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American Rescue Plan ActWhat 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:
- become familiar with the eligibility criteria under the ARP;
- take steps to seek and incorporate public input in the development of plans for the use of ARP funds;
- consider the possibility of transferring Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to other entities that can participate in recovery efforts; and
- become familiar with the CSLFRF reporting mandates.
Eligibility Criteria
The ARP authorized the creation of the CSLFRF.[2] Subsections 602(c)(1) and 603(c)(1) of the ARP 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 January 6, 2022, the U.S. Department of the Treasury (“Treasury”) published its Final Rule on the CSLFRF.[4] In general, recipients and subrecipients of ARP assistance may use a flexible approach that sets guidelines on eligible uses of CSLFRF and provides local officials with broad discretion in their use of CSLFRF.[5] Subsections 602(e) and 603(e) of the ARP authorize the recoupment of funds not used for eligible purposes. Municipalities should 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, which can also help municipalities to organize projects.[7]
Municipalities also may refer to the CSLFRF: Overview of the Final Rule.[8] Additional information may be provided when Treasury issues new Frequently Asked Questions (“FAQs”) specific to the Final Rule, as indicated in the Interim Final Rule FAQs, updated with the issuance of the Final Rule.[9] In the interim, municipalities may refer to the FAQs for 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 January 2022 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 or Negative Economic Impacts caused by the pandemic.
- FAQs #4.1 - 4.12 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 - 6.17 discuss the eligible uses of ARP assistance to address water, sewer, and broadband eligibility considerations.[10]
Public Input
The Final Rule emphasizes the importance of seeking public input during the use of CSLFRF in its list of uses to address the data, evidence, and program administration needs of recipients:
Community outreach and engagement resources to support the gathering and sharing of information in ways that improve equity and effective implementation of [CSLFRF]-funded programs and programs that respond to the public health emergency and its negative economic impacts, or which households, small businesses, or impacted industries are accessing during the pandemic that are funded by other sources. These methods include but are not limited to community meetings, online surveys, focus groups, human-centered design activities, behavioral science techniques, and other community engagement tools.[11]
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,” and that recipients may use funds to provide “loans or extension of credit” 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.[12], [13]
CSLFRF Transfer Authority:
The Final Rule addresses the authority of recipients of CSLFRF to transfer funds to other entities:
The final rule clarifies that, in addition to the entities enumerated in sections 602(c)(3) and 603(c)(3), recipients may transfer SLFRF funds to any entity to carry out as a subrecipient an eligible use of funds by the transferor, as long as they comply with the Award Terms and Conditions and other applicable requirements, including the Uniform Guidance at 2 C.F.R. §§ 200.331-200.333. Eligible subrecipients include, but are not limited to, other units of government (including Tribal governments), nonprofits and other civil society organizations, and private entities.[14]
CSLFRF Reporting Requirements:
Subsection 602(d)(2) and subsection 603(d) of the CSLFRF authorizations both require recipients and subrecipients of ARP assistance to provide regular reports to Treasury about their use of the assistance. Municipalities must be familiar with the reporting requirements in all the applicable statutes. Municipalities must also follow all guidance and requirements outlined in Treasury’s November 15, 2021 “Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds.”[15] In determining eligible expenses, municipalities may also consult Figure 7 of Treasury’s Portal for Recipient Reporting User Guide, released on August 9, 2021, which offers advice on how expenses should track eligible uses.[16]
In addition, recipients should consider the guidance issued in the Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule.[17]
Last Revised: March 11, 2022
[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).
[4] Treas. Reg. 31 CFR 35, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.
[5] Id., at 382.
[6] Id., at 12-313.
[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 & Local Fiscal Recovery Funds: Overview of the Final Rule, available at https://home.treasury.gov/system/files/136/SLFRF-Final-Rule-Overview.pdf.
[9] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of January 2022), at 1, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
[10] U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions as of January 2022, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
[11] Treas. Reg. 31 CFR 35 at 189, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.
[12] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (January 2022), at FAQ #4.1 at 19, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
[13] Id., at FAQ #4.11, at 25-26.
[14] Id., at 358.
[15] 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.
[16] 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.
[17] U.S. Department of the Treasury, Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-Statement.pdf.