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.