American Rescue Plan Act
(ARPA)
Policies and Procedures
City of Pomona
Fiscal
Policies & Procedures
Number:
Effective Date:
Approval
Overview
This policy document provides an overview of the American Rescue Plan Act (“ARPA”), with a specific focus on the eligible uses and the award of ARPA funds to beneficiaries and subrecipients under each eligible use category.
ARPA Eligible Use Categories
The American Rescue Plan Act (“ARPA”) was signed into law in March 2021. ARPA contained a section, the Coronavirus State and Local Fiscal Recovery Fund (“SLFRF”), to provide monetary support to local governments to respond to, mitigate, and recover from the COVID-19 public health emergency. In May 2021, the U.S. Treasury released an Interim Final Rule providing further guidance on SLFRF. Under the Statute and Rule, there are six categories of eligible use:
1 a) Support for public health expenditures;
b) Address negative economic impacts caused by the public health emergency; c) Replace lost public sector revenue;
d) Provide premium pay to eligible workers;
e) Invest in water, sewer, and broadband infrastructure.
ARPA Funds may be used for costs incurred after March 3, 2021 until December 31, 2024. ARPA Funds must be expended by December 31, 2026.2
Many of the enumerated uses are programs and actions that would be run by the City or through a third-party. When utilizing a third-party the City needs to evaluate if the award is to a subrecipient
1 American Rescue Plan Act of 2021, Pub. L. No. 117-2, § 603(c)(1); Coronavirus State and Local Fiscal Recovery Funds, 86 Fed. Reg. 26,786 (May 17, 2021) (codified at 31 C.F.R. Part 35) [hereinafter “Interim Final Rule”]; Coronavirus State and Local Fiscal Recovery Funds, 87 Fed. Reg. 4338, 4339 (January 27, 2022) (codified as of April 1, 2022 at 31 C.F.R. Part 35) [hereinafter “Final Rule”] 2 Final Rule at 4340.
Attachment No. 1
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or to the support of “effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements.”3 If the award is to a third-party to further execute a program on behalf of the City and the ARPA program, then the awardee would be considered a subrecipient. The requirements of a subrecipient are described in Section G of this policy document. Throughout this policy document requirements of impacted and disproportionately impacted categories are discussed, each of these are the beneficiaries under each category. Beneficiaries are defined as the end-user of the funds and when the funds are not going directly from the City to the beneficiary then it is likely that the award is going to a subrecipient and the additional requirements must be in place. A. Support for Public Health Expenditures When utilizing funds under this category, the City must identify a COVID-19 public health impact on an individual or class (i.e. group) and design a program that responds to the identified impact.4 Treasury has provided a list of enumerated uses under this category as well as a formula for the City to use the funds under this category outside of the enumerated uses.5 As this is pertinent to this section and Section B of this policy document, the use beyond those enumerated is discussed in section F of this policy document. 3 Coronavirus State and Local Fiscal Recovery Funds, Interim Final Rule: Frequently Asked Questions, at pg. 39 (January 2022) [hereinafter “Interim Final Rule FAQ”]. 4 Id. at 4343. 5 Id. at 4392-3; See also U.S. Treasury, Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule, pg. 32 (January 2022) [hereinafter “Overview of the Final Rule”].
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Enumerated uses under COVID-19 mitigation and prevention:6 Enumerated uses under Medical Expenses allow for ARPA Funds to be used for expenses to households, medical providers, or others that incurred medical costs due to the pandemic, including:7 6 Overview of the Final Rule, pg. 14. 7 Id. at pg. 15.
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Enumerated uses under Behavioral Healthcare for services to the general public includes:8 Enumerated uses under the Prevention and Response to Violence:9 B. Address negative economic impacts caused by the public health emergency ARPA Funds can be used to provide direct assistance to households/communities, small businesses, nonprofits, and impacted industries.10 Under most of the subcategories of eligible use, Treasury has provided an analysis of impacted and disproportionately impacted for each as well as enumerated uses for the impacted and disproportionately impacted under each subcategory.11Treasury has also provided an additional subcategory to assist recipients with public sector capacity and workforce. 12 8 Id. 9 Id. 10 Id. at pg. 12. 11 Id. 12 Final Rule at 4384.
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a. Assistance to Households and Communities Treasury has defined both impacted and disproportionately impacted households and communities.13 Further, Treasury has provided enumerated uses for impacted and disproportionately impacted households and communities.14 The City may award the funds directly to the individuals/communities that are impacted or disproportionately impacted. Additionally, the City may choose to award the funds through a competitive process to a subrecipient for the furtherance of a City and ARPA program that would benefit the impacted and / or disproportionately impacted communities identified. Should the City choose to use a subrecipient, the City will need to ensure Section G of this policy document is followed. Financial Information for Households and Communities to Qualify as Impacted15 • Low- or -moderate income households (income at or below 300 percent of the Federal Poverty Guidelines or 65 percent of the area median income for the county and size of households based on the most recently published data.) • Households that experienced unemployment • Households that experienced increased food or housing insecurity • Households that qualify for: o CHIP (Children’s Health Insurance Program); o Childcare subsidies through the CCDF (Child Care Development Fund) Program; or o Medicaid • For programs providing affordable housing: o Households that qualify for National Housing Trust Fund and Home Investment Partnership Programs • For programs addressing lost instructional time in K-12 schools: o Any student that lost access to in-person instruction for a significant period of time 13 Overview of Final Rule, pg. 17, 19. 14 Id. at pg. 18-19. 15 Id. at pg. 17.
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Enumerated Uses for Impacted Households and Communities16 Financial Information for Households and Communities to Qualify as Disproportionately Impacted17 • Low-income households (income at or below 185 percent of the Federal Poverty Guidelines or 40 percent of the area median income for the county and size of households based on the most recently published data.) • Households residing in a Qualified Census Tract • Households that qualified for: o TANF (Temporary Assistance for Needy Families); o SNAP (Supplemental Nutrition Assistance Program); o NSLP (Free- and Reduced-Price Lunch) and/or School Breakfast Programs (SBPs); o Medicare Part D; o SSI (Supplemental Security Income); o Head State and/or Early Head State; o Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); 16 Id. at pg. 18. 17 Id. at pg. 19.
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o Section 8 Vouchers; o LIHEAP (Low-Income Home Energy Assistance Program); and o Pell Grants • For programs to address educational disparities: o Title I eligible schools Enumerated uses for disproportionately impacted households and communities:18 b. Assistance to Small Businesses Treasury has defined both impacted and disproportionately impacted small businesses.19 Further, Treasury has provided enumerated uses for impacted and disproportionately impacted small businesses.20 For both impacted and disproportionately impacted small businesses must:21 (i) Have no more than 500 employees, or if applicable, the size standard in number of employees as established by the SBA, and (ii) Is a small business concern as defined by section 3 of the Small Business Act22, which includes: a. Independently owned and operated, and b. Is not dominant in its field of operation The City may award the funds directly to the small businesses that are impacted or disproportionately impacted. Additionally, the City may choose to award the funds through a competitive process to a subrecipient for the furtherance of a City and ARPA program that would benefit the impacted and / or disproportionately impacted small businesses identified. Should the City choose to use a subrecipient, the City will need to ensure Section G of this policy document is followed. 18 Id. at pg. 20. 19 Overview of Final Rule, pg. 21-22. 20 Id. 21 Id. at 21. 22 15 U.S.C. 632
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Information for Small Businesses to Qualify as Impacted23 • Decreased revenue or gross receipts; • Financial insecurity; • Increased costs; • Capacity to weather financial hardship; • Challenges covering payroll, rent or mortgage, and other operating costs Enumerated Uses for Impacted Small Businesses24 Information for Small Businesses to Qualify as Disproportionately Impacted25 • Small business operating in Qualified Census Tracts • Small business operated by Tribal governments or on Tribal lands • Small businesses operating in the U.S. Territories Enumerated Uses for Disproportionately Impacted Small Businesses26 c. Assistance to Nonprofits Treasury has defined both impacted and disproportionately impacted nonprofits.27 Further, Treasury has provided enumerated uses for impacted and disproportionately impacted nonprofits.28 Treasury has limited nonprofits eligible under all categories to 501(c)(3) and 501(c)(19) tax-exempt organizations.29 The City may award the funds directly to the nonprofits that are impacted or disproportionately impacted. Additionally, the City may choose to award the funds 23 Overview of Final Rule at pg. 21. 24 Id. 25 Id. at pg. 21-22. 26 Id. at pg. 22. 27 Id. at pg. 23. 28 Id. 29 Id.
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through a competitive process to a subrecipient for the furtherance of a City and ARPA program that would benefit the impact and / or disproportionately impacted nonprofits identified. Should the City choose to use a subrecipient, the City will need to ensure Section G of this policy document is followed. Information for Small Businesses to Qualify as Impacted • Decreased revenue (i.e. from donations and fees); • Financial insecurity; • Increased costs (i.e. uncompensated increased in service need); • Capacity to weather financial hardship; • Challenges covering payroll, rent or mortgage, and other operating costs Enumerated Uses for Impacted Nonprofits Information for Nonprofits to Qualify as Disproportionately Impacted • Nonprofits operating in Qualified Census Tracts • Nonprofits operated by Tribal governments or on tribal lands • Nonprofits operating in the U.S. territories Enumerated Uses for Disproportionately Impacted Nonprofits • The City is able to identify responses that are related and reasonably proportional to these disproportionate impacts d. Assistance to Impacted Industries30 Treasury presumes that if the industry is travel, tourism, or hospitality, then it is presumed impacted. For industries outside of the three above, the industry may be impacted if: (i) industry experienced at least 8 percent employment loss from pre-pandemic levels; or (ii) the industry is experiencing comparable or worse economic impacts form the three industries at the date of the final rule. Specific to this eligible use category, aid may only be: • Provided to a business, attraction, and tribal development district operating prior to the pandemic; and • Is/was affected by required closures and other efforts to contain the pandemic. 30 Id. at pg. 24.
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Enumerated Uses for Impacted Industries31
e. Public Sector Capacity and Workforce As this eligible use category does not have beneficiaries or subrecipients, it will not be analyzed in this policy document. If the City would like a review of this eligible use category for its use of ARPA funds, a memorandum will be provided. C. Replace lost public sector revenue ARPA Funds can be used to provide general government services up to the level of lost revenue.32 Lost revenue can be calculated with the formula provided in the Final Rule or the City may elect a standard allowance of $10 million – whichever route the City chooses, the decision is for the perpetuity of the program.33 General government services are considered “generally any service traditionally provided by a government, including construction of roads and other infrastructure, provision of public safety and other services, and health and education services.”34 This includes, but is not limited to: construction of schools and hospitals; road building and maintenance and other infrastructure; health services; general government administration, staff, and administrative facilities; environmental remediation; provision of police, fire, and other public safety services.35 When utilizing funds under this category, the City has discretion to utilize the funds, the City has three parties that can receive the funds as part of the use of funds under this category: (1) A City Department; (2) Subrecipient; or (3) Beneficiary. When utilizing a subrecipient to carry-out a general government service, the City will need to follow the steps in Section G below. When awarding funds to a Beneficiary under this category, the City is limited to awarding funds to: (1) individuals and households; (2) 501(c)(3) and 501(c)(19) non-profit organization; (3) Small Businesses; and (4) Impacted industries as defined by Treasury. The City may also choose to award funds to beneficiaries in accordance with the practice of providing general government services the City has provided previously. 31 Id. at pg. 25. 32 Id. at pg. 9. 33 Id. 34 Id. 35 Id.
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D. Provide premium pay to eligible workers To acknowledge the heightened risk essential workers perform and performed, recipients may utilize ARPA Funds to provide these essential workers premium pay.36 The Final Rule provides a list of eligible workers for this category, while also broadening the list of eligible workers who can receive premium pay without a recent justification.37 Those eligible receive premium pay in addition to wages or compensation, which pay may be provided in installments or lump-sums.38 Premium pay may be up to $13/hour and may not exceed $25,000 for any single worker during the program.39 There is a three step process for utilizing this category, should the City proceed with a premium pay program, a separate analysis can be provided. Important to this category, if the City awards the funds directly then the recipient is a beneficiary. Treasury permits the City to also award the funds to third-party employers and third-party contractors who employ essential workers in eligible sectors, the selection of these third-parties is at the discretion of the City.40 E. Invest in water, sewer, and broadband infrastructure ARPA Funds may be used for eligible water, sewer, and broadband investments.41 Water and sewer projects are eligible if they are eligible for the Clean Water State Revolving Loan Fund and the Drinking Water State Revolving Loan Fund.42 In addition, the Final Rule permits the use of funds for stormwater infrastructure, residential wells, lead remediation, and certain rehabilitations of dams and reservoirs if it is found to be necessary, as defined by the final rule.43 Necessary is defined by the Final Rule as (1) responsive to an identified need to achieve or maintain an adequate minimum level of service, which may include a reasonable projection of increased need, whether due to population growth or otherwise, (2) a cost-effective means for meeting that need, taking into account available alternatives, and (3) for investments in infrastructure that supply drinking water in order to meet projected population growth, projected to be sustainable over its estimated useful life.44 The Final Rule expands the use of funds for broadband infrastructure.45 There are three steps a recipient must undertake when utilizing funds for broadband infrastructure: (i) 36 Final Rule at 4396-7. 37 Id. at 4339. 38 Id. 39 Id. 40 Interim Final Rule FAQ at pg. 27. 41 Final Rule. at 4339. 42 Overview of the Final Rule, pg. 37-8. 43 Id. 44 Final Rule at 4408. 45 Id. at 4339.
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identify an eligible area for investment; (ii) design a project to meet high-speed technical standards; and (iii) require enrollment in a low-income subsidy program.46 When constructing a project under this eligible use section, the work may be done by the City directly or the City may choose to hire a contractor. Should the City choose to hire a contractor, the City is required to follow a competitive procurement process and the additional steps and requirements from 2 CFR 200, the Uniform Guidance (which is outlined in Section G below). F. Beyond Enumerated Uses As discussed in Section A and Section B of this policy document, Treasury has provided enumerated uses for the public health expenditure and negative economic impact categories, and for uses beyond those enumerated, Treasury has provided a framework for recipients:47 When utilizing ARPA Funds beyond an enumerated use, recipients must ensure that the use is reasonably proportional and related to the identified impact. Treasury has defined reasonably proportional as “the scale of the response compared to the scale of the harm, as well as the targeting of the response to beneficiaries compared to the amount of the harm experienced.”48 As with Sections A and B above, when awarding funds beyond an enumerated use, the City can award funds to a beneficiary and/or a subrecipient. If awarding funds to a subrecipient, the City must follow Section G below. G. Requirements of Subrecipients Below outlines the policies and procedures the City must have in place prior and during an agreement with a subrecipient. Additionally, the City should refer and utilize the Pomona – ARPA Uniform Guidance Checklist. Both this Section of the policies and the Checklist 46 Id. at 4418. 47 Overview of the Final Rule, pg. 32. 48 Id. pg. 34.
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serve as a guide and should the City have any specific questions, legal counsel should be sought. Policies the City must have in place:49 Both the Uniform Guidance and the United States Department of the Treasury (“Treasury”) require the City to adopt written policies that accomplish the following: • Track ARPA funds separately from other funds, including distributions made to Subrecipients; • Implement a financial management system capable of providing accurate, up-to-date reports of the use of ARPA funds; • Manage cash distributions and payments in a uniform manner that tracks spending and documents who received funds; • Implement a method of determining the reasonableness, allocability, and allowability of costs in accordance with Uniform Guidance and the Terms and Conditions of the City’s ARPA award;50 • Adopts a method of determining a Subrecipient’s risk of noncompliance with the terms of the award from the City and the requirements in the Uniform Guidance; • Adopts a means of monitoring Subrecipients to ensure compliance with authorized uses of funds. Agreements with Subrecipients:51 The Uniform Guidance requires the City to enter into agreements with Subrecipients to help ensure that ARPA funds are being spent in accordance with applicable requirements. The City must include the following information and terms in these agreements. In cases where some information is not available, the City must provide the best information available.52 • Subrecipient Name; • Subrecipient’s federally issued Unique Entity Identifier (“UEI”) number; • Federal Award Identification Number; • Federal Award Date; • The time period within which the funds must be used • The amount of federal funds awarded to the Subrecipient; • The total amount of federal funds committed to the Subrecipient, if they have accepted federal funds from other sources; • The project description; • Requirements to ensure the Subrecipient is using the funds in accordance with ARPA, other applicable laws and regulations, and the terms of the award (see Subrecipient Requirements below which must be referenced in the agreement); 49 See 2 C.F.R. §§ 302-309; See also Pomona – ARPA Uniform Guidance Checklist. 50 Refer to the Pomona – ARPA Uniform Guidance Checklist for more specific information on Cost Principles. 51 See 2 C.F.R. § 332(a); See also Pomona – ARPA Uniform Guidance Checklist. 52 See 2 C.F.R. § 332(a) City of Pomona ARPA Policies & Procedures Page 14 of 15
• Requirements to ensure that the City is meeting its obligations for the use of ARPA funds; • A requirement that the Subrecipient permit the City and auditors to have access to the Subrecipient’s records and financial statements as necessary for the City to meet requirements; • Terms and conditions to close out the award. City’s Reporting Obligations For grants, loans, transfers, and direct payments made with ARPA funds greater than $50,000, the City will have to report detailed information, including the below (some of which mirror the above): • Sub-recipient identifying and demographic information (e.g., UEI and TIN number and location) • Award number (e.g., Award number, Contract number, Loan number) • Award date, type, amount, and description • Award payment method (reimbursable or lump sum payment(s)) • For loans, expiration date (date when loan expected to be paid in full) • Primary place of performance • Related project name(s) • Related project identification number(s) (created by the recipient) • Period of performance start date • Period of performance end date • Quarterly obligation amount • Quarterly expenditure amount • Project(s) Subrecipient Requirements:53 • Subrecipients are required to follow Uniform Guidance, including but not limited to the financial management, cost principles, property standards, procurement standards, and record retention. Conflicts-of-Interest The Final Rule states that the City “may not use the ARPA funds in violation of the conflict-of-interest requirements contained in the Award Terms and Conditions, including any self-dealing or violation of ethics rules.”54 The Award Terms and Conditions requires the City to have and maintain a conflict-of-interest policy consistent with 2 C.F.R. 200.318(c).55 The City and its 53 2 C.F.R. §§ 200.310-316; 2 C.F.R. § 200.330; 2 C.F.R. §§ 200.334.338; 2 C.F.R. §§ 200.317-327; See also Pomona – ARPA Uniform Guidance Checklist. 54 Final Rule at 4340, 4431. 55 Id. at 4383, 4400, 4422, 4431.
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subrecipients are required to disclose in writing to Treasury, or a pass-through entity, any potential conflict-of-interest affecting the awarding of the funds. The Final Rule goes on to state that the City “must comply with the applicable requirements of the Uniform Guidance regarding . . . conflicts-of-interest. . . “56 Included within these requirements is that the award of ARPA funds “must be free of undisclosed personal obligation or organizational conflicts of interest, both in fact and in appearance.”57 Awards may be may to nonprofits or subrecipients by providing ARPA funds “available to nonprofits on generally applicable terms or utilizing a competitive grant process, respectively.” 58 2 C.F.R. 200.318(c)(1) states: The non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity. 2 C.F.R. § 200.318(c)(1) The Final Rule goes on to state that “[a] recipient may not use control over [ARPA] funds for their own private gain. . . no employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest.”59 56 Id. at 4374. 57 Id. at 4380, 4400. 58 Id. 59 Final Rule at 4380, 4387.