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What are the differences between eligible uses of funding for CARES Act and ARP?

According to language in the Interim Final Rule (IFR), the U.S. Department of the Treasury (Treasury) provided a “non-exhaustive list of eligible uses of [Coronavirus State and Local Fiscal Recovery Funds (CSLFR)] intended to “build and expand upon permissible expenditures under the CRF, while recognizing the difference between the ARPA and CARES Act… ."[1] Municipalities should also reference the Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions[2] (FAQ) document also issued by the U.S. Department of Treasury on May 10, 2021. This specific topic is addressed in FAQ number 6 where Treasury states:

Generally, funding uses eligible under CRF as a response to the direct public health impacts of COVID-19 will continue to be eligible under CSFRF/CLFRF, with the following two exceptions: (1) the standard for eligibility of public health and safety payrolls has been updated; and (2) expenses related to the issuance of tax-anticipation notes are not an eligible funding use.”

To further clarify the issue of items not explicitly permitted in the IFR, Treasury states the following in FAQ number 7:

“The Interim Final Rule contains a non-exclusive list of programs or services that may be funded as responding to COVID-19 or the negative economic impacts of the COVID-19 public health emergency, along with considerations for evaluating other potential uses of Fiscal Recovery Funds not explicitly listed. The Interim Final Rule also provides flexibility for recipients to use Fiscal Recovery Funds for programs or services that are not identified on these non-exclusive lists but which meet the objectives of section 602(c)(1)(A) or 603(c)(1)(A) by responding to the COVID-19 public health emergency with respect to COVID-19 or its negative economic impacts.”

The combination of the language contained in the IFR and FAQ should provide municipalities with enough guidance to begin considering investment options and ultimately to develop spending plans. When a potential item, that is not explicitly listed by Treasury, is being considered for an investment of funds, municipalities can mitigate the risk of it being a non-allowable expense by carefully documenting the methodology and rationale they used for considering it an allowable use and its alignment to either the public health emergency or its negative economic impacts.

Last Revised: May 24, 2021

 

[1] Footnote 41 of the Interim Final Rule reads: “Many of these expenses were also eligible in the CRF. Generally, funding uses eligible under CRF as a response to the direct public health impacts of COVID-19 will continue to be eligible under the ARPA, including those not explicitly listed here (e.g., telemedicine costs, costs to facilitate compliance with public health orders, disinfection of public areas, facilitating distance learning, increased solid waste disposal needs related to PPE, paid sick and paid family and medical leave to public employees to enable compliance with COVID–19 public health precautions), with the following two exceptions: 1) the standard for eligibility of public health and safety payrolls has been updated (see details on page 20) and 2) expenses related to the issuance of tax-anticipation notes are no longer an eligible funding use (see discussion of debt service on page 44).” Available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf, page 18.

[2] U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions, May 10, 2021, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.