After the revenue loss amount has been calculated, is it permissible to use funds for expenses incurred prior to March 3, 2021?

The U.S. Department of the Treasury’s (“Treasury”) American Rescue Plan Act (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule states that ARP funds may only be used for costs incurred within a specific time period, beginning March 3, 2021, with all funds obligated by December 31, 2024 and all funds spent by December 31, 2026.[1] Municipalities may not use CSLFRF funds to cover costs incurred prior to March 3, 2021.[2]

As specified in the Final Rule, municipalities must employ a “forward-looking” approach to use CSLFRF. The Final Rule states:

Treasury will retain March 3, 2021 as the first date when costs may be incurred, to provide for forward-looking or prospective use of funds and to align with the start date of the “covered period” as such term is used in section 602(c)(2)(A). The deadline for costs to be incurred – which the final rule clarifies means obligated – December 31, 2024, is specified in the ARPA statute, and Treasury will retain December 31, 2026 as the end of the period of performance to provide a reasonable amount of time for recipients to liquidate obligations incurred by the statutory deadline.[3]

However, while a municipality may only use CSLFRF to cover expenses incurred on or after March 3, 2021, costs for eligible infrastructure projects that were started prior to March 3, 2021, as well as assistance to households and retroactive premium pay, may be eligible so long as the recipient incurred the costs to which CSLFRF is being applied after March 3, 2021.[4] It should be noted that additional information may be provided when Treasury issues a new Frequently Asked Questions ("FAQ") specific to the Final Rule, as indicated in the Interim Final Rule FAQ updated simultaneously with the issuance of the Final Rule.[5]

Municipalities may wish to examine Federal Emergency Management Agency (“FEMA”) Public Assistance (“PA”) program as an alternative for certain COVID-related expenses incurred prior to March 3, 2021. As of November 9, 2021, the White House extended FEMA’s 100% reimbursement for COVID emergency protective measures and extended COVID Title 32 authorization at 100% cost share through April 1, 2022. This allows for retroactive 100% reimbursement of costs for eligible safe-opening and operations work prior to January 2021 (back to January 20, 2020), thus providing additional opportunities for expense reimbursement through PA funds.[6]

Last Revised: January 31, 2022