ARPA FAQ

The American Rescue Plan Act (ARPA) of 2021, also called the COVID-19 Stimulus Package or American Rescue Plan, is the federal government's economic stimulus bill to speed up the nation's recovery from the economic and health effects of the COVID-19 public health emergency. Under ARPA, Massachusetts state, county, tribal and local entities will receive federal aid to respond to these public health and economic impacts.

These questions and answers are from the ARPA Webinar presented by the MA Office of the Inspector General (OIG).

Note: The answers provided by the OIG are for information purposes only. For definitive guidance, please consult with the grantor agency and/or your own legal counsel.

Table of Contents

OIG Webinars

Is the session being recorded?

This session was not recorded. We are repeating free ARPA webinars now through June, and possibly after. Visit the MCPPO schedule and class page for more information. Slides are available upon request.

Procurement Rules

Are there additional recommendations for an RFQ process for engineer selection for a water infrastructure project (horizontal construction) that would be funded with an ARPA allocation?

We are still working on this issue.  In the interim, please contact Deb Anderson at the Office of the Attorney General with questions about construction procurement.

Are there procurement rules regarding the selection of subrecipients?

Rules relating to subrecipient monitoring and management can be found at 2 C.F.R. § 200.331 et seq. Subrecipient relationships are not procurement relationships. Subrecipients are bound by the Interim Final Rule and Final Rule to the same extent as jurisdictions are bound. In other words, you are responsible for ensuring that subrecipients expend the funds you grant them pursuant to the federal rules. 

Can inflation factors be included in the infrastructure projects?

Please contract Deb Anderson at the Office of the Attorney General at Deborah.Anderson@mass.gov with questions about construction procurement.

Do you see a reasonable basis for sole sourcing audit or engineering services if there is an incumbent vendor with unusual insight into your systems/situation?

A sole source procurement is a purchase of supplies or services without advertising or competition. M.G.L. c.30B, § 7 outlines the steps you must take to make a sole source procurement.  To make a sole source procurement, a jurisdiction must:

a) Conduct a reasonable investigation and determine there is only one practicable source for the supply or service

b) Make a determination in writing that only one practicable source (including any resale outlets) exists

c) Keep the written determination in the procurement file

It is unlikely that by itself, vendor “insight” into a jurisdiction’s systems or situation, is an adequate justification for a sole source contract award for audit or engineering services. Sole source is an exception to competition because a reasonable investigation determines that only one practicable source exists for the supply or service. Any incumbent vendor may have greater “insight” into your jurisdiction but that does not mean another vendor cannot gain that insight as well. Even the incumbent lacked the insight before they began working with you.

Note that audit and engineering services, although exempt under Chapter 30B, would not be exempt under the Federal rules and you must comply with the more stringent procurement rules that, in this case, would be the Federal rules. Please consult the Federal Acquisition Regulations. You will likely need to conduct an advertised qualifications-based selection process to select engineering services.

For audit services (assuming you use certified public accounting and not engineering audit services), you would need to comply with Federal rules. If these services are estimated to cost below $250,000, you may be able to use a Chapter 30B price quotation process to satisfy the Federal rules. You should consult with the grantor agency and/or legal counsel to determine the rules for using a sole source procurement.     

Eligible Uses of Funding

Can funds be used for new debt service that occurred after ARPA was awarded?

The Final Rule addresses that debt service is not an eligible use of fiscal recovery funds under any eligible use category. U.S. Department of the Treasury SLFRF Final Rule, 31 C.F.R. § 35 at 341.

Does the City qualify as a “business” to obtain faster broadband services for network connections between department buildings? 

We could not find information from the U.S. Department of the Treasury that directly responds to this question. However, we hope the following language is helpful: 

“[S]tates and localities should use funds to deploy broadband infrastructure projects whose objective is to provide service to unserved or underserved households or businesses. These unserved or underserved households or businesses do not need to be the only ones in the service area funded by the project.” U.S. Department of the Treasury, Interim Final Rule: Frequently Asked Questions (January 2022), 6.8.       

Could funding be used to support COVID-impacted business recovery if those funds are designated under the revenue loss allowance? I assume not. Are there other allowable uses under the grant that would not be allowable if revenue loss is claimed for all an NEU's funds?

“Government services can include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services.” U.S. Department of the Treasury SLFRF Interim Final Rule, 31 C.F.R. § 35 at 60.

Treasury has stated in its final rule that services provided by recipients are government services unless Treasury has specified otherwise. U.S. Department of the Treasury SLFRF Final Rule, 31 C.F.R. § 35 at 259. However, because the question suggests that businesses targeted by the hypothetical program have been impacted by COVID-19, the first eligibility category [“To respond to the public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality”] would likely apply.

Can ARPA funds be used to pay a municipality's portion of an MSBA grant?

The answer depends on what the MSBA agrees to provide in the grant agreement and whether that use of funds falls within an eligible use category under ARPA. If the MSBA uses grant funding to respond to an identified public health or economic impact of COVID-19, then the use would be allowable under the first eligible use category: to respond to the public health emergency or its negative economic impacts. Ensure that the jurisdiction and MSBA follow the guidance for capital expenditures included in the ARPA Final Rule: U.S. Department of the Treasury SLFRF Final Rule, 31 C.F.R. § 35 at 194.

Additionally, the third eligible use category, which allows jurisdictions to use funds “[f]or the provision of government services to the extent of the reduction in revenue due the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency.” The interim final rule explains that “[g]overnment services can include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure.” U.S. Department of the Treasury SLFRF Interim Final Rule, 31 C.F.R. § 35 at 60“Pay-go infrastructure funding refers to the practice of funding capital projects with cash-on-hand from taxes, fees, grants, and other sources, rather than with borrowed sums.” Id.

Treasury has stated in its final rule that services provided by recipients are government services unless Treasury has specified otherwise. U.S. Department of the Treasury SLFRF Final Rule, 31 C.F.R. § 35 at 259. Finally, depending on the nature of the MSBA grant, uses may be eligible under the fourth category: “[t]o make necessary investments in water, sewer, or broadband infrastructure."

Is it your understanding that funds could be used for impacted construction/facility renovation projects?

The “Interim Final Rule” provides that governments may spend fiscal recovery funds on the provision of government services to the extent of the reduction in revenue experienced due to the COVID-19 public health emergency. The Final Rule added that governments may elect to spend up to $10 million of fiscal recovery funds on government services instead of the reduction in revenue amount. This allowable use is referred to as the “Revenue Loss” category.

The Interim Final Rule states that “[g]overnment services can include … maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure … ” In a related footnote, the IFR defines “pay-go infrastructure funding” as “the practice of funding capital projects with cash-on-hand from taxes, fees, grants, and other sources, rather than with borrowed sums.” This description of government services is not exclusive, and the Final Rule states that “services provided by the recipient governments are “government services” under the interim Final Rule and Final Rule, unless Treasury has stated otherwise.”

Additionally, the Final Rule clarifies that recipients “may use funds for capital expenditures that support an eligible COVID-19 public health or economic response.” This allowable use category is referred to as the “Public Health and Economic Impacts” category. The Final Rule states that “capital expenditures should be a related and reasonably proportional response to a public health or negative economic impact of the pandemic.” If your government is pursuing a capital expenditure, please refer to the Final Rule’s section entitled “Capital Expenditures in General Provisions: Other” for additional standards and requirements that apply to uses of funds for capital expenditures.

Some communities are using ARPA funds to make repairs to town buildings or to purchase public safety equipment is this legal under the program?

Repairs to town buildings:

The “Interim Final Rule” provides that governments may spend fiscal recovery funds on the provision of government services to the extent of the reduction in revenue experienced due to the COVID-19 public health emergency. The Final Rule added that governments may elect to spend up to $10 million of fiscal recovery funds on government services instead of the reduction in revenue amount. This allowable use is referred to as the “Revenue Loss” category. The Interim Final Rule states that “[g]overnment services can include … maintenance … of infrastructure … ” The Final Rule states that “services provided by the recipient governments are “government services” under the interim Final Rule and Final Rule, unless Treasury has stated otherwise.”

Additionally, the Final Rule clarifies that recipients “may use funds for capital expenditures that support an eligible COVID-19 public health or economic response.” This allowable use category is referred to as the “Public Health and Economic Impacts” category. The Final Rule states that “capital expenditures should be a related and reasonably proportional response to a public health or negative economic impact of the pandemic.” If your government is pursuing a capital expenditure, please refer to the Final Rule’s section entitled “Capital Expenditures in General Provisions: Other” for additional standards and requirements that apply to uses of funds for capital expenditures.

Purchase of public safety equipment

The “Interim Final Rule” provides that governments may spend fiscal recovery funds on the provision of government services to the extent of the reduction in revenue experienced due to the COVID-19 public health emergency. The Final Rule added that governments may elect to spend up to $10 million of fiscal recovery funds on government services instead of the reduction in revenue amount. This allowable use is referred to as the “Revenue Loss” category. The Interim Final Rule states that “[g]overnment services can include … health services … and the provision of police, fire, and other public safety services.” The Final Rule states that “services provided by the recipient governments are “government services” under the interim Final Rule and Final Rule, unless Treasury has stated otherwise.”

Additionally, if the proposed purchase is a related and reasonable response to an identified public health or economic impact, it may be eligible under the “Public Health and Economic Impacts” category.

How does the premium pay eligible use address hybrid working conditions?

The Interim Final Rule states that essential work involves “regular in-person interactions or regular physical handling of items that were also handled by others. A worker would not be engaged in essential work and, accordingly may not receive premium pay, for telework performed from a residence.” Additionally, the Final Rule states that “essential work” means work that is “not performed while teleworking from a residence.” However, the Final Rule states that “a recipient may award premium pay to non-hourly or salaried workers as well as part-time workers.”

Our Town’s area ambulance services are having difficulty, would premium pay for ambulance services qualify?

Premium pay is designed to supplement the income of essential workers performing eligible work retrospectively for work performed at any time since the start of the COVID-19 public health emergency. Premium pay may be awarded to eligible workers up to $13 per hour, may be awarded in installments or lump sums (e.g., monthly, quarterly, etc.), and may be awarded to hourly, part-time, or salaried or non-hourly workers. Premium pay must be in addition to wages or remuneration (i.e., compensation) the eligible worker otherwise receives. Premium pay may not exceed $25,000 for any single worker during the program, and the obligation to provide such pay must not have been incurred by the recipient prior to March 3, 2021.

“Eligible” workers include workers “needed to maintain continuity of operations of essential critical infrastructure sectors.” “Essential work” means work “not performed while teleworking from a residence” and involves either “regular, in-person interactions with patients, the public, or coworkers of the individual that is performing the work” or “regular physical handling of items that were handled by, or are to be handled by, patients, the public, or coworkers of the individual that is performing the work.”

Critical infrastructure sectors include healthcare, emergency response, public health, and members of state, local, or tribal government, as provided in the Final Rule. Third-party contractors who employ essential workers in eligible sectors are also eligible for grants to provide premium pay; we recommend that jurisdictions put accountability procedures in place to help ensure that third-party contractors receiving payments under ARPA actually use such funds for the purposes of financing premium pay. The selection of third-party employers and contractors who receive grants is at the discretion of recipients.

For more information, see Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule (U.S. Department of the Treasury).

Would government services allow for the purchase of a police cruiser?

The Final Rule provides that governments may spend fiscal recovery funds on the provision of government services to the extent of the reduction in revenue experienced due to the COVID-19 public health emergency. The Final Rule added that governments may elect to spend up to $10 million of fiscal recovery funds on government services instead of the reduction in revenue amount.

The Final Rule states that “[g]overnment services include, but are not limited to . . . the provision of police, fire, and other public safety services.”

Would DPW workers (highway, water and sewer) be considered "eligible workers"?

Under the Final Rule, “eligible workers” include “workers needed to maintain continuity of operations of essential critical infrastructure sectors, including health care; . . . sanitation, disinfection, and cleaning work; maintenance work; . . . any work performed by an employee of a State, local, or Tribal government; . . . [and] transportation and warehousing . . . .” Eligible workers can only be compensated for “essential work,” which means work “not performed while teleworking from a residence” and involves either “regular, in-person interactions with patients, the public, or coworkers of the individual that is performing the work” or “regular physical handling of items that were handled by, or are to be handled by, patients, the public, or coworkers of the individual that is performing the work.”

Can ARPA fund public Wi-Fi hotspots?

Eligible “broadband infrastructure” must follow certain conditions. First, a broadband infrastructure project must be designed to provide service to households and businesses with an identified need. Second, it must be designed to, upon completion: either (1) reliably meet or exceed symmetrical 100 Mbps download speed and upload speeds; or (2) in cases where it is not practicable, because of the excessive cost of the project or geography or topography of the area to be served by the project, to reliably meet or exceed 100 Mbps download speed and between at least 20 Mbps and 100 Mbps upload speed, which is scalable to a minimum of 100 Mbps download speed and 100 Mbps upload speed. Third, the service provider for a completed broadband infrastructure investment project that provides service to households is required, for as long as the SLFRF-funded broadband infrastructure is in use, to: (1) participate in the Federal Communications Commission’s Affordable Connectivity Program (ACP) through the lifetime of the ACP; or (2) otherwise provide access to a broad-based affordability program to low-income consumers in the proposed service area of the broadband infrastructure that provides benefits to households commensurate with those provided under the ACP through the lifetime of the ACP. Jurisdictions can also use this funding to invest in “cybersecurity infrastructure investments” that are designed to improve the reliability and resiliency of new and existing broadband infrastructure, regardless of their speed delivery standards. Such investments may include the addition or modernization of network security hardware and software tools designed to strengthen cybersecurity for the end-users of these networks.

After commenters recommended that Treasury permit “investments in public wi-fi networks” and “free wi-fi in public housing communities,” the Final Rule stated that “these services, which expand internet access without constructing new networks, are an appropriate enumerated eligible use as assistance to households to respond to a negative economic impact, and they are permitted under the final rule,” adding that “eligible uses . . . can also include a wide range of programs and services to expand internet access and digital literacy, such as subsidies for the cost of internet service, other programs that support adoption of internet service where available, digital literacy programs, or programs that provide devices and equipment to access the internet.”

For more information, see Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule (U.S. Department of the Treasury).

 

If department budgets were cut due to the pandemic, could fiscal recovery make up for those cuts (e.g., 2.5% cuts)?

According to Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule (U.S. Department of the Treasury), governments may spend fiscal recovery funds on the provision of government services to the extent of the reduction in revenue experienced due to the COVID-19 public health emergency. This allowable use is referred to as the “Revenue Loss” category.

Jurisdictions (not individual departments) have two options in applying for such funds. First, recipients may elect a “standard allowance” of $10 million to spend on government services through the period of performance. Second, recipients can elect to calculate their actual revenue loss according to the formula articulated in the Final Rule. Under this option, recipients calculate revenue loss at four distinct points in time, either at the end of each calendar year (e.g., December 31 for years 2020, 2021, 2022, and 2023) or the end of each fiscal year of the recipient; recipients can choose whether to use calendar or fiscal year dates, but must be consistent throughout the period of performance.

“Revenue loss” for the calculation date is equal to “counterfactual revenue” (an estimation of revenue growth without the negative economic effects of COVID-19) minus “actual revenue” (revenues collected over the twelve months immediately preceding the calculation date, adjusted for any tax increases or tax decreases after January 6, 2022) for the twelve-month period. “Revenue loss” is therefore based on revenue values specifically, not general budget calculations.

For more information, and greater detail about making these calculations, see Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule (U.S. Department of the Treasury).

Subrecipient Rules

I understand that subrecipients must undergo a "pre-award assessment" before they may enter a subrecipient agreement using ARPA funds. It is my understanding that subrecipients must be non-profits or individuals, much like parties to grant agreements under MGL c. 30B.

Pass through entities are required by 200 C.F.R. § 200.332(b) to: 

“Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: 

1) The subrecipient's prior experience with the same or similar subawards; 

2) The results of previous audits including whether the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; 

3) Whether the subrecipient has new personnel or new or substantially changed systems; and 

4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency).”

Pursuant to 200 C.F.R. § 200.1, “subrecipient” means “an entity, usually but not limited to non-Federal entities, that receives a subaward from a pass-through entity to carry out part of a Federal award; but does not include an individual that is a beneficiary of such award. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency.” “Non-Federal entity” means “a State, local government, Indian tribe, Institution of Higher Education (IHE), or nonprofit organization that carries out a Federal award as a recipient or subrecipient.”

In its Final Rule, the Treasury states that “recipients may award SLFRF funds to many different types of organizations, including small businesses, to function as a subrecipient in carrying out eligible uses of funds on behalf of a recipient government.” 

What this means is that you must define why you are awarding ARPA funds to a subrecipient. 

Grants and grant agreements are unique terms under Chapter 30B and they refer to different things. If you plan to grant funds to an individual or nonprofit under a “grant agreement,” then you are entering into a contract with that party for a public purpose.  M.G.L. c. 30B, § 2, defines “grant agreement” as “an agreement between a governmental body and an individual or nonprofit entity the purpose of which is to carry out a public purpose of support or stimulation instead of procuring supplies or services for the benefit or use of the governmental body.” This definition restricts grant agreements to individuals or nonprofits. You would use grant agreements when you are contracting for a public service. Therefore, grant agreements are a procurement option covered under Chapter 30B. For example, you could use a grant agreement with a nonprofit to distribute COVID-19 test kits in your community. 

But grant agreements under Chapter 30B are different from grants. You may distribute or grant ARPA or other funds to subrecipients other than to carry out a public purpose of support or stimulation by creating a grant program. This would not be a procurement matter, but municipal finance law and public policy concerns must be considered. For example, under the final rule, you could provide grants to private businesses like local restaurants to purchase air purifiers in response to the pandemic or provide a grant to local businesses to assist them in training new employees.  These grants may satisfy a public policy purpose but they are not the procurement of supplies or services “to carry out a public purpose of support or stimulation instead of procuring supplies or services for the benefit or use of the governmental body.”  [Emphasis added.] Therefore, these grants could be given to individuals, non-profits, or businesses.

It would be helpful to see examples of pre-award assessments, and this might be something that cities and towns share information about.  

We are working to gather guidance for conducting pre-award assessments of subrecipients. However, you should consider contacting your peers and perhaps professional organizations like MAPPO (MA Association of Public Purchasing Officials), MASBO (MA Association of School Business Officials) or MFAA (MA Facilities Administrators Association) for their assistance in identifying jurisdictions that might be willing to share information.   

Contact

Phone

Available 8:30 a.m. to 4:30 p.m., M-F. Our confidential Hotline is for public employees and individuals with Chapter 30B procurement questions. Direct questions related to design and construction procurement to the Attorney General’s Office.

We welcome non-English speakers to contact us. Confidential translation services are available in most languages. Let us know which language you will need when first contacting us.

Address

Office of the Inspector General
One Ashburton Place
Room 1311
Boston, MA 02108
Image credits:  Shutterstock
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