On May 10, the U.S. Department of Treasury (Treasury) released an interim final rule, FAQs and a fact sheet for a portion of the $362 billion Coronavirus State and Local Fiscal Recovery Fund, established under the American Rescue Plan Act (ARP) signed into law on March 11 by President Biden.
This specific interim rule and related guidance covers the $61.5 billion in direct federal aid to America’s counties. Later this year, Treasury will release separate guidance for the $1.5 billion in additional federal aid for public lands counties under Sec. 605 of ARP.
NACo will continue to monitor any developments on additional guidance from the U.S. Treasury.
There are five primary ways that Recovery Funds can be spent:
- Support public health response: Fund COVID-19 mitigation efforts, medical expenses, behavioral healthcare and certain public health and safety staff
- Address negative economic impacts: Respond to economic harms to workers, families, small businesses, and nonprofits, or impacted industries and re-hiring of public sector workers
- Replace public sector revenue loss: Use funds to provide government services to the extend of the reduction in revenue experienced due to the pandemic
- Premium pay for essential workers: Offer additional support to those who have and will bear the greatest health risks because of their service in critical infrastructure. Funds can be used retroactively back to January 27, 2020.
- Water, sewer and broadband infrastructure: Make necessary investments to improve access to clean drinking water, invest in wastewater and stormwater infrastructure and provide unserved or underserved locations with new or expanded broadband access
The U.S. Treasury has not yet released submission instructions. NACo suggest that your county’s executive or authorized officer have this information on hand and is prepared to certify the submission once additional guidance is released.
TIMING AND DISTRIBUTION OF FUNDS
The ARP directs the Treasury to distribute funds no later than 60-days after a county certifies it needs funds. On May 10, the U.S. Treasury opened the portal for requesting funds. Treasury will distribute funds directly to counties of all sizes – regardless of population.
No. The Interim Final Rule requires that costs be incurred by December 31, 2024. Eligible recipients are encouraged to apply as soon as possible.
Fiscal Recovery Funds must be used in one of the four eligible use categories specified in the American Rescue Plan Act:
- To 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;
- To respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers;
- For the provision of 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
- To make necessary investments in water, sewer, or broadband infrastructure
5. Are expenses that were allowed under the CARES Act Coronavirus Relief Fund also allowable under the Recovery Fund?
Yes. However, there are three exceptions – certain restrictions on payroll costs for public health and safety employees, expenses related to issuing tax-anticipation notes are not eligible and non-federal matching requirements.
6. What is the difference in payroll expense coverage in the CARES Act Coronavirus Relief Fund and the American Rescue Plan State and Local Fiscal Recovery Fund?
The difference in payroll expense coverage is that the American Rescue Plan recognizes that the response to the COVID-19 public health emergency has changed and will continue to change over time. In particular, funds may be used for payroll and covered benefits expenses for public safety, public health, health care, human services, and similar employees, including first responders, to the extent that the employee’s time that is dedicated to responding to the COVID-19 public health emergency.
The recipient may consider a public health and safety employee to be entirely devoted to mitigating or responding to the COVID-19 public health emergency if the employee, or their operating unit or division, is primarily dedicated (e.g., more than half of the employee’s time is dedicated) to responding to the COVID-19 public health emergency.
7. What staff are included in “public safety, public health, health care, human services and similar employees”?
Public safety employees would include police officers (including state police officers), sheriffs and deputy sheriffs, firefighters, emergency medical responders, correctional and detention officers, and those who directly support such employees such as dispatchers and supervisory personnel.
Public health employees would include employees involved in providing medical and other health services to patients and supervisory personnel, including medical staff assigned to schools, prisons, and other such institutions, and other support services essential for patient care (e.g., laboratory technicians, medical examiner or morgue staff) as well as employees of public health departments directly engaged in matters related to public health and related supervisory personnel.
Human services staff include employees providing or administering social services; public benefits; child welfare services; and child, elder, or family care as well as others.
Yes. This assistance can include job training or other efforts to accelerate rehiring and thus reduce unemployment, such as childcare assistance, assistance with transportation to and from a jobsite or interview, and incentives for newly employed workers.
Yes. Counties can use Recovery Funds to cover the portion of employee payroll and benefit costs corresponding to time spent on administrative work due to COVID-19 and its economic impacts. Eligible uses include, but are not limited to, costs related to distributing Recovery Funds and managing new grant programs established with the funds.
Yes, if the purchase was an eligible use of funds.
11. Can Recovery Funds be used for non-federal matching requirements such as FEMA disaster assistance or Medicaid?
No. Recovery Funds are subject to pre-existing limitations in other federal statutes and regulations and may not be used as non-federal match for other federal programs whose statute or regulations bar the use of federal funds to meet matching requirements.
Specifically, Recovery Funds cannot be used to match funds for FEMA programs, unless specifically made so. Under a February 3, 2021 presidential directive, FEMA is authorized to provide 100 percent federal funding for the cost of COVID-related activities previously determined as eligible, from the beginning of the pandemic (January 27, 2020) to September 30, 2021. In addition, the directive allows FEMA to expand activities eligible for reimbursement from January 21, 2021 until September 30, 2021. Specifically, costs to support the safe opening and operation of eligible schools, child care facilities, health care facilities, non-congregate shelters, domestic violence shelters, and transit systems are now eligible.
Additionally, recipients may not use funds as a state match for the Clean Water Revolving Fund (CWSRF) and Drinking Water State Revolving Fund (DWSRF) due to prohibitions in utilizing federal funds as a state match in the authorizing statutes and regulations of the CWSRF and DWSRF.
Counties are not allowed to use funds for general infrastructure spending outside of water, sewer and broadband investments or above the amount allocated under the revenue loss provision.
13. How flexible are Categories 1 and 2 – public health response and negative economic impacts – when it comes to eligible uses?
Counties have broad flexibility so long as they can demonstrate that these activities support the public health response or that recipients of the Recovery Funds have experienced economic harm from the pandemic.
Yes. The Interim Final Rule permits a broad range of services to unemployed or underemployed workers and other individuals that suffered negative economic impacts from the pandemic. That can include public jobs programs, subsidized employment, combined education and on-the-job training programs, or job training to accelerate rehiring or address negative economic or public health impacts experienced due to a worker’s occupation or level of training. The broad range of permitted services can also include other employment supports, such as childcare assistance or assistance with transportation to and from a jobsite or interview. The Interim Final Rule includes as an eligible use re-hiring public sector staff up to the government’s level of pre-pandemic employment. “Public sector staff” would not include individuals participating in a job training or subsidized employment program administered by the recipient.
Recovery Funds may be used to replace revenue loss relative to the revenue collected in the full fiscal year prior to the COVID-19 public health emergency (January 27, 2020).
16. How do I know if a certain type of revenue should be counted for the purpose of computing revenue loss?
Recipients should refer to the definition of “General Revenue” included in the Interim Final Rule. If a recipient is unsure whether a particular revenue source is included in the Interim Final Rule’s definition of “General Revenue,” the recipient may consider the classification and instructions used to complete the Census Bureau’s Annual Survey.
For example, parking fees would be classified as a Current Charge for the purpose of the Census Bureau’s Annual Survey, and the Interim Final Rule’s concept of “General Revenue” includes all Current Charges. Therefore, parking fees would be included in the Interim Final Rule’s concept of “General Revenue.”
- Identify revenues collected in the most recent full fiscal year prior to the public health emergency (i.e. January 27, 2020), called the base year revenue. In calculating revenue, recipients should sum across all revenue streams covered as general revenue
- Estimated counterfactual revenue, which is equal to base year revenue:
[(1 + growth adjustment)^(n/12)], where n is the number of months elapsed since the end of the base year to the calculation date, and growth adjustment is the greater of 4.1 percent and the recipient’s average annual revenue growth in the three full fiscal years prior to the COVID-19 public health emergency
- Identify actual revenue, which equals revenues collected over the past 12 months of the calculation date
- The extent of the reduction in revenue is equal to counterfactual revenue less than actual revenue. If actual revenue exceeds counterfactual revenue, the extent of the reduction in revenue is set to zero for that calculation date
18. What can a county do with its funding from revenue loss (I.e. what does “government services” mean)?
Counties can spend revenue loss funding on a variety of government services. Government services can include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services.
However, expenses associated with obligations under instruments evidencing financial indebtedness for borrowed money would not be considered the provision of government services, as these financing expenses do not directly provide services or aid to citizens. Specifically, government services would not include interest or principal on any outstanding debt instrument, including, for example, short-term revenue or tax anticipation notes, or fees or issuance costs associated with the issuance of new debt.
Government services would not include satisfaction of any obligation arising under or pursuant to a settlement agreement, judgment, consent decree, or judicially confirmed debt restructuring in a judicial, administrative, or regulatory proceeding, except if the judgment or settlement required the provision of government services. That is, satisfaction of a settlement or judgment itself is not a government service, unless the settlement required the provision of government services. In addition, replenishing financial reserves (e.g., rainy day or other reserve funds) would not be considered provision of a government service, since such expenses do not directly relate to the provision of government services.
Where audited data is not available, recipients are not required to obtain audited data. Treasury expects all information submitted to be complete and accurate. See 31 CFR 35.4(c).
Recipients should use their own data sources to calculate general revenue, and do not need to rely on published revenue data from the Census Bureau. Treasury acknowledges that due to differences in timing, data sources, and definitions, recipients’ self-reported general revenue figures may differ somewhat from those published by the Census Bureau.
Recipients may provide data on a cash, accrual, or modified accrual basis, provided that recipients are consistent in their choice of methodology throughout the covered period and until reporting is no longer required.
22. Once a recipient has identified a reduction in revenue, how will Treasury track use of funds for the provision of government services?
Workers that are eligible for premium pay include:
- Any work performed by an employee of the state, local or tribal government
- Staff at nursing homes, hospitals, and home care settings
- Workers at farms, food production facilities, grocery stores, and restaurants
- Janitors and sanitation workers
- Truck drivers, transit staff and warehouse workers
- Public health and safety staff
- Childcare workers, educators and other school staff
- Social service and human services staff
Essential work is work involving regular in-person interactions or regular physical handling of items that are also handled by others. An individual who teleworked from a residence may not receive premium pay.
Yes. Third-party employers of essential workers are eligible. Third-party contractors who employ essential workers are also eligible for grants to provide premium pay. These decisions are at the discretion of the county. If a county does provide a grant to a third-party employer, additional reporting requirements are required.
Yes. Premium pay may be provided retroactively for work performed at any time since the start of the covid-19 public health emergency (January 27, 2020), where those workers have yet to be compensated adequately for work previously performed.
WATER, SEWER AND BROADBAND INFRASTRUCTURE
The Interim Rule aligns eligible water and sewer projects with those that are eligible to receive financial assistance from the Environmental Protection Agency’s (EPA) Clean Water State Revolving Fund and Drinking Water State Revolving Fund.
The types of projects eligible for CWSRF include:
- Projects to construct, improve, and repair wastewater treatment plants
- Control non-point sources of pollution
- Improve resilience of infrastructure to severe weather events
- Create green infrastructure, and
- Protect waterbodies from pollution.
The types of DWSRF projects that are eligible:
- Assist communities in making water infrastructure capital improvements, including the installation and replacement of failing treatment and distribution systems.In administering these programs, States must give priority to projects that:
- Ensure compliance with applicable health and environmental safety requirements
- Address the most serious risks to human health, and
- Assist systems most in need on a per household basis according to State affordability criteria.
Eligible projects are expected to meet or exceed symmetrical upload and download speeds of 100 Mbps. However, in instances where required speeds cannot be achieved (due of the geography, topography, or excessive costs), the affected project would be expected to meet or exceed 100 Mbps download with a minimum of 20 Mbps upload with scalability to a symmetrical minimum of 100 Mbps.
29. For broadband infrastructure investments, what does the requirement that infrastructure “be designed to” provide service to unserved or underserved households and businesses mean?
Designing infrastructure investments to provide service to unserved or underserved households or businesses means prioritizing deployment of infrastructure that will bring service to households or businesses that are not currently serviced by a wireline connection that reliably delivers at least 25 Mbps download speed and 3 Mbps of upload speed. To meet this requirement, states and localities should use funds to deploy broadband infrastructure projects whose objective is to provide service to unserved or underserved households or businesses. These unserved or underserved households or businesses do not need to be the only ones in the service area funded by the project.
30. For broadband infrastructure to provide service to “unserved or underserved households or businesses,” must every house or business in the service area be unserved or underserved?
No. It suffices that an objective of the project is to provide service to unserved or underserved households or businesses. Doing so may involve a holistic approach that provides service to a wider area in order, for example, to make the ongoing service of unserved or underserved households or businesses within the service area economical. Unserved or underserved households or businesses need not be the only households or businesses in the service area receiving funds.
Yes. Under the Interim Final Rule, counties may use payments from the Funds for “middle-mile projects,” but Treasury encourages counties to focus on projects that will achieve last-mile connections—whether by focusing on funding last-mile projects or by ensuring that funded middle-mile projects have potential or partnered last-mile networks that could or would leverage the middle-mile network.
32. For broadband infrastructure investments, what does the requirement to “reliably” meet or exceed a broadband speed threshold mean?
In the Interim Final Rule (IRF), the term “reliably” is used in two places: to identify areas that are eligible to be the subject of broadband infrastructure investments and to identify expectations for acceptable service levels for broadband investments funded by the Coronavirus State and Local Fiscal Recovery Funds. In particular:
- The IFR defines “unserved or underserved households or businesses” to mean one or more households or businesses that are not currently served by a wireline connection that reliably delivers at least 25 Mbps download speeds and 3 Mbps of upload speeds.
- The IFR provides that a recipient may use Coronavirus State and Local Fiscal Recovery Funds to make investments in broadband infrastructure that are designed to provide service to unserved or underserved households or businesses and that are designed to, upon completion:
- reliably meet or exceed symmetrical 100 Mbps download speed and upload speeds;
- or in limited cases, reliably meet or exceed 100 Mbps download speed and between 20 Mbps and 100 Mbps upload speed and be scalable to a minimum of 100 Mbps download and upload speeds.
The use of “reliably” in the IFR provides counties with significant discretion to assess whether the households and businesses in the area to be served by a project have access to wireline broadband service that can actually and consistently meet the specified thresholds of at least 25Mbps/3Mbps—i.e., to consider the actual experience of current wireline broadband customers that subscribe to services at or above the 25 Mbps/3 Mbps threshold. Whether there is a provider serving the area that advertises or otherwise claims to offer speeds that meet the 25 Mbps download and 3 Mbps upload speed thresholds is not dispositive.
When making these assessments, counties may choose to consider any available data, including but not limited to documentation of existing service performance, federal and/or state-collected broadband data, user speed test results, interviews with residents and business owners, and any other information they deem relevant. In evaluating such data, recipients may take into account a variety of factors, including whether users actually receive service at or above the speed thresholds at all hours of the day, whether factors other than speed such as latency or jitter, or deterioration of the existing connections make the user experience unreliable, and whether the existing service is being delivered by legacy technologies, such as copper telephone lines (typically using Digital Subscriber Line technology) or early versions of cable system technology (DOCSIS 2.0 or earlier).
The IFR also provides counties with significant discretion as to how they will assess whether the project itself has been designed to provide households and businesses with broadband services that meet, or even exceed, the speed thresholds provided in the rule.
33. How do I know if a water, sewer, or broadband project is an eligibile use of funds? Do I need pre-approval?
Recipients do not need approval from Treasury to determine whether an investment in a water, sewer, or broadband project is eligible under CSFRF/CLFRF. Each recipient should review the Interim Final Rule (IFR), along with the preamble to the Interim Final Rule, in order to make its own assessment of whether its intended project meets the eligibility criteria in the IFR. A recipient that makes its own determination that a project meets the eligibility criteria as outlined in the IFR may pursue the project as a CSFRF/CLFRF project without pre-approval from Treasury. Local government recipients similarly do not need state approval to determine that a project is eligible under CSFRF/CLFRF. However, recipients should be cognizant of other federal or state laws or regulations that may apply to construction projects independent of CSFRF/CLFRF funding conditions and that may require pre-approval.
For water and sewer projects, the IFR refers to the EPA Drinking Water and Clean Water State Revolving Funds (SRFs) for the categories of projects and activities that are eligible for funding. Recipients should look at the relevant federal statutes, regulations, and guidance issued by the EPA to determine whether a water or sewer project is eligible. Of note, the IFR does not incorporate any other requirements contained in the federal statutes governing the SRFs or any conditions or requirements that individual states may place on their use of SRFs.
Yes. There are two specific restrictions outlined in the Interim Rule:
- Pension funds: Recipients are not allowed to make an extraordinary deposit to a pension fund. However, recipients may use funds for routine payroll contributions to pensions of employees whose wages and salaries are an eligible use.
- Reduce net tax revenue (states and territories): States and territories are not allowed to use funding to reduce net tax revenue due to a change in law from March 3, 2021, through the last day of the fiscal year in which the funds provided have been spent.
Other restrictions include:
- Deposits into rainy day funds and reserves
- General infrastructure spending outside of water, sewer and broadband investments or above the amount allocated under the revenue loss provision
- Legal settlements or judgements
- Funding debt services
- Using funds for non-federal match including CWSRF, DWSRF and Medicaid
35. Do restrictions on using Coronavirus State and Local Fiscal Recovery Funds to cover costs incurred beginning on March 3, 2021 apply to costs incurred by the recipient (e.g., a State, local, territorial, or Tribal government) or to costs incurred by households, businesses, and individuals benefiting from assistance provided using Coronavirus State and Local Fiscal Recovery Funds?
The Interim Final Rule permits funds to be used to cover costs incurred beginning on March 3, 2021. This limitation applies to costs incurred by the recipient (i.e., the state, local, territorial, or Tribal government receiving funds). However, recipients may use Coronavirus State and Local Fiscal Recovery Funds to provide assistance to households, businesses, and individuals within the eligible use categories described in the Interim Final Rule for economic harms experienced by those households, businesses, and individuals prior to March 3, 2021. For example,
- Public Health/Negative Economic Impacts – Recipients may use Coronavirus State and Local Fiscal Recovery Funds to provide assistance to households – such as rent, mortgage, or utility assistance – for economic harms experienced or costs incurred by the household prior to March 3, 2021 (e.g., rental arrears from preceding months), provided that the cost of providing assistance to the household was not incurred by the recipient prior to March 3, 2021.
- Premium Pay – Recipients may provide premium pay retrospectively for work performed at any time since the start of the COVID-19 public health emergency. Such premium pay must be “in addition to” wages and remuneration already received and the obligation to provide such pay must not have been incurred by the recipient prior to March 3, 2021.
- Revenue Loss – The Interim Final Rule gives recipients broad latitude to use funds for the provision of government services to the extent of reduction in revenue. The calculation of lost revenue begins with the recipient’s revenue in the last full fiscal year prior to the COVID-19 public health emergency and includes the 12-month period ending December 31, 2020. However, use of funds for government services must be forward looking for costs incurred by the recipient after March 3, 2021.
- Investments in Water, Sewer, and Broadband – Recipients may use Coronavirus State and Local Fiscal Recovery Funds to make necessary investments in water, sewer, and broadband. See FAQ Section 6. Recipients may use Coronavirus State and Local Fiscal Recovery Funds to cover costs incurred for eligible projects planned or started prior to March 3, 2021, provided that the project costs covered by the Coronavirus State and Local Fiscal Recovery Funds were incurred after March 3, 2021.
OPEB refers to benefits other than pensions (see, e.g., Governmental Accounting Standards Board, “Other Post-Employment Benefits”). Treasury has determined that Sections 602(c)(2)(B) and 603(c)(2), which refer only to pensions, do not prohibit CSFRF/CLFRF recipients from funding OPEB. Recipients of either the CSFRF/CLFRF may use funds for eligible uses, and a recipient seeking to use CSFRF/CLFRF funds for OPEB contributions would need to justify those contributions under one of the four eligible use categories.
Interim reports: Counties will be required to submit one interim report, which will include the county’s expenditures by category at the summary level. The interim report will cover spending from the date the county receives Recovery Funds to July 31, 2021. Interim reports are due by August 31, 2021.
Quarterly project and expenditure reports: Counties will be required to submit quarterly project and expenditure reports, which will include financial data, information on contracts and subawards over $50,000 and other information regarding utilization of funds. These reports will be similar to CARES Act Coronavirus Relief Fund. The first report will cover spending from the date the county receives Recovery Funds to September 30, 2021. First report is due by October 31, 2021.
Recovery plan performance reports: Counties will be required to submit an annual recovery plan performance report, which will include descriptions of projects funded and information on performance indicators and objectives of each award. Initial recovery plan will cover activity from the date the county receives Recovery Funds to July 31, 2021. Local governments with less than 250,000 residents are not required to develop Recovery Plan Performance Report. Recovery plan is due by August 31, 2021.
No. Recovery Fund payments made by Treasury to local governments and Tribes are not subject to the requirement of maintaining balances in an interest-bearing account and remit payments to Treasury.
39. What provisions of the Uniform Guidance for grants apply to these funds? Will the Single Audit requirements apply?
Most of the provisions of the Uniform Guidance (2 CFR Part 200) apply to this program, including the Cost Principles and Single Audit Act requirements. Recipients should refer to the Assistance Listing for detail on the specific provisions of the Uniform Guidance that do not apply to this program. The Assistance Listing will be available on beta.SAM.gov.
Failure to comply with restriction on use of funds will be identified based on reporting provided by the county. The county will receive a written notice of violation, and within 60-days of the notice, a county can seek reconsideration of the violation based on supplemental information.
41. May recipients use funds to cover the costs of consultants to assist with managing and administering the funds?
Yes. Recipients may use funds for administering the CSFRF/CLFRF program, including costs of consultants to support effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements.
42. What is the Assistance Listing and Catalog of Federal Domestic Assistance (CFDA) number for the program?
The assistance listing includes helpful information including program purpose, statutory authority, eligibility requirements, and compliance requirements for recipients. The CFDA number is the unique 5-digit code for each type of federal assistance, and can be used to search for program information, including funding opportunities, spending on usaspending.gov, or audit results through the Federal Audit Clearinghouse.
To expedite payments and meet statutory timelines, Treasury issued initial payments under an existing CFDA number. If you have already received funds or captured the initial CFDA number in your records, please update your systems and reporting to reflect the final CFDA number 21.027. Recipients must use the final CFDA number for all financial accounting, audits, subawards, and associated program reporting requirements.
To ensure public trust, Treasury expects all recipients to serve as strong stewards of these funds. This includes ensuring funds are used for intended purposes and recipients have in place effective financial management, internal controls, and reporting for transparency and accountability.
Please see Treasury’s Interim Final Rule for more information. Further guidance on recipient compliance and reporting responsibilities is forthcoming.
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