Program

COVID-19 Federal Assistance e311

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Federal Funding Streams, Fund Planning & Allocation

Are there any flexible federal funds that can be used for a general purpose?

Federal financial assistance comes in many forms, such as grants, cooperative agreements, and loans, but all federal financial assistance has a specific programmatic purpose or intent. Most forms of federal funding are very prescriptive, with guidance that has developed over many years, greatly limiting the flexibility of the recipient’s deployment of the funds. The American Rescue Plan Act (“ARP”) of 2021[1] includes several funding streams to address the country’s ongoing recovery from the health and economic effects of the COVID-19 pandemic. These funding streams address a myriad of concerns relating to healthcare, vaccination efforts, small businesses, housing, education, childcare, and relief for individuals and households.

As a general matter, the most flexible forms of federal financial assistance are normally administrative funds and indirect cost recoveries associated with larger programs. Coronavirus Local Fiscal Recovery Fund (“CLFRF”) funds may be used to cover administrative 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.[2]

ARP, particularly its CLFRF, creates an opportunity for communities to invest in longer-term and more diverse projects and priorities than what was previously afforded by the Coronavirus Relief Fund (“CRF”), (created by the Coronavirus Aid, Relief, and Economic Security Act (“CARES” Act)). The new CLFRF funds are available to municipalities to help keep providers of essential services safely on the job as municipalities roll out vaccines and rebuild local economies.[3] Funds are available until December 31, 2024, to:

  • respond to the pandemic or its negative economic impacts;
  • provide assistance to households and small businesses;
  • provide premium pay for essential workers;
  • make necessary investments in water, sewer, or broadband infrastructure investments; and
  • respond to revenue lost in comparison to the most recent full fiscal year prior to the pandemic.[4]

When comparing the new CLFRF funds to the legacy CRF funding, ARP appears to offer local municipalities greater programmatic flexibility.

Program Guidance

CRF

CLFRF

Covered Period (Fund Availability)

Originally 9 months

Almost 4 years

Revenue Replacement

Not Allowed

Allowed

Premium Pay

Only Hazard Duty Pay

Allowed

Infrastructure Projects

Not Expressly Allowed

Allowed[5]

When the U.S. Department of the Treasury released CRF funds, there were questions surrounding the requirements of the “covered period” window, which lasted from March 1, 2020, to December 31, 2020. It was not clear to municipalities whether the window was for the obligation, expenditure, or liquidation of funds. This confusion, along with the abbreviated timeline of CRF, impacted communities’ program development and ability to address significant local priorities.

For most uses, CLFRF is forward looking.[6] The covered period for CLFRF begins on March 3, 2021, and ends on December 31, 2024.[7] However, the extended length of the covered period window (four years under CFLRF as opposed to nine months under CRF)[8] should allow municipalities to invest in IT and other longer-term projects critical to their local communities. Further, Treasury’s Frequently Asked Questions (“FAQs”) document as of June 10, 2021 states that recipients may use CFLRF funds for eligible expenses to address economic harm sustained by households, businesses, and individuals prior to March 3, 2021, but only if those costs were incurred by the recipient after March 3, 2021.[9] Additionally, the requirement that costs be incurred by December 31, 2024, only requires that recipients obligate the funds by that date.[10] The period of performance will run until December 31, 2026, which will provide recipients a reasonable amount of time to complete projects funded with Coronavirus State Fiscal Recovery Fund (“CSFRF”) and CLFRF.[11] 

Under the CARES Act, CRF funding could only be used indirectly to assist with revenue replacement. This concept is discussed in: (i) Treasury CRF FAQs,[12] and (ii) the “General State and Local Fiscal Assistance and COVID-19: Background and Available Data” report published by the Congressional Research Service.[13]  The FAQs and report state that CRF funding identified for revenue replacement must be used for direct COVID-related expenses and meet all the allowability criteria outlined in CRF. 

Municipalities may use CLFRF funds for “the provision of government services to the extent of the reduction in revenue experienced due to the COVID-19 public health emergency.”[14] Treasury indicates that once a deficit in revenue is identified, recipients will have broad latitude to use this funding to support government services, up to the amount of lost revenue.[15]

Last Updated: June 17, 2021

[1] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., Section 603, available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H7C2075B5C62541F9A348BDF1DDBECEB6.

[2] Treas. Reg. 35 CFR 31 at [141], available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[3] American Rescue Plan Act of 2021 at 602(c).; see also Id. at 603(c).

[4] Id. at 603(c)(1).

[5] CLFRF allows specifically for the funding of water, sewer, and broadband infrastructure. See Treas. Reg. 35 CFR 31 1.B.d) at 7, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[6] Under CLFRF, premium pay may be provided retroactively to the beginning of the public health emergency. (See Id. at 50.) The lost revenue provision also includes December 31, 2020, as a point in time at which loss of revenue can be calculated. (See Id. at 60.)

[7] Id. at 97.

[8] Id. at 99.

[9] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (updated as of June 10, 2021), at FAQ #4.7, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[10] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions, (updated as of June 10, 2021), at FAQ #6.2, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[11] Id.

[12] 86 Fed. Reg. 4187 (January 15, 2021).

[13] Grant A. Driessen, Congressional Research Service, R46298, February 8, 2021, available at: https://crsreports.congress.gov/product/pdf/R/R46298.

[14] Treas. Reg. 35 CFR 31 at 51-52, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[15] U.S. Department of the Treasury, FACT SHEET: The Coronavirus State and Local Fiscal Recovery Funds Will Deliver $350 Billion for State, Local, Territorial, and Tribal Governments to Respond to the COVID-19 Emergency and Bring Back Jobs, at 6, available at: https://home.treasury.gov/system/files/136/SLFRP-Fact-Sheet-FINAL1-508A.pdf.