COVID-19 Federal Assistance e311


Fund Planning & Allocation, Tourism

Funding Source

American Rescue Plan Act

Can a municipality use ARP funds to support “friends of” organizations for specific parks, venues, or other tourism-related activities?

A recipient may provide responsive services after determining that certain nonprofits were impacted by the pandemic or were disproportionately impacted by the pandemic.[1] Nonprofits have faced significant challenges due to the pandemic’s increased demand for services, changing operational needs, and declines in revenue sources such as donations and fees. Nonprofits eligible for assistance are those that experienced negative economic impacts or disproportionate impacts of the pandemic and meet the definition of “nonprofit,” specifically those that are 501(c)(3) or 501(c)(19) tax-exempt organizations. Specifically, Treasury defines a nonprofit as an organization that is exempt from federal income taxation and that is described in section 501(c)(3) or 501(c)(19) of the Internal Revenue Code.[2] 

The Final Rule also includes a non-exhaustive list of enumerated eligible uses that are recognized as responsive to the impacts and disproportionate impacts of COVID-19.[3] When reporting to Treasury, it is important to clarify that recipients providing enumerated uses to populations presumed eligible operated within the guidelines established by the Final Rule and accompanying Reporting and Compliance Guidance.

Recipients can identify nonprofits impacted by the pandemic and select the appropriate measures to respond, according to the level of impact. For example, recipients could consider the following categories of impacted nonprofits:

  • Decreased revenue (e.g., from donations and fees);    
  • Financial insecurity;
  • Increased costs (e.g., uncompensated increases in service need);    
  • Capacity to weather financial hardship; and    
  • Challenges covering payroll, rent or mortgage, and other operating costs.[4]    

Assistance to nonprofits that experienced negative economic impacts includes the following enumerated uses:

  • Loans or grants to mitigate financial hardship such as declines in donations or impacts of periods of closure;
  • Loans, grants, or in-kind assistance to implement COVID-19 prevention or mitigation tactics; and
  • Technical or in-kind assistance, counseling, or other services that mitigate negative economic impacts of the pandemic.[5]

Regarding disproportionately impacted nonprofits, Treasury presumes that the following nonprofits are disproportionately impacted by the pandemic:

  • Nonprofits operating in Qualified Census Tracts (“QCTs”);
  • Nonprofits operated by Tribal governments or on Tribal lands; and    
  • Nonprofits operating in the U.S. territories.[6]     

Accordingly, it seems that a municipality may in some circumstances use Fiscal Recovery Funds (“FRF”) to support “friends of” organizations for specific parks, venues, or other tourism-related activities, so long as these organizations use the funds in a manner that responds to a demonstrable and negative impact (i.e., the examples listed above) resulting from COVID-19 and the organization is an eligible nonprofit entity. A municipality may also consider directly funding a “friends of” organization as a subrecipient to perform eligible activities under the FRF. In those instances, municipalities should refer to the Final Rule section titled “Distinguishing Subrecipients versus Beneficiaries” for additional monitoring and reporting requirements.[7]                             

Last Updated: March 7, 2022

[1] Treas. Reg. 31 CFR 35 at 157, available at:

[2] Id., at 140.

[3] Id.

[4] Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule, at 23,  

[5] Id.

[6] Id.

[7] Treas. Reg. 31 CFR 35 at 208-209, available at: