CITY OF POMONA
COUNCIL REPORT
June 6, 2022
To: Honorable Mayor and Members of the City Council
From: James Makshanoff, City Manager
Submitted By: Andrew Mowbray, Finance Director/City Treasurer SUBJECT: AMERICAN RESCUE PLAN ACT (ARPA) POLICIES AND PROCEDURES RECOMMENDATION:
It is recommended that the City Council review and approve the Proposed ARPA Policies and Procedures.
EXECUTIVE SUMMARY: In response to the COVID-19 public health crisis, the U.S. Congress passed the American Rescue Plan Act (ARPA) act on March 11, 2021. This assistance programs provided needed relief to state, local and Tribal governments to enable them to continue to support the public health response and lay the foundation for a strong and equitable economic recovery. The City was allocated $45.37M in ARPA funds. The Mayor and City Council provided direction and proposed specific plan to allocate the $45.37 of the ARPA funds. To date, $17.3M has been appropriated of the $45.37M. It is important that City ensures that the ARPA funds are spent according to the U.S. Treasury guidelines. With the assistance of Best, Best and Krieger (BBK), agreements have been formulated for subrecipients, businesses and non-profits. In addition to the agreements, the U.S. Treasury “highly recommends” a transparent process to be setup which comes before the Mayor and City Council as ARPA Policies and Procedures (Attachment No. 1).
FISCAL IMPACT - The approval of the attached ARPA Policies and Procedures does not have any fiscal impact at this time.
PREVIOUS RELATED ACTION: On May 16, 2022, the City Council reviewed and approved the ARPA Grant Agreement Between the City of Pomona and Businesses and Non-Profits, ARPA Grant Agreement Between the City of Pomona and Individuals, and ARPA Subrecipient Agreement.
DISCUSSION
The U.S. Treasury has issued regulations and guidance in implementing ARPA. Treasury has also made clear that existing regulations beginning at 2 C.F.R. 200 (and specifically the Uniform Guidance at 2 CFR 200.317 through 2 CFR 200.327) apply to all federal funding programs, including to ARPA. These regulations and guidance regulate the use of ARPA funds differently depending on whether the user is a recipient, sub-recipient, or beneficiary of the ARPA funds.
Treasury defines recipients to include those who receive ARPA funds directly from the federal government – cities, counties, states and non-entitlement units (small cities). The City is a recipient according to this classification system. Treasury regulations and guidance and the other uniform guidance listed at 2 C.F.R. 200 impose a range of requirements on recipients related to documenting how funds are spent, ensuring contracts are publicly bid, and avoiding fraud.
Sub-recipients are those persons or entities that receive ARPA funds from the City, but who are not the end user of the funds. Instead, they are helping to deploy the funds to other end users. ARPA requires sub-recipients to comply with most of the same restrictions that apply to the City. The City is also accountable to Treasury for oversight of their sub-recipients. Other than the limitations on how funds can be spent in general, ARPA imposes few restrictions on beneficiaries. Reporting obligations instead fall to the City and sub-recipients who deliver funds to the beneficiaries.
The February 28, 2022 guidance from Treasury states that the City is responsible for developing and implementing policies and procedures, and retaining records, to determine and monitor implementation of criteria for determining the eligibility of beneficiaries and/or subrecipients. The guidance states that recipients should adopt the following best practices to implement their spending programs:
Best Practice
Description
Example
Written policies and procedures
Formal documentation of recipient policies and procedures Documented procedure for determining worker eligibility for premium pay Written standards of conduct
Formal statement of mission, values, principles, and professional standards Documented code of conduct / ethics for subcontractors
Risk-based due diligence
Pre-payment validations conducted according to an assessed level of risk Enhanced eligibility review of subrecipient with imperfect performance history Risk-based compliance monitoring
Ongoing validations conducted according to an assessed level of risk Higher degree of monitoring for projects that have a higher risk of fraud, given program characteristics Record maintenance and retention
Creation and storage of financial and non-financial records Storage of all subrecipient payment information
In addition to implementing the best practices above, Treasury will require the City to report detailed information about any contracts and grants awarded, loans issued, transfers made to other government entities, and direct payments made by the City that are greater than $50,000. Consequently, for all grants or loans to a sub-recipient greater than $50,000 the City should adopt a written policy collecting the following information:
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)
In addition to this written policy, the City should consider developing written policies to accomplish the following:
Evaluate each sub-recipient based on a set of common factors, such as prior experience in managing Federal funds, previous audits, personnel, and policies or procedures for award execution and oversight. The policy should include ongoing monitoring, and follow-up to ensure appropriate remediation.
Internal controls to ensure that funding decisions constitute eligible uses of funds, and document determinations. This can be accomplished by documenting the structure of the Council sub-committee and administrative review by City staff, including legal review, of funding decisions.
Internal controls and effective monitoring to ensure compliance with the Cost Principles described in 2 C.F.R. 200, subpart E. The City likely already has written policies on this matter as it applies to all federal funding programs.
Internal controls to ensure adherence to all applicable local, State, and federal procurement laws and regulations. The City has policies related to compliance with these requirements stemming from ongoing use of federal grant funds. Locating and documenting their use will be important to comply with Treasury’s reporting requirements.
Formal requirements documenting record keeping and monitoring for both the City’s direct spending and oversight of sub-recipients.
The City should consider adopting additional policies to ensure ARPA funds are deployed to beneficiaries in a manner that is within the requirements of the law. These policies should include the following:
For programs that are designed to deploy ARPA funds, document the status of the beneficiaries as “impacted” or “disproportionately impacted” in accord with the categories established by Treasury. This will require asking the beneficiary to provide information documenting the following:
Whether the beneficiary has an income that is below certain federally established thresholds Whether the project, business or beneficiary is located in a qualified census tract Whether the beneficiary is eligible for federal programs aimed at disadvantaged communities and low-income populations Employment status and whether the household experienced unemployment during the pandemic Adopt a policy collecting the same (or as much as feasible) information from beneficiaries as is collected from sub-recipients, as described above.
Prepared by:
Andrew Mowbray
Finance Director/City Treasurer
ATTACHMENT(S):
Attachment No. 1 – ARPA Policies and Procedures
Attachment No. 2 – ARPA Policies and Procedures: Uniform Guidance Checklist Attachment No. 3 – ARPA Policies and Procedures: Beneficiary Checklist American Rescue Plan (ARPA) Policies and Procedures