Can a municipality use CSLFRF funds to improve a park falling within a Qualified Census Tract ("QCT")? How will the municipality need to document and justify such expenditures of CSLFRF?

The U.S. Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule clarifies that investments to promote improved health outcomes and public safety, such as investments in “parks, green spaces, recreational facilities, sidewalks, and pedestrian safety features,” are enumerated eligible uses of funds in disproportionately impacted communities.[1] Thus, CSLFRF recipients may use funds to improve parks within Qualified Census Tracts (“QCTs”), as well as parks serving other communities presumed to be disproportionately impacted by the pandemic, including:

• low-income communities;
• communities served by Tribal governments; and
• communities served by territorial governments.[2]

CSLFRF recipients do not need to provide further justification of negative economic impacts or disproportionate impacts caused by the pandemic when using funds to provide services to populations presumed to be disproportionately impacted by the pandemic.[3] Recipients providing a service that reaches a general geographic area (e.g., a park) may also measure the median income of that area.[4]

Treasury recognizes that recipients may identify other communities or populations as disproportionately impacted by the pandemic based on academic research or government research publications, through analysis of their own data, or through analysis of other existing data sources.[5] To augment their analysis, or when quantitative data is not readily available, recipients may also consider qualitative research and sources like resident interviews or feedback from relevant state and local agencies, such as public health departments or social services departments. In both cases, recipients should consider the quality of the research, data, and applicability of analysis to their determination.[6]

The Final Rule clarifies that recipients may transfer CSLFRF funds to any entity to carry out, as a subrecipient, an eligible use of funds by the transferor, as long as the subrecipient complies with the Award Terms and Conditions and other applicable requirements, including the Uniform Guidance at 2 C.F.R. §§ 200.331-200.333.[7] Eligible subrecipients include, but are not limited to, “other units of government (including Tribal governments), nonprofits and other civil society organizations, and private entities.”[8] Recipients may also pool CSLFRF funds for a project, if this project qualifies as an eligible use of funds for each of the recipients involved, and these recipients remain able to track the use of funds in line with the reporting and compliance requirements of the CSLFRF.[9] When pooling funds for a project, the Final Rule determines that recipients may expend funds directly on the project or transfer funds to another government or other entity that is undertaking the project on behalf of multiple recipients.[10] Recipients may also fund a project with both CSLFRF funds and other sources of funding (i.e., blending and braiding of funds), provided all funds are used for projects, investments, or services that are eligible for CSLFRF funding and are compliant with all other applicable statutory and regulatory requirements and policies.[11] As an example of this approach, a CSLFRF recipient, such as a city, may collaborate with an entity, such as a local school system, to fund an eligible project (e.g., park improvement project).

Treasury’s Compliance and Reporting Guidance specifies that CSLFRF “recipients that are pass-through entities under 2 CFR 200.1 are required to manage and monitor their subrecipients to ensure compliance with requirements of the [CSLFRF] award pursuant to 2 CFR 200.332 regarding requirements for pass-through entities.”[12] To meet this requirement, recipients must:

Identify to the subrecipient: (1) that the award is a subaward of [C]SLFRF funds; (2) any and all compliance requirements for use of [C]SLFRF funds; and (3) any and all reporting requirements for expenditures of [C]SLFRF funds.[13]

[E]valuate each subrecipient’s risk of noncompliance based on a set of common factors. These risk assessments may include factors such as prior experience in managing Federal funds, previous audits, personnel, and policies or procedures for award execution and oversight. Ongoing monitoring of any given subrecipient should reflect its assessed risk and include monitoring, identification of deficiencies, and follow-up to ensure appropriate remediation.[14]

[D]evelop written policies and procedures for subrecipient monitoring and risk assessment and maintain records of all award agreements identifying or otherwise documenting subrecipients’ compliance obligations.[15]

Treasury also clarifies that:

[S]ubrecipients do not include individuals and organizations that received CSLFRF funds as end users to respond to the negative economic impacts of COVID-19 on these organizations. Such individuals and organizations are beneficiaries and not subject to audit pursuant to the Single Audit Act and 2 C.F.R. Part 200, Subpart F.[16]

A municipality using CSLFRF funds to improve a park falling within a QCT, or in an area identified in the response above, is serving a disproportionately impacted community. As described above, the Final Rule determines that populations living in QCTs and the other enumerated areas are presumed to have been disproportionately impacted by the pandemic; therefore, recipients do not need to provide further justification of negative economic impacts or disproportionate impacts caused by the pandemic for services provided in these enumerated areas.

Per Treasury’s CSLFRF Compliance and Reporting Guidance, for projects funded under the Negative Economic Impacts (EC 2) or Services to Disproportionately Impacted Communities (EC 3) expenditure categories, recipients are required to report in the annual Recovery Plan, using qualitative and quantitative data, how the recipients’ approach achieved or promoted equitable outcomes or progressed equity goals during the performance period.[17] Recipients will also report the dollar amount of the total project spending that is allocated towards evidence-based interventions for projects in the Public Health (EC 1), Negative Economic Impacts (EC 2), and Services to Disproportionately Impacted Communities (EC 3) expenditure categories.

Per Treasury’s Project and Expenditure Report User Guide, there are no additional programmatic data required for projects that develop neighborhood features that promote improved health and safety outcomes, such as parks, in disproportionately impacted communities.[18]