DATE: May 21, 2024
TO: Board of Supervisors
SUBMITTED BY: Paul Nerland, County Administrative Officer
SUBJECT: State Local Fiscal Recovery Funds, Amendments to Subrecipient Agreements
RECOMMENDED ACTION(S):
TITLE
1. Approve amendments to the Subrecipient Agreements listed in Attachment A for the provision of American Rescue Plan Act - State and Local Fiscal Recovery Funds (ARPA-SLFRF), in substantially the form as Attachment B to this item, to revise language in the timeline section of each Subrecipient Agreement and remove a County-imposed obligation deadline that the United States Department of the Treasury has recently clarified does not apply to Subrecipients; and
2. Approve and authorize the County Administrative Officer, or his designee, to execute the recommended amendments to the Subrecipient Agreements listed in Attachment A, subject to review and approval as to legal form by the County Counsel, and as to accounting form by the Auditor-Controller/Treasurer-Tax Collector.
REPORT
There is no Net County Cost associated with the recommended actions, which will approve amendments to the subrecipient agreements listed in Attachment A (Subrecipient Agreements) to remove a requirement that each subrecipient must account for all SLFRF which has not been bindingly obligated to a permissible use by December 31, 2024, and remit the same unobligated SLFRF to the County within thirty calendar days. When the Subrecipient Agreements were drafted, it was not clear whether this “obligation” requirement applied to SLFRF subrecipients, in addition to recipients, such as the County. On November 20, 2023, the United States Department of the Treasury (Treasury) issued the 2023 Obligation Interim Final Rule (OIFR) which revised the definition of “obligation” with respect to the ARPA-SLFRF program and clarified the application of the obligation deadline to subrecipients. The OIFR, including the Obligation Quick Reference Guide issued by the Treasury, attached to this item as Attachment C, clarifies that subrecipients are not subject to the December 31, 2024, obligation deadline.
Removal of the December 31, 2024, obligation deadline language from the Subrecipient Agreements will ensure that subrecipients listed in Attachment A have until December 31, 2026 to expend their SLFRF grants and do not unnecessarily return those funds to the County. Importantly, as the Subrecipient Agreements are currently written, if any of the subrecipients do not further obligate their SLFRF grants prior to the December 31, 2024 deadline, those subrecipients would need to return unobligated funds to the County, and the County would not have time to vet additional projects for ARPA eligibility, nor re-allocate those funds to other projects, and would likely have to return those funds to the Treasury.
Recommended Action Item two delegates authority to the County Administrative Officer, or his designee, to execute amendments to the Subrecipient Agreements listed in Attachment A, in substantial form as Exhibit B, subject to approval as to legal form by the County Counsel and as to accounting form by the Auditor-Controller/Treasurer-Tax Collector. This item is countywide.
ALTERNATIVE ACTION(S):
Your Board may choose not to accept the recommended actions, in which case the existing Subrecipient Agreements will continue to require the subrecipients further obligate their subaward by December 31, 2024. Under the existing Timeline subsection, subrecipients are required to waive or return any portions of their grant not bindingly obligated by December 31, 2024. However, if any subrecipients do return grant funds pursuant to this contractual deadline, which the Treasury has clarified is not now required, the County would not have time to re-allocate those funds and would likely have to return those funds to the Treasury.
FISCAL IMPACT:
Approval of the recommended actions will result in no increase in Net County Cost. The Subrecipient Agreements are fully funded with ARPA-SLFRF. Sufficient appropriations are included in the FY 2023-24 Adopted Budget for Auditor-Controller/Treasurer-Tax Collector Org. 1033 - Disaster Claiming, Fund 0026, Subclass 91021, Account 7845.
DISCUSSION:
The Treasury’s 2021 Interim Final Rule (IFR), 2022 Final Rule (FR), and 2023 OIFR permit ARPA-SLFRF to be used to cover costs for eligible activities described in the 2022 FR for the period that begins March 3, 2021, and ends on December 31, 2024. The 2022 FR states that recipients must return any funds to the Treasury which are not obligated by December 31, 2024, and any funds not expended to cover such obligations by December 31, 2026. The Treasury’s Title 31, Code of Federal Regulations, Part 35 Coronavirus SLFRF establish the framework for determining the types of programs and services that are eligible under the ARPA-SLFRF program.
The Treasury’s ARPA guidance designates that recipients, such as the County, are accountable to Treasury for oversight of their subrecipients, including ensuring their subrecipients comply with the SLFRF statute, SLFRF Award Terms and Conditions, other applicable federal statutes and regulations, and reporting requirements. To ensure that subrecipients of the County comply with the Treasury’s obligation deadlines, the standard subrecipient agreement, as it is currently written, requires subrecipients to further obligate their award by December 31, 2024. The Timeline subsection of the Subrecipient Agreements (in Section 1 of the Subrecipient Agreements) currently includes the following language:
“Subrecipient shall ensure that the Program is diligently undertaken and completed, and all SLFRF granted under this Agreement are fully expended, no later than December 31, 2026. By August 31, 2024, Subrecipient shall analyze, and shall report to County in writing, whether it can complete the Program or fully expend the SLFRF granted under this Agreement by December 31, 2026. If Subrecipient is not capable of completing the Program or fully expending the SLFRF granted under this Agreement on the Program by December 31, 2026, Subrecipient shall return any previously issued SLFRF, which have not been bindingly obligated to a permissible use, to County within fifteen calendar days. Additionally, Subrecipient shall account for all SLFRF which have not been bindingly obligated to a permissible use by December 31, 2024, and shall remit the same unobligated SLFRF to the County within thirty calendar days.” (emphasis added)
On November 20, 2023, the Treasury released the 2023 OIFR, which revised the definition of obligation with respect to the ARPA-SLFRF program. Treasury clarified that the obligation deadline applies to the recipient of ARPA, and a cost is considered to have been incurred once a recipient enters a subaward or contract that obligates the recipient to cover that cost. The 2023 OIFR clarified that subrecipients are not subject to the December 31, 2024, obligation deadline. Neither subrecipients nor contractors need to take additional steps to obligate SLFRF funds after entering into a subaward or contract with the recipient.
To date, your Board has approved 49 subrecipient agreements. Attachment A lists the active Subrecipient Agreements for ARPA-SLFRF funding for the implementation of various programs and services that benefit vulnerable populations, affordable housing projects, improvements to parks, and funding for infrastructure improvements related to public water or sewer systems in rural unincorporated communities.
On April 16, 2024, County staff issued an email announcement to inform the subrecipients of the recommended amendment and invited written comments to be emailed to the ARPA inbox. The comment period was opened on Tuesday, April 16, 2024 and closed on Friday, April 26, 2024. No subrecipient written comments were received during the comment period.
Approval of the recommended actions would authorize the County Administrative Officer, or designee, subject to approval as to legal form by the County Counsel and as to accounting form by the Auditor-Controller/Treasurer-Tax Collector, to execute amendments revising language in the Timeline subsection of Section 1 General Obligations of the Subrecipient of each Subrecipient Agreement to align with the Treasury’s recent flexibility provided by the 2023 OIFR:
“Subrecipient shall ensure that the Program is diligently undertaken and completed, and all SLFRF granted under this Agreement are fully expended, no later than December 31, 2026. By August 31, 2024, Subrecipient shall analyze, and shall report to County in writing, whether it can complete the Program or fully expend the SLFRF granted under this Agreement by December 31, 2026. No later than by December 31, 2025, Subrecipient shall submit a second written report to the County stating whether the Subrecipient can complete the Program and fully expend the SLFRF granted under this Agreement by December 31, 2026. Following issuance of either of these reports to County, if Subrecipient anticipates that any portion of SLFRF granted under this Agreement will not be fully expended on the Program by December 31, 2026, within ten (10) calendar days, the Subrecipient shall notify the County in writing of its intent to waive SLFRF previously allocated to Subrecipient and/or return to the County any portion of SLFRF provided by this Agreement .”
The recommended revised language will ensure that subrecipients have the maximum amount of time allowed by the Treasury to finish their projects and programs and expend all of the SLFRF allocated to each subrecipient by the County.
REFERENCE MATERIAL:
BAI #4, August 22, 2023
BAI #9, November 8, 2022
BAI # 7, June 21, 2022
BAI #3, February 1, 2022
ATTACHMENTS INCLUDED AND/OR ON FILE:
Attachment A - Subrecipient Agreement List
Attachment B - Form of Amendment
Attachment C - 2023 Obligation Interim Final Rule Quick Reference Guide
CAO ANALYST:
George Uc