Program

COVID-19 Federal Assistance e311

Topics

Community Engagement & Local Partnerships, Compliance & Reporting, Fund Planning & Allocation, Program Administration

What steps should my municipality consider in developing a plan for use of the ARP funds?

The American Rescue Plan Act of 2021 (“ARP”) established the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to provide assistance to state, local, Tribal, and territorial (“SLTT”) governments.

The ARP provides $350 billion in assistance to SLTT governments through CSLFRF. At the time of enactment, the ARP provided that states, territories, and Tribal governments would receive $219.8 billion pursuant to the Coronavirus State Fiscal Recovery Fund (“CSFRF”), while local governments would receive $130.2 billion through the Coronavirus Local Fiscal Recovery Fund (“CLFRF”).[1] Of the $130.2 billion, $45.6 billion was apportioned for metropolitan cities based on the Community Development Block Grant (“CDBG”) formula,[2] $65.1 billion was designated for counties based on population,[3] and $19.5 billion was designated for municipalities with populations under 50,000 (Non-Entitlement Units of Government, or “NEUs”).[4]

Eligible Uses

As outlined in section 9901 of the ARP, eligible uses of CLFRF assistance include:

  • supporting the COVID-19 public health response;
  • addressing negative economic impacts (e.g., assistance to households, small business and non-profit support, assistance to unemployed workers, etc.);
  • providing premium pay for essential workers;
  • covering payroll expenses for public health and public safety employees;
  • replacing revenue loss due to the COVID-19 public health emergency; and
  • developing water, sewer, and broadband infrastructure. [5]

Recipients Have Flexibility in Deciding How to Deploy Funds but Must be Mindful of Restrictions

The Final Rule, issued on January 6, 2022, aims to provide state, local and Tribal governments with even greater flexibility to determine how best to use CSLFRF funds to meet the needs of their communities.[6]

Treasury has also provided CSLFRF recipients with flexibility regarding the implementation of the Final Rule during the transition period before the Final Rule takes effect. Treasury’s Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule states:

State, territorial, local, and Tribal governments (together, recipients) must comply with the final rule beginning on April 1, 2022, when the final rule takes effect. Prior to April 1, 2022, recipients may take actions and use funds in a manner consistent with the final rule, and Treasury will not take action to enforce the interim final rule if a use of funds is consistent with the terms of the final rule, regardless of when the SLFRF funds were used.

[R]ecipients may obligate and expend funds in a manner consistent with the interim final rule prior to April 1, 2022…To the extent that a recipient has taken significant steps toward obligating SLFRF funds in a manner consistent with the interim final rule prior to January 6, 2022, Treasury will generally not take action to enforce provisions contained in the final rule, to the extent that they are more restrictive than those in the interim final rule. Such significant steps include initiation of procurement or grantmaking actions, detailed planning of projects or programs, appropriation of funds, and other significant planning steps.[7]

The Final Rule also provides additional information delineating the potential eligibility of specific kinds of projects within the eligible use categories mentioned above. Recipients should consult the Final Rule prior to committing any funds to projects, even when the planned projects appear to fall within the categories listed in the statute.

Recipients should be aware of the restrictions on use imposed upon funds obtained from CSLFRF, including, but not limited to:

  • making deposits into pension funds or financial reserves (such as “rainy day” or similar funds);
  • using funds for the purpose of offsetting a reduction in taxes collected by states and territories;
  • using funds as a non-federal match for any program that does not authorize the use of federal funds for cost-matching;
  • paying principal or interest on outstanding debt; and
  • paying settlements or fulfilling judgments that would not be otherwise eligible since these would not be considered provision of a government service.[8], [9]

Rules Regarding Funding Allocations

How much funding a local government is eligible for depends on whether the municipality is a “metropolitan city” or a “non-entitlement unit of local government,” as defined by the Housing and Community Development Act of 1974.[10]   

Treasury directs that States shall distribute funding proportionately among the total population of the non-entitlement units of local government (“NEUs”). The Final Rule provides further information about the distribution of CSLFRF funds to NEUs.[11] The total amount distributed to NEUs may not exceed an amount equal to 75 percent of the most recent budget for the NEUs as of January 27, 2020.[12]

State governments will receive a specific allocation of funds from Treasury and are responsible for distributing the funds to NEUs within their state.[13] Award amounts are based on the population of the NEU. The aggregate allocations to states for distribution to NEUs are detailed here. Additionally, the status of payments to states for distribution to NEUs, which is updated weekly, is located here.

Allocations to metropolitan cities can be found here on the Coronavirus State and Local Fiscal Recovery (“CSLFRF”) page.

The text of the ARP slates the second tranche of CSLFRF funding to be released to metropolitan cities and NEUs no less than 12 months after the distribution of the first tranche to those recipients.[14], [15] States will be allowed to receive their second tranche of funding beginning on May 12, 2022.[16] States must be up-to-date in their reporting requirements in order to receive their second tranche of funding.[17]

Good Practices: Planning

Local governments receiving assistance from CSLFRF should consider the following non-exhaustive steps in developing plans for the use of funds:

  • Stabilize government operations by replacing revenue and rehiring furloughed employees.
  • Conduct a comprehensive capacity assessment and unmet needs analysis.
  • Review eligible uses for funds obtained from CSLFRF and assess potential uses. [18]
  • Identify water, sewer, and broadband infrastructure priorities that may be eligible for funding through CSLFRF.[19]
  • Form a cross-sector recovery oversight committee and engage the public.
  • Assess and catalog available funding to prioritize needs.
  • Develop or update local recovery plan.
  • Be mindful of the nature of CSLFRF as a one-time source of funds when considering ongoing programs that extend beyond the CSLFRF covered period.

With respect to CSLFRF, municipalities can sign up for email updates from Treasury for any changes to the Final Rule or FAQs.

Good Practices: Reporting Requirements

Treasury has published Compliance and Reporting Guidance for CSLFRF.[20]    

All recipients of CSLFRF funding other than NEUs were required to submit one Interim Report, which included the government’s expenditures by category at the summary level.[21] The Interim Report required including spending from the date the local government received funds to July 31, 2021, and was due by August 31, 2021, or 60 days after receiving funding if the funding was received by October 15, 2021. This report is similar to the report required by the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Coronavirus Relief Fund (“CRF”), but with modifications for expenditure categories and the addition of data elements related to specific eligible uses.[22]

States, territories, metropolitan cities receiving $10 million or more in CSLFRF funding, and Tribal governments receiving $30 million or more in CSLFRF funding will be required to submit quarterly project and expenditure reports, including financial data, information on contracts, and subawards over $50,000.[23] The first report will cover spending from the date CSLFRF funds are received to December 31, 2021, and is due by January 31, 2022. Subsequent reports, covering only a single quarter, will be due 30 days after each quarter’s end. These reports are also similar to the reports required by the CRF, but with modifications for expenditure categories and the addition of data elements related to specific eligible uses.[24] 

Metropolitan cities receiving less than $10 million, Tribal governments receiving less than $30 million, and all NEUs will be required to submit project and expenditure reports on an annual basis. The first report will cover spending from the date CLSFRF funds are received to March 31, 2022 and is due by April 30, 2022. Subsequent reports will be due annually by April 30 through 2027.[25]

The NEU distribution Template User Guide provides instructions and additional details to assist recipients in completing the Draft NEU Distribution Reporting Template.[26] For reference, states and territories are required to provide an update on distributions to eligible NEUs under the following circumstances:

  • As part of the Interim Report due on August 31, 2021.
  • Every month until all distributions have been made.
  • Where information or status has been changed.[27]

States, territories, and municipalities with a population of over 250,000 residents are required to submit a Recovery Plan Performance Report that includes descriptions of projects funded, information on performance indicators, and the objectives of each award.[28] The initial Recovery Plan Performance Report is required to cover activities from the date CSLFRF funds are received to July 31, 2021, and was due by August 31, 2021, or 60 days after receiving funding, and due annually thereafter on July 31 through 2026, with the final report due March 31, 2027.[29]

On November 15, 2021, Treasury updated the Recovery Plan Performance Report Template. The Recovery Plan “provides information on the recipient’s projects and how they plan to ensure program outcomes are achieved in an effective and equitable manner.”[30] It is recommended that recipients use this template to provide performance data, which is then posted on the recipient’s website and provided to Treasury.[31] Technical guidance published on August 9, 2021, provides recommendations on navigating the Treasury Portal, advises on classifying and submitting formal reports and expenditures, and answers FAQs on reporting to Treasury on the use of CSLFRF.[32] 

Good Practices: Public Engagement

Treasury has emphasized the need for public input during recipients’ decision-making process relating to the use of CSLFRF funds.

Further, the Final Rule includes as an eligible use of CSLFRF program funds:  

Community outreach and engagement resources to support the gathering and sharing of information in ways that improve equity and effective implementation of SLFRF-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.[33]

It is important for CSLFRF recipients to take steps to ensure that the public is involved in community decision-making about the use of this assistance.

Good Practices: Disproportionate Impact Considerations

The Final Rule includes several references to the COVID-19 pandemic’s disproportionate impact on small businesses, low-income households and communities, and people of color. For example:

By fall 2021, the economy had exceeded its pre-pandemic size and unemployment had fallen below 5 percent, but despite this progress, too many Americans remain unemployed, out of the labor force, or unable to pay their bills, with this pain particularly acute among lower-income Americans and communities of color.[34]

The Final Rule also states that “[l]ong-standing disparities in health and economic outcomes in underserved communities, that amplified and exacerbated the impacts of the pandemic, also present continued barriers to full and equitable recovery.[35]

These references and others illustrate Treasury’s encouraging of recipients of CSLFRF to analyze disproportionate impact considerations while making decisions about the use of such assistance.

Last Revised: February 2, 2022

[1] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Sections 602(a) and 603(a), available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text#H7C2075B5C62541F9A348BDF1DDBECEB6.

[2] Id., at Section 603(b)(1).

[3] Id., at Section 603(b)(3).

[4] Id., at 603(b)(2).

[5] Id., at Section 603(c)(1).

[7] Department of Treasury, CSLFRF Compliance Statement: “Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule,” January 6, 2022, at 1-2, available at https://home.treasury.gov/system/files/136/SLFRF-Compliance-Statement.pdf.

[8] Treas. Reg. 31 CFR 35 at 314-5, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[9] Some payments of judgments or settlements could be an eligible use of CSLFRF funds, for example if the settlement or judgment requires the recipient to provide services to respond to the COVID-19 public health emergency or its negative economic impacts or to provide government services, then such costs are eligible use of CSLFRF funds. Treas. Reg. 31 CFR 35 at 345, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[10] Treas. Reg. 31 CFR 35 at 409, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[11] Id., at 350-352.

[12] Id.

[13] Department of Treasury, “Coronavirus State and Local Fiscal Recovery Funds for Non-entitlement Units of Local Government,” available at: https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-fund/non-entitlement-units.

[14] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Section 603(c)(1)(D) at 135 Stat. 231, available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text# HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5.

[15] Id.

[16] Treas. Reg. 31 CFR 35 at 350, available at: https://home.treasury.gov/system/files/136/S.LFRF-Final-Rule.pdf.

[17] Id., at 350.

[18] Id., at 12-13.

[19] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Section 603(c)(1)(D), available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text# HAECAA3A95C4E4FFAB6AA46CE5F9CB2B5.

[20] 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.

[21] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of November 15, 2021) – FAQ #9.2, at 35, (emphasis added), available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[22] Id.

[23] Id.

[24] Id.

[25] U.S. Department of the Treasury, “Compliance and Reporting Guidelines,” at 16, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

 

[27] Id., at 4.

[28] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of November 15, 2021) – FAQ #9.2, at 35-36, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[29] Id.

[30] U.S. Department of the Treasury Recovery Plan Template, at 1, available at: https://home.treasury.gov/system/files/136/SLFRF-Recovery-Plan-Performance-Report-Template.docx.

[31] U.S. Department of the Treasury, “Compliance and Reporting Guidelines”, at 23, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[32] Department of Treasury, “State and Local Fiscal Recovery Funds: Treasury’s Portal for Recipient Reporting”, available at: https://home.treasury.gov/system/files/136/SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf.

[33] Treas. Reg. 31 CFR 35 at 189, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[34] Treas. Reg. 31 CFR 35 at 3-4, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[35] Id., at 13.