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(Updated March 21, 2022)
Get answers to these FAQs about the American Rescue Plan Act (ARPA) of 2021:
Q1. Can my city still request funds?
Q2: How much funding did our city receive?
Q3. When will our city receive the final disbursement of funds?
Reporting and Auditing Requirements
Q4. What reporting will be required, and when will the reports be due?
Q5: How do I access the portal to submit my reports? (Updated March 21, 2022)
Q6. What records must be kept by governments receiving funds?
Q7. Will Federal Single Audit requirements apply to these funds?
Eligible Uses
Q8. What is the time frame for using the funds?
Q10. What are restrictions on the use of these funds?
Q11. Where can I find the full Treasury guidance?
Q14. Can my city use ARPA funds to provide COVID-19 paid leave to employees?
Q15. Does the final rule provide additional flexibility for broadband projects?
Q16. Can we transfer funds to another entity to use?
Q17. What are some of the other benefits available in the ARPA?
Q18. Can recipients use funds for administrative purposes?
Q19. May recipients use funds for general economic development or workforce development?
Q20. How can cities use funds to assist the travel, tourism, and hospitality industries?
Q21. We plan to help local businesses with our funds. Do we need to document their need for aid?
Q23. Can cities put some of the funds in a savings account for future projects?
Q32. When does the final rule take effect?
Q33. Interim Final Rule or Final Rule? Which one do we follow?
Q34. Did the final rule re-categorize eligible expenses?
Q35. What are key changes in the final rule?
Q1. Can my city still request funds?
A1. No. Cities under 50,000 in population had until October 11, 2021 to request funds from Minnesota Management and Budget. Cities had to request their first half of funds (distributed in 2021) to be eligible to receive the second half of funds in 2022.
Q2. How much funding did our city receive?
A2. Look up the latest ARPA Local Fiscal Recovery Fund Distribution Report to see distributions made by the state of Minnesota to cities less than 50,000 in population.
Non-entitlement jurisdictions in Minnesota (generally cities under 50,000 in population) received $105.81 per capita based on the city’s 2019 Census data in the summer of 2021 and an additional reallocation of $3.47 per capita was disbursed in the fall of 2021.
The final ARPA disbursement, with the second half of the additional reallocation amount, will be disbursed in the Summer of 2022.
The allocations for cities over 50,000 in population are available on the U.S. Treasury website.
See allocations for cities over 50,000 in population (pdf)
Q3. When will our city receive the final disbursement of funds?
A3. The final disbursement of funds will occur during the summer of 2022. Cities do not need to adopt an additional resolution for receiving these funds .
Most cities adopted a resolution accepting the full allocation, and then a second resolution to accept the reallocation of undistributed funds. The city should accept all receipts of ARPA by resolution, be that in one resolution or separate resolutions for each disbursement.
If cities choose to adopt the recommended resolution in the summer of 2021, they should have also passed a second resolution noting the acceptance of the additional reallocated funds. The final allocation cities receive in 2022 will include the original amount plus the redistribution money.
Reporting and Auditing Requirements
Q4. What reporting will be required, and when will the reports be due?
A4. Recipients must submit an interim report, quarterly project and expenditure reports, and annual recovery plan performance reports as specified below, regarding their utilization of Coronavirus State and Local Fiscal Recovery Funds.
- Interim reports: This deadline has passed.
- Quarterly Project and Expenditure reports: Entitlement Cities (cities with population exceeding 50,000) had the first report due Jan. 30, 2022. These reports must continue to be submitted quarterly within 30 days of the end of each quarter. See instructions on filing the Project and Expenditure Report (pdf).
- Annual Project and Expenditure report: Non-entitlement units of local government will be required to submit the project and expenditure report annually. The initial annual Project and Expenditure report for non-entitlement units of local government will cover activity from March 3, 2021 to March 31, 2022 and is due April 30, 2022. The subsequent annual reports will cover one calendar year and must be submitted to Treasury by April 30 each year.
- Recovery Plan Performance reports: The second Recovery Plan Performance report will cover the period from July 1, 2021 to June 30, 2022 and must be submitted to Treasury by July 31, 2022. Each annual recovery plan performance report must be posted on the public-facing website of the recipient. Local governments with fewer than 250,000 residents, Tribal governments, and non-entitlement units of local government are not required to develop a Recovery Plan Performance report. States (defined to include the District of Columbia), territories, metropolitan cities, and counties with a population that exceeds 250,000 residents will also be required to submit an annual recovery plan performance report to Treasury. This report will include descriptions of the projects funded and information on the performance indicators and objectives of each award, helping local residents understand how their governments are using the substantial resources provided by Coronavirus State and Local Fiscal Recovery Funds program. The initial recovery plan performance report will cover activity from date of award to July 31, 2021, and was submitted to Treasury by Aug. 31, 2021. Thereafter, the recovery plan performance reports will cover a 12-month period and recipients will be required to submit the report to Treasury within 30 days after the end of the 12-month period. Further guidance and instructions on the reporting requirements for programs is found in the U.S. Treasury Compliance and Reporting Guidance. (Treasury FAQ 5/10/21, updated 11/15/21)
Get additional Information on the Department of Treasury’s Portal for Recipient Reporting
Q5. How do I submit my reports — is there a video that explains the steps to access the portal to file the NEU Agreement and Supporting Documents Report due April 30, 2022?
A5. There are two reports that city recipients of ARPA funds will need to submit depending on population size:
1. NEU Agreement and Supporting Documents Report (for cities under 50,000 population)
The American Rescue Plan Act requires all non-entitlement units (NEU), generally all cities with populations under 50,000, to complete the NEU Agreement and Supporting Documents report on the Treasury Reporting Portal by April 30, 2022.
The Department of Treasury provides a helpful video that walks through the reporting process and covers:
- Reporting Responsibilities – overview of NEU reporting requirements
- Accessing Treasury’s Portal – how to log in, designate users, and view reports
- Submitting Supporting Documents – walkthrough for submitting the NEW Agreements and Supporting Documents Report
- Frequently Asked Questions – common errors, misconceptions and more
Access the video “State and Local Fiscal Recover Funds: Reporting for Non-Entitlement Units of Local Government”
The video is 46 minutes and answers many questions about the initial ARPA reporting process.
To facilitate reporting, each NEU will need a NEU Recipient Number. This number can be found on MMB’s ARP Local Fiscal Recovery Fund Distribution Report. Click on the latest report and then search for your city’s name.
As the distributor of ARPA funds, Minnesota Management and Budget’s COVID-19 Response Accountability Office is gathering information they will need for their reporting purposes. Much of this is the same information cities will need for reporting to the Treasury such as “Coronavirus Local Fiscal Recovery Fund Award Terms and Conditions,” “Assurances of Compliance with Civil Rights Requirements,” and documentation supporting the budget number reported to determine the allocation and ensure that the 75% of budget cap was not exceeded. MMB will communicate these expectations with the city’s listed contact from the initial application via email.
2. Project and Expenditure Report (for cities of all population sizes)
The Compliance and Reporting Guidance for the SLFRF provides additional detail and clarification for each recipient’s compliance and reporting responsibilities, and should be read in concert with the Award Terms and Conditions, the authorizing statute, the final rule, and other regulatory and statutory requirements. All prime recipients of SLFRF, including non-entitlement units of local government (NEUs), will need to be familiar with the portals. The portal will be the main repository for the project and expenditure report due April 30, 2022.
Please note, the user guide recommends recipients to first designate staff or officials for specific roles in managing the reports for their award.
Designated individual(s) for non-entitlement cities will access the Department of Treasury’s portal that will direct them to the login.gov (ID.me for entitlement cities) verification website where they will need to create an account. The Treasury has developed a user guide for login.gov and recorded a webinar explaining the process. An email will follow from the US Treasury granting access to the reporting portal.
See instructions on filing the Project and Expenditure Report (pdf)
Q6. What records must be kept by governments receiving funds?
A6. Financial records and supporting documents related to the award must be retained for a period of five years after all funds have been expended or returned to Treasury, whichever is later. This includes those which demonstrate the award funds were used for eligible purposes in accordance with the ARPA, Treasury’s regulations implementing those sections, and Treasury’s guidance on eligible uses of funds. (Treasury FAQ 5/10/21)
For auditing and reporting purposes, the award letter/grant agreement for ARPA funds includes the following:
- U.S. Department of the Treasury Coronavirus Local Fiscal Recovery Fund Award Terms and Conditions (pdf)
- U.S. Department of the Treasury Assurances of Compliance with Civil Rights Requirements (pdf)
Q7. Will Federal Single Audit requirements apply to these funds?
A7. Yes. A single audit is required by the federal government for any non-federal entity that spends $750,000 or more in federal funds in one year. It is intended to show that the entity has adequate internal controls and is generally in compliance with program requirements.
The city is responsible for the cost of the single audit and can contract with an auditing firm or the Minnesota Office of the State Auditor to perform it.
Eligible Uses
Q8. What is the time frame for using the funds?
A8. The covered period begins March 3, 2021, and the deadline for spending is Dec. 31, 2024. The period of performance will run until Dec. 31, 2026, which will provide recipients an additional two years during which they may expend funds for costs incurred (i.e., obligated to a contract).
Q9. What are eligible uses of these funds as provided in the interim final rule, effective until April 1, 2022 (see Q32 for key changes under the final rule)?
A9. Eligible uses include:
- Responding to the public health emergency. Expenses may include vaccination programs; medical care; testing; contact tracing; support for isolation or quarantine; supports for vulnerable populations to access medical or public health services; public health surveillance (e.g., monitoring case trends, genomic sequencing for variants); enforcement of public health orders; public communication efforts; enhancement to health care capacity, including through alternative care facilities; purchases of personal protective equipment; support for prevention, mitigation, or other services in congregate living facilities (e.g., nursing homes, incarceration settings, homeless shelters, group living facilities) and other key settings like schools; ventilation improvements in congregate settings, health care settings, or other key locations; enhancement of public health data systems; and other public health responses. Capital investments in public facilities to meet pandemic operational needs are also eligible, such as physical plant improvements to public hospitals and health clinics or adaptations to public buildings to implement COVID-19 mitigation tactics.
- Responding to the negative economic impacts of the pandemic. Eligible uses in this category include assistance to households; small businesses and non-profits; and aid to impacted industries. Assistance to households includes, but is not limited to: food assistance; rent, mortgage, or utility assistance; counseling and legal aid to prevent eviction or homelessness; cash assistance; emergency assistance for burials, home repairs, weatherization, or other needs; internet access or digital literacy assistance; or job training to address negative economic or public health impacts experienced due to a worker’s occupation or level of training. Assistance to small business and non-profits includes, but is not limited to:
- Loans or grants to mitigate financial hardship such as declines in revenues or impacts of periods of business closure, for example by supporting payroll and benefits costs, costs to retain employees, mortgage, rent, or utilities costs, and other operating costs.
- Loans, grants, or in-kind assistance to implement COVID-19 prevention or mitigation tactics, such as physical plant changes to enable social distancing, enhanced cleaning efforts, barriers or partitions, or COVID-19 vaccination, testing, or contact tracing programs; and
- Technical assistance, counseling, or other services to assist with business planning needs
- Premium pay for essential workers.
- An amount up to $13 per hour that is paid to an eligible worker in addition to wages the worker otherwise received, for all work performed by the eligible worker during the COVID-19 public health emergency. Such amount may not exceed $25,000 per eligible worker.
- Essential workers are those in critical infrastructure sectors who regularly perform in-person work, interact with others at work, or physically handle items handled by others.
- Critical infrastructure sectors include healthcare, education and childcare, transportation, sanitation, grocery and food production, and public health and safety, among others, as provided in the Treasury guidance. Governments receiving Fiscal Recovery Funds have the discretion to add additional sectors to this list, so long as the sectors are considered critical to protect the health and well-being of residents.
- The Treasury guidance emphasizes the need for recipients to prioritize premium pay for lower income workers. Premium pay that would increase a worker’s total pay above 150% of the greater of the state or county average annual wage requires specific justification for how it responds to the needs of these workers.
- Treasury encourages recipients to consider providing premium pay retroactively for work performed during the pandemic, recognizing that many essential workers have not yet received additional compensation for their service during the pandemic.
- Revenue replacement for the provision of government services to the extent the reduction in revenue is due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency (see additional questions below for definitions and calculations). The final rule offers a standard allowance for revenue loss of $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation. Recipients that select the standard allowance may use that amount – in many cases their full award – for government services, with streamlined reporting requirements.
- General revenue includes revenue from taxes, current charges, and miscellaneous general revenue. It excludes refunds and other correcting transactions, proceeds from issuance of debt or the sale of investments, agency or private trust transactions, and revenue generated by utilities and insurance trusts. General revenue also includes intergovernmental transfers between state and local governments, but excludes intergovernmental transfers from the Federal government, including Federal transfers made via a state to a locality pursuant to the Coronavirus Relief Funds (CRF) or the Fiscal Recovery Funds.
- Cities should calculate revenue on an entity-wide basis. This approach minimizes the administrative burden for cities, provides for greater consistency across all recipients, and presents a more accurate representation of the net impact of the COVID-19 public health emergency on a city’s revenue, rather than relying on financial reporting prepared by each city, which vary in methodology used and which generally aggregates revenue by purpose rather than by source.
- Cities are permitted to calculate the extent of reduction in revenue as of four points in time: Dec. 31, 2020; Dec. 31, 2021; Dec. 31, 2022; and Dec. 31, 2023. This approach recognizes that some recipients may experience lagged effects of the pandemic on revenues. Upon receiving Fiscal Recovery Fund payments, recipients may immediately calculate revenue loss for the period ending Dec. 31, 2020.
- The Treasury has released FAQs about Fiscal Recovery Funds, and they include a formula for calculating revenue loss. Read the Coronavirus State and Local Fiscal Recovery Funds FAQs (pdf).
- Please note: Treasury is disallowing the use of projections to ensure consistency and comparability across recipients and to streamline verification. However, in estimating the revenue shortfall using the formula above, recipients may incorporate their average annual revenue growth rate in the three full fiscal years prior to the public health emergency. (Treasury FAQ 5/10/21)
- Investments in water, sewer, and broadband infrastructure.
- Under the Drinking Water State Revolving Fund (DWSRF), categories of eligible projects include: treatment, transmission, and distribution (including lead service line replacement), source rehabilitation and decontamination, storage, consolidation, and new systems development. See a list of eligible projects from the Environmental Protection Agency (EPA).
- Under the Environmental Protection Agency’s Clean Water State Revolving Fund (CWSRF), categories of eligible projects include: construction of publicly owned treatment works, nonpoint source pollution management, national estuary program projects, decentralized wastewater treatment systems, stormwater systems, water conservation, efficiency, and reuse measures, watershed pilot projects, energy efficiency measures for publicly-owned treatment works, water reuse projects, security measures at publicly-owned treatment works, and technical assistance to ensure compliance with the Clean Water Act. See a list of eligible projects from the EPA.
- As mentioned in the Treasury guidance, eligible projects under the DWSRF and CWSRF support efforts to address climate change, as well as to meet cybersecurity needs to protect water and sewer infrastructure. Given the lifelong impacts of lead exposure for children, and the widespread nature of lead service lines, Treasury also encourages recipients to consider projects to replace lead service lines.
- Costs for construction on eligible water, sewer, or broadband infrastructure projects must be obligated by Dec. 31, 2024. The period of performance will run until Dec. 31, 2026, which will provide recipients a reasonable amount of time to complete projects funded with Fiscal Recovery Funds.
- Broadband improvements require eligible projects to reliably deliver minimum speeds of 100 Mbps download and 100 Mbps upload. In cases where it is impracticable due to geography, topography, or financial cost to meet those standards, projects must reliably deliver at least 100 Mbps download speed, at least 20 Mbps upload speed, and be scalable to a minimum of 100 Mbps download speed and 100 Mbps upload speed. Projects must also be designed to serve unserved or underserved households and businesses, defined as those that are not currently served by a wireline connection that reliably delivers at least 25 Mbps download speed and 3 Mbps of upload speed.
The items listed are not exclusive. Other expenses may be eligible.
Q10. What are restrictions on the use of these funds?
A10. States and territories cannot use funds to directly or indirectly offset tax reductions or delay a tax/tax increase, nor can funds be deposited into any pension fund.
Treasury interprets “deposit” in this context to refer to an extraordinary payment into a pension fund for the purpose of reducing an accrued, unfunded liability. More specifically, it does not permit this assistance to be used to make a payment into a pension fund if both: (1) the payment reduces a liability incurred prior to the start of the COVID-19 public health emergency, and (2) the payment occurs outside the city’s regular timing for making such payments. Recipients may use funds for routine payroll contributions connected to an eligible use of funds.
No debt service or replenishing financial reserves. Since SLFRF funds are intended to be used prospectively, recipients may not use SLFRF funds for debt service or replenishing financial reserves (e.g., rainy day funds).
No satisfaction of settlements and judgments. 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 is itself not an eligible use. However, if a settlement requires the recipient to provide services or incur other costs that are an eligible use of SLFRF funds, SLFRF may be used for those cost.
Finally, SLFRF funds may not be used for a project that conflicts with or contravenes the purpose of the American Rescue Plan Act statute (e.g., uses of funds that undermine COVID-19 mitigation practices in line with CDC guidance and recommendations) and may not be used in violation of the Award Terms and Conditions or conflict of interest requirements under the Uniform Guidance. Other applicable laws and regulations, outside of SLFRF program requirements, may also apply (e.g., laws around procurement, contracting, conflicts-of-interest, environmental standards, or civil rights).
Q11. Where can I find the full Treasury guidance?
Q12. Do cities need to demonstrate that reduction in revenue is due to the COVID-19 public health emergency?
A12. No. In the Treasury guidance, any diminution in actual revenue calculated using the formula in the FAQ would be presumed to have been “due to” the COVID-19 public health emergency. This presumption is made for administrative ease and in recognition of the broad-based economic damage that the pandemic has wrought. (Treasury FAQ 5/10/21)
According to the final rule, recipients may elect a “standard allowance” of $10 million to spend on government services through the period of performance (March 3, 2020, to Dec. 31, 2024, or Dec. 31, 2026, for projects in process). Under this option, the Treasury presumes that up to $10 million in revenue has been lost due to the public health emergency and recipients are permitted to use that amount (not to exceed the award amount) to fund “government services.” The standard allowance provides an estimate of revenue loss that is based on an extensive analysis of average revenue loss across states and localities, and offers a simple, convenient way to determine revenue loss, particularly for ARPA’s smallest recipients.
All recipients may elect to use this standard allowance instead of calculating lost revenue using the formula.
Recipients may use ARPA funds on government services up to the revenue loss amount, whether that be the standard allowance amount or the amount calculated using the formula approach. Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise. Here are some common examples, although this list is not exhaustive:
- Road building and maintenance, and other infrastructure.
- Health services.
- General government administration, staff, and administrative facilities.
- Environmental remediation.
- Provision of police, fire, and other public safety services (including purchase of fire trucks and police vehicles).
Government services is the most flexible eligible use category under the ARPA program, and funds are subject to streamlined reporting and compliance requirements. Recipients should be mindful that certain restrictions, which apply to all uses of funds, apply to government services as well. These restrictions include deposits into pension funds, debt service, replenishing financial reserves, settlements and judgments, or any projects that conflict with or contravene the purpose of the American Rescue Plan Act.
Q13. Should my city adopt a resolution to elect the standard allowance of up to $10 million available under the revenue replacement provision of ARPA?
A13. Although a resolution is not specifically required under ARPA, the League recommends that cities adopt a resolution to clearly memorialize the intentions of the council. The League has created a model resolution, available at the link below.
Q14. Can my city use ARPA funds to provide COVID-19 paid leave to employees?
A14. Yes, the final rule includes paid family and medical leave for public employees to enable compliance with COVID-19 public health precautions as an eligible use of funds.
Q15. Does the final rule provide additional flexibility for broadband projects?
A15. The final rule broadens the set of eligible broadband infrastructure investments that recipients may undertake. Recipients are encouraged to prioritize projects that are designed to serve locations without access to reliable wireline 100/20 Mbps broadband service (meaning service that reliably provides 100 Mbps download speed and 20 Mbps upload speed through a wireline connection), but are broadly able to invest in projects designed to provide service to locations with an identified need for additional broadband investment. Recipients have broad flexibility to define need in their community. Examples of need could include:
- Lack of access to a reliable high-speed broadband connection.
- Lack of affordable broadband.
- Lack of reliable service.
Consult the final rule in situations where other federal and state funding commitments exist.
Recipients are required to design projects to, upon completion, reliably meet or exceed symmetrical 100 Mbps download and upload speeds. In cases where it is not practicable, because of the excessive cost of the project or geography or topography of the area to be served by the project, eligible projects may be designed to reliably meet or exceed 100/20 Mbps and be scalable to a minimum of symmetrical 100 Mbps download and upload speeds. Treasury encourages recipients to prioritize investments in fiber-optic infrastructure wherever feasible and to focus on projects that will achieve last-mile connections. Further, Treasury encourages recipients to prioritize support for broadband networks owned, operated by, or affiliated with local governments, nonprofits, and co-operatives.
Recipients must require the service provider for a broadband project that provides service to households to either:
- Participate in the FCC’s Affordable Connectivity Program (ACP).
- Provide access to a broad-based affordability program to low-income consumers that provides benefits commensurate to ACP.
Treasury encourages broadband services to also include at least one low-cost option offered without data usage caps at speeds sufficient for a household with multiple users to simultaneously telework and engage in remote learning.
Q16. Can we transfer funds to another entity to use?
A16. Yes, transfers are allowed to nonprofit organizations, public benefit corporations involved in transporting passengers or cargo, special purpose unit of government, and states when used for the same allowable purposes as cities. The final rule clarifies that recipients may transfer SLFRF funds to any entity to carry out as a subrecipient an eligible use of funds as long as they comply with the Award Terms and Conditions and other applicable requirements, including the Uniform Guidance.
Q17. What are some of the other benefits available in the ARPA?
Q18. Can recipients use funds for administrative purposes?
A18. Recipients may use funds to cover the portion of payroll and benefits of employees corresponding to time spent on administrative work necessary due to the COVID-19 public health emergency and its negative economic impacts. This includes, but is not limited to, costs related to disbursing payments of Fiscal Recovery Funds and managing new grant programs established using Fiscal Recovery Funds. (Treasury FAQ 5/10/21)
Q19. May recipients use funds for general economic development or workforce development?
A19. Generally not. Recipients must demonstrate that funding uses directly address a negative economic impact of the COVID-19 public health emergency, including funds used for economic or workforce development. For example, job training for unemployed workers may be used to address negative economic impacts of the public health emergency and be eligible. (Treasury FAQ 5/10/21)
Q20. How can cities use funds to assist the travel, tourism, and hospitality industries?
A20. Aid provided to tourism, travel, and hospitality industries should respond to the negative economic impacts of the pandemic. For example, a recipient may provide aid to support safe reopening of businesses in the tourism, travel, and hospitality industries and to industries that were closed during the COVID-19 public health emergency, as well as aid a planned expansion or upgrade of tourism, travel, and hospitality facilities delayed due to the pandemic. (Treasury FAQ 5/10/21)
Q21. We plan to help local businesses with our funds. Do we need to document their need for aid?
A21. Yes. Cities should maintain records to support their assessment of how businesses or business districts receiving assistance were affected by the negative economic impacts of the pandemic and how the aid provided responds to these impacts. (Treasury FAQ 5/10/21)
Q22. How does the Treasury guidance help address the disparate impact of COVID-19 on certain populations and geographies?
A22. In recognition of the disproportionate impacts of the COVID-19 virus on health and economic outcomes in low-income and Native American communities, the Treasury guidance identifies a broader range of services and programs that are considered to be in response to the public health emergency when provided in these communities. Specifically, Treasury will presume that certain types of services are eligible uses when provided in a Qualified Census Tract (QCT), to families living in QCTs, or when these services are provided by Tribal governments.
Recipients may also provide these services to other populations, households, or geographic areas disproportionately impacted by the pandemic. In identifying these disproportionately impacted communities, recipients should be able to support their determination for how the pandemic disproportionately impacted the populations, households, or geographic areas to be served.
Eligible services include:
- Addressing health disparities and the social determinants of health, including community health workers, public benefits navigators, remediation of lead paint or other lead hazards, and community violence intervention programs.
- Building stronger neighborhoods and communities, including: supportive housing and other services for individuals experiencing homelessness, development of affordable housing, and housing vouchers and assistance relocating to neighborhoods with higher levels of economic opportunity.
- Addressing educational disparities exacerbated by COVID-19, including: early learning services, increasing resources for high-poverty school districts, educational services like tutoring or afterschool programs, and supports for students’ social, emotional, and mental health needs.
- Promoting healthy childhood environments, including: child care, home visiting programs for families with young children, and enhanced services for child welfare-involved families and foster youth.
(Treasury FAQ 5/10/21)
The final rule recognizes that the pandemic caused broad-based impacts that affected many communities, households, and small businesses across the country; for example, many workers faced unemployment and many small businesses saw declines in revenue. The final rule describes these as “impacted” households, communities, small businesses, and nonprofits.
At the same time, the pandemic caused disproportionate impacts, or more severe impacts, in certain communities. For example, low-income and underserved communities have faced more severe health and economic outcomes like higher rates of COVID-19 mortality and unemployment, often because pre-existing disparities exacerbated the impact of the pandemic. The final rule describes these as “disproportionately impacted” households, communities, small businesses, and nonprofits.
To simplify administration of the program, the final rule presumes that certain populations were “impacted” and “disproportionately impacted” by the pandemic; these populations are presumed to be eligible for services that respond to the impact they experienced. The final rule also enumerates a non- exhaustive list of eligible uses that are recognized as responsive to the impacts or disproportionate impacts of COVID-19. Recipients providing enumerated uses to populations presumed eligible are clearly operating consistently with the final rule.
Recipients can also identify other pandemic impacts, impacted or disproportionately impacted populations or classes, and responses.
Q23. Can cities put some of the funds in a savings account for future projects?
A23. No. Funds made available to respond to the public health emergency and its negative economic impacts are intended to help meet pandemic response needs and provide immediate stabilization for households and businesses. Contributions to rainy day funds and similar reserves funds would not address these needs or respond to the COVID-19 public health emergency, but would rather be savings for future spending needs. (Treasury FAQ 5/10/21)
Q24. For broadband investments, may cities use funds for related programs such as cybersecurity or digital literacy training?
A24. Yes. Cities may use funds to provide assistance to households facing negative economic impacts due to COVID-19, including digital literacy training and other programs that promote access to the internet. Cities may also use funds for modernization of cybersecurity, including hardware, software, and protection of critical infrastructure, as part of provision of government services up to the amount of revenue lost due to the public health emergency. (Treasury FAQ 5/10/21)
Q25. What is the definition of “budget” for the purpose of the 75% cap on non-entitlement cities payments, and who is responsible for enforcing this cap?
A25. States are responsible for enforcing the “75% cap” on city payments, which is a statutory requirement that distributions to cities not exceed 75% of the city’s most recent budget. Treasury interprets the most recent budget as the city’s most recent annual total operating budget, including its general fund and other funds, as of Jan. 27, 2020. States may rely for this determination on a certified top-line budget total from the city. Funding amounts in excess of such cap must be returned to Treasury. (Treasury FAQ 5/10/21)
Q26. The Coronavirus Relief Fund (CRF) included as an eligible use: “Payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency.” What has changed with the Coronavirus State and Local Fiscal Recovery Funds (CSFRF/CLFRF), and what type of documentation is required for these funds?
A26. Many of the expenses authorized under the Coronavirus Relief Fund are also eligible uses under the CSFRF/CLFRF. However, in the case of payroll expenses for public safety, public health, health care, human services, and similar employees (hereafter, public health and safety staff), the CSFRF/CLFRF does differ from the CRF. This change reflects the differences between the ARPA and CARES Act and 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.
For administrative convenience, 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, and therefore fully covered, if the employee, or his or her 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.
Recipients may use presumptions for assessing whether an employee, division, or operating unit is primarily dedicated to COVID-19 response. The recipient should maintain records to support its assessment, such as payroll records, attestations from supervisors or staff, or regular work product or correspondence demonstrating work on the COVID-19 response. Recipients need not routinely track staff hours. Recipients should periodically reassess their determinations. (Treasury FAQs)
Q27. If the city chooses to award premium pay to employees, are the amounts paid to employees considered wages?
A27. Yes, any payment in the nature of compensation with ARPA funds is considered wages. Employers generally must withhold federal income tax, social security tax, and Medicare tax from employees’ wages along with paying federal unemployment tax on the wages.
Q28. If amounts paid to employees are considered wages are all payments to individuals considered wages?
A28. No. If a payment is made to an individual with ARPA funds but is not for compensation or services, it is NOT considered income and therefore a Form 1099-MISC is likely not required.
Q29. Our city decided to provide assistance to households for food assistance, rent, mortgage, and utility assistance. Does the city need to issue a 1099-MISC for these payments? What if the city directly paid the utility bills?
A29. The city does not need to issue a 1099-MISC because the payment would not be considered income to the recipient.
Q30. Does the IRS have any information on their website with updates clarifying when taxes need to be withheld or 1099-MISC form filed?
A30. Yes, updates are available on the IRS website. Read the frequently asked questions for states and local governments on taxability and reporting of payments from Coronavirus State and Local Fiscal Recovery Funds
Q31. While the League’s FAQs are helpful, it would be handy to have something in PDF format, similar to the Handbook for Minnesota Cities. Does this exist?
A31. Yes, the National League of Cities just released a pdf of the handy “Local Fiscal Recovery Funds Playbook.”
Access the Local Fiscal Recovery Funds Playbook (pdf) on NLC’s website
Q32. When does the final rule take effect?
A32. The final rule becomes effective on April 1, 2022. Until the final rule becomes effective on April 1, 2022, the interim final rule remains binding and effective. However, recipients can choose to take advantage of the final rule’s flexibilities and simplifications now, even ahead of the effective date. Treasury will not take action to enforce the interim final rule to the extent that a use of funds is consistent with the terms of the final rule, regardless of when the SLFRF funds were used. Recipients may consult the Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule, which can be found on Treasury’s website, for more information on compliance with the interim final rule and the final rule.
Access a video and infographic that provide a quick summary and more details on the ARPA Final Rule
Q33. Interim Final Rule or Final Rule? Which one do we follow?
A33. Provisions of the interim final rule may be applied until the provisions of the final rule are effective on April 1, 2022. Until the final rule becomes effective on April 1, 2022 the interim final rule remains binding and effective. Recipients can choose to take advantage of the final rule’s flexibilities and simplifications now, even ahead of the effective date.
Q34. Did the final rule re-categorize eligible expenses?
A34. Yes, in some cases, enumerated eligible uses included in the interim final rule under responding to the public health emergency have been re-categorized in the organization of the final rule to enhance clarity.
For discussion of eligible uses for public health and safety staff and to improve the design and execution of public health programs, please see section Public Sector Capacity and Workforce in General Provisions: Other.
For discussion of eligible uses to address disparities in public health outcomes, please see section Assistance to Households in Negative Economic Impacts.
Conversely, discussion of eligible assistance to small businesses and nonprofits to respond to public health impacts has been moved from Assistance to Small Businesses and Assistance to Nonprofits in Negative Economic Impacts to this section. This change is consistent with the interim final rule, which provides that appropriate responses to address the public health impacts of COVID-19 may be provided to any type of entity.
Q35. What are key changes in the final rule?
A35. The final rule delivers broader flexibility and greater simplicity in the program, responsive to feedback in the comment process. Among other clarifications and changes, the final rule provides the features below.
Replacing lost public-sector revenue
The final rule offers a standard allowance for revenue loss of $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation. Recipients that select the standard allowance may use that amount – in many cases their full award – for government services, with streamlined reporting requirements.
Public health and economic impacts
In addition to programs and services, the final rule clarifies that recipients can use funds for capital expenditures that support an eligible COVID-19 public health or economic response. For example, recipients may build certain affordable housing, childcare facilities, schools, hospitals, and other projects consistent with final rule requirements.
In addition, the final rule provides an expanded set of households and communities that are presumed to be “impacted” and “disproportionately impacted” by the pandemic, thereby allowing recipients to provide responses to a broad set of households and entities without requiring additional analysis. Further, the final rule provides a broader set of uses available for these communities as part of COVID-19 public health and economic response, including making affordable housing, childcare, early learning, and services to address learning loss during the pandemic eligible in all impacted communities and making certain community development and neighborhood revitalization activities eligible for disproportionately impacted communities.
The final rule also allows for a broader set of uses to restore and support government employment, including hiring above a recipient’s pre-pandemic baseline, providing funds to employees that experienced pay cuts or furloughs, avoiding layoffs, and providing retention incentives.
Premium pay
The final rule delivers more streamlined options to provide premium pay, by broadening the share of eligible workers who can receive premium pay without a written justification while maintaining a focus on lower-income and front-line workers performing essential work.
Water, sewer, and broadband infrastructure
The final rule significantly broadens eligible broadband infrastructure investments to address challenges with broadband access, affordability, and reliability, and adds additional eligible water and sewer infrastructure investments, including a broader range of lead remediation and stormwater management projects.
For more information
The League hosted a webinar with more details about the ARPA Coronavirus Local Fiscal Recovery Fund on May 18, 2021.
