Is there a cap on program administration, whether for the recipient city, or for subrecipients if the City contracts the funds out for services? And are there limitations on what is considered admin (i.e. regular labor, leave, benefits, etc)?

The United States Department of the Treasury (“Treasury”) has not explicitly identified a set cap on the use of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) for administrative expenses. However, Treasury has stated that administrative costs, inclusive of direct and indirect costs, must be “reasonable and allocable” as defined in Treasury’s Final Rule.[1] Considerations for municipalities seeking to apply CSLFRF funds to administrative costs are listed below.

A.  Administrative Expenses/Costs and the Final Rule and FAQ Guidance

The Final Rule explains that funds may be used for administrative expenses which “improve the efficacy of public health or economic relief programs through tools like program evaluation, data analysis, and targeted consumer outreach.”[2] This includes “[a]dministrative costs associated with the recipient’s COVID-19 public health emergency assistance programs, including services responding to the COVID-19 public health emergency or its negative economic impacts, that are not federally funded.”[3]

Treasury’s Frequently Asked Questions (“FAQs”) relating to CSLFRF FAQ #10.2 states:

[r]ecipients may use funds to cover the portion of payroll and benefits of employees corresponding to time spent on administrative work necessary due to the COVID–19 public health emergency and its negative economic impacts. This includes, but is not limited to, costs related to disbursing payments of Fiscal Recovery Funds and managing new grant programs established using Fiscal Recovery Funds.[4]

B.  Administrative Costs and Mitigating Factors

The Final Rule acknowledges that the American Rescue Plan Act of 2021 (“ARP”) “will generate administrative costs relative to a pre-statutory baseline. This includes, chiefly, costs required to administer [CSLFRF] funds, oversee subrecipients and beneficiaries, and file periodic reports with Treasury.”[5]

Treasury expects that the administrative burden associated with this program will:

• “[B]e moderate for a grant program of its size. Treasury expects that many recipients receive direct or indirect funding from federal government programs and that many have familiarity with how to administer and report on federal funds or grant funding provided by other entities;” and
• “[S]tates, territories, and large localities will rely heavily on established processes developed through that program [the 2020 CRF] or other prior grant funding, mitigating burden on these governments.” [6]

The above suggests that Treasury expects the administrative burden from running these programs to be reasonable and not excessive.

In addition, Treasury has implemented measures further mitigating administrative burden, including “‘tiering’ reporting requirements so that recipients that receive relatively lesser amounts of CSLFRF funds are required to submit less frequent reports than recipients receiving greater amounts of funds” and allowing for “‘categorical eligibility’ when delivering assistance to particular groups, such as impacted or disproportionately impacted households.”[7] The Final Rule states:

[i]n making implementation choices, Treasury has hosted numerous consultations with a diverse range of direct recipients— states, cities, counties, and Tribal governments—along with various communities across the United States, including those that are underserved. Furthermore, Treasury has made clear in guidance that [CSLFRF] funds may be used to cover certain expenses related to administering programs established using [CSLFRF] funds.[8]

As of now, however, neither the ARP itself nor the guidance released from the Treasury specifies a “cap” on program administration costs.

C.  Conclusion

As stated in the Final Rule and the Compliance and Reporting Guidance,

Recipients may use funds for administering the [CSLFRF] program, including costs of consultants to support effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements.2 Further, costs must be reasonable and allocable as outlined in 2 CFR 200.404 and 2 CFR 200.405. Pursuant to the [CSLFRF] Award Terms and Conditions, recipients are permitted to charge both direct and indirect costs to their SLFRF award as administrative costs as long as they are accorded consistent treatment per 2 CFR 200.403. Direct costs are those that are identified specifically as costs of implementing the [CSLFRF] program objectives, such as contract support, materials, and supplies for a project. Indirect costs are general overhead costs of an organization where a portion of such costs are allocable to the [CSLFRF] award such as the cost of facilities or administrative functions like a director’s office. 34 Each category of cost should be treated consistently in like circumstances as direct or indirect, and recipients may not charge the same administrative costs to both direct and indirect cost categories, or to other programs. If a recipient has a current Negotiated Indirect Costs Rate Agreement (“NICRA”) established with a Federal cognizant agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals, then the recipient may use its current NICRA. Alternatively, if the recipient does not have a NICRA, the recipient may elect to use the de minimis rate of 10 percent of the modified total direct costs pursuant to 2 CFR 200.414(f).[9]

Treasury’s guidance has not stated whether there is a cap on administrative expenses, only that administrative costs, inclusive of direct and indirect costs, are “reasonable and allocable” as defined in the Final Rule.[10] Treasury’s Compliance and Reporting Guidance provides further guidance on allowable direct and indirect costs.[11]  

 Last Revised: March 4, 2022

Can a municipality use ARP funds to support “friends of” organizations for specific parks, venues, or other tourism-related activities?

A recipient may provide responsive services after determining that certain nonprofits were impacted by the pandemic or were disproportionately impacted by the pandemic.[1] Nonprofits have faced significant challenges due to the pandemic’s increased demand for services, changing operational needs, and declines in revenue sources such as donations and fees. Nonprofits eligible for assistance are those that experienced negative economic impacts or disproportionate impacts of the pandemic and meet the definition of “nonprofit,” specifically those that are 501(c)(3) or 501(c)(19) tax-exempt organizations. Specifically, Treasury defines a nonprofit as an organization that is exempt from federal income taxation and that is described in section 501(c)(3) or 501(c)(19) of the Internal Revenue Code.[2] 

The Final Rule also includes a non-exhaustive list of enumerated eligible uses that are recognized as responsive to the impacts and disproportionate impacts of COVID-19.[3] When reporting to Treasury, it is important to clarify that recipients providing enumerated uses to populations presumed eligible operated within the guidelines established by the Final Rule and accompanying Reporting and Compliance Guidance.

Recipients can identify nonprofits impacted by the pandemic and select the appropriate measures to respond, according to the level of impact. For example, recipients could consider the following categories of impacted nonprofits:

• Decreased revenue (e.g., from donations and fees);    
• Financial insecurity;
• Increased costs (e.g., uncompensated increases in service need);    
• Capacity to weather financial hardship; and    
• Challenges covering payroll, rent or mortgage, and other operating costs.[4]    

Assistance to nonprofits that experienced negative economic impacts includes the following enumerated uses:

• Loans or grants to mitigate financial hardship such as declines in donations or impacts of periods of closure;
• Loans, grants, or in-kind assistance to implement COVID-19 prevention or mitigation tactics; and
• Technical or in-kind assistance, counseling, or other services that mitigate negative economic impacts of the pandemic.[5]

Regarding disproportionately impacted nonprofits, Treasury presumes that the following nonprofits are disproportionately impacted by the pandemic:

• Nonprofits operating in Qualified Census Tracts (“QCTs”);
• Nonprofits operated by Tribal governments or on Tribal lands; and    
• Nonprofits operating in the U.S. territories.[6]     

Accordingly, it seems that a municipality may in some circumstances use Fiscal Recovery Funds (“FRF”) to support “friends of” organizations for specific parks, venues, or other tourism-related activities, so long as these organizations use the funds in a manner that responds to a demonstrable and negative impact (i.e., the examples listed above) resulting from COVID-19 and the organization is an eligible nonprofit entity. A municipality may also consider directly funding a “friends of” organization as a subrecipient to perform eligible activities under the FRF. In those instances, municipalities should refer to the Final Rule section titled “Distinguishing Subrecipients versus Beneficiaries” for additional monitoring and reporting requirements.[7]                             

Last Updated: March 7, 2022

When determining what constitutes the “negative economic impacts” of COVID-19, should municipalities look to FY2020 or prior fiscal years for comparison?

When assessing whether a program or service is an eligible use to respond to the negative economic impacts of the COVID–19 public health emergency, the U.S. Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule indicates several eligibility requirements:

1. First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class; and
2. Second, the response must be designed to address the identified economic harm or impact resulting from or exacerbated by the public health emergency.[1]

The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID–19 public health emergency.[2]

[T]he recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact.[3]

Responses must also be related and reasonably proportional to the extent and type of harm experienced; uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses.[4]

Although Treasury does not explicitly identify a specific fiscal year that municipalities should use as a comparison benchmark for negative economic impacts, regarding the use of CSLFRF for the provision of government services, the Final Rule states:

Sections 602(c)(1)(C) and 603(c)(1)(C) of the Social Security Act provide that [CSLFRF] funds may be used “for the provision of government services to the extent of the reduction in revenue of such . . . government due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the . . . government prior to the [COVID-19 public health] emergency.”[5]

Finally, recipients must follow key compliance principles to substantiate the use of funds and maintain a robust documentation and compliance system.[6]

Recipients should also ensure the use of strong internal controls, including documented processes and procedures for all decision-making and final determinations, such as which fiscal year comparisons are used. Some strong internal controls include:

• written policies and procedures;
• written standards of conduct;
• risk-based due diligence;
• risk-based compliance monitoring; and,
• record maintenance and retention.[7]

Last Revised: February 20, 2022

How can a city use ARP funds to address school safety?

The U.S. Department of Education announced that the American Rescue Plan (ARP) includes $122 billion for Elementary and Secondary School Emergency Relief (ESSER) funding for each state to support efforts to reopen K-12 schools safely.^[1] 

According to the U.S. Department of Education, the following are some uses of ESSER funds that are consistent with the permissible uses of ESSER funds under the CARES Act:^[2]

• Investing in resources to implement CDC’s K-12 operations strategy for in-person learning to keep educators, staff, and students safe; improving ventilation; purchasing personal protective equipment (PPE); and obtaining additional space to ensure social distancing in classrooms;
• Hiring additional school personnel, such as nurses and custodial staff, to keep schools safe and healthy;
• Providing for social distancing and safety protocols on school buses; and
• Additional uses as allowed in the statute.

With regards to the last bullet above, ARP, Section 2001, d, (e), (2) (Q) authorizes the use of the funds for “developing strategies and implementing public health protocols including, to the greatest extent practicable, policies in line with guidance from the Center for Disease Control and Prevention for the reopening and operation of school facilities to effectively maintain the health and safety of students, educators, and other staff.”^[3]

The Department of Health and Human Services (HHS) also announced that the Centers for Disease Control and Prevention (CDC) will provide $10 billion to states to support COVID-19 screening testing for K-12 teachers, staff, and students in schools.^[4]  According to the Department of Health and Human Services (HHS), the “CDC’s Operational Strategy for K-12 Schools through Phased Mitigation, released in February 2021,^[5] makes clear that screening testing is a tool schools can utilize to help reopen safely as part of a comprehensive COVID-19 mitigation approach. Using existing funding mechanisms, this funding will be able to be deployed quickly as part of a strategy to help get schools open in the remaining months of this school year. In addition to ensuring diagnostic testing of symptomatic and exposed individuals, serial screening testing will help schools identify infected individuals without symptoms who may be contagious so that prompt action can be taken to prevent further transmission. With this ARP funding, states can support the critical testing and testing supports schools need to implement screening testing programs.  Recognizing that establishing a testing program is new for many schools, CDC and state and local health departments will support technical assistance to assist states and schools in standing up and implementing these programs.”

The CDC’s Operational Strategy includes a section titled Prevention Strategies to Reduce Transmission of SARS-CoV-2 in Schools that references the following five key prevention strategies that are essential to safe delivery of in-person instruction and help to prevent COVID-19 transmission in schools:^[6]

1. Universal and correct use of masks
2. Physical distancing
3. Handwashing and respiratory etiquette
4. Cleaning and maintaining healthy facilities
5. Contact tracing in combination with isolation and quarantine

The CDC’s Operational Strategy also notes that schools providing in-person instruction should prioritize two prevention strategies:

1. Universal and correct use of masks should be required
2. Physical distancing should be maximized to the greatest extent possible.

There is also the CDC’s K-12 Schools COVID-19 Prevention Toolkit that includes resources, tools, and checklists to help school administrators and school officials prepare schools to open for in-person instruction and to manage ongoing operations. These tools and resources include considerations for addressing health equity, such as class sizes, internet connectivity, access to public transportation, etc.^[7]

It is suggested that cities consult with their local school district representatives, as sub-recipients of these funds, to ensure that the ESSER funding received is adequate to support ongoing response and recovery efforts that ensure the safety of students, teachers, and other staff inside of schools.

Last Revised: April 14, 2021

What documentation will cities need to provide to show that city expenses are in response to the “public health emergency with respect to COVID-19 or its negative consequences”?

The American Rescue Plan Act of 2021 (“ARP”) grants broad, but not unlimited, discretion to local governments in using their allocations of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) within four broad categories:

1. to respond to the COVID-19 public health emergency and its negative economic impacts;
2. to provide premium pay to essential workers;
3. to provide government services to the extent of eligible government revenue losses; and
4. to make necessary water, sewer, and broadband infrastructure investments.[1]

The U.S. Department of the Treasury’s (“Treasury”) CSLFRF Final Rule “clarifies and expands on how [CSLFRF] funds may be used for certain capital expenditures, including [the applicable] criteria and documentation requirements” in response to the public health emergency or its negative economic impacts.^[2]

The Final Rule states that:

Treasury provides presumptions and guidelines for capital expenditures that are enumerated earlier in sections Public Health, Negative Economic Impacts, and General Provisions: Other under the Public Health and Negative Economic Impact eligible use category . . . along with capital expenditures beyond those enumerated by Treasury. In addition to satisfying the two-part framework in Standards: Designating a Public Health Impact and Standards: Designating a Negative Economic Impact for identifying and designing a response to a pandemic harm, Treasury will require projects with total expected capital expenditure costs of $1 million or greater to undergo additional analysis to justify their capital expenditure. Increased reporting requirements will be required for projects that are larger in size, as well as projects that are not enumerated as eligible by Treasury . . . . Smaller projects with total expected capital expenditures below $1 million will not be required to undergo additional analysis to justify their capital expenditure, as such projects will be presumed to be reasonably proportional, provided that they are responding to a harm caused or exacerbated by the public health emergency. These standards and documentation requirements are designed to minimize administrative burden while also ensuring that projects are reasonably proportional and supporting­­ Treasury’s risk-based approach to overall program management and monitoring.^[3]­­­­

Recipients of CSLFRF must meet compliance and reporting requirements to ensure an equitable, transparent, and responsible recovery.[4] Treasury provides resources to help recipients understand how to comply with the guidelines set forth in ARP[5] and the Final Rule.[6] Most notably, Treasury recently updated the Compliance and Reporting Guidance[7] prescribing reporting requirements and deadlines with which recipients must comply. On January 24, 2022, Treasury also released the Project and Expenditure Report User Guide which provides additional information about the reports which recipients must complete. [8]

Good documentation practices include:

Demonstration of compliance and validation that the municipality met the rules and requirements of the different programs: Municipalities may have to forgo eligible funding or face de-obligation if they fail to meet documentation requirements or if they provide documentation that does not adequately support a claim under any given funding source. Municipalities should determine that a nexus to the COVID-19 public health emergency or its negative economic impacts exists in accordance with the eligible uses listed in the ARP and further addressed by the Final Rule.[9] Municipalities must be prepared to show documentation of their decision-making process. Municipalities will benefit from maintaining a record of all relevant documentation, such as invoices, proofs of payments, procurement methodologies, etc. To help prevent duplication of benefits (“DOB”), to demonstrate a nexus to the COVID-19 public health emergency or its negative economic impacts, and to maximize additional funding, it may be helpful to maintain documentation that is:

• detailed;
• stored centrally and electronically; and
• organized logically.

In addition to meeting the federal program requirements, municipalities should be prepared to show that they also followed the same policies and procedures they used for procurements from non-federal funds. A municipality’s procurement policies and procedures must comply with federal regulation at CFR 200.[10] Municipalities should designate a representative to: (i) track deadlines; (ii) monitor newly published guidance and regulations; and (iii) share pertinent information with internal representatives and external stakeholders. Municipalities may be subject to external audits.

Detailed tracking of costs is critical to avoiding duplication of benefits: No two funding sources can provide funding for the same item, service, or scope. In some cases, multiple funding sources may be eligible to provide funding for the same item, so each municipality must identify and choose which funding source will best meet its needs. For example, many COVID-19 funding sources may cover the cost of purchasing Personal Protective Equipment (“PPE”), so it is important to ensure that two or more funding sources are not used to reimburse the purchase of the same PPE, including donations.

The Compliance and Reporting Guidance states that “[r]ecipients should ensure they maintain proper documentation supporting determinations of costs and applicable compliance requirements, and how they have been satisfied as part of their award management, internal controls, and subrecipient oversight and management.”[11]

Table 1: Internal controls good practices[12]

Last Revised: March 31, 2022

Are ARP funds "emergency" funds and, if so, do they therefore have the flexibility of emergency dollar disbursement protocols?

The American Rescue Plan Act (ARP) of 2021 recently passed and there are no compliance supplements from prior years for reference. Municipalities should thus exercise caution; a municipality that treats ARP funds as subject to emergency dollar disbursement protocols risks its ability to use the Coronavirus Local Fiscal Recovery Fund (CLFRF) monies for those purposes. On May 10, 2021, Treasury published guidance on the ARP and its various funding processes, but did not address whether the ARP funds will have the flexibility of emergency dollar disbursement protocols.

As background the ARP’s CLFRF is a form of federal financial assistance, making it subject to many of the provisions of the Uniform Guidance (2 CFR 200). ^[1]  

In question number 46 of the CLFRF Frequently Asked Questions (“FAQ”) ^[2] document issued on May 10, 2021, the U.S. Department of Treasury (Treasury) addressed which provision of 2 CFR Part 200 will be applicable:

“Most of the provisions of the Uniform Guidance (2 CFR Part 200) apply to this program, including the Cost Principles and Single Audit Act requirements. Recipients should refer to the Assistance Listing for detail on the specific provisions of the Uniform Guidance that do not apply to this program. The Assistance Listing will be available on beta.SAM.gov.”

In general, in the absence of any specific “emergency dollar disbursement protocols” language from Treasury, municipalities should follow their usual procurement policies and practices.  If a municipality would not pursue a disbursement transaction with its own funding, the municipality in all likelihood ought not consider doing so with CLFRF funds.  

Last Revised: May 24, 2021

May cities expend ARP funds to support events aimed at economic recovery, including tourism or supporting small businesses?

1. ARP General Guidance:

The U.S. Department of the Treasury’s (“Treasury”) Final Rule on the American Rescue Plan Act of 2021 (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) provides guidance for municipal governments intending to use CSLFRF to respond to the COVID-19 public health emergency and mitigate the economic impacts of the pandemic.

Municipalities may use CSLFRF to support small businesses and affected industries, such as tourism. The Final Rule clarifies that the ARP provides for CSLFRF to be used 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.”[1] Whether expenditures for an event funded by a municipality for tourism and small businesses are eligible under the Final Rule depends on the facts and circumstances related to that event based on the eligibility criteria discussed below.

Furthermore, Treasury provides a framework to determine eligibility for using CSLFRF awards:

[W]hen assessing whether a program or service is an eligible use to respond to the public health impacts of the COVID–19 public health emergency, the Department will consider the two eligibility requirements discussed below… First, there must be a negative public health impact or harm experienced by an individual or a class…[and] Second, the program, service, or other intervention must address or respond to the identified [COVID-19 related] impact or harm.[2]

Treasury does not make transfers directly to nonprofits or private organizations, such as small businesses, as part of the CSLFRF. However, municipalities receiving CSLFRF allocations may transfer funds to a “private nonprofit organization … a Tribal organization … a public benefit corporation involved in the transportation of passengers or cargo, or a special-purpose unit of state or local government” as well as other constituent units of governments and other private entities.[3] Any such transferee is consequently a CSLFRF subrecipient and must comply with all regulations regarding the uses of such funds, including only using funds in manners determined to be eligible under the Final Rule, as well as subrecipient reporting requirements.[4] Additionally, the municipality is responsible for oversight of their subrecipients, as well as reporting upon the uses of the funds by the transferee as part of its regular CSLFRF reporting process.[5]

Note that the Final Rule maintains “that general economic development or workforce development, meaning activities that do not respond to negative economic impacts of the pandemic and rather seek to more generally enhance the jurisdiction’s business climate, would generally not be eligible under this eligible use category.”[6]

2. Tourism:

A CSLFRF recipient may provide aid to impacted industries, such as tourism, travel, and hospitality industries, to respond to the negative economic impacts of the pandemic. In the Final Rule, Treasury clarifies that aid to impacted industries should be limited to “businesses, attractions, business districts, and Tribal development districts that were operating prior to the pandemic and affected by required closures and other efforts to contain the pandemic.”[7] A recipient may also provide aid to support a “planned expansion or upgrade of tourism, travel and hospitality facilities delayed due to the pandemic.”[8]

The Final Rule specifies that aid may be used to implement COVID-19 response and infection prevention measures to enable safe resumption of tourism, travel, and hospitality services, such as:

• Improvements to ventilation;
• Physical barriers or partitions;
• Signage to facilitate social distancing;
• Provision of masks or personal protective equipment; and
• Consultation with infection prevention professionals to develop safe reopening plans. [9]

3. Small Businesses:

Under the Final Rule, small businesses need to be designated as either “impacted” or “disproportionately impacted” to be eligible to receive CSLFRF assistance to small businesses.[10]

The Final Rule defines a small business as one that “[h]as no more than 500 employees or, if applicable, the size standard in number of employees established by the Administrator of the Small Business Administration for the industry in which the business concern or organization operates,” and “[i]s a small business concern as defined in section 3 of the Small Business Act.”[11]

Municipalities may consider a number of factors to determine whether a small business has been impacted by the pandemic, including, but not limited to, decreased revenue or gross receipts; financial insecurity; increased costs; capacity to weather financial hardship; and challenges covering payroll, rent or mortgage, and other operating costs.[12] Assistance to small businesses that experienced such negative economic impacts may include loans or grants to mitigate financial hardship, such as by supporting payroll and benefits and costs to retain employees, and mortgage, rent, utility, and other operating costs, as well as technical assistance, counseling, or other services to support business planning.[13]

Disproportionately impacted small businesses include those operating in Qualified Census Tracts, operated by Tribal governments or on Tribal lands, or operating in the U.S. territories.[14] Such businesses are eligible for assistance including rehabilitation of commercial properties, storefront improvements and façade improvement; technical assistance, business incubators, and grants for start-up or expansion costs for small businesses; and support for microbusinesses, including financial, childcare, and transportation costs.[15]

Additionally, Treasury notes that “recipients may also designate a class of small businesses that experienced a negative economic impact or disproportionate negative economic impact (e.g., microbusinesses, small businesses in certain economic sectors), design an intervention to fit the impact, and document that the individual entity is a member of the class.”[16] For more information on designating a class of small businesses that experiences a negative or disproportionate negative economic impact from the COVID-19 public health emergency and designing a response to these harms, see pages 21-27 of the Final Rule.[17]

Treasury notes that uses of funds under these parameters:

[S]hould be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced … uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses.[18]

4.  Revenue Loss

Revenue loss may also be an applicable route for recipients to consider when pursuing economic recovery. Municipalities are permitted to use CLSFRF funds for the provision of government services up to the extent of the reduction in revenue or take the standard allowance of $10 million.[19] Although the enumerated set of eligible uses does not include events focused on supporting tourism and small businesses, such events could be considered services traditionally provided by governments and would thus be eligible uses of funds designated for replacement of lost revenue.[20] For more details, see pages 12-20 and 30-34 of the Overview of the Final Rule.[21]

5.  Additional Considerations

Relative to Public Health and Economic Impact use, the Final Rule further requires state, local, and Tribal governments to:

[P]ublicly report assistance provided to private-sector businesses under this eligible use, including tourism, travel, hospitality, and other impacted industries, and its connection to negative economic impacts of the pandemic. Recipients also should maintain records to support their assessment of how businesses were affected by the negative economic impacts of the pandemic and the aid provided in response to these impacts.[22]

Last Revised: April 1, 2022

What steps should a municipality take when planning how to allocate ARP funds?

Below are a few non-exhaustive steps municipalities can take to prepare for the distribution of funds: 

(1) Assess your government’s potential needs and uses for ARP funds:

Complete an Unmet Needs Assessment / Gap Analysis – As a first step, municipalities should (i) identify unmet needs in current and ongoing COVID-19 response and recovery operations; (ii) determine which COVID-19 response and recovery costs meet the municipality’s operational budgets (and which costs exceed the operational budgets); and (iii) determine which of those needs cannot be covered through additional funding sources provided through previous COVID-19 legislation, FEMA Public Assistance, or private funding sources. Examples of eligible uses for COVID-19 mitigation and prevention described in the Final Rule include: 

• vaccination programs;
• medical care;
• testing;
• contact tracing;
• support for isolation or quarantine;  
• support for vulnerable populations to access medical or public health services;
• public health surveillance (e.g., monitoring case trends, genomic sequencing for variants);
• enforcement of public health orders;
• public communication efforts;
• enhancement to health care capacity, including through alternative care facilities;
• purchases of personal protective equipment;
• support for prevention, mitigation, or other services in congregate living facilities (e.g., nursing homes, incarceration settings, homeless shelters, group living facilities) and other key settings like schools;
• ventilation improvements in congregate settings, health care settings, or other key locations;
• enhancement of public health data systems;
• public health responses; and
• capital investments in public facilities to meet pandemic operational needs, such as physical plant improvements to public hospitals and health clinics or adaptations to public buildings to implement COVID-19 mitigation tactics.[1]

Examples of eligible uses for COVID-19 medical expenses described in the Final Rule include: 

• costs related to medical care provided directly to an individual due to COVID-19 infection (e.g., treatment) or a potential infection (e.g., testing);
• medical costs to uninsured individuals;
• deductibles, co-pays, or other costs not covered by insurance;
• costs for uncompensated care at a health provider;
• emergency medical response costs; and
• excess health insurance costs due to COVID-19 medical care.[2]

Identify Capital Improvement Priorities – Municipalities should consider identifying existing capital plans that could be expedited through ARP funding and would assist the community in recovering from the COVID-19 public health emergency. Costs for water, sewer, and broadband infrastructure projects are included as allowable uses within the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”).[3] Certain other capital improvement projects may be funded using the Replacing Lost Public Sector Revenue Expenditure Category (discussed in greater detail below).

Address Budget Impacts Through Revenue Loss Reimbursement – Municipalities can identify anticipated loss of revenue projections towards which CSLFRF funds may be applied. The U.S. Department of the Treasury’s (“Treasury)” Final Rule offers municipalities a standard allowance for revenue loss of $10 million, or recipients can choose to follow the established methodology to calculate its reduction in revenue.[4] If taking the latter approach, recipients compute the extent of their reduction in revenue by comparing their actual revenue to an alternative revenue number which represents what could have been expected to occur in the absence of the pandemic.[5]

Assess and Catalog Available Funding to Prioritize Needs – Municipalities should identify all available funding to create a strategy that defines when and how funds should be used, from most to least restrictive, to maximize all resources. Short-term and long-term fiscal impact of fund uses should also be considered. Cities should develop a fund deployment strategy that: (i) positively influences their credit rating; (ii) enables them to finance new projects; and (iii) assists in refinancing of existing debt.

(2) Engage stakeholders to identify priorities and additional unmet needs:

Coordinate with Community Partners – Municipalities should consider working with community partners in response to the COVID-19 public health emergency. Municipalities can receive feedback and strategic direction from community partners to identify ways they can support the community’s recovery, leverage existing partnerships and funding opportunities, and maximize the impact of ARP funds. In certain circumstances, CSLFRF funding may be shared with subrecipients responding to the COVID-19 public health emergency for both new and existing programs.[6]

Consider Public Engagement Opportunities – Municipalities should consider holding public hearings to obtain feedback from residents on ways to best serve the community in responding to and recovering from the COVID-19 pandemic.

(3) Prepare to Take Potential Certification Steps:

Certification for Metropolitan Cities – Metropolitan cities (generally populations over 50,000) can now apply to receive funds directly through the Treasury Submission Portal, and individuals applying on behalf of their municipality will be asked to provide the following information, at a minimum:

1. Jurisdiction name, taxpayer ID number, DUNS Number, and address.
2. Authorized representative name, title, and email.
3. Contact person name, title, phone, and email.
4. Funds transfer information, including recipient’s financial institution, address, phone, and routing number and account number.
5. Completed certification document (to be signed by the authorized representative).[7]

Certification for Non-Entitlement Cities – Non-entitlement cities are subject to rules and regulations of their state and generally are expected to receive guidance and payment from their state within 30 days of the state’s receipt of CSLFRF funds.[8]

(4) Assess Available Resources to Manage ARP Funds:

Municipalities in receipt of ARP funds are also responsible for ensuring proper oversight and management of funds. Based on each municipality’s unmet needs, additional internal resources may be required to monitor the implementation of ARP funds. Municipalities should assess internal resources and consult staff with significant experience to determine if there are any limitations or gaps in the support staff’s capabilities.

Considerations for Tribal Governments

In addition, Tribal governments should be aware of and prepare for the Treasury guidance regarding the disbursement in two tranches of Fiscal Recovery Funds specific to Tribes. Treasury’s CSLFRF Frequently Asked Questions (“FAQs”) document addressed this and then further refined this topic.[9]

The $1.9 trillion ARP funds are administered by numerous federal agencies, each of which sets its own rules regarding allowable uses of the funds. Distribution methodologies, application methods, and allowable uses vary from program to program. Some ARP funds may be received directly or indirectly by municipalities, as outlined below.

What steps should my municipality consider in developing a plan for use of the ARP funds?