Program

COVID-19 Federal Assistance e311

Topics

FEMA Funding, Vaccine Distribution

Which resources are available for vaccine efforts, including but not limited to distribution, incentives, and community engagement? In addition, can you summarize resources available for vaccine efforts via the Federal Emergency Management Agency?

There are multiple avenues for municipalities to receive funding for vaccination efforts, including: (i) FEMA Public Assistance (“PA”) funding; (ii) grants provided through the Centers for Disease Control and Prevention (“CDC”); and (iii) the Coronavirus State and Local Fiscal Recovery Fund (“CSLFRF”) which is provided through the American Rescue Plan Act of 2021 (“ARP”). These avenues address vaccine incentive programs and cover costs related to local vaccination efforts.

Importantly, municipalities should strongly consider using funding from more restrictive programs such as FEMA PA before tapping into sources that provide more flexibility, such as CSLFRF funding.

It is advisable to consider FEMA PA (which is not capped or competitive) as the priority fund for any eligible activities not already funded by private insurance programs or the CDC.[1] Notably, FEMA has already provided more than $4.47 billion for expenses related to COVID-19 vaccination at 100% federal cost share.[2] If eligible expenditures under FEMA PA are exhausted, municipalities can then pursue other funding sources for expenditures ineligible for FEMA reimbursement.

The CDC is actively funding state, local, and territorial public health organizations responding to the COVID-19 pandemic, including vaccination efforts. The CDC has received supplemental funds through the Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020; the Coronavirus Aid, Relief and Economic Security Act of 2020; the Paycheck Protection Program and Health Care Enhancement Act; the Coronavirus Response and Relief Supplemental Appropriations Act of 2021; and most recently, the ARP. The CDC is awarding funding received through these congressional appropriations to jurisdictions nationwide.[3] The ARP authorizes $130.2 billion in funds specifically allocated for local governments as a separate appropriation pursuant to CSLFRF.[4]

Municipalities should focus efforts on coordinating with their respective state public health agencies, which predominantly serve as the pass-through entity for CDC funding. Working closely with the pertinent state public health agency will help to prevent depletion of the more flexible CSLFRF funding and will allow tapping into the direct state and federal funding for specific vaccination purposes.

The ARP separately authorizes an additional $7.5 billion as “[f]unding for COVID-19 Vaccine Activities at the [CDC].”[5] The ARP has designated funds to be available to the CDC specifically for such purposes as improving nationwide vaccine distribution and delivering technical support to local governments. As defined under this authority, “technical assistance” provides a host of vaccine efforts for municipalities, including:

  • distribution and administration of vaccines;
  • expansion of community vaccination centers;
  • deployment of mobile vaccination areas;
  • enhancement of data sharing and systems that increase vaccine efficiency, effectiveness, and uptake;
  • facility enhancements;
  • communications with the public; and
  • transportation of individuals to facilitate vaccination.[6]

The U.S. Department of the Treasury’s (“Treasury”) Interim Final Rule (the “Rule”) specifically includes “[e]xpenses related to COVID-19 vaccination programs and sites, including staffing, acquisition of equipment or supplies, facilities costs, and information technology or other administrative expenses” as an eligible use of CSLFRF.[7]

As described in Treasury’s CSLFRF Frequently Asked Questions (“FAQ”) to the Rule, CSLFRF funds may also be used to fund programs that provide incentives which are designed to: (i) influence people who would otherwise not get vaccinated; or (ii) assist people to get vaccinated more quickly, so long as the costs are reasonably proportional to the expected health benefit.[8] For example, Massachusetts is providing fully vaccinated residents who are 18 or older a chance to win one of five $1 million prizes, while those between the ages of 12 and 17 will be eligible to win one of five $300,000 scholarship grants in order to drive increases in vaccinations.[9] In New Jersey, the Governor’s Office launched the “Shot and a Beer” program to also encourage their eligible population to get vaccinated.[10]

 

Last Updated: August 2, 2021

[1] FEMA, Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 93-288 as Amended, Section 312, at 17-18, available at: https://www.fema.gov/sites/default/files/2020-03/stafford-act_2019.pdf.

[2] FEMA, “FEMA COVID-19 Vaccination Update,” available at: https://www.fema.gov/press-release/20210329/fema-covid-19-vaccination-update.

[3] CDC COVID-19 State, Tribal, Local, and Territorial Funding, available at: https://www.cdc.gov/budget/fact-sheets/covid-19/funding/index.html. See also “CDC Awards $3 Billion to Expand COVID-19 Vaccine Programs” available at: https://www.cdc.gov/media/releases/2021/p0407-covid-19-vaccine-programs.html.

[4] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Sections 602 and 603, available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5.

[5] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Section 262, available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5.

[6] Id.

[7] Treas. Reg. 31 CFR 35 at 138, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[8] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) – FAQ #2.12, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf

[9] National Governors Association, “Covid-19 Vaccine Incentives,” available at https://www.nga.org/center/publications/covid-19-vaccine-incentives/.

[10] Id.

Program

COVID-19 Federal Assistance e311

Topics

Housing & Rental Assistance, Program Administration

Would the following done in an effort to support or obtain affordable and attainable housing be eligible uses under the ARP: (i) purchasing vacant land; (ii) or conveying vacant land to non-profit entities?

Pursuant to guidance issued by the U.S. Department of the Treasury (“Treasury”), the purchase of vacant land in support of affordable housing may be permitted if the proposed housing is directly related to reducing the negative economic impacts caused by the COVID-19 health crisis, particularly where it relates to the development of affordable housing. On the other hand, the conveyance of vacant land is not addressed by the Treasury guidance.

Treasury’s Interim Final Rule (the “Rule”) states that the economic impacts of COVID-19 have “likely been most acute in lower-income neighborhoods” with concentrated areas of housing insecurity.[1] The eligible services in the Rule include “affordable housing development to increase supply of affordable and high-quality living units.”[2]

Treasury’s Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Frequently Asked Question (“FAQ”) #2.11 addresses how the Rule helps certain populations and geographies disparately impacted by COVID-19:

In recognition of the disproportionate impacts of the COVID-19 virus on health and economic outcomes in low-income and Native American communities, the Interim Final Rule identifies a broader range of services and programs that are considered to be in response to the public health emergency when provided in these communities. Specifically, Treasury will presume that certain types of services are eligible uses when provided in a Qualified Census Tract (QCT), to families living in QCTs, or when these services are provided by Tribal governments.

Recipients may also provide these services to other populations, households, or geographic areas disproportionately impacted by the pandemic. In identifying these disproportionately-impacted communities, recipients should be able to support their determination for how the pandemic disproportionately impacted the populations, households, or geographic areas to be served.[3]

Eligible services under this consideration include:

Building stronger neighborhoods and communities, including: supportive housing and other services for individuals experiencing homelessness, development of affordable housing, and housing vouchers and assistance relocating to neighborhoods with higher levels of economic opportunity.[4]

Again, the guidance does not speak directly to conveyance of land to a non-profit, but rather the transfer of funds.

FAQ #1.8 clarifies how non-profit entities may receive ARP funding as subrecipients:  

Under section 602(c)(3) of the Social Security Act, a State, territory, or Tribal government 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.” Similarly, section 603(c)(3) authorizes a local government to transfer funds to the same entities (other than Tribal organizations). The Interim Final Rule clarifies that the lists of transferees in sections 602(c)(3) and 603(c)(3) are not exclusive, and recipients may transfer funds to constituent units of government or private entities beyond those specified in the statute. A transferee receiving a transfer from a recipient under sections 602(c)(3) and 603(c)(3) will be considered to be a subrecipient and will be expected to comply with all subrecipient reporting requirements.

The ARPA does not authorize Treasury to provide CSFRF/CLFRF funds directly to non-profit or private organizations. Thus, non-profit or private organizations should seek funds from CSFRF/CLFRF recipient(s) in their jurisdiction (e.g., a State, local, territorial, or Tribal government).[5]

Based on the above, a municipality may transfer funds to a non-profit under a subaward agreement for the general development of affordable or supportive housing.

However, the recipient must bear in mind that the guidance and particularly FAQ #2.11 indicates that unless the presumption of eligibility is met where certain services are rendered in a QCT, the services or programs must be in response to the public health emergency in conjunction with any other eligibility considerations.[6] 

Last Updated: June 29, 2021

[2] Id.

[4] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) — FAQ #2.11, at 7, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[5] Id., at FAQ #1.8, at 3-4.

[6] Id., at FAQ #2.11, at 7.

Program

COVID-19 Federal Assistance e311

Topics

Lost Revenue & Revenue Replacement

What is the proper course of action to take if a municipality identifies that it calculated lost revenue incorrectly? Can the funds be put back in the reserves?

Municipalities should follow the revenue calculation guidelines identified in the American Rescue Plan Act of 2021 (“ARP”)[1] and further explained in both the U.S. Department of the Treasury’s  (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Interim Final Rule (the “Rule”)[2] and Treasury’s CSLFRF Frequently Asked Questions (“FAQs”) as of July 19, 2021.[3]  If a municipality identifies lost revenue incorrectly and/or later identifies its lost revenue was miscalculated or overcalculated, a municipality will need to reclassify the corresponding “re-identified” municipal funds into an appropriate municipal subaccount where the calculation error occurred.

Revenue Loss Re-Calculation

While municipalities should always apply their internal financial controls to ensure lost revenue is calculated correctly, Treasury provides municipalities with the opportunity to further identify revenue loss which was miscalculated or overcalculated, and to re-calculate that revenue loss. Treasury appears to recognize that the COVID-19 pandemic can affect economies at different points in time, stating in the Rule:

[R]ecipients will have the opportunity to re-calculate revenue loss at several points throughout the program, recognizing that some recipients may experience revenue effects with a lag. This option to re-calculate revenue loss on an ongoing basis should result in more support for recipients to avoid harmful cutbacks in future years.[4]

In addition, the FAQs state that “recipients should calculate the extent of the reduction in revenue as of four points in time: December 31, 2020; December 31, 2021; December 31, 2022; and December 31, 2023.”[5]

In the event of a miscalculation or overcalculation, municipalities should follow their internal budgetary procedures designated for reclassifying ineligible costs from the financial accounts identified for CSLFRF expenditures into or returning to the appropriate municipal fund subaccount(s). This reclassification explanation should be documented in accordance with internal financial control mechanisms, rules, procedures and relevant Treasury and program rules. Notification to Treasury of the miscalculation should be included as a part of the initial interim report, or the quarterly or annual Project and Expenditure reports (which include subaward reporting, and in some cases annual Recovery Plan reports). The municipality should maintain accounting records to assist with compiling and reporting accurate and compliant financial data in accordance with the appropriate accounting standards and principles.[6] 

Use of Funds

The Rule gives municipalities broad latitude to use funds for the provision of government services. It is recommended that the FAQs[7] and the Rule[8] are reviewed when determining eligible/ineligible uses.[9]

As a reminder, Treasury’s CSLFRF Compliance and Reporting Guidance[10] requires municipalities to take several steps to ensure that funds are used for permitted activities. Municipalities are advised to carefully review the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200)[11] and any additional regulatory and statutory requirements applicable to the funding stream it is utilizing.

Last Revised: July 27, 2021

[1] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5.

[3] Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (as of July 19, 2021) – FAQ #3.4, at 14, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[4] Treas. Reg. 31 CFR 35, at 118-119, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[5] Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (as of July 19, 2021) – FAQ #3.4, at 14, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[6] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds, Compliance and Reporting Guidance, at 9, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[7] Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (as of July 19, 2021) – FAQ #3.8, at 15, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf; see also id., at FAQ #2.1, at 4.

[8] Treas. Reg. 31 CFR 35, at 9, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf; see also Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (as of July 19, 2021) – FAQ #3.8, at 15, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[9] Id., at FAQ #8, at 34.

[10] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds, Compliance and Reporting Guidance, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[11] Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200), available at: https://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title02/2cfr200_main_02.tpl.

Program

COVID-19 Federal Assistance e311

Topics

Due Diligence & Fraud Protection

What documentation is a municipality required to supply in order to receive funds? What is the due date for the documentation?

Pursuant to its commitment to providing guidance and instructions on the reporting requirements,[1] on November 15, 2021, the United States Department of the Treasury (“Treasury”) published Version 2.1 of the Compliance and Reporting Guidance (“Reporting Guidance”) for CSLFRF.[2] The Reporting Guidance clarifies the compliance responsibilities of CSLFRF recipients and lists three reports that recipients may need to provide by specified deadlines, namely: 

  • Interim Report: “Provides an initial overview of status and uses of funding. This is a one-time report.”
  • Project and Expenditure Report: “Report on projects funded, expenditures, and contracts and subawards over $50,000, among other information.”
  • Recovery Plan Performance Report: “The Recovery Plan Performance Report (“Recovery Plan”) will provide information on the projects that large recipients are undertaking with program funding and how they plan to ensure program outcomes are achieved in an effective, efficient, and equitable manner. It will include key performance indicators identified by the recipient and some mandatory indicators identified by Treasury. The Recovery Plan will be posted on the website of the recipient as well as provided to Treasury.”[3]

Recipients will submit required reports via the Treasury Reporting CSLFRF portal.[4] On August 9, 2021, Treasury published updated guidance on submitting reports via the Portal, including the policy and technical requirements for entering information.[5]

Treasury’s Reporting Guidance currently includes a graphic, including due dates, describing reporting requirements for three reports, delineated by CSLFRF recipient type as follows:[6]

Treasury’s Reporting Guidance

The Reporting Guidance sets a deadline of August 31, 2021, for recipients to provide the one-time Interim Report on CSLFRF expenditures and obligations; this deadline applies to states, U.S. territories, metropolitan cities, counties, and Tribal governments (recipients other than Non-Entitlement Units of Local Government (“NEUs”)).[7] If funding was received after October 15, 2021, the Interim Report may be submitted 60 days after receiving funds. The Interim Report must reflect a recipient’s expenditures and obligations from the date of award to July 31, 2021, broken down by Expenditure Category (which can be selected from a menu of available options on the CSLFRF portal).[8] For purposes of reporting in the CSLFRF portal, an “expenditure” is an amount incurred as a liability of the entity (e.g., the service has been rendered or the good has been delivered to the entity),[9] and an “obligation” encompasses orders placed for property and services, contracts and subawards made, and similar transactions that require payment.[10] Appendix 1 of the Reporting Guidance contains the Expenditure Categories list.[11]

Treasury also establishes a requirement for Project and Expenditure Reports. The information required for these reports includes information regarding Projects, Expenditures, Project Status, Project Demographic Distribution, Subawards, Civil Rights Compliance, Programmatic Data, and NEU Distributions.[12] Additional information requirements are found on pages 14 to 22 of the Reporting Guidance. For all Tribal Governments that received over $30 million, as well as states, U.S. territories, and metropolitan cities and counties that either (1) have a population that exceeds 250,000 residents or (2) have fewer than 250,000 residents but received more than $10 million in CSLFRF funding, the first report is due January 31, 2022, and subsequent reports are to be filed quarterly as follows:[13]

Quarterly Project and Expenditure Reports

For NEUs, Tribal Governments that received less than $30 million in CSLR, and metropolitan cities and counties with populations lower than 250,000 residents and that receive less than $10 million in CSLFRF, the second Project and Expenditure Report is due April 30, 2022, and subsequent reports are due annually thereafter,[14] as follows:

Annual Project and Expenditure Reports

Treasury also requires states, U.S. territories, metropolitan cities, and counties with more than 250,000 residents to submit Recovery Plan Performance Reports and to post copies to the entity’s website by August 31, 2021, and annually thereafter. This report will provide the public and Treasury with information on the recipient’s planned and ongoing projects funded by its CSLFRF allocation and describe the recipient’s plans to achieve program outcomes effectively, efficiently, and equitably.[15] The first report will cover the period ending July 31, 2021. Treasury sets the following timeline for the submission of Recovery Plan Performance Reports:[16]

Recovery Plan Performance Reports

On November 5, 2021, Treasury released the most comprehensive revisions to the Compliance and Reporting Guidance for the SLFRF Program to date. The guidance provides additional detail and clarification for each recipient’s compliance and reporting responsibilities and should be read in concert with the Award Terms and Conditions, the authorizing statute, the Rule, and other regulatory and statutory requirements.

The Treasury is now accepting the Interim Report and the Recovery Plan Performance Report through Treasury’s Portal. Recipients should refer to Treasury’s Portal for Recipient Reporting, which includes step-by-step guidance for submitting the required SLFRF reports using Treasury’s Portal.

The Treasury also indicated that a forthcoming User Guide will provide information on submitting Project and Expenditure Reports. Additional resources located on its respective Recipient Compliance and Reporting Responsibilities page include the following:

It is important to note that the NEU Template is not the final version and should not be used for submission.[17] Recipients should use the template that will be posted in the Treasury Submission Portal once it opens to report information.[18]

Municipalities should conduct an in-depth review of the Reporting Guidance, as it provides additional detail regarding the information required to be included in each of these reports and is revised to reflect further reporting requirements as they become available.

Last Revised: November 19, 2021

[1] Previously, the Supplementary Information section preceding the Rule discusses Reporting requirements at a general level, noting, “Treasury will provide additional guidance and instructions on the reporting requirements…at a later date.” Treas. Reg. 31 CFR 35 at 112, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[3] Id., at 12.

[4] Id., at 13 (see footnotes).

[5] Department of the Treasury, Treasury’s Portal for Recipient Reporting: State and Local Fiscal Recovery Funds, available at https://home.treasury.gov/system/files/136/SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf.

[6] Department of Treasury, Coronavirus State and Local Fiscal Recovery Funds—Compliance and Reporting Guidance at 13, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[7] Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds—Compliance and Reporting Guidance, at 13, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[9] Id., (see footnotes).

[10] Id.

[11] Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds—Compliance and Reporting Guidance, at 30-31, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[12] Id., at 16-23.

[13] Id., at 15-16.

[14] Id., at 16.

[15] Id., at 23-30.

[16] Id., at 23.

[17] Department of the Treasury, Draft Non-entitlement Units of Government (NEU) Template, available at: https://home.treasury.gov/system/files/136/NEU-Distribution-Templates.xlsx.

[18] Id.

Program

COVID-19 Federal Assistance e311

Topics

Lost Revenue & Revenue Replacement

Should federal, state, and local grants be included when calculating revenue loss for the ARP?

 

For the purpose of calculating lost revenue pursuant to the American Rescue Plan Act of 2021 (“ARP”) and the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), intergovernmental transfers from the federal government should be excluded from general revenue, while intergovernmental transfers from state and local governments can generally be included unless it is a pass-through transfer of funding from the federal government.

According to the U.S. Department of the Treasury’s (“Treasury”) Interim Final Rule (the “Rule”), the definition of general revenue for purposes of the revenue loss calculation “excludes intergovernmental transfers from the Federal government, including Federal transfers made via a State to a local government pursuant to the [CARES Act of 2020’s Coronavirus Relief Fund (“CRF”)] or as part of the Fiscal Recovery Funds.” In particular, the Rule states:

[T]he term “general revenue” includes intergovernmental transfers between State and local governments, but excludes intergovernmental transfers from the Federal government, including Federal transfers made via a State to a local government pursuant to the CRF or as part of the Fiscal Recovery Funds…. Accordingly … the definition of general revenue would include intergovernmental transfers from States or local governments other than funds transferred pursuant to ARPA, CRF, or another Federal program.[1]

The US Census Bureau’s Annual Survey of State and Local Government Finances provides the basis of Treasury’s definition of “general revenue” given in the Rule.[2] Pursuant to the Rule, municipalities can consider intergovernmental transfers between state and local governments as intergovernmental revenue.[3]

Therefore, for the purpose of calculating revenue loss, municipalities must exclude funds transferred from the federal government and may consider including intergovernmental transfers between state and local governments, with the exception of funds from ARP, CRF, or other federal programs.

With regard to identifying intergovernmental revenue:

In calculating General Revenue, recipients should exclude all intergovernmental transfers from the federal government. This includes, but is not limited to, federal transfers made via a state to a locality pursuant to the Coronavirus Relief Fund or Fiscal Recovery Funds. To the extent federal funds are passed through states or other entities or intermingled with other funds, recipients should attempt to identify and exclude the federal portion of those funds from the calculation of General Revenue on a best-efforts basis.[4]

This underscores Treasury’s position that all intergovernmental transfers from the federal government must be excluded from recipients’ and sub-recipients’ calculations of revenue loss.

Last Updated: July 15, 2021

[3] U.S. Bureau of the Census Government Finance and Employment Classification Manual (Updated 2006), at 4-6, available at: https://www2.census.gov/govs/pubs/classification/2006_classification_manual.pdf.

[4] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 14, 2021) - FAQ #3.13, at 16-17, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

Program

COVID-19 Federal Assistance e311

Topics

Lost Revenue & Revenue Replacement

When excluding certain revenues for revenue loss calculations, must a municipality also exclude those same revenues from its base year?

When excluding certain revenues for the revenue loss calculation under the American Rescue Plan Act’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CLFRF”),[1] a municipality will likely have to exclude those same revenues from the base year.

The U.S. Department of the Treasury’s (“Treasury”) Interim Final Rule (the “Rule”) adopts a definition of “General Revenue” based on the concept of “General Revenue from Own Sources.”[2] This is the case as explained in the Census Bureau’s Government Finance and Employment Classification manual, with limited exceptions including the treatment of certain intergovernmental transfers and liquor store revenues.[3] This definition ensures consistency when assessing which revenues to  include and exclude when calculating revenue loss both in the base year and in future years. In a recent update to its Coronavirus State and Local Recovery Fund (“CSLFRF”) Frequently Asked Questions, Treasury included an Appendix that municipalities can review to assist in their determination of which of their respective revenue streams qualifies as General Revenue.[4]

The Rule establishes the following process for calculating revenue:[5]

Recipients should calculate the extent of the reduction in revenue as of four points in time: December 31, 2020; December 31, 2021; December 31, 2022; and December 31, 2023. To calculate the extent of the reduction in revenue at each of these dates, recipients should follow a four-step process:

Step 1: Identify revenues collected in the most recent full fiscal year prior to the public health emergency (i.e., last full fiscal year before January 27, 2020), called the base year revenue.

Step 2: Estimate counterfactual revenue, which is equal to base year revenue * [(1 + growth adjustment) ^( n/12)], where n is the number of months elapsed since the end of the base year to the calculation date, and growth adjustment is the greater of 4.1 percent and the recipient’s average annual revenue growth in the three full fiscal years prior to the COVID-19 public health emergency.

Step 3: Identify actual revenue, which equals revenues collected over the past twelve months as of the calculation date.

Step 4: The extent of the reduction in revenue is equal to counterfactual revenue less actual revenue. If actual revenue exceeds counterfactual revenue, the extent of the reduction in revenue is set to zero for that calculation date.

Last Updated: July 14, 2021

[1] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5.

[2] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 24, 2021), – FAQ #3.3, page 13, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[3] U.S. Bureau of the Census, Government Finance and Employment Classification Manual, October 2006, 3-4, available at: https://www2.census.gov/govs/pubs/classification/2006_classification_manual.pdf.

[4] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 24, 2021), page 35, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[5] Treas. Reg. 31 CFR Part 35 at 58, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

Program

COVID-19 Federal Assistance e311

Topics

Program Administration

Would an incentive program for residents to connect to existing sewer lines be considered an eligible use of ARP funding?

Guidance issued by the U.S. Department of the Treasury (“Treasury”) regarding the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) of the American Rescue Plan Act (“ARP”) does not expressly indicate whether municipalities using ARP funds for the purpose of establishing or operating an incentive program to connect residents to existing sewer lines would be an eligible use of funds.

According to the CSLFRF Frequently Asked Questions, municipalities have some leeway in determining whether a water, sewer, or broadband project is eligible:

Recipients do not need approval from Treasury to determine whether an investment in a water, sewer, or broadband project is eligible under CSFRF/CLFRF. Each recipient should review the Interim Final Rule (IFR), along with the preamble to the Interim Final Rule, in order to make its own assessment of whether its intended project meets the eligibility criteria in the IFR. A recipient that makes its own determination that a project meets the eligibility criteria as outlined in the IFR may pursue the project as a CSFRF/CLFRF project without pre-approval from Treasury. Local government recipients similarly do not need state approval to determine that a project is eligible under CSFRF/CLFRF. However, recipients should be cognizant of other federal or state laws or regulations that may apply to construction projects independent of CSFRF/CLFRF funding conditions and that may require pre-approval.

For water and sewer projects, the IFR refers to the Environmental Protection Agency (EPA) Drinking Water and Clean Water State Revolving Funds (SRFs) for the categories of projects and activities that are eligible for funding. Recipients should look at the relevant federal statutes, regulations, and guidance issued by the EPA to determine whether a water or sewer project is eligible. Of note, the IFR does not incorporate any other requirements contained in the federal statutes governing the SRFs or any conditions or requirements that individual states may place on their use of SRFs.[1]

Under the guidance given by the EPA for SRFs (which, as noted above, Treasury has stated should guide CSLFRF recipients):

States may customize loan terms to meet the needs of small and disadvantaged communities, or to provide incentives for certain types of projects. Beginning in 2009, Congress authorized the CWSRFs to provide further financial assistance through additional subsidization, such as grants, principal forgiveness, and negative interest rate loans. Through the Green Project Reserve, the CWSRFs target critical green infrastructure, water and energy efficiency improvements, and other environmentally innovative activities.[2]

If the municipality determines that an incentive program meets the intended eligibility criteria to fulfill a sewer infrastructure project and can be appropriately documented, the incentive program could conceivably satisfy eligibility requirements for CSLFRF funding. 

In addition, Treasury has advised that certain incentive programs—specifically: (1) motivating people to get vaccinated; and (2) to return to work—are eligible uses of funds.[3] 

When justifying a potential incentive program, the municipality should identify how the “costs are reasonably proportional to the expected public health benefit.”[4] Municipalities should note that the guidance Treasury has provided to date is still in the interim phase and municipalities may wish to consider waiting until the final rule’s issuance (31 CFR Part 35) before finalizing plans to implement an incentive program encouraging residents to connect to existing sewer lines.

Last Updated: July 14, 2021

[1] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 24, 2021), – FAQ #6.7 [emphasis added], available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[2] Environmental Protection Agency, Learn about the Clean Water State Revolving Fund (CWSRF) [emphasis added], available at: https://www.epa.gov/cwsrf/learn-about-clean-water-state-revolving-fund-cwsrf#eligibilities.

[3] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 24, 2021), – FAQ #2.12, 2.13, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[4] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 24, 2021), – FAQ #2.12, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

Program

COVID-19 Federal Assistance e311

Topics

Program Administration

May municipalities use ARP funds to supplement salaries for municipal employees whose salaries were reduced in 2020 due to the COVID-19 pandemic?

Neither the text of the American Rescue Plan Act of 2021 (“ARP”) nor the U.S. Department of the Treasury’s (“Treasury”) affiliated Interim Final Rule (the “Rule”) on ARP’s Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF” or “Fiscal Recovery Funds”) provides an explicit option for municipalities to supplement the salaries of municipal employees who faced salary reductions in 2020 due to the COVID-19 pandemic.

However, a municipality could argue that a notable exception exists for workers who performed essential services during the COVID-19 public health emergency.  

The ARP and Treasury’s Rule authorize recipients to use CSLFRF to provide “premium pay” to essential workers up to a statutory cap, depending on several factors and limitations, which are discussed in more detail below.[1] Workers who are not essential would not fall into this category and would thus not be eligible. Notably, the ARP does not define or address “back-pay,” “supplemental pay,” or “salary reductions,” specifically. Only premium pay, rather than an employee’s entire or reduced salary, would be eligible for CSLFRF, and only in cases where the employee qualifies as an essential worker during the COVID-19 public health emergency.[2]

The ARP defines “premium pay” as an additional amount up to $13 per hour paid to an eligible worker for work during the COVID-19 pandemic. “Premium pay” is capped to a maximum of $25,000 for any single eligible worker.[3] The ARP defines eligible workers as those “needed to maintain continuity of operations of essential critical infrastructure sectors and additional sectors” and that are designated as “critical to protect[ing] the health and well-being of the residents [by] each chief executive officer of a metropolitan city, non-entitlement unit of local government, or county.”[4] Guidance from Treasury further clarifies that essential workers are those who “regularly perform in-person work, interact with others at work, or physically handle items handled by others.”[5] Notably, this does not include any work performed while teleworking from a residence.[6] The Rule identifies 24 categories of “critical” infrastructure sectors, including health care and emergency response. Workers in these sectors will likely qualify to receive premium pay in most circumstances.[7]

According to Treasury’s July 14, 2021 Frequently Asked Questions (“FAQs”), a recipient may consider a “public health and safety employee” to be “entirely devoted to mitigating or responding to the COVID-19 public health emergency, and therefore fully covered, if the employee, or his or her operating unit or division, is primarily dedicated (e.g., more than half of the employee’s time is dedicated) to responding to the COVID-19 public health emergency.”[8] Police and Fire department employees generally fall within this group.[9] The FAQs also state that CSLFRF recipients may “use presumptions for assessing whether an employee, division, or operating unit is primarily dedicated to COVID-19 response.”[10] 

Treasury encourages recipients to consider providing premium pay retrospectively for work performed during the pandemic (from January 27, 2020), but notes that the obligation to provide such pay must not have been incurred by the recipient prior to March 3, 2021.[11] Additionally, the Rule “emphasizes the need for recipients to prioritize premium pay for lower-income workers.”[12] Treasury’s guidance sets limits that appear to further that priority, noting that “premium pay that would increase a worker’s total pay above 150% of the state or county average annual wage [whichever is greater] requires specific justification as to how it responds to the needs of these workers.”[13]

Notably, Treasury has stated that recipients should maintain records to support their assessments, such as “payroll records, attestations from supervisors or staff, or regular work product or correspondence demonstrating work on the COVID-19 response.”[14] Treasury also advises recipients to “periodically reassess their determinations.”[15] Municipalities may want to track premium pay for employees separate from employees’ regular payroll through a separate billing code or account to ensure proper recordkeeping. A failure to maintain accurate records could lead to a clawback after the funds are received.

In addition to its explicit authorization of premium payments to eligible workers, the ARP authorizes certain assistance to individuals impacted by COVID-19. This can include direct financial and programmatic assistance to individuals experiencing economic harm (such as loss of employment or reduction in compensation) as a result of the pandemic.[16] This is applicable in the following areas:

  1. Assistance to Unemployed Workers, “including job training, for individuals who want and are available for work, including those who have looked for work sometime in the past 12 months or who are employed part time but who want and are available for full-time work.”[17]; and
  2. Assistance to Households, “including cash assistance programs, that respond to the COVID-19 public health emergency.”[18]

 

Last Updated: July 16, 2021

 

[1] Treas. Reg. 35 CFR 31 at 143, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.; see also American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Section 603(c)(1)(B)), available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#toc-H65C66E46488F4CB6ACD99E77DF090885.

[2] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions, as of July 14, 2021, FAQ#5.1, at 26-27, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[3] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Section 602(g)(3), available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#toc-H65C66E46488F4CB6ACD99E77DF090885.

[4] Id., at Section 603(g)(2).

[5] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 14, 2021) - FAQ#5.1, at 26, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[8] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 14, 2021) - FAQ#2.14, at 8, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[9] Id., at FAQ#2.15, at 9 (stating, “[p]ublic safety employees would include police officers (including state police officers), sheriffs and deputy sheriffs, firefighters, emergency medical responders, correctional and detention officers, and those who directly support such employees such as dispatchers and supervisory personnel”).

[10] Id., at FAQ#2.14, at 8.

[11] Id., at FAQ#4.7, at 20-21 (emphasis added).

[12] Id., at FAQ#5.1, at 26-27.; see also Treas. Reg. 31 CFR Part 35 at 49, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[13] Id.

[14] Id., at FAQ#2.14, at 8-9.

[15] Id.

[17] Id., at 140.

[18] Id., at 141.

Program

COVID-19 Federal Assistance e311

Topics

Lost Revenue & Revenue Replacement

Where a municipality’s sales tax rate was reduced in the base year for revenue calculation (leading to understated revenue loss), could an adjustment be made to compensate for the change in sales tax?

Likely not.  The U.S. Department of Treasury’s  (“Treasury”) Interim Final Rule (the “Rule”) states that a municipality may use funds derived from the American Rescue Plan Act of 2021’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) “for the provision of government services to the extent of the reduction in revenue experienced due to the COVID-19 public health emergency.”[1] Treasury’s associated Frequently Asked Questions (“FAQ”) establishes the specific guidance as to how to calculate lost revenues.[2]  A municipality can calculate its revenue loss by “comparing actual revenue to a counterfactual trend representing what could have been expected to occur in the absence of the pandemic.”[3]

Revenue loss is calculated using the “base year revenue” as the starting point for estimates of revenue growth absent the pandemic and then assumes growth at a constant rate in the subsequent years.[4]  The Rule defines base year revenue as “revenues collected in the most recent full fiscal year prior to the public health emergency (i.e., last full fiscal year before January 27, 2020).”[5]

Given this definition, municipalities should avoid adjusting baseline tax rates for the purpose of revenue loss calculations; amounts used in these calculations must remain true to the municipality’s actual revenue collected. Current guidance does not indicate that any adjustments should be made on the basis of policy changes and suggests that actual figures for ‘general revenues from own sources’ should be used.[6]

At the time of this writing, several municipalities have requested clarification from  Treasury regarding the treatment of tax policy changes for municipalities; further guidance regarding this issue may be forthcoming.

Last Updated: July 12, 2021

[1] U.S. Department of Treasury Coronavirus State and Local Fiscal Recovery Funds, 31 CFR Part 35 RIN 1505-AC77, at 51, https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[2] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions, as of May 10, 2021, at 12-16, https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf

[3] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds: Interim Final Rule at 50. https://public-inspection.federalregister.gov/2021-10283.pdf.

[4] Id.

[5] CSLFRF – Interim Final Rule: Treas. Reg. 35 CFR 31 at 58, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf. A similar reference leading to the same conclusion, can be found at Treas. Reg. 35 CFR 31 at 144, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[6] CSLFRF FAQs (as of June 24, 2021) – FAQ #3.5, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

Program

COVID-19 Federal Assistance e311

Topics

Fund Planning & Allocation, Lost Revenue & Revenue Replacement

Can a municipality transfer American Rescue Plan (“ARP”) Revenue Replacement funds into an operating fund and spend the ARP Revenue Replacement funds from the operating fund? Or must the funding and the expenditures remain in a separate grant fund?

Municipalities may earn interest on funds obtained through the American Rescue Plan Act of 2021 (“ARP”).

Under the U.S. Department of the Treasury’s (“Treasury”) Interim Final Rule (“the Rule”) to the ARP’s Coronavirus State and Local Fiscal Recovery Funds (“CSFRF” and “CLFRF”), municipalities are not subject to requirements to remit interest to Treasury as set forth in the Cash Management Improvement Act.[1] Further, the Rule’s associated Frequently Asked Questions (“FAQs”) state:

CSFRF/CLFRF payments made by Treasury to local governments and Tribes are not subject to the requirement of 2 CFR 200.305(b)(8)-(9) to maintain balances in an interest-bearing account and remit payments to the Treasury.[2]

Therefore, should municipalities choose to maintain CSFRF and CLFRF payments in a separate, interest-bearing account, even though it is not required under current guidance, they do not need to return earned interest to Treasury. Any interest earned on CSFRF and CLFRF is “not subject to program restrictions.”[3] As such, there are no restrictions from CSLFRF on how municipalities can spend this earned interest. For further references see Treasury’s Compliance and Reporting Guidance.[4]

States may also retain interest on payments for distribution to Non-entitlement Units of Local Government (“NEUs”) prior to the actual distribution of the funds to NEUs, “provided that the State adheres to the statutory requirements and Treasury’s guidance regarding the distribution of funds to NEUs.”[5]

The statutory requirements and guidance relating to the distribution of funds to NEUs can be found in the Treasury publication, “Coronavirus Local Fiscal Recovery Funds: Guidance on Distribution of Funds to Non-Entitlement Units of Local Government.”[6] Such interest is also “not subject to program restrictions”[7] and the Portal for Recipient Reporting for CSFRF and CLFRF.[8] 

Last Revised: August 20, 2021

[1] Treas. Reg. 31 CFR 35 at 102, n. 176, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[2] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) – FAQ #10.3, at 38, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[3] Id.

[4] Department of Treasury, “Coronavirus State and Local Fiscal Recovery Funds: Guidance on Recipient Compliance and Reporting Responsibilities,” available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[5] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) – FAQ #10.3, at 38, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[6] Department of the Treasury, “Coronavirus Local Fiscal Recovery Funds: Guidance on Distribution of Funds to Non-Entitlement Units of Local Government,” available at: https://home.treasury.gov/system/files/136/NEU_Guidance.pdf.

[7] Department of Treasury, Coronavirus State and Local Fiscal Recovery Funds: “Guidance on Recipient Compliance and Reporting Responsibilities,” available at https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[8] Department of Treasury, Treasury’s Portal for Recipient Reporting: State and Local Fiscal Recovery Funds, (as of August 9, 2021), at pages 47-48 available at https://home.treasury.gov/system/files/136/SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf.

Program

COVID-19 Federal Assistance e311

Topics

Compliance & Reporting

What are some good practices municipalities can follow to ensure that expenditures under the ARP fall under an eligible use?

Several good practices can help municipalities determine eligibility to use funds under the American Rescue Plan Act of 2021 (“ARP”).[1] Municipalities should:

  1. become familiar with the eligibility criteria under the ARP;
  2. take steps to seek and incorporate public input in the development of plans for the use of ARP funds;
  3. consider the possibility of transferring Fiscal Recovery Funds to other entities that can participate in recovery efforts; and
  4. become familiar with the Fiscal Recovery Funds reporting mandates.

Eligibility Criteria

ARP, P.L. 117-2, authorized the creation of the Coronavirus State Fiscal Recovery Fund (“CSFRF”) and the Coronavirus Local Fiscal Recovery Fund (“CLFRF”).[2] Subsections 602(c)(1) and 603(c)(1) state that funds may generally be used to:

a) 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;

b) respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers;

c) provide government services to the extent of the reduction in revenue due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency; and

d) make necessary investments in water, sewer, or broadband infrastructure.[3]

On May 17, 2021, the U.S. Department of the Treasury (“Treasury”) published its Interim Final Rule (the “Rule”).[4] In general, recipients and subrecipients of ARP assistance may use a flexible approach that sets guidelines on eligible uses of Fiscal Recovery Funds and provides local officials with broad discretion in their use of Fiscal Recovery Funds.[5] Subsections 602(e) and 603(e) of the Fiscal Recovery Fund authorize the recoupment of funds not used for eligible purposes. Municipalities must familiarize themselves with the ARP’s eligibility requirements.[6] On August 9, 2021, Treasury provided the Recovery Plan Template with a table for reporting expenditures in eligible use categories,[7] which will also help municipalities to organize projects.

Treasury’s July 19, 2021  updates to its Frequently Asked Questions (“FAQs”) provides additional information, including but not limited to the following:

  • Municipalities can review specific ineligible uses at FAQs #8.1 and #8.2 in Treasury’s July 19, 2021, FAQs.
  • Treasury’s FAQs #2.1-2.21 include an extensive discussion of the eligible uses of ARP funds in responding to the Public Health Emergency caused by the pandemic. 
  • FAQs #4.1-4.8 discuss eligible uses of ARP funds generally. 
  • FAQs #5.1-5.3 discuss the use of ARP funds for issues relating to Premium Pay for essential workers.
  • Finally, FAQs #6.1-6.12 discuss the eligible uses of ARP assistance to address water, sewer, and broadband eligibility considerations.[8]

Public Input

The Rule emphasizes the importance of seeking public input during the use of Fiscal Recovery Funds:

Implementation of the Fiscal Recovery Funds also reflect the importance of public input, transparency, and accountability […] Treasury urges State, territorial, Tribal, and local governments to engage their constituents and communities in developing plans to use these payments, given the scale of funding and its potential to catalyze broader economic recovery and rebuilding.[9]

The FAQs also state that “funds made available for the provision of governmental services (to the extent of a reduction in revenue) are intended to support direct provision of services to citizens,”[10] and that recipients may use funds to provide “loans or extension of credit”[11] to non-governmental entities to ensure delivery of these activities, or to provide other forms of support for disenfranchised members of the community who were negatively impacted by COVID-19.

Fiscal Recovery Fund Transfer Authority:

The Rule addresses the authority of recipients of Fiscal Recovery Funds to transfer funds to other entities:

The (ARP) authorizes State, territorial, and Tribal governments; counties; metropolitan cities; and nonentitlement units of local government […] to transfer amounts paid from the Fiscal Recovery Funds to a number of specified entities. By permitting these transfers, Congress recognized the importance of providing flexibility to governments seeking to achieve the greatest impact with their funds, including by working with other levels or units of government or private entities to assist recipient governments in carrying out their programs. This includes special-purpose districts that perform specific functions in the community, such as fire, water, sewer, or mosquito abatement districts.[12]

Fiscal Recovery Fund Reporting Requirements:

Municipalities must be familiar with the reporting requirements in all the applicable statutes. Subsection 602(d)(2) of the CSFRF authorization and subsection 603(d) of the CLFRF authorization both require recipients and subrecipients of ARP assistance to provide regular reports to Treasury about their use of the assistance. Municipalities must also follow all guidance and requirements outlined in Treasury’s June 24, 2021 “Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds.”[13] In determining eligible expenses, municipalities may also consult Figure 7 of the Recipient Portal Reporting Guide, released on August 9, 2021, which advises on how expenses should track eligible use. [14]

Last Revised: August 18, 2021

[1] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Section 603, available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#toc-H65C66E46488F4CB6ACD99E77DF090885.

[2] Id., at § 9901.

[3] Id., at § 9901, Subsections 602(c)(1) and 603(c)(1).

[5] Id., at 137-145. 

[6] Treas. Reg. 35 CFR 31, at 10-77, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[7] U.S. Department of the Treasury, Recovery Plan State and Local Fiscal Recovery Funds 202x Report, as of August 9, 2021, at 6-8, available at: https://home.treasury.gov/system/files/136/SLFRF-Recovery-Plan-Performance-Report-Template.docx.

[8] U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions as of July 19, 2021, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[10] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021), at FAQ#4.1 at 19, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[11] Id., at #4.11, at 25-26.

[12] Id., at 105. 

[13] U.S. Department of the Treasury, “Compliance and Reporting Guidelines”, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[14] U.S. Department of the Treasury, Treasury’s Portal for Recipient Reporting, State and Local Fiscal Recovery Funds, as of August 9, 2021, Figure 7 at 9, available at: https://home.treasury.gov/system/files/136/SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf.

Program

COVID-19 Federal Assistance e311

Topics

Lost Revenue & Revenue Replacement

Can a municipality use ARPA American Rescue Act (“ARP”) funds to pay lost revenue for a partner organization, like the City's Parking Authority, even where the partner organization is a separate entity?

The American Rescue Plan Act of 2021 (“ARP”) explicitly allows the transfer of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) from the recipient to certain organizations:

A metropolitan city, nonentitlement unit of local government, or county receiving a payment from funds made available under this section may transfer funds to a private nonprofit organization (as that term is defined in paragraph (17) of section 401 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11360(17)), a public benefit corporation involved in the transportation of passengers or cargo, or a special-purpose unit of State or local government.[1]  

Additionally, the U.S. Department of Treasury’s (“Treasury”) CSLFRF Interim Final Rule (the “Rule”) notes that the list of transferees listed above is non-exhaustive, and that other constituent units of government are eligible. The Rule states the following:

“State, local, territorial, and Tribal governments that receive a Federal award directly from a Federal awarding agency, such as Treasury, are “recipients.” A transferee receiving a transfer from a recipient under sections 602(c)(3) and 603(c)(3) will be a subrecipient. Subrecipients are entities that receive a subaward from a recipient to carry out a program or project on behalf of the recipient with the recipient’s Federal award funding. The recipient remains responsible for monitoring and overseeing the subrecipient’s use of Fiscal Recovery Funds and other activities related to the award to ensure that the subrecipient complies with the statutory and regulatory requirements and the terms and conditions of the award. Recipients also remain responsible for reporting to Treasury on their subrecipients’ use of payments from the Fiscal Recovery Funds for the duration of the award.”[2]

As stated above, any subrecipient of CSLFRF is bound to the same regulations and restrictions as the recipient. Moreover, the recipient is responsible for monitoring and oversight to ensure that the uses of these funds by the subrecipient falls under the eligible uses laid out by the Rule, as well as reporting on the uses of these funds as part of their regular CSLFRF reporting.[3]

Treasury further addresses this issue in its CSLFRF FAQ (updated June 24, 2021):

1.3. Are special-purpose units of government eligible to receive funds?

Special-purpose units of local government will not receive funding allocations; however, a state, territory, local, or Tribal government may transfer funds to a special-purpose unit of government. Special-purpose districts perform specific functions in the community, such as fire, water, sewer or mosquito abatement district.[4]

Last Updated: July 9, 2021

[1] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., Section 603 (c)(3) https://www.congress.gov/bill/117th-congress/house-bill/1319/text#HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5.

[2] Treas. Reg. 35 CFR 31 at 106, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[3] Ibid.

[4] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 24, 2021),  – FAQ #1.3, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.