OIG Bulletin, February 2022: Ensuring Proper Use of ARPA Funds by Grant Recipients

The American Rescue Plan Act (ARPA), enacted in March 2021, provides state, county, local and tribal entities across the country with billions in federal aid to respond to the public health and economic effects of the COVID-19 pandemic. Massachusetts jurisdictions received over $25 billion through ARPA.

Best Practices for ARPA Grant Management

The prevention and detection of fraud, waste and abuse of public funds – always an important issue for government entities – is even more critical now that jurisdictions are receiving billions of additional dollars in ARPA funding. To promote accountability, ARPA includes requirements for the administration, monitoring and reporting of funds. Additionally, ARPA funds are subject to oversight by certain state and federal agencies, including the Massachusetts OIG.

Government entities that have received ARPA funding may be able to award grants to third parties. For example, the city of Boston used ARPA fiscal recovery funds to award more than $3.4 million in grants to 192 local arts and cultural organizations. ARPA rules may impose additional reporting requirements for grants made to third-party employers, including public disclosure of grants provided.

Jurisdictions should build on these federal requirements to ensure that grant recipients spend grant money appropriately by implementing their own comprehensive monitoring and reporting policies.

Insufficient reporting requirements or processes, or lack of attention to grant administration, can lead to a wide range of negative results, including project mismanagement, inappropriate use of funds and failure to comply with legal requirements. However, jurisdictions can take actions to ensure that grantees use ARPA funds in accordance with grant agreements. To promote appropriate and effective use of ARPA funds, jurisdictions should:

• Identify and understand the intended uses of the funds in the grant award agreement. Incorporate by reference any federal rules that apply to the grant award.
• Maintain open and direct communication with grantees.
• Require regular and thorough reporting from grantees relating to expenditures.
• Tie grant disbursements to deliverables, milestones or other reportable actions when possible.
• Track and maintain records of all grant-related documents, including communications, receipts and invoices.
• Include a right-to-audit clause in grant agreements. A right-to-audit clause allows a jurisdiction to request documents and engage in an active review process.
• Establish attainable program goals and targets, and understand which expenditures are allowable under federal law.
• Implement internal controls to prevent fraud, waste and abuse.

To facilitate grant management, jurisdictions should develop clear expectations for grant programs and include this language in grant awards.

Jurisdictions should also develop evidence-based methods of measuring performance and project goals to make sure that grantees meet those expectations. By regularly monitoring key performance indicators and tying grant payments to measurable standards, jurisdictions can determine which projects are working well and which require additional attention. Additionally, establishing and maintaining open communication with grantees regarding grant requirements and expectations will help lead to successful project completion.

Failure to implement sound grant monitoring policies that ensure proper use of ARPA funds can result in recoupment of funds by the federal government. However, developing comprehensive monitoring policies, measuring project performance and conducting grantee audits can help jurisdictions reduce fraud, waste and abuse. These practices will also ensure that ARPA funding is used for its intended purpose: helping communities recover from the devastating health and economic impacts of the COVID-19 pandemic.

Date published:	February 25, 2022