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Will there be administrative caps on the use of funds for each procurement? May interdepartmental billings for professional technical services, such as engineering design, be charged to ARP/CLFRF funds. Do they fall within a possible administrative cap?

The U.S. Department of Treasury (“Treasury”) has not indicated whether there will be administrative caps on the use of ARP or Coronavirus Local Fiscal Recovery Funds (“CLFRF”).  Nor is there Treasury guidance related to interdepartmental billings for professional technical services. There is, however, general Treasury guidance which municipalities can consider.

Treasury’s Interim Final Rule (the “Rule”) regarding the CLFRF states that CLFRF funds “will be subject to the provisions of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200) (the “Uniform Guidance”), including the cost principles and restrictions on general provisions for selected items of cost.”[1] For more details regarding implementation of the Uniform Guidance, please see the following e311 resource:

As of now, Treasury guidance for ARP and CLFRF does not explicitly state that there is a cap on administrative costs, except that such costs must be reasonable and allocable under the Uniform Guidance.[2]

Treasury has indicated that recipients may use CLFRF funds for: (i) direct cost (“those that are identified specifically as costs of implementing the [CLFRF] program objectives, such as contract support, materials, and supplies for a project”); and (ii) indirect cost (“general overhead costs of an organization where a portion of such costs are allocable to the [CLFRF] awards such as the cost of facilities or administrative functions like a director’s office”).[3] Treasury further notes that:

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).[4]

With regard to interdepartmental billings for professional technical services, such as  engineering design services, these “charge back” type expenses would likely be categorized as direct costs rather than administrative costs and would therefore be built into the overall programmatic budget.

Treasury recently issued additional guidance relative to “pre-project” development costs for water, sewer and broadband infrastructure projects, and it is illustrative for potential “charge back” costs such as engineering design fees.  Specifically:

To determine whether Funds can be used on pre-project development for an eligible water or sewer project, recipients should consult whether the pre-project development use or cost is eligible under the Drinking Water and Clean Water State Revolving Funds (CWSRF and DWSRF, respectively). Generally, the CWSRF and DWSRF often allow for pre-project development costs that are tied to an eligible project, as well as those that are reasonably expected to lead to a project. For example, the DWSRF allows for planning and evaluations uses, as well as numerous pre-project development costs, including costs associated with obtaining project authorization, planning and design, and project start-up like training and warranty for equipment. Likewise, the CWSRF allows for broad pre-project development, including planning and assessment activities, such as cost and effectiveness analyses, water/energy audits and conservation plans, and capital improvement plans. Similarly, pre-project development uses and costs for broadband projects should be tied to an eligible broadband project or reasonably expected to lead to such a project. For example, pre-project costs associated with planning and engineering for an eligible broadband infrastructure build-out is considered an eligible use of funds, as well as technical assistance and evaluations that would reasonably be expected to lead to commencement of an eligible project (e.g., broadband mapping for the purposes of finding an eligible area for investment).[5]

In contrast to potential direct costs described by Treasury, administrative costs include: “[c]osts required to administer Fiscal Recovery Funds, oversee subrecipients and beneficiaries, and file periodic reports with Treasury.”[6]

Last Updated: June 24, 2021

[1] Treas. Reg. 35 CFR 31 at [97], available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[2] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 17, 2021), – FAQ #9.3, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[3] Dept. Of Treasury Compliance and Reporting Guidance (State and Local Fiscal Recovery Funds), June 17, 2001, [7], available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[4] Id.

[5] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 17, 2021), – FAQ #6.12, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[6] Treas. Reg. 35 CFR 31 at [121], available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.