As part of the American Rescue Plan Act, Congress appropriated $65.1 billion dollars to provide direct aid to counties. But as with all federal funds, there are significant restrictions on how the money can be used, and strict safeguards to review the spending. In order to comply with the reporting requirements, it is important that counties carefully consider the rules governing how the funds are spent, and implement accounting practices to ensure the necessary reports can be prepared efficiently.
How may a county spend the funds?
The funds may only be used for eligible purposes, which generally include (1) responding to the public health emergency and its negative economic impacts, (2) providing premium pay to essential workers, (3) providing government services to the extent of the eligible governments’ revenue losses due to COVID-19, and (4) making water, sewer, and broadband infrastructure investments. Treasury’s FAQ document provides a non-exhaustive list of appropriate uses of the funds, as well as a handful of prohibited uses.
The funds may only be used to cover costs incurred by a local government from March 3, 2021 to December 31, 2024. This provision has some nuances, so please contact an Eaton Peabody attorney for additional details.
What are the reporting and compliance requirements?
In addition to the eligible uses, a recipient must also be aware of the reporting and compliance requirements. Cities and counties with a population of less than 250,000 residents that received more than $5 million in funding were required to submit one interim report by August 31st. Counties must now submit the initial Project and Expenditure Report by October 31, 2021, and then submit quarterly Project and Expenditure Reports through the end of the award period on December 31, 2026. The quarterly Project and Expenditure reports must contain:
- A name, description, project number, expenditure category, and completion status for each project;
- The primary place of performance;
- The start date for the project;
- The end date for the project;
- The amount committed to be spent, broken down by quarter;
- The amount actually spent, broken down by quarter;
- Project demographic information;
- Obligation and expenditure information for certain subawards;
- Other programmatic data if applicable; and
- A narrative description of compliance with Title VI of the Civil Rights Act
Appendix 1 of the Compliance and Reporting Guidance lists the Expenditure Categories; counties should ensure their systems are compatible with these Expenditure Categories as they are necessary for reporting purposes. Counties and cities with a population of more than 250,000 residents must also submit an annual Recovery Plan Performance Report.
Additionally, the use of the funds are subject to the award terms which detail some reporting requirements and state that the funds are subject to the provisions of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). The funds are also subject to any pre-existing federal statutes or regulations.
To assist with preparing and uploading the Interim Report the Treasury released the User Guide: Treasury’s Portal for Recipient Reporting. The Treasury will release additional guidance for preparing and submitting the Project and Expenditure Reports.
What documentation is required?
Recipients must keep financial records and supporting information for five years after all funds have been expended or returned to the Treasury, whichever is later. The Treasury recommends that the records are stored in open machine-readable formats and the Treasury has the right to access the records to conduct audits or other investigations. Counties should also implement effective internal controls to ensure any funding decisions constitute eligible use of funds and for reporting purposes.
What are the penalties for failing to comply?
Failing to comply with the restrictions on the use of the funds may result in recoupment of the funds. Filing a late report may result in a corrective action plan or other consequences.
Some helpful resources include the Interim Final Rule, the Treasury’s Compliance and Reporting Guidance, FAQ document, User Guide: Treasury’s Portal for Recipient Reporting, and webinars. Be sure to visit the Coronavirus State and Local Fiscal Recovery Funds page on the Treasury’s website for more updates. Additionally, the National Association of Counties (NACo) has established virtual meet-ups for counties to discuss the Fiscal Recovery Fund program, including the challenges and opportunities associated with the program.
If a county or local government has any questions about permissible uses of the Coronavirus Local Fiscal Recovery Fund (CLFRF) or the associated compliance and reporting procedures, please contact Dan Pittman in our Economic Development and Government Relations practice group.