Program

COVID-19 Federal Assistance e311

Topics

Compliance & Reporting

What are some good practices municipalities can follow to ensure that expenditures under the ARP fall under an eligible use?

Several good practices can help municipalities determine eligibility to use funds under the American Rescue Plan Act of 2021 (“ARP”).[1] Municipalities should:

  1. become familiar with the eligibility criteria under the ARP;
  2. take steps to seek and incorporate public input in the development of plans for the use of ARP funds;
  3. consider the possibility of transferring Fiscal Recovery Funds to other entities that can participate in recovery efforts; and
  4. become familiar with the Fiscal Recovery Funds reporting mandates.

Eligibility Criteria

ARP, P.L. 117-2, authorized the creation of the Coronavirus State Fiscal Recovery Fund (“CSFRF”) and the Coronavirus Local Fiscal Recovery Fund (“CLFRF”).[2] Subsections 602(c)(1) and 603(c)(1) state that funds may generally be used to:

a) respond to the public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries, such as tourism, travel, and hospitality;

b) respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers;

c) provide government services to the extent of the reduction in revenue due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency; and

d) make necessary investments in water, sewer, or broadband infrastructure.[3]

On May 17, 2021, the U.S. Department of the Treasury (“Treasury”) published its Interim Final Rule (the “Rule”).[4] In general, recipients and subrecipients of ARP assistance may use a flexible approach that sets guidelines on eligible uses of Fiscal Recovery Funds and provides local officials with broad discretion in their use of Fiscal Recovery Funds.[5] Subsections 602(e) and 603(e) of the Fiscal Recovery Fund authorize the recoupment of funds not used for eligible purposes. Municipalities must familiarize themselves with the ARP’s eligibility requirements.[6] On August 9, 2021, Treasury provided the Recovery Plan Template with a table for reporting expenditures in eligible use categories,[7] which will also help municipalities to organize projects.

Treasury’s July 19, 2021  updates to its Frequently Asked Questions (“FAQs”) provides additional information, including but not limited to the following:

  • Municipalities can review specific ineligible uses at FAQs #8.1 and #8.2 in Treasury’s July 19, 2021, FAQs.
  • Treasury’s FAQs #2.1-2.21 include an extensive discussion of the eligible uses of ARP funds in responding to the Public Health Emergency caused by the pandemic. 
  • FAQs #4.1-4.8 discuss eligible uses of ARP funds generally. 
  • FAQs #5.1-5.3 discuss the use of ARP funds for issues relating to Premium Pay for essential workers.
  • Finally, FAQs #6.1-6.12 discuss the eligible uses of ARP assistance to address water, sewer, and broadband eligibility considerations.[8]

Public Input

The Rule emphasizes the importance of seeking public input during the use of Fiscal Recovery Funds:

Implementation of the Fiscal Recovery Funds also reflect the importance of public input, transparency, and accountability […] Treasury urges State, territorial, Tribal, and local governments to engage their constituents and communities in developing plans to use these payments, given the scale of funding and its potential to catalyze broader economic recovery and rebuilding.[9]

The FAQs also state that “funds made available for the provision of governmental services (to the extent of a reduction in revenue) are intended to support direct provision of services to citizens,”[10] and that recipients may use funds to provide “loans or extension of credit”[11] to non-governmental entities to ensure delivery of these activities, or to provide other forms of support for disenfranchised members of the community who were negatively impacted by COVID-19.

Fiscal Recovery Fund Transfer Authority:

The Rule addresses the authority of recipients of Fiscal Recovery Funds to transfer funds to other entities:

The (ARP) authorizes State, territorial, and Tribal governments; counties; metropolitan cities; and nonentitlement units of local government […] to transfer amounts paid from the Fiscal Recovery Funds to a number of specified entities. By permitting these transfers, Congress recognized the importance of providing flexibility to governments seeking to achieve the greatest impact with their funds, including by working with other levels or units of government or private entities to assist recipient governments in carrying out their programs. This includes special-purpose districts that perform specific functions in the community, such as fire, water, sewer, or mosquito abatement districts.[12]

Fiscal Recovery Fund Reporting Requirements:

Municipalities must be familiar with the reporting requirements in all the applicable statutes. Subsection 602(d)(2) of the CSFRF authorization and subsection 603(d) of the CLFRF authorization both require recipients and subrecipients of ARP assistance to provide regular reports to Treasury about their use of the assistance. Municipalities must also follow all guidance and requirements outlined in Treasury’s June 24, 2021 “Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds.”[13] In determining eligible expenses, municipalities may also consult Figure 7 of the Recipient Portal Reporting Guide, released on August 9, 2021, which advises on how expenses should track eligible use. [14]

Last Revised: August 18, 2021

[1] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Section 603, available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#toc-H65C66E46488F4CB6ACD99E77DF090885.

[2] Id., at § 9901.

[3] Id., at § 9901, Subsections 602(c)(1) and 603(c)(1).

[5] Id., at 137-145. 

[6] Treas. Reg. 35 CFR 31, at 10-77, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[7] U.S. Department of the Treasury, Recovery Plan State and Local Fiscal Recovery Funds 202x Report, as of August 9, 2021, at 6-8, available at: https://home.treasury.gov/system/files/136/SLFRF-Recovery-Plan-Performance-Report-Template.docx.

[8] U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions as of July 19, 2021, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[10] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021), at FAQ#4.1 at 19, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[11] Id., at #4.11, at 25-26.

[12] Id., at 105. 

[13] U.S. Department of the Treasury, “Compliance and Reporting Guidelines”, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[14] U.S. Department of the Treasury, Treasury’s Portal for Recipient Reporting, State and Local Fiscal Recovery Funds, as of August 9, 2021, Figure 7 at 9, available at: https://home.treasury.gov/system/files/136/SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf.