made the following findings:
Fl. Local guidelines for the awarding of Small Business grants by the city of Los Banos were not clearly defined or adequately publicized despite numerous requests from the public.
F2. The Treasury Department issued interim guidelines which we believe created a situation where cities were unclear until the final rule was adopted.
F3. County and Cities often relied on their established internal control procedures which varied between cities and relied on antiquated procedures on how to track funds.
F4. Public opportunity for local input on the use of ARPA funding was inadequate.
F5. Criteria for determining the awarding of ARPA funds were often vague and confusing.
F6. Decisions about how funds were spent were solely made by the City Councils or the Board of Supervisors in accordance with the Treasury Department Final Rule Guidelines that took effect on April 1, 2022. However, these procedures were not followed consistently.
F7. During our investigation, we discovered Dos Palos and Livingston were quick to invest in identified needs immediately, whereas other cities retained their funds until the issuance of the Final Rule.
Based on these findings, the Grand Jury made the following recommendations:
R 1. The County and its incorporated cities should develop policies and procedures keeping transparency and public input first and foremost for possible future occurrences of unexpected funding. Minimal Funding required. (Fl) R2. Each Agency should designate at least one individual or office to serve as a one-stop-shop for residents, small business owners, contractors, and other members of the business community. This individual(s) should provide guidance and recommendations to assist in determining eligibility for Federal, State or Local funds. Moderate funding required. (Fl)
R3. In addition to using internal controls, ARPA funds received should be audited regularly by an outside agency to ensure accountability and transparency.
Moderate funding required. (F4)
R4. The amount of ARPA-related funding received, and its proposed usage, should be posted prominently on public agency's websites and social media sites detailing the receipt and distribution of all ARPA-related funds. Minimal funding required. (F2, F3, F5, F6,)
R5. Cities and the County need to provide information to residents to easily track the amount of funding received and its usage including contracts awarded for ARPA related projects, progress on ARPA funded projects and the impact of the funding on their community. Minimal funding required. (F2, F3, F4, F6) Pursuant to Penal Code Section §933.5, the City is required to provide a written response to all five recommendations above within 60 days (by August 28, 2024).
DISCUSSION
Below are staff's draft responses to this report:
Fl. Local guidelines for the awarding of Small Business grants by the city of Los Banos were not clearly defined or adequately publicized despite numerous requests from the public.
Response: This finding is not applicable to the City of Gustine.
F2. The Treasury Department issued interim guidelines which we believe created a situation where cities were unclear until the final rule was adopted.
Response: The City agrees with Finding No. 2.
F3. County and Cities often relied on their established internal control procedures which varied between cities and relied on antiquated procedures on how to track funds.
Response: The City disagrees with Finding No.3 as applied to the City of Gustine. The City of Gustine has an internal control procedure to review and track the revenue and expenditures associated with our funds. These funds are tracked using a robust Enterprise Resource Planning (ERP) software system provided by Tyler Technologies. This includes tracking of all accounts payable and accounts receivable.
F4. Public opportunity for local input on the use of ARPA funding was inadequate.
Response: The City disagrees with Finding No.4 as applied to the City of Gustine. The City conducted numerous public meetings to discuss the expenditure plans for this fund. The first expenditure plan public meeting was held on May 11, 2021 at a special council meeting specifically to address ARPA spending. Upon receipt of comments from City Council and the public, staff held a second public meeting in the form of a budget workshop on May 26, 2021 for Fiscal Year 2021-2022. This workshop incorporated these ARPA specific comments into a draft budget. This budget was then adopted in a separate City Council meeting on June 1, 2021. With the issuance of the SLFRF Guidance document, the City held a third public meeting in the form of a budget workshop on May 30, 2023 for Fiscal Year 2023-2024 to revise the expenditure plan for the ARPA fund. This budget including the revised ARPA expenditure plan was subsequently approved at a regular council meeting on June 20, 2023. Lastly, the City held an expenditure plan discussion with City Council and the public on August 20, 2024 to make revisions to this plan. This meeting provided ample opportunity for the public to provide input on the use of ARPA funding.
F5. Criteria for determining the awarding of ARPA funds were often vague and confusing.
Response: The City disagrees with Finding No. 5 as applied to the City of Gustine. The City created a simple application process to qualify businesses that were impacted by the pandemic. If businesses could provide proof of closure and financial impact due to the pandemic, they qualified to receive the first round of the Gustine Business Relief Program. The City also created a second Relief Program to assist businesses by creating a simple application process to provide funding for businesses to make improvements as part of their recovery efforts. All of these processes were conducted at public
meetings at the City Council chambers with public and business owner input (June 15, 2021 City Council Meeting). All requirements used to determine funding eligibility were clearly stated on the front page of the application.
F6. Decisions about how funds were spent were solely made by the City Councils or the Board of Supervisors in accordance with the Treasury Department Final Rule Guidelines that took effect on April 1, 2022. However, these procedures were not followed consistently.
Response: The City disagrees with Finding No. 6 as applied to the City of Gustine. The City's decisions on funding were made with public input through numerous public meetings. All decisions related to ARPA fund expenditure were associated with regular and special City Council meetings, with public input. This was consistently followed from Fiscal Year 2021-2022 to Fiscal Year 2023-2024.
F7. During our investigation, we discovered Dos Palos and Livingston were quick to invest in identified needs immediately, whereas other cities retained their funds until the issuance of the Final Rule.
Response: The City agrees with Finding No. 7.
R l. The County and its incorporated cities should develop policies and procedures keeping transparency and public input first and foremost for possible future occurrences of unexpected funding. Minimal Funding required. (Fl) Response: The City disagrees with Recommendation No. 1 with respect to the City of Gustine. All decisions related to the expenditure plan for ARPA Fund were made at public meetings. All meeting minutes related to each of these meetings are accessible on the City's website. The City will create a webpage dedicated to ARPA fund documentation and expenditures.
R2. Each Agency should designate at least one individual or office to serve as a one-stop-shop for residents, small business owners, contractors, and other members of the business community. This individual(s) should provide guidance and recommendations to assist in determining eligibility for Federal, State or Local funds. Moderate funding required. (Fl)
Response: The City agrees with Recommendation No. 2. The designated person for the business relief fund has been and is the Community and Economic Development Director, Jami Westervelt.
R3. In addition to using internal controls, ARPA funds received should be audited regularly by an outside agency to ensure accountability and transparency.
Moderate funding required. (F4)
Response: This recommendation requires further analysis. The City of Gustine is committed to the best financial practices as established by the Government Finance Officers Association (GFOA) and will be in compliance with the reporting and auditing requirements of the SLFRF program.
R4. The amount of ARPA-related funding received, and its proposed usage, should be posted prominently on public agency's websites and social media sites detailing the receipt and distribution of all ARPA-related funds. Minimal funding required. (F2, F3, F5, F6,)
Response: The City agrees with this recommendation. The City will create a webpage dedicated to ARPA fund documentation and expenditures.
R5. Cities and the County need to provide information to residents to easily track the amount of funding received and its usage including contracts awarded for ARPA related projects, progress on ARPA funded projects and the impact of the funding on their community. Minimal funding required. (F2, F3, F4, F6) Response: The City agrees with this recommendation. The City has been transparent and consistent in adopting expenditure plans for ARPA Funds through numerous public meetings. All ARPA funded projects are identified in the annual budget and shown in the Capital Improvement Program. All contract awards follow the California Uniform Construction Cost Accounting Act and are approved by City Council per the City Purchasing Procedures (Article 2 of the Gustine Municipal Code).
FISCAL IMPACT
There is no fiscal impact associated with this action at this time.
RECOMMENDATION
Staff recommends the City Council take the following actions:
l. Review the Merced County Civil Grand Jury Report for The American Rescue Plan Act of 2021- Where the Money Went
2. Authorize the City Manager to respond to the Grand Jury as outlined in the · staff report in accordance with California Penal Code Section 933(c)
EXHIBIT(S)
A) 2023-2024 Merced County Civil Grand Jury Report
MERCED COUNTY
CIVIL GRAND JURY REPORT
2023 - 2024
American Rescue Plan Act Of 2021
Where the Money Went
SUMMARY
The 2023-2024 Merced County Civil Grand Jury (Grand Jury) convened in July of 2023 with a commitment to fulfill the "watchdog" role ascribed to it by the California Penal Code $888- 939.1 /
The Grand Jury fulfilled this obligation by investigating the receipt, accounting, safe-handling, transparency, and planned expenditure of millions of taxpayer dollars provided to the residents of Merced County due to federal legislation in response to the COVID-19 pandemic of 2020-2022.
For purposes of this report, the use of the term "ARPA funds" references the American Rescue Plan Act of 2021.
The Grand Jury investigated Merced County and its incorporated cities and met with city staff and elected officials, who had direct knowledge and responsibility for the management and distribution of ARPA funds.
In this report the Grand Jury submits recommendations, based on what, in the opinion of the Grand Jury, are believed to be best practices for the handling, distribution, and methods to provide transparency to residents of the use of ARPA funds for their cities.
BACKGROUND
The Merced County Civil Grand Jury received a citizen complaint which questioned the allocation of Small Business Grants with funds provided through the ARPA. The Jury has the authority to investigate, under California Penal Code $888-939.1.0
During this investigation, the Grand Jury broadened its scope to review how Merced County and its incorporated cities used ARPA funds. Most importantly, 43
the Grand Jury investigated whether Merced County and cities followed their own policies and procedures and how transparent was the process.
The 117 Congress (2021-2022) Bill H.R.1319 - American Rescue Plan Act of 2021, Public Law 117-2-Mar 11,2021, was signed into law on March 21, 2021, to support the immediate pandemic response, bring back jobs, and lay the groundwork for a strong and equitable recovery. The plan provided $1.9 trillion to states, counties, and cities (based on population) to speed the country's recovery from the economic and health effects of the COVID-19 pandemic. l ARPA provided $350 billion dollars in the form of grant funds from the Federal Government to states, territories, Tribal governments, counties, and localities, generating a significant macroeconomic effect on the U.S. economy. The U.S.
Department of the Treasury (Treasury Department) also sought to implement the program in ways that maximized its potential benefits while minimizing its costs. It has done so by aiming to target relief in key areas according to the congressional mandate; offering clarity to states, territories, Tribal governments, and localities while maintaining their flexibility to respond to local needs; and limiting administrative burdens.3
The Treasury Department issued an interim final rule implementing the State and Local Fiscal Recovery Funds (SLFRF) program which was established by the ARPA funding on May 10, 2021. It has since disbursed over $240 billion to state, local, and Tribal governments and received over 1,500 public comments on the interim final rule. The first half of the ARPA funding was distributed on May 17, 2021. (I
California has received over $43 billion in combined recovery funds from the American Rescue Plan Act of 2021, to mitigate the impacts of the COVID-19 Pandemic.[l
The Treasury Department adopted the final rule on January 6, 2022, implementing the SLFRF program, with the effective date of April 1, 2022. On February 28, 2022, the Treasury Department released the updated Compliance and Reporting Guidance for the SLFRF program. This guidance is meant to 44
support recipients in complying with the final rule and provide clarification for each recipient's compliance and reporting responsibilities under the SLFRF program.
In addition to this guidance, recipients were to follow the award terms and conditions, the authorizing statute, the final rule and other regulatory and statutory requirements, including regulatory requirements under the Uniform Guidance and related Compliance Supplement.
The local funding portion is approximately $130 billion, equally divided between cities and counties. Localities will receive the funds in two tranches-the first after the U.S. Treasury Department certifies the proceeds to each jurisdiction and the second one year later.
For cities, $65 billion is divided between jurisdictions that are Community Development Block Grant (CDBG) entitlement jurisdictions and those that are not. $45.5 billion of the $65 billion will be allocated to metropolitan cities utilizing a modified CDBG formula, and the remaining amount for jurisdictions that are non-entitlement CDBG, will be allocated according to population. For the nonentitlement jurisdictions, the amount will not exceed seventy- five percent of their most recent budget as of January 27, 2020. Additionally, non-entitlement jurisdictions proceeds will be allocated through the state for redistribution to local governments.(
For counties, $65 billion will be allocated based on the county's population.
Counties that are CDBG recipients will receive the larger of the population or CDBG-based formula.
Eligible uses of these funds include:
• Revenue replacement for the provision of government services to the extent of the reduction in revenue due to the ARPA public health emergency, relative to revenues collected in the most recent fiscal year prior to the emergency,
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• ARPA expenditures or negative economic impacts of ARPA, including assistance to small businesses, households, and hard-hit industries, and economic recovery,
• Premium pay for essential workers,
• Investments in water, sewers, and broadband infrastructure.
Restrictions on the uses of these funds include:
• Funds allocated to states cannot be used to directly or indirectly to offset tax reductions or delay a tax or tax increase.
• Funds cannot be deposited into any pension fund.
Implementation of ARPA relief package was an extensive process as new or updated guidance and FAQs were developed and released by the Treasury Department.
For example, the legislation requires each jurisdiction's designated executive to "certify" that the funds were to be used for eligible purposes.
The Government Finance Officers Association (GFOA) will provide regular updates as information becomes available. If you have specific questions or need clarification, GFOA launched an on line portal to gather member questions to help shape engagement and solicit answers from the Administration For many jurisdictions, the funding provided under ARPA is substantial and could be transformational for states and local governments in their pandemic rescue and recovery efforts. Elected leaders will need to decide how to best use the additional funding consistent with the ARPA requirements, which are very broad.
Finance officers play a critical role in advising elected leaders on the prudent spending of moneys received under ARPA. Finance officers are best positioned to help ensure the long-term value of investments and financial stability of its government using this one-time infusion of resources. When considering how to best advise elected officials and plan for the prudent use of ARPA funds, we (GFOA) offer the following outline of Guiding Principles for the use of ARPA funds.(
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There are seven major categories as enumerated by Congress interim rule.
1. Public Health and Negative Economic Impacts - Public Health mitigation efforts, medical expenses, behavioral health, and other public health services.
2. Negative Economic Impacts - assistance to small businesses, households, and others negatively impacted due to the economic impacts of the ARPA pandemic.
3. Public Health-Negative Economic Impact - Public Sector Capacity to support public sector workforce and rehiring.
4. Premium Pay - Public and private sector workers performing essential work.
5. Infrastructure - Necessary investments to improve water, wastewater, stormwater, broadband and public safety projects.
6. Revenue Replacement - Provide for government services impacted by the reduction of revenue due to the COVID pandemic.
7. Administrative - Cover expenses of employees or consultants to ensure program compliance, fiscal integrity, and facility costs. [8 ARPA funds are for temporary and non-recurring expenditures arid not for ongoing financial commitment.
The first half of ARPA funding was received by most Merced County cities in the summer 2021. The second half of the funding arrived in the summer of 2022. Funding must be encumbered by Dec 31, 2024, and spent by Dec 31, 2026.
The table below shows the ARPA funding received by Merced County and its incorporated cities in its two funding disbursements.
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[Merced_County[ _Atwater Dos Palos Gustine Lvngston [osBans TiiegadCty] ARPA DEPOSIT 2021 $26.968.042 $3.535.571 $66 1.088 $570.227 $1.781.720 $4.908.432 $13.7 13.941 ARPA DEPOSIT 2022 $26.968.043 $3.535.571 $66 1.08.8 $570.228 $1.781.720 $4.908.432 $13.713.941 itere511h: 317.108
Reta Ion AD Card 335.366
[iofil [ss3@3@@gT sis25 siz2iTs siiiii5 ss5@ii@ s@gig@ Tszii2is@2] Merced County and its incorporated cities received ARPA funds consistent with federal distribution requirements and had the authority over the use of these funds, subject to ARPA regulations. In addition, these decisions were made by elected officials at council and board meetings subject to the Ralph M. Brown Act.
METHODOLOGY
The Grand Jury investigated Merced County and its six incorporated cities with in-person interviews to discuss the receipt, accounting, disbursement and transparency of the uses of ARPA funds.
Grand Jury members met with finance directors, city managers, elected officials, and staff of the incorporated cities of Atwater, Dos Palos, Gustine, Livingston, Los Banos, Merced and the County of Merced, between December 2023 and March 2024 for in-depth interviews, which included discussions on the use of ARPA funds.
Members of the Grand Jury contacted Merced County and its incorporated cities for in-person interviews to discuss the receipt, accounting, disbursement, and transparency of the uses of ARPA funds.
The Grand Jury requested copies of documents regarding ARPA funding and its expenditures be sent to the Grand Jury, which included the receipt and planned allocation of ARPA funds, are as follows:
1. Copies of notices from the state of the ARPA award(s) to the City.
2. Copies of plans approved by the City Council for allocation of funds to various local programs.
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3. Copies of established criteria and requirements used to determine awards and spending within the various programs.
4. A listing of each fund receipt from the ARPA
5. Listing of disbursements to date grouped by program.
6. Detail, listing by program, of commitments not yet disbursed.
7. Any internal report(s) evaluating the effectiveness of the ARPA on the City.
A request for information was sent to Merced County and the cities asking for a summary of their receipts and disbursements for ARPA funding and SLFRF reports. Whereas some cities were expedient with their requested information, others required multiple contacts to get the information requested.
DISCUSSION
The receipt, proposed use, and eventual distribution of ARPA funds has been an evolving process. To fulfill their "watchdog" responsibilities, the Grand Jury initiated contact with representatives of Merced County and its incorporated cities.
Generally, cities used ARPA funding for, public health, medical expenses, negative economic impact to small businesses, households, and others, provide premium pay to both the public and private sector workers performing essential work, infrastructure, and revenue replacement for administrative and government services due to the loss of revenue from the COVID-19 pandemic.
Merced County and its cities, like many of those across the country, were suddenly awash with millions of dollars. Federal interim guidelines as to how those funds should or could be spent were often unclear. The cities of Gustine and Los Banos used ARPA funding to provide small business grants of $5000- $25000 to their local small businesses. Local guidelines and a contact person were published on their application establishing a one stop shop for Gustine whereas Los Banos provided little to no information on theirs.
One City official from Dos Palos said the funding was an unanticipated "windfall" for their community which amounted to over a million dollars. Most cities were 49
concerned about how they could spend this funding. The Federal government's interim guidelines (issued in May 2021) laid out some, but not all requirements.
The Treasury Department adopted the final rule on January 6, 2022, implementing the SLFRF program, with the effective date of April 1, 2022. On February 28, 2022, the Treasury Department released the updated Compliance and Reporting Guidance for the SLFRF program. The SLFRF reporting/tracking requirements are designed to ensure that funds received as part of the SLFRF program are used for eligible purposes. There are three types of reporting requirements for SLFRF program funds:
• Interim Report
• Project and Expenditure Report
• Recovery Plan Performance Report
Recipients of the funds are required to report on how they spent or are spending the funds they received, and what the status is of ongoing projects funded by the program.
The reports will be collected through April 30, 2027. The SLFRF requires program and performance reporting to build public awareness, increase accountability, and monitor compliance of eligible uses. "We didn't want to do anything wrong and have to send the money back," said one official. This was a common situation not just in Merced County, but across the country according to media reports.
Mayors from across the U.S. pleaded for immediate action on billions of dollars targeted to shore up their finances and revive their communities. Some cities delayed investments to improve water, wastewater, stormwater, broadband and public safety projects. Dos Palos and Livingston has identified needs with water infrastructure issues.
"The cities wanted to get theirs, but we needed to be prepared." [6l States and cities were slow to spend federal pandemic money I 50
According to an Associated Press news agency David A. Lieb • published (October 3, 2021) a review of the first financial reports due under law. States had spent just 2.5% of their initial allotment while large cities had spent 8.5%.
Many state and local governments reported they were still working on plans for their share of the $350 billion, which can be spent on a wide array of programs.
Though President Biden signed the law in March, the Treasury Department didn't release the money and spending guidelines until May.
Cities sometimes delayed decisions while soliciting suggestions from the public.[9
During the fall of 2021 the lack of final rules from the Treasury Department discouraged some cities from making firm decisions of how to allocate the funding as they awaited clarification regarding eligible uses.
During the pandemic of 2021 and early 2022, city halls were closed to the public with limited staff onsite and many employees worked remotely. Cities relied heavily on social media and city websites to inform businesses and residents of available ARPA funds. As might be expected, larger cities appeared to be able to communicate better than smaller cities with limited staff. As a result, Merced County and its incorporated cities developed preliminary usage lists, gathered public input from residents, held town hall meetings, and provided directions to staff. Others waited for a final determination from the Treasury Department before moving forward.
Finally, in January 2022, the Treasury Department released the final SLFRF rule "which will officially take effect on April 1, 2022. The final rule provides useful clarifications in some areas, and substantive expansions of eligible activities in others. I6
These are the seven major categories are monitored by the Treasury Department in the SLFRF reports final rule.
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1. Public Health and Negative Economic Impacts - Public Health mitigation efforts, medical expenses, behavioral health, and other public health services.
2. Negative Economic Impacts - assistance to small businesses, households, and others negatively impacted due to the economic impacts of the ARPA pandemic. ARPA funding provided grants from $5,000- $25,000 to small businesses.
3. Public Health-Negative Economic Impact - Public Sector Capacity to support public sector workforce and rehiring.
4. Premium Pay - Public and private sector workers performing essential work.
5. Infrastructure - Necessary investments to improve water, wastewater, stormwater, broadband and public safety projects.
6. Revenue Replacement - Provide for government services impacted by the reduction of revenue due to the ARPA pandemic.
7. Administrative - Cover expenses of employees or consultants to ensure program compliance, fiscal integrity, and facility costs.( The following tables illustrate how Merced County, and its incorporated cities utilized their ARPA funds. All data in the following tables was obtained from submitted requested information, available public records, published council meeting minutes, agendas and budgets dated on or before Dec 31, 2023. 52
Merced County-ARPA Funds Summary
Amount received $53,936,085
ARPA DEPOSIT 2021 $26,968,042
ARPA DEPOSIT 2022 $26,968,043
1.Public Health $0
2. Negative Economic Impact $0
3. Public Health - Negative Economic Impact $0
4. Premium Pav $0
5. Infrastructure $0
6. Revenue Replacement $4,632,076
Project CF! (Community Facilities 1) $6,663,087
Merced Library Handrails, Bal ico Park Irrigation
Gustine Veterans Hall & ADA, Henderson Park Bat Removal LeGrand Community Hall, Yosemite Lake Boat Dock
Le Grand Municipal Court Roof Replacement, C ourthouse Park Irrigation Santa Nella Roof Replacement, LeGrand Park Irrigation System Hot Coals Containers Countywide, Henderson Park Split Rail Fencing Livingston Veterans Hall Water Repair, Spring F air. Water System/lrigat ion HVAC: Ballico Veterans Hall, Yosemite Lake Walking Pier HVAC: Courthouse Museum, HVAC: Winton Veterans Hall
HVAC: Del Hale Community Hall, HVAC: Germino Building
HVAC: E!Nido Community Hall, HVAC: Le Grand Muni Court
Livingston Library Public Service Counter, HVAC: Le Grand Veterans Hall Los Banos Library Public Service Counter, HVAC: Planada Community Hall HVAC: Winton Community Hal , HVAC: Stevinson Veterans Hall Merced Library Book Elevator Replacement, Le Grand Library Roof Broadway Park lrrigatiorJSidewalk/Landscape
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Project CF2 (Community Facilities 2) $11,059,500
H VAC: Atwater Veterans H all, Atwater Library Pub lie Service Count er HVAC: Delhi Senior Citizens Cemter, Gustine Library Public Service C ounter HVAC: Hilmar Community Hall, Hoffman Teen C enter Construction HVAC: Los Banos Veterans Hall, Delhi Parkland Purchase
HVAC; Merced Library, Le Grand Veterans Hall Roof
HVAC: County Administration Building, Old Courthouse Museum Roof Project CF3 (Com munity Facilities 3 ) $4,600,000
Community P ark 42 Project
Delhi Education P ark Restrooms
Franklin Beachwood Environmental and Park De sign
Santa Nella Park Environmental and Park Design
Germino Building Retrofit
Hagaman Park Restrooms
Project CS1 (COVID-19 Support1) $302,428
EMFLA for employees
Administrative and Sick Leave
Data Collection Management
Outreach equipment
Personal protective equipment
Vaccination Clinics
Support costs, including: software, supplies, janitorial service Project Cs52 (C0ID-19 Support2 ) $100,000
Items included in this project are related to ARPA community engage me nt Project Cs53 (€OVID-19 Support3 ) $350,000
This project was established during the 2022 reporting period as part of This project was removed as part of the ARPA framework by the Board of Project FC1( Black Rascal Creek Flood Control Project1) $7,200,000 1 [Project PP1 (Pandemic Payment1 )
Project HS1 (Homeless Services1)
The County currently operates a Homeless Navigation Center that provide s 54 $3,000 ,ooo 1
$4,000,000
Project PS1( Publlc Safely 1) I $6,500,000
Funds allocated under this project will be used towards employee salaries ] Project RD 1(Roads 1) l $10,000,000
7. Administrative l $0
Totals I $58,407,091
Unencumbered Funds I $0
Non ARPA Funds l $4,471,006
ATWATER -ARPA Funds Summary
Amount received $7,071,142
ARPA DEPOSIT 2021 $3.535.571
ARPA DEPOSIT 2022 $3.535.571
Interest other $17,108
Grand Total $7,088,250
1.Public Health $0
2. Negative Economic Impact $0
3. Public Health- Negative Economic Impact $0
4. Premium Pay $602,188
Premium Pay to Essential Wrkrs $409.293
COVID Related Employment Exp $192.895
5. Infrastructure $6,201,487
Fruitland Ave Rd Improve ments $1,047,936
Civic Building- Civic Center #1 $1,067,889
Police Dept Remodel/Rehab $340.296
Civic Building- Civic Center #2 $2,025.239
HVAC Retrofit System PD Dept $12.502
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HVAC Retrofit System Youth Center $22,399
Broadway Ave Re Tasking Traffic $1,000
City-Wide Lighting $0
City-Wide Security $67,308
Cedar and First Parking Lot $150,000
Osborn Park Renovation $558,625
Third & Atwater Blvd Sidewalks $59,988
City Council Chambers Improvmt $27,517
Palm/Bellevue ST/SLWK Improv. $157,255
Station 41 Flooring $55,533
Ralston Park Restrooms $1,000
Third & Fourth Alley Pavement $6,000
Shaffer/Browne ll Alley Pavement $1,000
First Street Overdav $600,000
6. Revenue Replacement $0
7. Administrative $574,461
Drop In $30,060
Recreation & Community Events $44.218
Professional Services $112.795
Memberships & Subscriptions $7,518
Professional Services $247,912
Machinery & Equipment $131.958
Totals $7,378,136
Unencumbered Funds
Non ARPA Funds $289,886
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DOS PALOS - ARPA Funds Summary
Amount recelved $1,322,176
[ARPA DEPOSIT 2021 $661,088
[ARPA DEPOSIT 2022 $661,088
1.Public Health $0
2. Negative Economic Impact $0
3. Public Health - Negative Economic Impact $0
4. Premium Pay $0
5. Infrastructure $1,322,176
]Rehabilitate 750,000 Gal on water tank $1,322.176
6. Revenue Replacement $0
7. Administrative $0
Totals $1,322,176
Unencumbered Funds $0
Non ARPA Funds
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GUSTINE -ARPA Funds Summary
Amount received $1,140,445
ARPA DEPOSIT 2021 $570.227
ARPA DEPOSIT 2022 $570.228
1.Publc Health $0
2. Negatve Economic Impact $141,176
209 Multi Media Corporation $70.000
Kenny Pham (Mimi's Nails and Spa) $2.500
Hair's the Place (Joyce M. Caetano) $3,905
Monica M Barnes (Cornerstone Dance) $4.971
Vance L Woltsen (Woltsen Meat & Sausage) $2,500
Jennifer McDonald (Gustine Club) $2,500
Patricia A Test (Pat's House of Beauty $5.000
Pastime Club LLC (William R. M arsigl) $5,000
Aged to Perfection (Sherri M Marsigl) $5,000
Salvador Lupian Manzo (ELPiscosito) $7.500
Jennifer Suzanne Villalobos (ACrafter's Paradise) $5.000 Bazil Al Thabit (Texas Burger Drive LLC) $2,500
Megan Ventura (Ventura Fitness &I raining) $2.500
James D Freitas (Perry's More than Pizza) $5.000
Mikayla Parreira (MK Salon & Boutique $5.000
Kenneth M Lopes (Ken's Cobblery) $4.800
Martin Godinez (Martin Godinez Carmona dba MG Bakery $5.000 Jonathan Robert Flanagan (Four of Hearts Screen Printing) $2.500
3. Publlc Health -Negative Economic Impact $0
4. Premium P ay $37,060
Payroll-Workers Pay $30,127
Payroll-Workers Taxes $6,932
5. Infrastructure $200,000
Water Sewer Line Mapping $200.000
6. Revenue Replacement $183,863
7. Administrative $0
Totals $562,099
Unencumbered Funds $578,346
Non ARPA Funds
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LIVINGSTON - ARPA Funds Summary
Amount received $3,563,440
ARPA DEPOSIT 2021 $1.781.720
ARPA DEPOSIT 2022 $1,781,720
1.Public Health $0
2. Negative Economic Impact $0
3.Public Health- Negative Economic Impact $0
4. Premium Pay $344,480
5 . Infrastructure $2,563,131
Well8A $2,000,000
Disc and Ripper Tractor - Utility Rate Study $188,131
Emergency Repairs Wastewater Treatment Plant $375,000
6. Revenue Replacement $0
7. Administrative $0
Totals $2,907,611
Unencumbered Funds $655,830
Non ARPA Funds
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LOS BANOS-ARPA Funds Summary
Amount received $9,851,930
ARPA DEPOSIT 2021 $4,908,432
ARPA DEPOSIT 2022 $4,908,432
Refund from RAD Card Program $35.066
1. Public Health $187,284
Young's Air Conditioning $108,668
The Radar Shop Inc $540
LN Curtis & Sons $4,788
Proforce Law Enforcement $30,059
Victory Tactical Gear LLC $12.332
Cook's Communications $12,434
Pen-Link LTD $19,553
Truck Vault Inc $7,475
US Bank Corp $13,174
AT&T Mobility $39
Proforce Law Enforcement $9,030
Penlink C omputer $5,349
2. Negative Economic Impact $1,200,600
Merced County Human Services $200,000
US Bank Corp $2,500
Law Office of William Vaughn $225
RAD Card Funding $514,375
Elaine Cory (Central Hotel} $25,000
Kenneth Lambert (Biggins Texas BBQ) $25,000
IE M Innovation Engine ering Modular (Monica He rador) $25.000 Jimmy Wayne Dueval ( Tony's Rendezvous) $25.000
Reginald S Grimes (The Academy of Performing Arts and Fitness) $25,000 Donna Koblis (Body Transformations) $25,000
Chenny Francine Tumer (Tumer's Dance Explosion) $25,000 Los Banos Chamber of Commerce (Michelle Sandoval) $25.000 Mount Brow Lodge82 (Larry Johnson) $25.000
Jose M Parra (RP Communication) $5,000
Ziad Husein (The Fun Zone) $15,000
BK Beauty Services Inc. (Baljeet Kour Singh) $8,000
Maria Tostada (Westside Elderly Care) $6,000
Santa Martinez Ortiz (Courtyard Mimosas) $19,000
El Behemio Sport Bar Inc. (Rafael R Jurado) $10.000
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Jenifer Correia (Crossfit Valleyview) $15,000
Crystal Martinez (Sheen Riah) $12,100
Tori D. Gonzalez (TDJ & Associates Photography) $5,000
Maria Lou Vierra (Lou's Beauty Salon) $15,000
Miguel Alejandre (Compound Grounds LLC) $20,000
Patricia Reyes (Jesse's Bar) $20,000
Ray Lewis Walton (League of United African American Citizens (LUAAC)) $7,500 Karla Navaro Sevier (Hair by Karla) $7,500
Los Banos Elks Lodge No. 2510 $24,987
Pedro L Cintora (Pete's Barber Shop) $20,000
Anthony M Parolise (Parolise Chiropractic Office) $11.500 Chester D Hogue (Central Valley GEEKS) $10.000
Strike Fitness LLC, (Amber Pope) $25,000
Giovanni Rodriguez (Giovanni Rodriguez Hair) $15,000
Los Banos Elks Lodge No. 2510 -$25,987
Crystal Martinez (Sheen Riah) $12,900
3. Public Health - Negative Economic Impact $0
4. Premium Pav $2,251,438
Payroll-Workers Benefits $159.438
Payroll-Workers Pay $2.092,000
5 . Infrastructure $313,993
Anthony Gomes $2.337
Callander Assoc Landscape Architect $26,388
Electro-Mech Scoreboard Co $11,800
Halcyon Creek Inc. $9,260
Law Office of William Vaughn $563
Ronny's Inc $245,054
SIJ Holdings Inc $315
US Bank Corp $375
Valley Iron Inc. $2,036
Quad Knopf, Inc. $15,866
6. Revenue Replacement $6,409,183
7. Adminstrative $225
Law Office of William Vaughn $225
Totals $10,398,879
Unencumbered Funds
Non ARPA Funds $546,949
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Merced City ARPA Funds Summary
Amount received $27,427,882
ARPA DEPOSIT2021 $13.713.941
ARPA DEPOSIT 2022 $13.713.941
1.Public Health $523,046
COVID-19 Ciy Expense $523.046
2. Negative Economic Impact $0
3. Public Health - Negative Economic Impact $0
4. Premium Pay $1,000,000
Stimulus Payments $1.000.000
5. Infrastructure $13,861,400
Bob Hart Square Expansion $800.000
Broadband Infrastructure $2.650.000
Mainstreet TrafficDirectional Enc ha nc em ent $750.000 Parklets/Beautification $200.000
Water infrastructure $2.500.000
Communiy Park#42 $4.536.400
Applegate Zoo Renovation/Expansion $2,000.000
Applegate Restroom $425.000
6. Revenue eplacement $13,885,686
Parklets/Beautification project -CP240043 $393,686
Provision of Government Services $20.000
Non-Profit Support $7.500,000
Utility Bill Relief $1.500.000
Stimulus Payments $1.000.000
Job Training Program $772.000
Expanded Youth Programs $2.200,000
7. Adm in istrative $250,000
Supplies and Services $250.000
Totals $29.520.132
Unencumbered Funds
Non ARPA Funds $2,092.250
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FINDINGS
F1: Local guidelines for the awarding of Small Business grants by the city of Los Banos were not clearly defined or adequately publicized despite numerous requests from the public.
F2: The Treasury Department issued interim guidelines which we believe created a situation where cities were unclear until the final rule was adopted.
F3: County and Cities often relied on their established internal control procedures which varied between cities and relied on antiquated procedures on how to track funds.
F4: Public opportunity for local input on the use of ARPA funding was inadequate.
F5: Criteria for determining the awarding of ARPA funds were often vague and confusing.
F6: Decisions about how funds were spent were solely made by the City Councils or the Board of Supervisors in accordance with the Treasury Department Final Rule Guidelines that took effect on April 1, 2022. However, these procedures were not followed consistently.
F7: During our investigation, we discovered Dos Palos and Livingston were quick to invest in identified needs immediately, whereas other cities retained their funds until the issuance of the Final Rule.
RECOMMENDATIONS
R1: The County and its incorporated cities should develop policies and procedures keeping transparency and public input first and foremost for 63
possible future occurrences of unexpected funding. Minimal Funding required. (F1)
R2: Each Agency should designate at least one individual or office to serve as a one-stop-shop for residents, small business owners, contractors, and other members of the business community. This individual(s) should provide guidance and recommendations to assist in determining eligibility for Federal, State or Local funds. Moderate funding required. (F1) R3: In addition to using internal controls, ARPA funds received should be audited regularly by an outside agency to ensure accountability and transparency. Moderate funding required. (F4)
R4: The amount of ARPA-related funding received, and its proposed usage, should be posted prominently on public agency's websites and social media sites detailing the receipt and distribution of all ARPA-related funds. Minimal funding required. (F2, F3, F5, F6,)
RS: Cities and the County need to provide information to residents to easily track the amount of funding received and its usage including contracts awarded for ARPA related projects, progress on ARPA funded projects and the impact of the funding on their community. Minimal funding required. (F2, F3, F4, F6)
REFERENCES
.1 California Legislative Information, Penal Code, Part 2, Title 4, Chapter 3, Article 2, Section 925. Published 1977. Accessed March 17, 2022, from https://leqinfo.leqislature.ca.gov/faces/codes displaySection.xhtml?lawCode=PE N& sectionNum=925.
[21 United States Department of Treasury Department, "Coronavirus State and Local Fiscal Recovery Funds," Final Rule. Federal Register, Vol. 87, No. 18, Rules and Regulations. Published January 27, 2022. Accessed March 21, 2022, from 2022-00292.pdf (govinfo.gov)
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(3) Department of Finance.ca.gov/budget/state-fiscal-recovery-fund/ State Fiscal Recovery Funds
4 AMERICAN Rescue Plan Spending: Recommended Guiding Principles from American Rescue Plan Spending: Recommended Guiding Principles (gfoa.org) 5US Department of Treasury Management contact GFOA-Treasury and Management Best Practices
I6) Associated Press, "States and cities slow to spend federal pandemic money." Published October 3, 2021. Accessed March 21, 2022, from AP: States and cities slow to spend federal pandemic money I AP News
[71 Teasury.gov/news/press-releases Treasury Issues Final Rule for State and Local Fiscal Recovery Funds Program to Support the Ongoing COVID Response I U.S. Department of the Treasury
[Bl mrsc.org/explore topics/finance/revenues/American rescue plan Interim rule MRSC -American Rescue Plan Act (ARPA)
[9 https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf SLFRE-FinalRule.pdf (treasury.gov)
REQUESTS FOR RESPONSES
Pursuant to Penal Code Section §933.5, the following responses are required written in 60 days.
• Merced County Board of Supervisors. Response to R-1 through R-3. • Merced County CEO. Response to R-1 through R-5.
• County Councils of the incorporated cities of Atwater, Dos Palos, Gustine, Livingston, Los Banos and Merced. Responses R-1 through R-5.
The following responses are required within 90 days.
• City Managers of the aforementioned incorporated cities. 65
Responses are to be submitted to the Presiding Judge of the Merced County Superior Court in accordance with Penal Code Section §933.05.
DISCLAIMER
Reports issued by the Grand Jury do not identify the individuals who have been interviewed. Penal Code § 929 requires that reports of the Grand Jury not contain the name of any person or facts leading to the identity of any person who provides information to the Grand Jury.
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