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COVID-19 Federal Assistance e311

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Community Engagement & Local Partnerships

How can cities balance funding requests between the private and public sectors?

To date, the U.S. Department of the Treasury (“Treasury”) has not provided any guidance regarding the distribution and balancing of Coronavirus Local Fiscal Recovery Funds (“CLFRF”) through subgrant(s) to private entities vs. public entities.

Per the American Rescue Plan Act of 2021 (“ARP”), recipients may transfer CLFRF funds to private nonprofit organizations, Tribes, public benefit corporations involved in the transportation of passengers or cargo, and special-purpose units of state or local governments.[1] The Interim Final Rule (the “Rule”) states that recipients of this funding may transfer CLFRF funds to other constituent units of government or private entities as long as the transferee abides by the transferor’s eligible use and other requirements. Similarly, local governments are authorized to transfer CLFRF funds to other constituent units of government in instances provided in the Rule (e.g., a county can transfer CLFRF funds to a city, town, or school district within it).[2] This includes, as subrecipients, non-entitlement units of government who received their own respective allocation.[3] The Rule also confirms that while special-purpose units of local government will not receive funding allocations directly, under the right circumstances, a direct recipient may transfer funds to a special-purpose unit of government, such as those performing functions in the community such as fire, water, sewer, or mosquito abatement districts.[4]

There are a variety of factors and best practices for municipalities to determine how to balance public and private sector needs and the most appropriate subrecipients for CLFRF:

  • Goals: Articulate the goals for CLFRF funding. There are four sections of eligible use of funding: (i) responding to the public health emergency or its negative economic impacts; (ii) supporting workers performing essential work; (iii) provision of government services; or (iv) making necessary investments in water, sewer, or broadband infrastructure.
  • Needs assessment: Conduct a needs assessment to determine how its constituents were affected by COVID-19. The needs assessment should include, among other things: (i) the disproportionate negative public health and economic impacts of COVID-19; (ii) how certain types of funding can assist particular recipients; and (iii) the pandemic’s exacerbation of pre-existing disparities on specific communities identified by Treasury’s guidance.[5] A municipality may consider reaching out to those entities with whom they have pre-existing relationships to assess what new unmet needs have been identified in their ongoing response to the pandemic and how potential additional funding would assist the entity in responding to COVID-19.
  • Applications: Request that to formally or informally submit applications for aid. Where utilizing an application approach to identify potential subrecipients, a municipality should determine objective criteria to evaluate applications and document their decisions to award sub-grants. The entities should address the following issues at a minimum:
    • The impact of COVID-19
    • Expenses incurred due to COVID-19
    • Total amount of aid being requested

Treasury has also released the following documents to assist municipalities in their compliance and reporting responsibilities:

Last Revised: August 24, 2021

[1] Id., at Section 603(c)(3).

[3] Coronavirus State and Local Fiscal Recovery Funds: Frequently Asked Questions (as of July 19, 2021) NEU supplement (as of June 30, 2021) – FAQ#7.2 at 2, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[4] Treas. Reg. 31 CFR 35 at 105, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[6] Department of Treasury, Compliance and Reporting Guidance: State and Local Fiscal Recovery Funds, (as of June 24, 2021), available at: SLFRF-Compliance-and-Reporting-Guidance.pdf (treasury.gov).

[7] Department of Treasury, Treasury’s Portal for Recipient Reporting: State and Local Fiscal Recovery Funds, (as of August 9, 2021), available at: SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf.

[8] Department of Treasury, SLFRF Recovery Plan Performance Report Template, at 33, available at: https://home.treasury.gov/system/files/136/SLFRF-Recovery-Plan-Performance-Report-Template.docx.