This Week in Federal Funding

Route Fifty's This Week in Federal Funding newsletter provides weekly updates on what's happening with the pandemic-era aid dollars the federal government is sending to states and localities. The newsletter goes out on Tuesdays and Route Fifty Today subscribers receive it automatically. If you don't subscribe to Route Fifty Today and would like to receive This Week in Federal Funding, you can sign up for it here.

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Welcome to Route Fifty's This Week in Federal Funding! I'm Senior Editor Bill Lucia.

From R50 this week: Andrea Noble reports on the outlook for broadband spending with American Rescue Plan Act funds. She also has the latest on one of the legal battles where states are challenging ARPA's ban on using aid to offset tax cuts. And I recap discussion at the Government Finance Officers Association conference about how "transformative" ARPA spending can mean different things in different places.

What we're watching: The watchdogs. The Pandemic Response Accountability Committee was formed by last year's CARES Act and is charged with overseeing and promoting transparency with spending and programs under federal coronavirus relief and recovery laws. The committee is composed of 22 inspectors general and aims to prevent and detect instances of waste, fraud, abuse and mismanagement.

"There are a lot of bad actors out there who are just waiting to get their hands on this money," Sandra Bruce, chair of the PRAC's Federal, State and Local Coordination Subcommittee and the acting IG at the Department of Education, said during a phone interview last week, noting that the pandemic response money totals over $5 trillion, including the billions going to states and localities. That's more than the entire federal budget for fiscal 2019.

Bruce explained that the PRAC has been holding meetings for those with a stake in the state and local programs, where attendees have been able to make recommendations to the committee and discuss challenges and best practices. The thousands of small "non-entitlement units" of local government that will receive funds through states are a specific concern that's been coming up lately in these forums. "A lot of the places that are receiving these payments haven't ever had to deal with federal funding," Bruce said. The National Association of State Auditors, Comptrollers and Treasurers is one of the groups that's been involved in these sessions. "This coordination for all of us is really important," Bruce said. "Our state and local partners are our boots on the ground view as to how these vital dollars are being spent."

So far, much of the fraud and abuse the committee has zeroed in on has to do with unemployment benefits and the Paycheck Protection Program, which provided aid to businesses. Between last Oct. 1 to March 31 a committee report shows 95% of the indictments and criminal complaints the PRAC recorded were linked to unemployment, the PPP, or economic injury disaster loans. "The states have been hit really hard with identity theft, especially with unemployment insurance," Bruce said. The committee, she said, has turned to advanced data analytics, with over 42 million records meant to help identify instances of fraud across programs and is sharing this information where possible with state and local officials.

Bruce described programs like the PPP and unemployment insurance as "low hanging fruit" for fraudsters. Aid flowing directly to state and local governments under ARPA is getting spent more slowly, so if there is corruption occurring with those funds it will likely take time to emerge. After  funds are issued, "it probably takes about a year before you start really seeing some audit work … and with investigations, it takes a little longer, because the money actually has to be obligated and spent before you can start to see fraud at that level with public officials," Bruce said.

The PRAC's website is worth checking out. Some highlights include transparency-oriented data tools for tracking funds and an online library launched earlier this month that's stocked with dozens of pandemic oversight reports from state and local agencies.

Elsewhere… Massachusetts Gov. Charlie Baker's administration said Monday the state would devote $186 million of its roughly $5.3 billion in direct ARPA aid toward hospitals, health and human services, mental health and workforce development. That spending will include $50 million for financially distressed hospitals and $31 million for inpatient psychiatric facilities. Baker and the state legislature sparred over who would take the lead role in deciding how to spend the state's ARPA allocation. But lawmakers largely prevailed, with the governor signing a bill in late June that will send about $4.9 billion into a fund the legislature will control. Baker's administration has filed legislation with a plan for spending $2.9 billion of the funds. House and Senate lawmakers on Tuesday held the first of several planned joint public hearings on ARPA spending. Baker was on hand virtually to testify in support of his proposal.

In Maine, Gov. Janet Mills signed a bill into law on Monday that will allow for upwards of $1 billion of ARPA spending, and said the legislation is "likely the most transformational proposal of our lifetimes," with initiatives focused on child care, housing, broadband, health care subsidies, workforce training and economic recovery grants. (More here from the Portland Press Herald)

Local notes: Disagreements between St. Louis Mayor Tishaura Jones and Board of Alderman President Lewis Reed over whether an ARPA spending plan Reed backs complies with Treasury rules continued into late last week, bogging down the proposal. "We cannot approve legislation that goes against U.S. Treasury rules and could force St. Louis to pay back millions of dollars," Jones said in a statement. (More from Riverfront Times). In Lynchburg, Virginia officials are hoping that ARPA funding will help to complete a long-standing sewer system upgrade to prevent overflows. (More from The News & Advance). The board of supervisors in Eau Claire County, Wisconsin has a plan to use $2.8 million in ARPA funds for broadband expansion. The measure has won committee approval and is on the full board's agenda for Tuesday night.   

That's it for this week. In the meantime, if you have news tips or feedback on what we should be covering, if you want to share your community's story, or if you just want to say hello, please email us at: editor@routefifty.com. Thanks for reading!

This week's federal funds stories from Route Fifty:

• How Localities and States Can Prepare for Broadband Expansion
• The Many Flavors of 'Transformative' State and Local ARPA Spending
• Judge Declines to Block ARPA Tax Cut Mandate Before Case is Heard

For last week's edition, which looks at ARPA spending plans in Erie County, New York, click here.