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Federal Funding Streams, Premium & Hazard Pay

May municipalities use funds from the CARES Act CRF or the ARP CLFRF to support administrative hiring costs (including immigration paperwork and filing fees) related to personnel who were hired for and are funded by COVID-19 grants?

Neither the American Rescue Plan (“ARP”) Act legislative text nor the Interim Final Rule released on May 10th, 2021 specifically defines administrative cost allowances for fiscal recovery funds (“FRF”) under the Coronavirus Local Fiscal Recovery Fund (“CLFRF”).  Administrative costs and technical assistance are listed as eligible uses under the May 10th, 2021 Interim Final Rule.[1] However, the Interim Final Rule does not specifically reference administrative hiring costs, and whether they might be considered under such administrative costs is not entirely certain. 

Additionally, the Interim Final Rule includes the costs related to rehiring of local government staff as an eligible use, including payroll, covered benefits, and other costs associated with rehiring public sector staff, up to the pre-pandemic staffing level of the government;[2] however, no further guidance defining “other costs” is currently included.

The U.S. Department of the Treasury will be issuing further regulations and clarifications regarding the CLFRF program, and further guidance regarding administrative hiring costs may be included. Until such guidance is provided, it is advisable to adhere to general standards of reasonableness and appropriateness.

Below are guidelines regarding administrative costs from previous programs and legislation related to the COVID-19 pandemic, which may be helpful as points of comparison:

  • Under the CARES Act, Treasury did not apply an administrative cap to support the distribution of the Coronavirus Relief Funds (“CRF”);[3] State and Local governments were permitted to use their discretion to define reasonable allowances.[4]
  • With respect to various programs funded under the Consolidated Appropriations Act, (“CAA-HR133”), Treasury demonstrated a reasonable approach to administrative costs (see chart below).
  • Congress likewise recently demonstrated a reasonable approach to administrative costs with respect to certain ARP programs (see chart below).
  • Treasury may recognize that the FRF expenditure time frame, which lasts through December 31, 2024,[5] makes a reasonable administrative cost framework even more important than in programs with a shorter duration.

The administrative cost framework under the CRF and CAA-HR133 programs are generally aligned with the administrative cost frameworks seen in other, non-COVID-19, disaster recovery programs, as demonstrated below.

Administrative/Management Allowances by Federal Disaster Program

Funding Source/Grant Program

Administrative/Management Allowances

(Generally applicable)

Coronavirus Relief Funds - CARES Act

Allowable, no cap

Elementary and Secondary School Emergency Relief Fund - CARES Act

1/2 percent

Elementary and Secondary School Emergency Relief Fund - Consolidated Appropriations Act

1/2 percent

Emergency Rental Assistance Program - Consolidated Appropriations Act

10 percent

Emergency Rental Assistance Program - American Rescue Plan Act

15 percent

FEMA Public Assistance

12 percent (7 percent for the grantee and 5 percent for the subgrantee)

Disaster Community Development Block Grants (“CDBG-DR”)

5 percent

Hazard Mitigation Grant Program (“HMGP”)

15 percent (10 percent for the recipient and 5 percent for the subrecipient)

Building Resilient Infrastructures and Communities (“BRIC”)

15 percent (10 percent for the applicant and 5 percent for the subapplicant)

Last Revised: May 24, 2021

 

[1] Department of the Treasury 31 CFR Part 35 RIN 1505-AC77 Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule §35.6 (B) XII, accessible at https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf

[2] Department of the Treasury 31 CFR Part 35 RIN 1505-AC77 Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule, pages 35-36 (B) XII, accessible at https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf

[3] Municipalities may consider the distinction between indirect and direct costs in their review given that this is central to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), found at Title 2 of the Code of Federal Regulations, Part 200, but can remain cognizant that the Treasury blurred the lines on this issue in its guidance regarding the CRF: “[p]ayments from the Fund are not administered as part of a traditional grant program and the provisions of the Uniform Guidance, 2 CFR part 200, that are applicable to indirect costs do not apply. Recipients may not apply their indirect costs rates to payments received from the Fund. Recipients may, if they meet the conditions specified in the guidance for tracking time consistently across a department, use payments from the Fund to cover the portion of payroll and benefits of employees corresponding to time spent on administrative work necessary due to the COVID–19 public health emergency. (In other words, such costs would be eligible direct costs of the recipient). This includes, but is not limited to, costs related to disbursing payments from the Fund and managing new grant programs established using payments from the Fund. As with any other costs to be covered using payments from the Fund, any such administrative costs must be incurred by December 31, 2021, with an exception for certain compliance costs as discussed below. Furthermore, as discussed in the Guidance above, as with any other cost, an administrative cost that has been or will be reimbursed under any federal program may not be covered with the Fund. For example, if an administrative cost is already being covered as a direct or indirect cost pursuant to another federal grant, the Fund may not be used to cover that cost.” Federal Register, Vol. 86, No. 10, p. 4186. https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf.

[5] American Rescue Plan Act (HR 1319 Subtitle M Section 603(c)(1)).