COVID-19 Federal Assistance e311


Compliance & Reporting, Workforce & Economic Development

Funding Source

American Rescue Plan Act

How should a municipality document and support expenditures of American Rescue Plan Act (ARP) funds outside of Qualified Census Tracts (QCTs)?

The U.S. Department of Treasury (“Treasury”) Treasury has not yet released specific guidance regarding requirements for documentation and reporting of ARP funds outside of Qualified Census Tracts (“QCT”s). Treasury has stated it will presume that a wide range of equity-focused services are eligible uses of CSLFRF when provided within a QCT (as defined by the Department of Housing and Urban Development (“HUD”).[1] Treasury’s Interim Final Rule (“the Rule”) indicates that recipients may also provide equity-focused services outside of QCTs in other populations, households, or geographic areas disproportionately impacted by the pandemic, provided recipients can demonstrate their decision-making processes and rationale for their conclusions..[2]

Municipalities must maintain documentation demonstrating that its expenditures meet eligibility requirements. The Rule provides four eligible CSLFRF funding uses:

  • strengthening the response to the COVID-19 public health emergency and its economic impacts;
  • easing fiscal pressure on State, local, and Tribal governments that might otherwise lead to harmful cutbacks in employment or government services;
  • providing premium pay to essential workers; and
  • making necessary investments in certain types of infrastructure.[3]

A municipality should gather at least the following information regarding any equity-focused services or projects:

  • the number of COVID-positive patients;
  • the number of COVID-19 related deaths; and
  • the number of hospitalizations due to COVID-19.

In each case, this data should be compared to the corresponding data for other populations, households or geographies to demonstrate if there is disproportionate impact from community to community.

In making its determinations, municipalities should consider utilizing, among other factors: (i) unemployment figures; (ii) taxable sales; (iii) business closures; (iv) increases in food insecurity; (v) increases in housing insecurity; (vi), the number and extent of arrears in utility bills and property tax bills; and (vii) increases in childcare needs. These data points might demonstrate that the pandemic resulted in disproportionate public health or economic outcomes to specific populations, households, or geographic areas.

Notably, the Rule permits funds to be used to cover costs incurred beginning on March 3, 2021.[4] Recipients may use CSLFRF to provide assistance to households, businesses, and individuals within the eligible use categories described in the Rule for economic harm experienced by those households, businesses, and individuals prior to March 3, 2021.[5]

Demonstration of compliance and validation that the municipality met the rules and requirements of the different programs:

Failure to meet documentation requirements, or documentation that does not adequately support a municipality’s claim under any given funding source, could result in recoupment of funds. Municipalities should be prepared to demonstrate a nexus to COVID in accordance with the eligible uses listed in the text of the ARP and the Rule. As such, municipalities should record and save all relevant documentation, including but not limited to: (i) the decision to make the expenditure; (ii) invoices; (iii) proofs of payments; and (iv) procurement methodologies.  Documentation should be detailed, stored centrally and electronically, and organized logically.

On April 6, 2021, the Federal Emergency Management Agency (“FEMA”) released a Fact Sheet titled “Audit Related Guidance for Entities Receiving FEMA Public Assistance Funds.” The Fact sheet provides the below recommendations on documenting and accounting disaster costs:[6]

  • Designate a person to coordinate the accumulation of records (i.e., receipts, invoices, etc.);
  • Establish a separate and distinct account for recording revenue and expenditures and a separate identifier for each distinct FEMA project. (This same thought process can be used for separating CARES and ARP funds and the individual projects within each.);
  • Ensure that the final expenditures for each project are supported by the dollar amounts recorded within your accounting system of record;
  • Ensure that each expenditure is recorded and linked to supporting documentation (i.e., checks, invoices, etc.) that can be easily retrieved; and
  • Ensure that expenditures claimed are necessary to respond to the COVID-19 pandemic, reasonable pursuant to federal regulations and federal cost principles, and conform to standard program eligibility and other federal requirements.[7]

Last Revised: August 10, 2021

[2]  Id.

[3] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) – FAQ #4.7 available at:

[4] Id.

[5] Id.

[6] FEMA Fact Sheet:  Federal Emergency Management Agency, Fact Sheet, “Audit-Related Guidance for Entities Receiving FEMA Public Assistance Funds,” April 6, 2021, available at:

[7] Id.