Are cities permitted to include payroll expenses in the cost of an entire project? When reporting project expenditures, should labor expenses be separated into the "labor" expenditure category, or be included in the reporting for the project itself?

Treasury's Compliance and Reporting Guidance stipulates that a project “should be scoped to align to a single Expenditure Category.”  Likewise, each project must be refined and reported under one Expenditure Category (“EC”) to accurately illustrate its programmatic intent.  Note, however, that a project under any EC may potentially include costs necessary to achieve the intent of the project such as payroll. If payroll costs are an approved as a part of the project scope and necessary to achieve the intent of the project, it can likely be included within the overall project.

Related to the reporting of expenses across projects under the American Rescue Plan Act’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), municipalities must adhere to all compliance and reporting requirements outlined by the U.S. Department of the Treasury’s (“Treasury”) Compliance and Reporting Guidance for CSLFRF,[1]  Portal for Recipient Reporting: State and Local Fiscal Recovery Funds,[2]and Project and Expenditure Report User Guide,[3] which includes the guidelines for 2 CFR Part 200.[4]

However, if the intent of the project is to fund payroll costs for public health, safety, and other public sector staff responding to COVID-19, then the cost should likely be separated, limited to payroll, and reported under the appropriate EC under EC 3: Public Health-Negative Economic Impact: Public Sector Capacity.

2 CFR §200.1 defines “expenditures” as “charges made by a non-Federal entity to a project or program for which a federal award was received.”[5] As defined, expenditures tie directly to the project from which the federal award was obligated.

Treasury explicitly outlines in the Project and Expenditure Report User Guide that municipalities must report a project’s obligations and expenditures, including payroll, according to the corresponding Expenditure Category (“EC”).[6] Accordingly, for reporting purposes, an expense likely cannot correspond to multiple projects or expenditure categories. To remain compliant with 2 CFR §200.1,[7] municipalities should report project expenses for a single project within that project in Treasury’s Portal for Recipient Reporting: State and Local Fiscal Recovery Funds.[8]

Municipalities must follow the reporting procedure outlined in the Project and Expenditure Report User Guide.[9] For further details and specific guidance, recipients may refer to Treasury's CSLFRF Project and Expenditure Reporting User Guide[10] and the Portal for Compliance Reporting.[11]

Last Updated: March 3, 2023