CARES Act Funding Information for Cities

Published: July 6, 2020

(Updated Sept. 29, 2020)

Cities across Minnesota are certifying their eligibility to receive federal Coronavirus Relief Fund (CRF) distributions. The fund, created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, is designed to provide economic help to entities struggling because of the COVID-19 pandemic. Guidance is evolving in this area, so please check back frequently for updates.

—Access U.S. Department of the Treasury guidance and updates

Get answers to FAQs regarding CARES Act funding:

Certification and logistics

Q1. Who must sign the certification form?

Q2. What is the application process for cities with populations under 200?

Q3. Are counties required to distribute funds to cities under 200 population that request them? (Updated Sept. 29)

Q4. If a city is split between two counties, which county does the city return the unused funds to?

Q5. If the city does not fill out the certification form, what happens to the funds allocated to the city?

Q6. Does my city need a Data Universal Number System (DUNS) number related to the use of these funds?

Q7. If there is an expense that has not been paid out yet but will be incurred before Dec. 30, 2020, can the city keep the funds for those expenses past Nov. 15? (Updated Sept. 29)

Financial reporting

Q8. If our city accepts the funds, is there additional audit requirements? (Updated Sept. 29)

Q9. Who determines what expenses were improper and need to be repaid?

Q10. What are the state reporting requirements for city expenses? (Updated Sept. 29)

Eligible expenses

Q11. How does our city determine if an expense is an eligible use of this funding? (Updated Sept. 29, 2020)

Q12. What should a city’s finding of an eligible expense look like?

Q13. What are some of the eligible uses according to the federal guidance?

Q14. What expenses are not allowable?

Q15. The guidance provides that funding may be used to meet 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. May CRF payments be used to cover such an employee’s entire payroll cost or just the portion of time spent on mitigating or responding to the COVID-19 public health emergency? (Updated Sept. 29)

Q16. Can cities transfer a portion of their unused CRF allocation to another local government? Can a city accept a portion of another local government’s unused CRF allocation? (Added Sept. 29)

Q17. Are FEMA-eligible expenses (the city’s 25% match) also eligible for Coronavirus Relief Funds?

Q18. Does the city have to first seek FEMA reimbursement for expenses incurred that would be eligible for CRF?

Q19. May CRF payments be used to replace foregone utility fees? If not, can CRF payments be used as a direct subsidy payment to all utility account holders?

Q20. Can we use the CARES Act funding to expand technology options (e.g., purchase tablets to facilitate remote meetings, trainings, updating recording equipment, software to allow employees to work remotely)?

Q21. How do cities structure grant programs for businesses that are experiencing hardship because of COVID-19 closures? (Updated Sept. 29)

Q22. If the city gives business grants and the funds are found to have been used improperly by the business, who is responsible for repaying those funds?

Q23. Can payments be used to cover increased administrative leave costs of employees who could not telework in the event of a stay-at-home order or a case of COVID-19 in the workplace? (Added July 8, 2020)

Q24. May recipients use CRF payments to remarket the recipient’s convention facilities and tourism industry? (Added July 10, 2020)

Q25. My council wants to know how other cities are spending their CARES Act funds—is there data on this yet? (Added July 23)

Certification and logistics

Q1. Who must sign the certification form?

A1. The Department of Revenue (DOR) suggests that the city administrator/manager or mayor sign the certification form. The state suggests that it is a best practice for auditing purposes. There is not a specific requirement in law. State representatives said they won’t deny the form if it is signed by another city official.

—Learn more about the certification process from the DOR website

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Q2. What is the application process for cities with populations under 200?

A2. Cities under 200 in population will need to apply to their county. There is not a specific form prepared by the state for this purpose. Counties can create their own form or use the state’s form. Please reach out to your county for further information.

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Q3. Are counties required to distribute funds to cities under 200 population that request them?

A3. Yes.  Gov. Tim Walz is following SF 47 in distributing the fund. It states that a city that is not an eligible city may apply to its home county for a reimbursement, to be paid from the county aid distribution under subdivision 2 to cover costs incurred by the city or town that are allowed uses. The county may require the city to provide sufficient information to demonstrate that the cost incurred meets the requirements of the CARES Act and further guidance.. Upon appropriate documentation, the county must make a reimbursement of up to the lesser of: (1) $75.34 multiplied by the population of the city; or (2) the amount of documented allowed costs. The county, at its discretion, may increase the reimbursement above this amount, but to no more than the amount of documented allowed costs.

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Q4. If a city is split between two counties, which county does the city return the unused funds to?

A4. The funds will go back to the home county where the city’s administrative offices are located.

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Q5. If the city does not fill out the certification form, what happens to the funds allocated to the city?

A5. The state will hold the funds until the Sept. 15 certification deadline for cities. Unused/unclaimed city funds will be available for the state to use.

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Q6. Does my city need a Data Universal Number System (DUNS) number related to the use of these funds?

A6. Yes. If your city does not have one, you can file for one on grants.gov.

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Q7. If there is an expense that has not been paid out yet but will be incurred before Dec. 30, 2020, can the city keep the funds for those expenses past Nov. 15?

A7.  No.  Sept. 25, 2020, Minnesota Management and Budget (MMB) FAQ guidance confirms that all unspent funds must be returned to the home county, Hennepin County Medical Center, or another Hennepin County hospital (for Hennepin County cities only), or Regions Hospital or another Ramsey County hospital (for Ramsey County cities only), as of Nov. 15, 2020.  The deadline to transfer all unspent funds to these entities is Nov. 20, 2020.  Cities agreed to this with the submission of their certificate form in the CRF application.

There are two exceptions to this rule:

  • CRF eligible payroll expenses incurred through Nov. 15.
  • CRF eligible items ordered for delivery prior to Nov. 15 that have not yet been received due to supply chain disruption.

Guidance continues to evolve on this aspect of the CRF.  If guidance about dates changes at the federal level, the state will decide at that point if date changes will be made at the local level as well.

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Financial reporting

Q8. If our city accepts the funds, is there additional audit requirements?

A8. Yes.  U.S. Treasury FAQ guidance states that fund payments are considered to be federal financial assistance subject to the Single Audit Act and must conform to subpart F of the Uniform Grant Guidance.  Any city that expends $750,000 or more during the city’s fiscal year in federal awards must have an audit per the Single Audit Act’s requirements.

Cities that expend less than $750,000 in federal awards must still preserve records for review or audit by officials of the U.S. Treasury, Office of Inspector General.

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Q9. Who determines what expenses were improper and need to be repaid?

A9. The city’s auditor, the state government, or the federal government can make the determination that an expense was improper and needs to be repaid.

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Q10. What are the state reporting requirements for city expenses?

A10. The Minnesota COVID-19 Response Accountability Office (MCRAO) within MMB handles reporting requirements to the State of Minnesota.  The state then reports to the U.S. Treasury.

Cities over 200 in population are required to submit monthly reports to the MCRAO, beginning the month following receipt of CRF funds.  Reports are due Sept. 10, Oct. 9, Nov. 10, and Nov. 24 (covering Nov. 1 – Nov. 15) for each monthly period.  Cities begin reporting the month following receipt of CRF funds.

—Access the report form on the MCRAO website

Cites under 200 in population do not report to the MCRAO.  These cities should consult their county’s finance department for instructions on reporting to the county.

The League has held two webinars with MMB on CRF reporting.  The webinars and slides provide detailed instructions on reporting procedures:

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Eligible expenses

Q11. How does our city determine if an expense is an eligible use of this funding?

A11. To qualify, expenses must satisfy three distinct elements:

(1) Necessary expenditures incurred due to the public health emergency with respect to COVID-19. An expenditure is reasonably necessary for its intended use in the reasonable judgment of the government officials responsible for spending Coronavirus Relief Fund payments. Expenditures must be used for actions taken to respond to the public health emergency, including expenditures incurred to respond directly to the emergency, as well as expenditures incurred to respond to second order effects, such as by providing economic support to those suffering from employment or business interruptions due to COVID-19-related business closures.

(2) Costs not accounted for in the city’s budget most recently approved as of March 27, 2020.

(3) Performance or delivery must occur during the covered period, and payment of funds must be made during that time. For cities, due to state reporting requirements, the covered period is March 1, 2020, to Nov. 15, 2020. There are two limited exceptions. Payroll expenses incurred through Nov. 15 and paid on the next regularly scheduled payroll are allowed. Additionally, items or services ordered with expected delivery by Nov. 15, which are delayed due to supply chain disruption, are allowed. This area of regulation continues to evolve. Please check back for the latest updates.

Cities should document the reasons the expenses were determined to satisfy the three-part test. These findings can be used later to explain decisions to auditors and show the council’s careful consideration.

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Q12. What should a city’s finding of an eligible expense look like?

A12. While there isn’t a prescribed method, here is a sample that may be helpful to you:

Police Department Reassignment of Staff:

The police department priorities changed due to the pandemic. To make officers available to respond to the public health emergency, other police functions, such as community policing, school resource officers, and special projects, were discontinued. The cost of reassigned officers to monitor and enforce pandemic-related guidance was not accounted for in the most recent budget because it was for a substantially different use from the expected use of these funds. For example, leadership training, the evidence management upgrade project, and Coffee with a Cop community outreach were canceled to redirect resources to pandemic-related issues. Because the reassigned officer cost was determined necessary by the city administration, in response to the pandemic, and for a use substantially different from the expected use of these funds, it is a reimbursable cost under CRF. The reimbursable expense for March 1, 2020, to Nov. 15, 2020, is $100,000.

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Q13. What are some of the eligible uses according to the federal guidance?

A13. The categories include expenses for:

  • Medical expenses (public hospitals, clinics, testing).
  • Public health (personal protective equipment, enforcement of public health orders).
  • Payroll (public health and public safety workers, employees repurposed for COVID-19 response).
  • Unemployment Insurance costs for reimbursable employers.
  • Public health measures (food delivery to vulnerable, required paid leave for employees, telework capabilities).
  • Economic support (provision of grants to small businesses to reimburse the costs of business interruption caused by required closures).
  • Any other COVID-19-related expenses reasonably necessary to the function of government that satisfy the fund’s eligibility criteria.

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Q14. What expenses are not allowable?

A14. The following expenses are not eligible for funding:

  • Expenses for the state share of Medicaid.
  • Replacement of lost revenues, including property tax relief.
  • Payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 public health emergency.
  • Expenses that have been or will be reimbursed under any federal program, such as the reimbursement by the federal government pursuant to the CARES Act of contributions by states to state unemployment funds.
  • Reimbursement to donors for donated items or services.
  • Workforce bonuses other than hazard pay or overtime.
  • Severance pay or legal settlements.
  • Damages covered by insurance.
  • Per capital payments to residents of a particular jurisdiction without an assessment of individual need.

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Q15. The guidance provides that funding may be used to meet 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. May CFR payments be used to cover such an employee’s entire payroll cost or just the portion of time spent on mitigating or responding to the COVID-19 public health emergency?

A15. U.S. Treasury guidance has consistently stated that payroll expenses of public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to COVID-19 are eligible expenses.

For public safety and public health employees only, cities may presume that payroll costs are payments for services substantially dedicated to mitigating or responding to the COVID-19 public health emergency, unless the chief executive (or equivalent) of the city determines that specific circumstances indicate otherwise.  All costs of such employees may be covered using payments from the CRF during the period between March 1, 2020, and Nov. 15, 2020.

Public safety and public health employees include the following: 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) as well as employees of public health departments directly engaged in matters related to public health and related supervisory personnel.

Cities do not need to demonstrate that public safety or public health employees’ duties are/were substantially dedicated to mitigating or responding to COVID-19.  Per U.S. Treasury, Office of Inspector General guidance dated Sept. 21, 2020, “the government is not required to perform an analysis or maintain documentation of the substantially dedicated conclusion for payroll expenses of public safety, public health, health care, and human service employees.” (See Question 70.)

For employees who are not public safety or public health employees, payroll and expenses for only the time spent on responding or attending to COVID-19 issues are eligible. Cities should track time spent by these employees related to COVID-19 and apply CRF payments on that basis but need to do so consistently within the relevant department.The League encourages cities to document how employee payroll and expenses meet the general three-part test for CRF eligible expenses.

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Q16. Can cities transfer a portion of their unused CRF allocation to another local government? Can a city accept a portion of another local government’s unused CRF allocation?

Yes, as long as the transfer is to (1) another local government within the city’s borders, such as a school district, or (2) when the city shares COVID-19 expenses for shared services with other local governments. Examples of the second condition are when the city is a member of a joint powers entity or contracts for shared services such as fire, ambulance, police, or public health functions. When those conditions do not apply, cities cannot transfer funds to other local governments and must return unused funds to the home county or a hospital (for Ramsey and Hennepin counties) by Nov. 15, 2020.

This clarifies that transfers to local school districts are acceptable as well as transfers to joint powers entities or where the city contracts with another local government to receive services. Conversely, the city may receive transfers from other local governments that contract with the city for services.

Transfers must still qualify as a necessary expenditure incurred due to COVID-19 and meet the other criteria of the CARES Act. Cities must keep records of agreements to share CARES Act funds as well as any accounting records sufficient to document the transfers.

—See Questions 30-35 of MMB guidance dated Sept. 25, 2020 for further information

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Q17. Are FEMA-eligible expenses (the city’s 25% match) also eligible for Coronavirus Relief Funds?

A17. Yes. Payments from the CRF may be used to meet the non-federal matching requirements for Stafford Act assistance to the extent such matching requirements entail COVID-19-related costs that otherwise satisfy the CRF’s eligibility criteria and the Stafford Act. Regardless of the use of CRF payments for such purposes, FEMA funding is still dependent on FEMA’s determination of eligibility under the Stafford Act.

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Q18. Does the city have to first seek FEMA reimbursement for expenses incurred that would be eligible for CRF?

A18. No.

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Q19. May CRF payments be used to replace foregone utility fees? If not, can CRF payments be used as a direct subsidy payment to all utility account holders?

A19. CRF payments may not be used for government revenue replacement, including the replacement of unpaid utility fees. Federal guidance specifically says that fund payments may be used for subsidy payments to electricity account holders to the extent that the subsidy payments are deemed by the recipient to be necessary expenditures incurred due to the COVID-19 public health emergency and meet the other criteria of section 601(d) of the Social Security Act outlined in the guidance. For example, if determined to be a necessary expenditure, a government could provide grants to individuals facing economic hardship to allow them to pay their utility fees and thereby continue to receive essential services. There is not similar guidance for water/sewer service. There is some latitude to give assistance to individuals experiencing hardship due to COVID. The city granting these types of payment would have to give them to the individuals rather than crediting their unpaid utility accounts. There is not a standard program for how cities could do this, so working with your city attorney and/or city auditor would be encouraged.

Fund payments cannot be provided to all utility account holders. Any program providing assistance must have the participants demonstrate need.

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Q20. Can we use the CARES Act funding to expand technology options (e.g., purchase tablets to facilitate remote meetings, trainings, updating recording equipment, software to allow employees to work remotely)?

A20. Likely. Many cities are claiming such expenses for payment by the CRF. The city will want to document the necessity of the expense in relation to COVID-19.

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Q21. How do cities structure grant programs for businesses that are experiencing hardship because of COVID-19 closures?

A21. There is not a specific program that the city must adopt. The League has collected a sample library of grant guidelines, applications, and agreements from various cities.  The League and Ehlers, Inc. also held a Sept. 2, 2020 webinar that discussed the grant programs of Marshall and West St. Paul.

If you award grants or loans to a small business, you must ensure the recipient follows the same federal requirements for use of the funds, including subrecipient monitoring regulations under Uniform Grant Guidance.

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Q22. If the city gives business grants and the funds are found to have been used improperly by the business, who is responsible for repaying those funds?

A22. The city is accountable to the state and federal government. If a local government has transferred funds to another entity, the U.S. Treasury Department would seek to recoup any funds used in a manner not consistent with the CARES Act from the government that received the CRF payment directly from the state.

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Q23. Can payments be used to cover increased administrative leave costs of employees who could not telework in the event of a stay-at-home order or a case of COVID-19 in the workplace?

A23. The statute requires that payments be used only to cover costs that were not accounted for in the budget most recently approved as of March 27, 2020. As stated in the Guidance, a cost meets this requirement if either (a) the cost cannot lawfully be funded using a line item, allotment, or allocation within that budget or (b) the cost is for a substantially different use from any expected use of funds in such a line item, allotment, or allocation. If the cost of an employee was allocated to administrative leave to a greater extent than was expected, the cost of such administrative leave may be covered using payments from the CRF.

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Q24. May recipients use fund payments to remarket the recipient’s convention facilities and tourism industry?

A24. Yes, if the costs of such remarketing satisfy the requirements of the CARES Act. Expenses incurred to publicize the resumption of activities and steps taken to ensure a safe experience may be needed due to the public health emergency. Expenses related to developing a long-term plan to reposition a recipient’s convention and tourism industry and infrastructure would not be incurred due to the public health emergency and therefore may not be covered using payments from the CRF.

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Q25. My council wants to know how other cities are spending their CARES Act funds—is there data on this yet?

A25. There is not data available yet. But during the week of July 20, the League hosted six #WeGotThis Series Roundtables: How Cities are Using CARES Act Funds, where we discussed ideas with about 200 cities. From those conversations, common themes we observed about how cities plan to use the funds include:

  • Payroll (public safety, administration devoted to pandemic management, administrative leave, unemployment) (U.S. Treasury Guidance, page 1)
  • Building and sanitation expenses (HVAC sanitation system, hand sanitizer, sprayers for sanitizing at parks, hands-free door pulls)
  • Elections (pens for each voter, plexiglass dividers, additional sanitation employee)
  • Business subsidies (EDA, county partnerships) (U.S. Treasury Guidance, page 5)
  • Telework technology (laptops, tablets, web cameras)
  • City attorney costs (unbudgeted for COVID-19-related advice)
  • Meeting room technology (AV system)

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—Access more COVID-19 News and Resources