Is there a cap on program administration, whether for the recipient city, or for subrecipients if the City contracts the funds out for services? And are there limitations on what is considered admin (i.e. regular labor, leave, benefits, etc)?

The United States Department of the Treasury (“Treasury”) has not explicitly identified a set cap on the use of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) for administrative expenses. However, Treasury has stated that administrative costs, inclusive of direct and indirect costs, must be “reasonable and allocable” as defined in Treasury’s Final Rule.[1] Considerations for municipalities seeking to apply CSLFRF funds to administrative costs are listed below.

A.  Administrative Expenses/Costs and the Final Rule and FAQ Guidance

The Final Rule explains that funds may be used for administrative expenses which “improve the efficacy of public health or economic relief programs through tools like program evaluation, data analysis, and targeted consumer outreach.”[2] This includes “[a]dministrative costs associated with the recipient’s COVID-19 public health emergency assistance programs, including services responding to the COVID-19 public health emergency or its negative economic impacts, that are not federally funded.”[3]

Treasury’s Frequently Asked Questions (“FAQs”) relating to CSLFRF FAQ #10.2 states:

[r]ecipients may use funds 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 and its negative economic impacts. This includes, but is not limited to, costs related to disbursing payments of Fiscal Recovery Funds and managing new grant programs established using Fiscal Recovery Funds.[4]

B.  Administrative Costs and Mitigating Factors

The Final Rule acknowledges that the American Rescue Plan Act of 2021 (“ARP”) “will generate administrative costs relative to a pre-statutory baseline. This includes, chiefly, costs required to administer [CSLFRF] funds, oversee subrecipients and beneficiaries, and file periodic reports with Treasury.”[5]

Treasury expects that the administrative burden associated with this program will:

• “[B]e moderate for a grant program of its size. Treasury expects that many recipients receive direct or indirect funding from federal government programs and that many have familiarity with how to administer and report on federal funds or grant funding provided by other entities;” and
• “[S]tates, territories, and large localities will rely heavily on established processes developed through that program [the 2020 CRF] or other prior grant funding, mitigating burden on these governments.” [6]

The above suggests that Treasury expects the administrative burden from running these programs to be reasonable and not excessive.

In addition, Treasury has implemented measures further mitigating administrative burden, including “‘tiering’ reporting requirements so that recipients that receive relatively lesser amounts of CSLFRF funds are required to submit less frequent reports than recipients receiving greater amounts of funds” and allowing for “‘categorical eligibility’ when delivering assistance to particular groups, such as impacted or disproportionately impacted households.”[7] The Final Rule states:

[i]n making implementation choices, Treasury has hosted numerous consultations with a diverse range of direct recipients— states, cities, counties, and Tribal governments—along with various communities across the United States, including those that are underserved. Furthermore, Treasury has made clear in guidance that [CSLFRF] funds may be used to cover certain expenses related to administering programs established using [CSLFRF] funds.[8]

As of now, however, neither the ARP itself nor the guidance released from the Treasury specifies a “cap” on program administration costs.

C.  Conclusion

As stated in the Final Rule and the Compliance and Reporting Guidance,

Recipients may use funds for administering the [CSLFRF] program, including costs of consultants to support effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements.2 Further, costs must be reasonable and allocable as outlined in 2 CFR 200.404 and 2 CFR 200.405. Pursuant to the [CSLFRF] Award Terms and Conditions, recipients are permitted to charge both direct and indirect costs to their SLFRF award as administrative costs as long as they are accorded consistent treatment per 2 CFR 200.403. Direct costs are those that are identified specifically as costs of implementing the [CSLFRF] program objectives, such as contract support, materials, and supplies for a project. Indirect costs are general overhead costs of an organization where a portion of such costs are allocable to the [CSLFRF] award such as the cost of facilities or administrative functions like a director’s office. 34 Each category of cost should be treated consistently in like circumstances as direct or indirect, and recipients may not charge the same administrative costs to both direct and indirect cost categories, or to other programs. If a recipient has a current Negotiated Indirect Costs Rate Agreement (“NICRA”) established with a Federal cognizant agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals, then the recipient may use its current NICRA. Alternatively, if the recipient does not have a NICRA, the recipient may elect to use the de minimis rate of 10 percent of the modified total direct costs pursuant to 2 CFR 200.414(f).[9]

Treasury’s guidance has not stated whether there is a cap on administrative expenses, only that administrative costs, inclusive of direct and indirect costs, are “reasonable and allocable” as defined in the Final Rule.[10] Treasury’s Compliance and Reporting Guidance provides further guidance on allowable direct and indirect costs.[11]  

 Last Revised: March 4, 2022