Dear Bangor City Council,
As I stated last night during public comment, I have many questions and concerns about the City’s management of the SLFRF funding it received via ARPA.
I intend to break down all of these questions and concerns into multiple e-mails, as there is much to unpack.
In this e-mail I am raising specific concerns about the way the city is not complying with the U.S. Treasury’s Final Rule regarding reporting, and a possible non-compliance issue if some projects aren’t identified soon.
As you are now aware, the city of Bangor is required to file Quarterly Project and Expenditure Reports. These reports are due on the last day of the month following the end of each quarter.
As of last night’s City Council Meeting, we are still out of compliance with our 2022 Quarter 1 and Quarter 2 reports. They’re missing in the eyes of the Treasury. “Drafts” do not cut it. We’re 213 days late and counting.
While I understand the City Manager believes this is a technical issue out of her control, I strongly disagree with the assertion that it is out of her control.
In the response the City Manager provided to me, which all of you were copied on, she provided documentation that she reached out for technical support on May 26th for submitting the Q1 2022 report. This was 26 days after the report was already due.
Why was there no follow-up to the Treasury? Why was no other organization reached out to for help until Quarter 3? Why didn’t the City Manager update the City Council on the status and ask for assistance or guidance before it was late? It should not have come to me asking to see the reports before this was uncovered. That is NOT transparency, especially for a program that the Treasury is trying to build the public trust for. From a document of Frequently Asked Questions about SLFRF published by the U.S. Treasury:
“To ensure public trust, Treasury expects all recipients to serve as strong stewards of these funds. This includes ensuring funds are used for intended purposes and recipients have in place effective financial management, internal controls, and reporting for transparency and accountability.”
Source: SLFRPFAQ.pdf (treasury.gov)
I am extra concerned because being late on reporting is something that has already happened in Bangor recently with another Federally funded COVID program.
I’m referencing “Reports Required by Maine Uniform Accounting and Auditing Practices for Community Agencies For the Year Ended June 30, 2021”
INDEPENDENT AUDITOR’S REPORT ON (bangormaine.gov)
On Page 10 of that report (Page 12 of the PDF version) the auditor noted, “The August and September 2020 reports for COM-200-2003B were not filed by the required deadlines.”
That funding required adherence to Federal regulations, as pointed out in the application process:
Round2_Muni_Partnership_Application_0.pdf (maine.gov)
I trust you can see my concern that City Hall is dropping the ball on federal reporting requirements. I don’t know the current City Manager’s role during that period of 2020, but the current ARPA non-compliance with reporting combined with past deficiencies indicates a serious issue within City Hall regarding our protocols for handling federal funds.
Further, I was dismayed that the City Manager is dismissing our current non-compliance and apparently thinks we are fine because the 2022 Q1&Q2 reports are in “draft” mode. The Treasury does not count “drafts.” I know this because I already asked the Treasury for the information FIRST and they didn’t have it. Now I’m extra glad I did, because this would have just stayed swept under the rug. Certification is key and it is made abundantly clear in the U.S. Treasury’s User Guide here:
Oct-2022-PE-Report-User-Guide.pdf (treasury.gov)
And to be frank, the very notion that it’s not a problem these reports are in “draft” mode makes absolutely NO sense. Why in the world would the Treasury think it was OK to just leave reports in a draft mode with no certification? The certification screen of the submission process asks the person submitting to attest under penalty of law that everything is accurate. The U.S. Government has spelled it out clear in Title 2, Subtitle A, Chapter 2, Part 200, Subpart D for the Federal Code of Regulations how important measurement is, and included additional regulations on how to remedy non-compliance. See below.
eCFR :: 2 CFR Part 200 Subpart D — Post Federal Award Requirements
The remedies for non-compliance could look like an action plan (which is an embarrassment for the City) but it could escalate to TERMINATION of the grant if we don’t get our house in order. Especially with our history across TWO federally funded COVID programs now.
I fail to understand how these deadlines keep slipping by. Technology exists for setting multiple calendar reminders so that important deadlines and appointments are not missed. This is not a staffing issue. This is a priorities and process issue.
I am worried, and honestly, I am not sure I trust the City Manager to be a good steward of this program when she says things in the workshop like “hopefully” we’ll be all set for the next quarter. “Hopefully” doesn’t work here. We need firm action and dependability. We are not seeing it. We’re 0 for 2 on federally funded COVID program reporting compliance.
I also have a concern about the management of the funds themselves.
In a letter from RKO to the City dated March 21, 2022, they noted under Bank Reconciliations on Page 4 that:
“During our testing of cash accounts, we identified two bank accounts for which the balances on the trial balance did not agree with the bank statements.”
Here is the City’s response, in full as printed in that letter:
“Management’s response/corrective action plan: These were new accounts established to segregate funds for school debt service sinking fund and ARPA funds. The debt service sinking fund is an internal transfer of funds only. The ARPA account was established to segregate the one receipt of funds in FY 2021. No activity regularly occurs within either account that isn’t initiated by City staff. A department staff person has been assigned the task of ensuring a reconciliation of each account is prepared.”
Source: REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL (bangormaine.gov)
No year-end reconciliation was done on an account (ARPA) that holds millions of highly scrutinized federal dollars? Even if it only has 1 transaction, you still reconcile it. Was that reconciliation ever prepared? In the year-end financial report an ARPA fund reflected the first tranche payment three(3) times. An additional number associated with the ARPA fund of $11,555 was printed NINE(9) times. It never specifically identified as to how it came to be other than “revenue from use of money and property.” Is it interest? Odd we didn’t used the language “interest” as the report did for interest earned on other funds. In summary, it sounds to me there is more going on in that account than just the “one receipt of funds.” This is not building the “public trust”.
Source: FY21_City_of_Bangor,_Maine_ACFR.pdf (bangormaine.gov)
I call on the City Council to make a written policy available on the website that explains what the City will be doing with earned interest. The City Manager is correct: Interest earned is not subject to the Treasury’s Cash Management rule and has no restrictions placed upon it. We’ve been waiting 18+ months since we first knew this money was coming to see action, and now it’s been revealed the City has been earning interest this whole time it had the ARPA money. This gives the appearance that this process is deliberately being dragged out in order to collect the maximum amount of interest before Treasury deadlines force the money to be allocated and spent in their entirety. I do not want to believe this is the case. But the longer the Council and the City sits with 0 projects selected, the greater this concern becomes that the City/Council has chosen earning interest over dealing with a homeless crisis that was made worse by the pandemic and the prospect of 200+ people stuck out in the winter this year.
I call on the Council to publish a written copy of the process it states it is following for making project/funding determinations. All the city has offered the public to date is a 2 page memo in November that much of it seems to be copy/pasted and paraphrased from a GFOA memo written back in March of 2021. Bullet points like “Take Time and Careful Consideration” were relevant 18 months ago, but in November 2021 with 0 projects, we need something a little more concrete and something that fits Bangor and its needs. You can see the GFOA’s written statement from their website below. Compare it with the memo handed to Council for the ARPA meeting held earlier this month.
American Rescue Plan Spending: Recommended Guiding Principles (gfoa.org)
I eluded to a potential compliance issue for not having projects identified to date. Here is an excerpt from Page 23 of the Treasury’s P&E User Guide I linked earlier in this e-mail:
“If your jurisdiction has not yet identified any projects to report, please know that Treasury encourages you to identify projects as soon as possible for your jurisdiction’s uses of SLFRF funds […] In the event recipients have no projects available for entry, an option has been included on the Project Overview screen to allow recipients to indicate this status to Treasury in lieu of adding projects. Selecting this option will require providing a written explanation and may result in additional compliance follow-up from Treasury.“
In my previous e-mail I pointed out that as of Quarter 2 there are only three(3) Tier 2 recipients including us, who were not compliant. This failure to report on time combined with no projects identified through Quarter 3 of 2022, potentially Quarter 4 as well, does not paint a great picture. As of Quarter 2 there are only thirteen(13) Tier 2 recipients left have not identified any projects. That number is sure to go down when the U.S. Treasury publishes Q3 2022 data. With the Treasury now adding language like this to their published materials, I suggest we get at least one identified project on the books. I have the perfect suggestion for you for that project: Hire a firm/organization to oversee compliance and management of the ARPA program for Bangor.
An expert consultant can get us BACK ON TRACK to compliance and ensure we STAY in compliance for the life of the program. Not to mention proper financial oversight of these vital federal dollars. Hiring someone to do this is an acceptable use of ARPA funds per the U.S. Treasury. An excerpt from the Treasury’s F.A.Q. I linked above:
“10.5. May recipients use funds to cover the costs of consultants to assist with managing and administering the funds? [6/8]
Yes. Recipients may use funds for administering the CSFRF/CLFRF program, including costs of consultants to support effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements.”
I am HIGHLY SUGGESTING the Council takes advantage of this. Paying someone to cross every “t” and dot every “i” (and ON TIME) is a smart investment to make to keep $20.48 of total funding in compliance. If we’re fumbling the football on reporting that has ZERO projects, I feel we’re setting ourselves up for worse failure when we actually do have projects to report.
I am also HIGHLY SUGGESTING the city update the bangormaine.gov/ARPA page to be up to date with all of the information it has, such as:
– Copies of the Interim Report
– Copies of each Quarterly Report
– A full written explanation of the process Bangor is following to determine how projects will be selected and funding amount determined
– Information about the current status of the funds, including how many accounts, balances of the accounts, structures of the account (i.e. municipal savings, certificates of deposits, maturity dates)
– A form for citizens to give feedback on the process as it progresses
Let’s build some public trust and get this process moving forward. I fully appreciate the fact that you have a lot on your plate, which is why hiring experts to help move us forward makes all the more sense.
Sincerely,
Michael Beck
Update: I received a response back from the U.S. Treasury regarding Bangor, Maine’s SLFRF reporting compliance. Because Bangor was able to submit their Q3 2022 report, they are now considered in compliance. The Treasury no longer is requiring Bangor to submit Q1 or Q2 2022, which contradicts language the Treasury uses in the Reporting User Guide. I am leaving this post up in its entirety as the fact still remains that it wasn’t until 26 days after the Q1 was due that the City reached out for technical assistance and did not make any such effort for Q2. This issue should never have been allowed to span two quarters. We are fortunate the Treasury is giving the City a reprieve here.
From: SLFRF@treasury.gov <slfrf@treasury.gov>
Date: Tue, Dec 6, 2022 at 1:40 PM
Subject: RE: Bangor, Maine: Missing Quarterly P&E Reports
To: Michael Beck
Hello,
Thank you for your inquiry. Once a reporting period has opened for a subsequent period, previous reports will be unable to submitted or adjusted. Because Bangor was able to submit their Q3 report, they will remain in compliance.
If you have questions about the Treasury Submission Portal or for technical support, please email covidreliefitsupport@treasury.gov. If you have general questions about the Coronavirus State and Local Fiscal Recovery Funds please email SLFRP@treasury.gov.
Regards,
U.S. Department of the Treasury
Coronavirus State and Local Fiscal Recovery Fund Contact Center
Email: SLFRF@Treasury.gov
