ProgramCOVID-19 Federal Assistance e311
TopicsHousing & Rental Assistance
Funding SourceAmerican Rescue Plan Act, CARES Act
Can cities retroactively shift expenditures from ERA1 to ERA2? How can cities avoid recapture of ERA2 funds moving forward? If cities have been reallocated ERA funds initially allocated to states, may they request an expenditure extension?
The Emergency Rental Assistance Program (“ERA”) provides funding “to assist households that are unable to pay rent or utilities.” There are two separately established ERA programs, each with its own respective award terms and conditions and associated guidance. The U.S. Department of the Treasury’s (“Treasury”) ERA webpage states:
Two separate programs have been established: ERA1 provides up to $25 billion under the Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020, and ERA2 provides up to $21.55 billion under the American Rescue Plan Act of 2021, which was enacted on March 11, 2021.
- Can municipalities retroactively shift expenditures from ERA1 to ERA2?
Treasury does not provide explicit guidance on shifting expenditures between ERA1 and ERA2. Treasury notes that:
While there are some differences in eligibility between ERA1 and ERA2, the eligibility requirements are very similar, and Treasury is seeking to implement ERA2 consistently with ERA1, to the extent possible, to reduce administrative burdens for grantees.
Municipalities must comply with the respective funding source’s award terms and conditions. The ERA1 award terms and conditions can be found here, whereas the ERA2 award terms and conditions can be found here. Municipalities can reference Treasury’s provided reporting guidance on ERA (located here for further guidance on expenditures.
There is no guidance from Treasury explicitly restricting retroactive accounting changes. Thus, the shifting of expenditures from ERA1 to ERA2 is likely allowable, assuming the municipality in question ensures it complies with all relevant terms and conditions. If the municipality were to make such adjustments, the municipality should segregate ERA1 and ERA2 fiscal controls pertaining to ledger and voucher adjustments. Moreover, adjusted expenditures should pertain to the same reporting period and proper supporting documentation, including a memorandum to file explaining the adjustments made and how these adjustments are in compliance with program terms and conditions, is recommended to substantiate any adjustments made.
- How can municipalities avoid recapture of ERA2 funds moving forward?
Municipalities must abide by Treasury’s “Emergency Rental Assistance Under the American Rescue Plan Act of 2021 (ERA2) Reallocation Guidance” to diminish the possibility of ERA2 fund recapture. Municipalities should submit timely quarterly reports, monitor their expenditure ratio, and draw down funds in a timely manner. Moreover, Treasury’s “Summary of Emergency Rental Assistance (ERA2) Reallocation Guidance” states:
- The grantee can avoid reallocation if, based on data submitted to Treasury reflecting expenditures as of April 30, it has achieved an expenditure ratio [of] at least 20%. Otherwise, excess funds will be calculated based on the difference between its reported expenditures as of March 31 and the amount of expenditure needed to reach the 20% threshold.
- Further, grantees will avoid reallocation if they have made voluntary reallocations of ERA1 funds in at least the amount of 25% of their ERA1 allocation.
- After the first assessment, Treasury will assess each grantee's expenditure ratio on a quarterly basis. The expenditure ratio threshold used to calculate excess funds will rise by 20 percentage points each quarter (for example, the threshold as of June 30 will be 40 percent). As of December 31, 2022, any unpaid funds may be designated as excess funds and be reallocated, helping to ensure that funding does not go unused and is appropriately used in the emergency context. Under the ERA2 statute, funds paid to a grantee (based on the grantee having achieved 75% obligation of funds disbursed to date) may not be reallocated.
For further information on how Treasury calculates the ERA2 expenditure ratio, Treasury states that it:
will periodically determine a Grantee's "ERA2 Expenditure Ratio," which will be calculated as (i) the sum of the Grantee's total expenditure of ERA2 funds on assistance to eligible households and eligible costs for housing stability services (for purposes of the Quarter 3 and Quarter 4 assessments) divided by (ii) an amount equal to 75% (for purposes of the Quarter 1 and 2 Assessments, described below) or 85% (for subsequent assessments) of the Grantee's total ERA2 allocations, including any amounts reallocated to or from the Grantee, as of the date of the assessment. The 75% and 85% allowances both reflect the ERA2 statute's limitation that a maximum of 15% of the total amount of ERA2 funds paid to a Grantee may be used for administrative costs, and the 75% allowance also reflects the ability under the statute for Grantees to use up to 10% of their ERA2 funds to provide housing stability services. Treasury encourages Grantees to use ERA2 funds for such housing stability services.
Additionally, Treasury notes:
For any Grantee that does not draw its first tranche of ERA2 funds, comprising 40% of its initial ERA2 allocation, by April 30, 2022, Treasury may deem all undrawn funds exceeding 40% of the Grantee's initial ERA2 allocation to be excess funds subject to reallocation.
Regarding excess funds, Treasury further clarifies:
As noted above, excess funds are funds that Treasury determines are available for reallocation. For each Grantee whose ERA2 Expenditure Ratio is below the then-applicable minimum threshold at the time of the assessment[.] Treasury will calculate the Grantee's excess funds as the difference between (i) the amount of expenditures needed for the Grantee to achieve the then-applicable minimum threshold at the time of that assessment and (ii) the Grantee's reported total assistance expenditures (i.e., the numerator of the ERA2 Expenditure Ratio calculation). As a result, the amount subject to reallocation will be less for Grantees whose Expenditure Ratios are closer to the minimum threshold.
Lastly, Treasury indicates that:
Notwithstanding anything in this guidance to the contrary, if a Grantee fails to submit a required quarterly report by the applicable deadline, without having received an extension from Treasury, Treasury may deem all undrawn funds exceeding 40% of the Grantee's initial ERA2 allocation to be excess funds subject to reallocation.
- If municipalities have been reallocated ERA funds initially allocated to states, may they request an expenditure extension?
Under ERA1, Treasury explicitly provides:
Grantees are prohibited from obligating any funds from their initial allocations after the statutory deadline of September 30, 2022. Grantees may, however, request an extension through December 29, 2022 to continue obligating funds received through reallocation. The funding request form described in Section III.A. will enable such extension requests.
After June 30, 2022, Treasury intends to consider whether additional recapture of unobligated funds is appropriate to help ensure that ERA1 funds are used by the statutory deadline.
Treasury has not provided explicit guidance on expenditure extensions with respect to ERA2. But, notably, Treasury has indicated that “[t]he American Rescue Plan Act of 2021 requires Treasury to begin reallocating ERA2 funds not yet paid to eligible Grantees on March 31, 2022.” And Treasury states that it “will begin accepting requests from Grantees for reallocated funds after March 31, 2022 on a form to be published by Treasury.”
Last Updated: May 7, 2022
 U.S. Department of the Treasury, Emergency Rental Assistance Program, “Keeping Families in their Homes,” available at: https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/emergency-rental-assistance-program.
 U.S. Department of the Treasury, Emergency Rental Assistance Frequently Asked Questions (as of August 25, 2021) – FAQ #1, at 1-2, available at: https://home.treasury.gov/system/files/136/ERA-FAQ-8-25-2021.pdf.
 U.S. Department of the Treasury, Emergency Rental Assistance Under the American Rescue Plan Act of 2021 (ERA2) Reallocation Guidance (as of March 30, 2022), available at: ERA2 Reallocation Guidance March 30 2022 (treasury.gov).
 U.S. Department of the Treasury, Summary of Emergency Rental Assistance (ERA2) Reallocation Guidance (as of March 30, 2022), available at: ERA2 Reallocation Summary Fact Sheet (treasury.gov).
 Id., at 1.
 Id., at 2.
 U.S. Department of the Treasury, Emergency Rental Assistance Under the American Rescue Plan Act of 2021 (ERA2) Reallocation Guidance (as of March 30, 2022), at 2, available at: ERA2 Reallocation Guidance March 30 2022 (treasury.gov).
 U.S. Department of the Treasury, Emergency Rental Assistance Under the Consolidated Appropriations Act, 2021 Reallocation Guidance (as of March 30, 2022), at 2, available at: Updated ERA1 Reallocation Guidance March 30 2022 (treasury.gov).
 U.S. Department of the Treasury, Emergency Rental Assistance Program, Request for Reallocated Funds, (as of April 11, 2022), at 2, available at: https://home.treasury.gov/system/files/136/1505-0266-Request-Voluntarily-Reallocated-Funds.pdf.
 U.S. Department of the Treasury, Emergency Rental Assistance Under the American Rescue Plan Act of 2021 (ERA2) Reallocation Guidance (as of March 30, 2022), at 1, available at: ERA2 Reallocation Guidance March 30 2022 (treasury.gov).
 Id., at 3.