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American Rescue Plan Act of 2021: Sample Uniform Guidance Policies and Implementation Tools

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American Rescue Plan Act (ARPA) Funding, Project & Expenditure Report, Uniform Guidance

Published: 03/01/22

Author: Kara Millonzi

US Treasury issued the Final Rule of the Coronavirus State and Local Fiscal Recovery Fund program of the American Rescue Plan Act of 2021 (ARP/CSLFRF) in January 2022. With more complete information, local government officials are now looking to finalize (at least some) expenditure decisions. With the addition of the standard allowance, authorizing many NC local governments to expend their entire ARP/CSLFRF allocation for almost any purpose authorized by state law, counties and municipalities across the state have an even greater opportunity to make the best strategic investments for their communities with these one-time funds.

But taking the standard allowance and spending all the funds in the revenue replacement category does not convert these monies into general funds. They are still federal grant funds, subject to all the award terms (be sure to read this document thoroughly) and most of the provisions of the federal Uniform Guidance (UG), which is the set of regulations that apply to the administration of federal awards. This blog post highlights the UG requirements and provides several sample policies and other implementation tools.

Applicable Uniform Guidance Provisions

The Final Rule Supplemental Information (pages 373-374) states that:

Recipients of SLFRF funds are subject to the provisions of the Uniform Guidance (2 CFR Part 200) from the date of award to the end of the period of performance on December 31, 2026 unless otherwise specified in this rule or program-specific guidance. Costs must follow the requirements in 2 CFR 200 Subpart E, Cost Principles, including procurement standards. Recipients that receive an aggregate amount of federal financial assistance in a given fiscal year that exceeds the Single Audit threshold are subject to the requirements in 2 CFR 200 Subpart F, Audit Requirements, unless otherwise specified in program-specific guidance.

SLFRF funds transferred to subrecipients are also subject to reporting and Uniform Guidance requirements. Additional information about the definition of subrecipients is available in the section Distinguishing Subrecipients versus Beneficiaries.

Recipients should refer to the Assistance Listing for details on the specific provisions of the Uniform Guidance that do not apply to this program. The Assistance Listing is available on SAM.gov. Additional changes to compliance and reporting guidelines, including any clarifications on Uniform Guidance requirements, will be addressed in Compliance and Reporting Guidance and the User Guide.

Based on the Assistance Listing: Coronavirus State and Local Fiscal Recovery Funds and Part 2 of the US Treasury State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (v3.0 February 2022) (Compliance Guide), the following UG provisions apply to the ARP/CSLFRF grant award:

Most of these UG provisions impose process and internal control requirements, but some impose limitations on when, how, and for what purposes federal grant funds may be spent. The UG requirements are in addition to those imposed by the Final Rule related to project eligibility. Many of the UG provisions require that the local government adopt and implement policies and procedures to ensure compliance with its requirements.

List of UG Policies

Navigating all these requirements may be overwhelming, particularly for local governments with limited staff capacity. As mentioned below, we are working on detailed roadmaps to help local governments know when/how to implement each policy based on specific expenditure decisions. To start, here is a summary list of UG policies and their triggers.

Mandated for All Local Governments (even those taking the standard allowance and expending 100% of their funds in the revenue replacement category)

  • Eligible Use Policy
  • Allowable Costs and Cost Principles Policy
  • Nondiscrimination Policy
  • Records Retention Policy
  • Conflict of Interest Policy
  • Financial Management and Internal Controls

Triggered by Certain Expenditures

  • Program Income Policy (if local government uses ARP/CSLFRF funds to establish a loan program or otherwise earns income related to an ARP/CSLFRF expenditure)
  • Procurement Policy (if a local government contracts for goods or services paid for with ARP/CSLFRF funds, or must engage in a Single Audit (even if the audit is paid for with other funds))
  • Property Management Policy (if a local government uses ARP/CLSFRF to acquire or improve any real property, equipment, or supplies)
  • Subaward Policy (if a local government partners with another government, nonprofit, or other private entity to carry out an ARP/CSLFRF-eligible project)

Sample Policies and Implementation Tools

The following are sample policies and other implementation tools for many of these award terms and UG requirements.

Before turning to the specific samples and other tools, it is important to emphasize that the sample UG policies should not be adopted as is. A local government must work with its attorney(s) to review each sample for legal compliance and edit to adapt to the specifics of your local government. A local government should craft its policies and procedures so that they can be reasonably implemented by its staff. It will be equally problematic from a compliance standpoint to have a policy your unit cannot or does not follow than to not have one at all.

 

I. ELIGIBLE USE POLICY AND IMPLEMENTATION TOOLS

The Compliance Guide states that:

Allowable Activities. Each recipient should review program requirements, including Treasury’s final rule and the recipient’s Award Terms and Conditions, to determine and record eligible uses of SLFRF funds. Per 2 CFR Part 200.303, your organization must develop and implement effective internal controls to ensure that funding decisions under the SLFRF award constitute eligible uses of funds, and document determinations.

To comply with this requirement, a local government must adopt and implement an Eligible Use Policy. This policy sets up procedures for making project requests, approving those requests, and documenting that approval and any required justifications and other records. As part of those procedures, a local government should identify the core team who will perform the review processes and implement necessary controls. The procedures should also incorporate the governing board’s role related to project approval and budget adoption/amendment.

The following are tools to implement this requirement:

 

II. ALLOWABLE COST AND COST PRINCIPLES POLICY AND IMPLEMENTATION TOOLS

The Compliance Guide states that:

Allowable Costs/Cost Principles. As outlined in the Uniform Guidance at 2 CFR Part 200, Subpart E regarding Cost Principles, allowable costs are based on the premise that a recipient is responsible for the effective administration of Federal awards, application of sound management practices, and administration of Federal funds in a manner consistent with the program objectives and terms and conditions of the award. Recipients must implement robust internal controls and effective monitoring to ensure compliance with the Cost Principles, which are important for building trust and accountability.

SLFRF funds may be, but are not required to be, used along with other funding sources for a given project. Recipients should note that SLFRF funds available under the “revenue loss” eligible use category generally may be used to meet the non-federal cost-share or matching requirements of other federal programs. If a recipient seeks to use SLFRF funds to satisfy match or cost-share requirements for a federal grant program, the recipient should first confirm with the relevant awarding agency that no waiver has been granted for that program, that no other circumstances enumerated under 2 CFR 200.306(b) would limit the use of SLFRF funds to meet the match or cost-share requirement, and that there is no other statutory or regulatory impediment to using the SLFRF funds for the match or cost-share requirement. For instance, recipients should note that SLFRF funds may not be used as the non-federal share for purposes of a state’s Medicaid and CHIP programs because the OMB has approved a waiver from this provision as requested by the Centers for Medicare & Medicaid Services pursuant to 2 CFR 200.102 of the Uniform Guidance and related regulations.

SLFRF funds beyond those that are available under the revenue loss eligible use category may not be used to meet the non-federal match or cost-share requirements of other federal programs, other than as specifically provided for by statute. As an example, the Infrastructure Investment and Jobs Act provides that SLFRF funds may be used to meet the non-federal match requirements of authorized Bureau of Reclamation projects and certain broadband deployment projects. Recipients should consult the final rule for further details if they seek to utilize SLFRF funds as a match for these projects.

Treasury’s final rule, program guidance, and the Uniform Guidance outline the types of costs that are allowable, including certain audit costs. For example, per 2 CFR 200.425, a reasonably proportionate share of the costs of audits required by the Single Audit Act Amendments of 1996 are allowable; however, costs for audits that were not performed in accordance with 2 CFR Part 200, Subpart F and the Compliance Supplement are not allowable. Please see 2 CFR Part 200, Subpart E regarding the Cost Principles for more information.

Administrative costs: Recipients may use funds for administering the SLFRF program, including costs of consultants to support effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements. Further, costs must be reasonable and allocable as outlined in 2 CFR 200.404 and 2 CFR 200.405. Pursuant to the SLFRF Award Terms and Conditions, recipients are permitted to charge both direct and indirect costs to their SLFRF award as administrative costs as long as they are accorded consistent treatment per 2 CFR 200.403. Direct costs are those that are identified specifically as costs of implementing the SLFRF program objectives, such as contract support, materials, and supplies for a project. Indirect costs are general overhead costs of an organization where a portion of such costs are allocable to the SLFRF award such as the cost of facilities or administrative functions like a director’s office. Each category of cost should be treated consistently in like circumstances as direct or indirect, and recipients may not charge the same administrative costs to both direct and indirect cost categories, or to other programs. If a recipient has a current Negotiated Indirect Costs Rate Agreement (“NICRA”) established with a Federal cognizant agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals, then the recipient may use its current NICRA. Alternatively, if the recipient does not have a NICRA, the recipient may elect to use the de minimis rate of 10 percent of the modified total direct costs pursuant to 2 CFR 200.414(f).

Salaries and Expenses: In general, certain employees’ wages, salaries, and covered benefits are an eligible use of SLFRF award funds.

This requirement builds on the eligible use determination. The expenditures for each eligible project are comprised of cost items. Typical cost items include compensation and fringe benefits, materials and supplies, equipment and other capital, consultants/professional services, audits, communications, insurance, maintenance and repair, and rental costs. Some of these are associated with a particular project; others are associated with the entire grant award.

The regulations related to allowable costs and cost principles are complex. To ensure that the cost items within an eligible project are proper, a local government must adopt and implement an Allowable Costs and Cost Principles Policy. That policy will accomplish three different goals: (1) General review that a cost item is reasonable, allowable, allocable, consistently treated, and properly documented; (2) Identification of cost item as direct or indirect; and (3) Specific review of certain identified cost items, for special treatment, justification, and/or documentation.

The following are tools to implement this requirement:

 

III. NONDISCRIMINATION POLICY

The Compliance Guide states that:

Civil Rights Compliance. Recipients of Federal financial assistance from the Treasury are required to meet legal requirements relating to nondiscrimination and nondiscriminatory use of Federal funds. Those requirements include ensuring that entities receiving Federal financial assistance from the Treasury do not deny benefits or services, or otherwise discriminate on the basis of race, color, national origin (including limited English proficiency), disability, age, or sex (including sexual orientation and gender identity), in accordance with the following authorities: Title VI of the Civil Rights Act of 1964 (Title VI) Public Law 88-352, 42 U.S.C. 2000d-1 et seq., and the Department’s implementing regulations, 31 CFR part 22; Section 504 of the Rehabilitation Act of 1973 (Section 504), Public Law 93-112, as amended by Public Law 93-516, 29 U.S.C. 794; Title IX of the Education Amendments of 1972 (Title IX), 20 U.S.C. 1681 et seq., and the Department’s implementing regulations, 31 CFR part 28; Age Discrimination Act of 1975, Public Law 94-135, 42 U.S.C. 6101 et seq., and the Department implementing regulations at 31 CFR part 23.

In order to carry out its enforcement responsibilities under Title VI of the Civil Rights Act, Treasury will collect and review information from non-Tribal recipients to ascertain their compliance with the applicable requirements before and after providing financial assistance. Treasury’s implementing regulations, 31 CFR part 22, and the Department of Justice (DOJ) regulations, Coordination of Non-discrimination in Federally Assisted Programs, 28 CFR part 42, provide for the collection of data and information from recipients (see 28 CFR 42.406). Treasury may request that recipients submit data for post-award compliance reviews, including information such as a narrative describing their Title VI compliance status. This collection does not apply to Tribal governments.

If a local government does not already have a written nondiscrimination policy, it must adopt and implement one consistent with this guidance. The following is a sample policy:

 

IV. RECORDS RETENTION POLICY

The Compliance Guide states:

Recordkeeping Requirements. Generally, your organization must maintain records and financial documents for five years after all funds have been expended or returned to Treasury, as outlined in paragraph 4.c. of the Award Terms and Conditions. Treasury may request transfer of records of long-term value at the end of such period. Wherever practicable, such records should be collected, transmitted, and stored in open and machine-readable formats.

Your organization must agree to provide or make available such records to Treasury upon request, and to the Government Accountability Office (“GAO”), Treasury’s Office of Inspector General (“OIG”), and their authorized representative in order to conduct audits or other investigations.

The record retention requirements for ARP/CSLFRF-related records are more stringent than those imposed under State law. All documentation must be maintained for at least 5 years from the end of the award term. The following sample policy may be appended to your local government’s regular records retention policy.

 

V. PROGRAM INCOME POLICY

The Compliance Guide states:

Program Income. Generally, program income includes, but is not limited to, income from fees for services performed, the use or rental of real or personal property acquired under Federal awards, and principal and interest on loans made with Federal award funds. Program income does not include interest earned on advances of Federal funds, rebates, credits, discounts, or interest on rebates, credits, or discounts. Recipients of SLFRF funds should calculate, document, and record the organization’s program income. Additional controls that your organization should implement include written policies that explicitly identify appropriate allocation methods, accounting standards and principles, compliance monitoring checks for program income calculations, and records.

The Uniform Guidance outlines the requirements that pertain to program income at 2 CFR 200.307. Treasury intends to provide additional guidance regarding program income and the application of 2 CFR 200.307(e)(1).

The following is a sample policy to address any program income:

Note that there are some grey areas related to how to identify program income, particularly fees for services assessed for water, sewer, or broadband assets constructed or improved with ARP/CSLFRF monies. We will update the policy if/when we receive more guidance from US Treasury. 

 

VI. PROPERTY MANAGEMENT POLICY

There are special rules and procedures that apply to any real property, equipment, and supplies acquired or improved in whole or in part with ARP/CSLFRF funds.

The Compliance Guide states:

Equipment and Real Property Management. Any purchase of equipment or real property with SLFRF funds must be consistent with the Uniform Guidance at 2 CFR Part 200, Subpart D. Equipment and real property acquired under this program must be used for the originally authorized purpose, unless stated otherwise by Treasury. Consistent with 2 CFR 200.311 and 2 CFR 200.313, any equipment or real property acquired using SLFRF funds shall vest in the non- Federal entity, consistent with any guidance that Treasury may issue. Any acquisition and maintenance of equipment or real property must also be in compliance with relevant laws and regulations.

The following is a sample policy to address the specifics of property management:

Note that there are some grey areas related to whether and how a local government must seek US Treasury’s approval for disposal of real property, equipment, or supplies over $5,000, and whether or not a local government will have to repay US Treasury its federal share. We will update the policy if/when we receive more guidance from US Treasury.

 

VII. SUBAWARD POLICY, RISK ASSESSMENT, AGREEMENT TEMPLATE, and MONITORING TOOL

If a local government partners with another government, nonprofit, or other private entity to carry out an ARP/CSLFRF award project, it must follow the subaward process.

The Compliance Guide states:

Subrecipient Monitoring. SLFRF recipients that are pass-through entities as described under 2 CFR 200.1 are required to manage and monitor their subrecipients to ensure compliance with requirements of the SLFRF award pursuant to 2 CFR 200.332 regarding requirements for pass- through entities.

First, your organization must clearly identify to the subrecipient: (1) that the award is a subaward of SLFRF funds; (2) any and all compliance requirements for use of SLFRF funds; and (3) any and all reporting requirements for expenditures of SLFRF funds.

Next, your organization will need to evaluate each subrecipient’s risk of noncompliance based on a set of common factors. These risk assessments may include factors such as prior experience in managing Federal funds, previous audits, personnel, and policies or procedures for award execution and oversight. Ongoing monitoring of any given subrecipient should reflect its assessed risk and include monitoring, identification of deficiencies, and follow-up to ensure appropriate remediation.

Accordingly, your organization should develop written policies and procedures for subrecipient monitoring and risk assessment and maintain records of all award agreements identifying or otherwise documenting subrecipients’ compliance obligations.

Recipients should note that NEUs and Non-UGLGs are not subrecipients under the SLFRF program. They are SLFRF recipients that will report directly to Treasury.

Recipients should also note that subrecipients do not include individuals and organizations that received SLFRF funds as end users. Such individuals and organizations are beneficiaries and not subject to audit pursuant to the Single Audit Act and 2 C.F.R. Part 200, Subpart F.

Many recipients may choose to provide a subaward or contract to other entities to provide services to other end users. For example, a recipient may provide a subaward to a nonprofit to provide homeless services to individuals experiencing homelessness. In this case, the subaward to a nonprofit is based on the services that the recipient intends to provide (assistance to households experiencing homelessness), and the nonprofit is serving as the subrecipient, providing services on behalf of the recipient. Subrecipients are subject to an audit pursuant to the Single Audit Act and 2 CFR part 200, subpart F regarding audit requirements, whereas contractors are not subject to an audit pursuant to the Single Audit Act and 2 CFR part 200, subpart F regarding audit requirements.

The following are a sample subaward policy, risk assessment, subaward agreement template, and subrecipient monitoring tool (they are all in a single Word file):

Maximize Benefit, Minimize Burden

Although there is a lot of federal “red tape” to navigate regardless of how a local government expends its ARP/CSLFRF funds, there are some opportunities to reduce a local unit’s compliance burden. Because ARP/CSLFRF in the revenue replacement category may be spent on any government service authorized under state law (assuming allowable cost items), a local government may use ARP/CSLFRF to supplant employees’ salaries and benefits during the award term, thus freeing up general fund or enterprise fund monies to be spent on more complex capital projects or programs. Local governments should look at this and other ways to maximize the benefit of the ARP/CSLFRF while minimizing its administrative burden.

More Help to Come

UG Roadmaps

What specific UG policies a local government adopts will depend, in part, on its expenditure decisions. As indicated above, there may be ways to strategically spend the ARP/CSLFRF to minimize (but not eliminate) a local government’s UG burden. We are working on detailed roadmaps to implementing these UG policies and templates for different potential expenditure items. (For example, a specific roadmap for standard allowance local governments looking to spend their full allotment on salaries and benefits.) Look for those in the coming weeks.

Additional Courses

We also will be holding at least two courses this spring:

April 4, 2022: Basics of ARP/CSLFRF and UG for Local Government Attorneys and Grant Managers. This ½ day course provides an overview of the legal requirements in managing the ARP/CSLFRF award. It will include a detailed look at the various UG provisions and sample policies. It also will identify grey areas that may require further legal scrutiny before finalizing expenditure decisions.

April 11, 2022: Basics of Implementing the Standard Allowance. This course is targeted to finance and management staff of smaller and mid-sized units that will be taking the standard allowance and spending most, if not all, of their ARP/CSLFRF as revenue replacement. The course will have three parts, including brief overview videos, a 1-day live (Zoom) workshop, and extended daily Zoom Help Desk Office Hours the last two weeks of April (to help with implementation issues and completion of the Project & Expenditure report – due by April 30).

Registration information coming soon.

ARP Office Hours

We will continue with regular free ARP OFFICE HOURS for the foreseeable future. The following is the schedule for the next several weeks. Come with your questions and share your experiences and insights with colleagues across the State.

Counties and municipalities receiving $0 – $10 million in total ARP/CSLFRF funding

  • Thursday, March 3, at 12:00pm
  • Wednesday, March 9, at 8:30am
  • Friday, March 18, at 8:30am
  • Friday, March 25, at 12:00pm
  • Wednesday, April 6, at 8:30am
  • Monday, April 18, at 12:00pm
  • Thursday, April 28, at 8:30am

Counties and municipalities receiving over $10 million in total ARP/CSLFRF funding

  • Monday, March 7, at 12:00pm
  • Thursday, March 24, at 8:30am (focus on affordable housing)
  • Monday, April 4, at 12:00pm
  • Wednesday, April 13, at 8:30am
  • Wednesday, April 20, at 8:30am
  • Friday, April 29, at 12:00pm
  • Wednesday, May 4, at 8:30am

The Zoom link for all Office Hours is: https://unc.zoom.us/j/94011361206?pwd=MjIzWnlzOWxtNGtoUlNjaEV3ZWNPdz09

Meeting ID: 940 1136 1206

Passcode: 522329

Thank Yous

Finally, in addition to my colleagues Rebecca Badgett, who drafted some of the above UG policies, and Connor Crews, who is working on procurement and conflict of interest policies, we want to thank our two amazing research assistants, Tiffany Oliva and Abby Gostling, who drafted several of our templates and other tools. We also are grateful for a group of dedicated county attorneys, including Bob Shaver, Glynn Rollins, Anne Marie Tosco, Aimee Scotton, and Russ Burrell, who provided helpful feedback on the draft policies.

Coates’ Canons NC Local Government Law

American Rescue Plan Act of 2021: Sample Uniform Guidance Policies and Implementation Tools

Published: 03/01/22

Author: Kara Millonzi

US Treasury issued the Final Rule of the Coronavirus State and Local Fiscal Recovery Fund program of the American Rescue Plan Act of 2021 (ARP/CSLFRF) in January 2022. With more complete information, local government officials are now looking to finalize (at least some) expenditure decisions. With the addition of the standard allowance, authorizing many NC local governments to expend their entire ARP/CSLFRF allocation for almost any purpose authorized by state law, counties and municipalities across the state have an even greater opportunity to make the best strategic investments for their communities with these one-time funds.

But taking the standard allowance and spending all the funds in the revenue replacement category does not convert these monies into general funds. They are still federal grant funds, subject to all the award terms (be sure to read this document thoroughly) and most of the provisions of the federal Uniform Guidance (UG), which is the set of regulations that apply to the administration of federal awards. This blog post highlights the UG requirements and provides several sample policies and other implementation tools.

Applicable Uniform Guidance Provisions

The Final Rule Supplemental Information (pages 373-374) states that:

Recipients of SLFRF funds are subject to the provisions of the Uniform Guidance (2 CFR Part 200) from the date of award to the end of the period of performance on December 31, 2026 unless otherwise specified in this rule or program-specific guidance. Costs must follow the requirements in 2 CFR 200 Subpart E, Cost Principles, including procurement standards. Recipients that receive an aggregate amount of federal financial assistance in a given fiscal year that exceeds the Single Audit threshold are subject to the requirements in 2 CFR 200 Subpart F, Audit Requirements, unless otherwise specified in program-specific guidance.

SLFRF funds transferred to subrecipients are also subject to reporting and Uniform Guidance requirements. Additional information about the definition of subrecipients is available in the section Distinguishing Subrecipients versus Beneficiaries.

Recipients should refer to the Assistance Listing for details on the specific provisions of the Uniform Guidance that do not apply to this program. The Assistance Listing is available on SAM.gov. Additional changes to compliance and reporting guidelines, including any clarifications on Uniform Guidance requirements, will be addressed in Compliance and Reporting Guidance and the User Guide.

Based on the Assistance Listing: Coronavirus State and Local Fiscal Recovery Funds and Part 2 of the US Treasury State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (v3.0 February 2022) (Compliance Guide), the following UG provisions apply to the ARP/CSLFRF grant award:

Most of these UG provisions impose process and internal control requirements, but some impose limitations on when, how, and for what purposes federal grant funds may be spent. The UG requirements are in addition to those imposed by the Final Rule related to project eligibility. Many of the UG provisions require that the local government adopt and implement policies and procedures to ensure compliance with its requirements.

List of UG Policies

Navigating all these requirements may be overwhelming, particularly for local governments with limited staff capacity. As mentioned below, we are working on detailed roadmaps to help local governments know when/how to implement each policy based on specific expenditure decisions. To start, here is a summary list of UG policies and their triggers.

Mandated for All Local Governments (even those taking the standard allowance and expending 100% of their funds in the revenue replacement category)

  • Eligible Use Policy
  • Allowable Costs and Cost Principles Policy
  • Nondiscrimination Policy
  • Records Retention Policy
  • Conflict of Interest Policy
  • Financial Management and Internal Controls

Triggered by Certain Expenditures

  • Program Income Policy (if local government uses ARP/CSLFRF funds to establish a loan program or otherwise earns income related to an ARP/CSLFRF expenditure)
  • Procurement Policy (if a local government contracts for goods or services paid for with ARP/CSLFRF funds, or must engage in a Single Audit (even if the audit is paid for with other funds))
  • Property Management Policy (if a local government uses ARP/CLSFRF to acquire or improve any real property, equipment, or supplies)
  • Subaward Policy (if a local government partners with another government, nonprofit, or other private entity to carry out an ARP/CSLFRF-eligible project)

Sample Policies and Implementation Tools

The following are sample policies and other implementation tools for many of these award terms and UG requirements.

Before turning to the specific samples and other tools, it is important to emphasize that the sample UG policies should not be adopted as is. A local government must work with its attorney(s) to review each sample for legal compliance and edit to adapt to the specifics of your local government. A local government should craft its policies and procedures so that they can be reasonably implemented by its staff. It will be equally problematic from a compliance standpoint to have a policy your unit cannot or does not follow than to not have one at all.

 

I. ELIGIBLE USE POLICY AND IMPLEMENTATION TOOLS

The Compliance Guide states that:

Allowable Activities. Each recipient should review program requirements, including Treasury’s final rule and the recipient’s Award Terms and Conditions, to determine and record eligible uses of SLFRF funds. Per 2 CFR Part 200.303, your organization must develop and implement effective internal controls to ensure that funding decisions under the SLFRF award constitute eligible uses of funds, and document determinations.

To comply with this requirement, a local government must adopt and implement an Eligible Use Policy. This policy sets up procedures for making project requests, approving those requests, and documenting that approval and any required justifications and other records. As part of those procedures, a local government should identify the core team who will perform the review processes and implement necessary controls. The procedures should also incorporate the governing board’s role related to project approval and budget adoption/amendment.

The following are tools to implement this requirement:

 

II. ALLOWABLE COST AND COST PRINCIPLES POLICY AND IMPLEMENTATION TOOLS

The Compliance Guide states that:

Allowable Costs/Cost Principles. As outlined in the Uniform Guidance at 2 CFR Part 200, Subpart E regarding Cost Principles, allowable costs are based on the premise that a recipient is responsible for the effective administration of Federal awards, application of sound management practices, and administration of Federal funds in a manner consistent with the program objectives and terms and conditions of the award. Recipients must implement robust internal controls and effective monitoring to ensure compliance with the Cost Principles, which are important for building trust and accountability.

SLFRF funds may be, but are not required to be, used along with other funding sources for a given project. Recipients should note that SLFRF funds available under the “revenue loss” eligible use category generally may be used to meet the non-federal cost-share or matching requirements of other federal programs. If a recipient seeks to use SLFRF funds to satisfy match or cost-share requirements for a federal grant program, the recipient should first confirm with the relevant awarding agency that no waiver has been granted for that program, that no other circumstances enumerated under 2 CFR 200.306(b) would limit the use of SLFRF funds to meet the match or cost-share requirement, and that there is no other statutory or regulatory impediment to using the SLFRF funds for the match or cost-share requirement. For instance, recipients should note that SLFRF funds may not be used as the non-federal share for purposes of a state’s Medicaid and CHIP programs because the OMB has approved a waiver from this provision as requested by the Centers for Medicare & Medicaid Services pursuant to 2 CFR 200.102 of the Uniform Guidance and related regulations.

SLFRF funds beyond those that are available under the revenue loss eligible use category may not be used to meet the non-federal match or cost-share requirements of other federal programs, other than as specifically provided for by statute. As an example, the Infrastructure Investment and Jobs Act provides that SLFRF funds may be used to meet the non-federal match requirements of authorized Bureau of Reclamation projects and certain broadband deployment projects. Recipients should consult the final rule for further details if they seek to utilize SLFRF funds as a match for these projects.

Treasury’s final rule, program guidance, and the Uniform Guidance outline the types of costs that are allowable, including certain audit costs. For example, per 2 CFR 200.425, a reasonably proportionate share of the costs of audits required by the Single Audit Act Amendments of 1996 are allowable; however, costs for audits that were not performed in accordance with 2 CFR Part 200, Subpart F and the Compliance Supplement are not allowable. Please see 2 CFR Part 200, Subpart E regarding the Cost Principles for more information.

Administrative costs: Recipients may use funds for administering the SLFRF program, including costs of consultants to support effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements. Further, costs must be reasonable and allocable as outlined in 2 CFR 200.404 and 2 CFR 200.405. Pursuant to the SLFRF Award Terms and Conditions, recipients are permitted to charge both direct and indirect costs to their SLFRF award as administrative costs as long as they are accorded consistent treatment per 2 CFR 200.403. Direct costs are those that are identified specifically as costs of implementing the SLFRF program objectives, such as contract support, materials, and supplies for a project. Indirect costs are general overhead costs of an organization where a portion of such costs are allocable to the SLFRF award such as the cost of facilities or administrative functions like a director’s office. Each category of cost should be treated consistently in like circumstances as direct or indirect, and recipients may not charge the same administrative costs to both direct and indirect cost categories, or to other programs. If a recipient has a current Negotiated Indirect Costs Rate Agreement (“NICRA”) established with a Federal cognizant agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals, then the recipient may use its current NICRA. Alternatively, if the recipient does not have a NICRA, the recipient may elect to use the de minimis rate of 10 percent of the modified total direct costs pursuant to 2 CFR 200.414(f).

Salaries and Expenses: In general, certain employees’ wages, salaries, and covered benefits are an eligible use of SLFRF award funds.

This requirement builds on the eligible use determination. The expenditures for each eligible project are comprised of cost items. Typical cost items include compensation and fringe benefits, materials and supplies, equipment and other capital, consultants/professional services, audits, communications, insurance, maintenance and repair, and rental costs. Some of these are associated with a particular project; others are associated with the entire grant award.

The regulations related to allowable costs and cost principles are complex. To ensure that the cost items within an eligible project are proper, a local government must adopt and implement an Allowable Costs and Cost Principles Policy. That policy will accomplish three different goals: (1) General review that a cost item is reasonable, allowable, allocable, consistently treated, and properly documented; (2) Identification of cost item as direct or indirect; and (3) Specific review of certain identified cost items, for special treatment, justification, and/or documentation.

The following are tools to implement this requirement:

 

III. NONDISCRIMINATION POLICY

The Compliance Guide states that:

Civil Rights Compliance. Recipients of Federal financial assistance from the Treasury are required to meet legal requirements relating to nondiscrimination and nondiscriminatory use of Federal funds. Those requirements include ensuring that entities receiving Federal financial assistance from the Treasury do not deny benefits or services, or otherwise discriminate on the basis of race, color, national origin (including limited English proficiency), disability, age, or sex (including sexual orientation and gender identity), in accordance with the following authorities: Title VI of the Civil Rights Act of 1964 (Title VI) Public Law 88-352, 42 U.S.C. 2000d-1 et seq., and the Department’s implementing regulations, 31 CFR part 22; Section 504 of the Rehabilitation Act of 1973 (Section 504), Public Law 93-112, as amended by Public Law 93-516, 29 U.S.C. 794; Title IX of the Education Amendments of 1972 (Title IX), 20 U.S.C. 1681 et seq., and the Department’s implementing regulations, 31 CFR part 28; Age Discrimination Act of 1975, Public Law 94-135, 42 U.S.C. 6101 et seq., and the Department implementing regulations at 31 CFR part 23.

In order to carry out its enforcement responsibilities under Title VI of the Civil Rights Act, Treasury will collect and review information from non-Tribal recipients to ascertain their compliance with the applicable requirements before and after providing financial assistance. Treasury’s implementing regulations, 31 CFR part 22, and the Department of Justice (DOJ) regulations, Coordination of Non-discrimination in Federally Assisted Programs, 28 CFR part 42, provide for the collection of data and information from recipients (see 28 CFR 42.406). Treasury may request that recipients submit data for post-award compliance reviews, including information such as a narrative describing their Title VI compliance status. This collection does not apply to Tribal governments.

If a local government does not already have a written nondiscrimination policy, it must adopt and implement one consistent with this guidance. The following is a sample policy:

 

IV. RECORDS RETENTION POLICY

The Compliance Guide states:

Recordkeeping Requirements. Generally, your organization must maintain records and financial documents for five years after all funds have been expended or returned to Treasury, as outlined in paragraph 4.c. of the Award Terms and Conditions. Treasury may request transfer of records of long-term value at the end of such period. Wherever practicable, such records should be collected, transmitted, and stored in open and machine-readable formats.

Your organization must agree to provide or make available such records to Treasury upon request, and to the Government Accountability Office (“GAO”), Treasury’s Office of Inspector General (“OIG”), and their authorized representative in order to conduct audits or other investigations.

The record retention requirements for ARP/CSLFRF-related records are more stringent than those imposed under State law. All documentation must be maintained for at least 5 years from the end of the award term. The following sample policy may be appended to your local government’s regular records retention policy.

 

V. PROGRAM INCOME POLICY

The Compliance Guide states:

Program Income. Generally, program income includes, but is not limited to, income from fees for services performed, the use or rental of real or personal property acquired under Federal awards, and principal and interest on loans made with Federal award funds. Program income does not include interest earned on advances of Federal funds, rebates, credits, discounts, or interest on rebates, credits, or discounts. Recipients of SLFRF funds should calculate, document, and record the organization’s program income. Additional controls that your organization should implement include written policies that explicitly identify appropriate allocation methods, accounting standards and principles, compliance monitoring checks for program income calculations, and records.

The Uniform Guidance outlines the requirements that pertain to program income at 2 CFR 200.307. Treasury intends to provide additional guidance regarding program income and the application of 2 CFR 200.307(e)(1).

The following is a sample policy to address any program income:

Note that there are some grey areas related to how to identify program income, particularly fees for services assessed for water, sewer, or broadband assets constructed or improved with ARP/CSLFRF monies. We will update the policy if/when we receive more guidance from US Treasury. 

 

VI. PROPERTY MANAGEMENT POLICY

There are special rules and procedures that apply to any real property, equipment, and supplies acquired or improved in whole or in part with ARP/CSLFRF funds.

The Compliance Guide states:

Equipment and Real Property Management. Any purchase of equipment or real property with SLFRF funds must be consistent with the Uniform Guidance at 2 CFR Part 200, Subpart D. Equipment and real property acquired under this program must be used for the originally authorized purpose, unless stated otherwise by Treasury. Consistent with 2 CFR 200.311 and 2 CFR 200.313, any equipment or real property acquired using SLFRF funds shall vest in the non- Federal entity, consistent with any guidance that Treasury may issue. Any acquisition and maintenance of equipment or real property must also be in compliance with relevant laws and regulations.

The following is a sample policy to address the specifics of property management:

Note that there are some grey areas related to whether and how a local government must seek US Treasury’s approval for disposal of real property, equipment, or supplies over $5,000, and whether or not a local government will have to repay US Treasury its federal share. We will update the policy if/when we receive more guidance from US Treasury.

 

VII. SUBAWARD POLICY, RISK ASSESSMENT, AGREEMENT TEMPLATE, and MONITORING TOOL

If a local government partners with another government, nonprofit, or other private entity to carry out an ARP/CSLFRF award project, it must follow the subaward process.

The Compliance Guide states:

Subrecipient Monitoring. SLFRF recipients that are pass-through entities as described under 2 CFR 200.1 are required to manage and monitor their subrecipients to ensure compliance with requirements of the SLFRF award pursuant to 2 CFR 200.332 regarding requirements for pass- through entities.

First, your organization must clearly identify to the subrecipient: (1) that the award is a subaward of SLFRF funds; (2) any and all compliance requirements for use of SLFRF funds; and (3) any and all reporting requirements for expenditures of SLFRF funds.

Next, your organization will need to evaluate each subrecipient’s risk of noncompliance based on a set of common factors. These risk assessments may include factors such as prior experience in managing Federal funds, previous audits, personnel, and policies or procedures for award execution and oversight. Ongoing monitoring of any given subrecipient should reflect its assessed risk and include monitoring, identification of deficiencies, and follow-up to ensure appropriate remediation.

Accordingly, your organization should develop written policies and procedures for subrecipient monitoring and risk assessment and maintain records of all award agreements identifying or otherwise documenting subrecipients’ compliance obligations.

Recipients should note that NEUs and Non-UGLGs are not subrecipients under the SLFRF program. They are SLFRF recipients that will report directly to Treasury.

Recipients should also note that subrecipients do not include individuals and organizations that received SLFRF funds as end users. Such individuals and organizations are beneficiaries and not subject to audit pursuant to the Single Audit Act and 2 C.F.R. Part 200, Subpart F.

Many recipients may choose to provide a subaward or contract to other entities to provide services to other end users. For example, a recipient may provide a subaward to a nonprofit to provide homeless services to individuals experiencing homelessness. In this case, the subaward to a nonprofit is based on the services that the recipient intends to provide (assistance to households experiencing homelessness), and the nonprofit is serving as the subrecipient, providing services on behalf of the recipient. Subrecipients are subject to an audit pursuant to the Single Audit Act and 2 CFR part 200, subpart F regarding audit requirements, whereas contractors are not subject to an audit pursuant to the Single Audit Act and 2 CFR part 200, subpart F regarding audit requirements.

The following are a sample subaward policy, risk assessment, subaward agreement template, and subrecipient monitoring tool (they are all in a single Word file):

Maximize Benefit, Minimize Burden

Although there is a lot of federal “red tape” to navigate regardless of how a local government expends its ARP/CSLFRF funds, there are some opportunities to reduce a local unit’s compliance burden. Because ARP/CSLFRF in the revenue replacement category may be spent on any government service authorized under state law (assuming allowable cost items), a local government may use ARP/CSLFRF to supplant employees’ salaries and benefits during the award term, thus freeing up general fund or enterprise fund monies to be spent on more complex capital projects or programs. Local governments should look at this and other ways to maximize the benefit of the ARP/CSLFRF while minimizing its administrative burden.

More Help to Come

UG Roadmaps

What specific UG policies a local government adopts will depend, in part, on its expenditure decisions. As indicated above, there may be ways to strategically spend the ARP/CSLFRF to minimize (but not eliminate) a local government’s UG burden. We are working on detailed roadmaps to implementing these UG policies and templates for different potential expenditure items. (For example, a specific roadmap for standard allowance local governments looking to spend their full allotment on salaries and benefits.) Look for those in the coming weeks.

Additional Courses

We also will be holding at least two courses this spring:

April 4, 2022: Basics of ARP/CSLFRF and UG for Local Government Attorneys and Grant Managers. This ½ day course provides an overview of the legal requirements in managing the ARP/CSLFRF award. It will include a detailed look at the various UG provisions and sample policies. It also will identify grey areas that may require further legal scrutiny before finalizing expenditure decisions.

April 11, 2022: Basics of Implementing the Standard Allowance. This course is targeted to finance and management staff of smaller and mid-sized units that will be taking the standard allowance and spending most, if not all, of their ARP/CSLFRF as revenue replacement. The course will have three parts, including brief overview videos, a 1-day live (Zoom) workshop, and extended daily Zoom Help Desk Office Hours the last two weeks of April (to help with implementation issues and completion of the Project & Expenditure report – due by April 30).

Registration information coming soon.

ARP Office Hours

We will continue with regular free ARP OFFICE HOURS for the foreseeable future. The following is the schedule for the next several weeks. Come with your questions and share your experiences and insights with colleagues across the State.

Counties and municipalities receiving $0 – $10 million in total ARP/CSLFRF funding

  • Thursday, March 3, at 12:00pm
  • Wednesday, March 9, at 8:30am
  • Friday, March 18, at 8:30am
  • Friday, March 25, at 12:00pm
  • Wednesday, April 6, at 8:30am
  • Monday, April 18, at 12:00pm
  • Thursday, April 28, at 8:30am

Counties and municipalities receiving over $10 million in total ARP/CSLFRF funding

  • Monday, March 7, at 12:00pm
  • Thursday, March 24, at 8:30am (focus on affordable housing)
  • Monday, April 4, at 12:00pm
  • Wednesday, April 13, at 8:30am
  • Wednesday, April 20, at 8:30am
  • Friday, April 29, at 12:00pm
  • Wednesday, May 4, at 8:30am

The Zoom link for all Office Hours is: https://unc.zoom.us/j/94011361206?pwd=MjIzWnlzOWxtNGtoUlNjaEV3ZWNPdz09

Meeting ID: 940 1136 1206

Passcode: 522329

Thank Yous

Finally, in addition to my colleagues Rebecca Badgett, who drafted some of the above UG policies, and Connor Crews, who is working on procurement and conflict of interest policies, we want to thank our two amazing research assistants, Tiffany Oliva and Abby Gostling, who drafted several of our templates and other tools. We also are grateful for a group of dedicated county attorneys, including Bob Shaver, Glynn Rollins, Anne Marie Tosco, Aimee Scotton, and Russ Burrell, who provided helpful feedback on the draft policies.

This blog post is published and posted online by the School of Government for educational purposes. For more information, visit the School’s website at www.sog.unc.edu.

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