Government Agencies May Be Eligible for Relief Funding

Government agencies, from states down to the smallest municipalities, are eligible to receive relief funds related to the COVID-19 pandemic that were approved as part of the American Rescue Plan Act (ARPA). Recipients must adhere to eligibility rules and submit detailed plans to the federal government about how they plan to spend the money to receive the funds.

Eligible Expenditures

Recently, the Treasury issued its Final Rule for the Coronavirus State and Local Fiscal Recovery Funds that become effective on April 1, 2022. Important items to note from previous interim rulings, as well as from the final ruling, can be found below.

Eligible expenditures include:

  • The restoration and support of government employment
  • Provision of government services to the extent of revenue loss due to the pandemic
  • Water, sewer, and broadband infrastructure
  • Response to public health and negative economic impacts such as:
    • Building affordable housing, childcare facilities, schools, and hospitals
    • Assistance to households, small businesses, and nonprofits
    • Aid to impacted industries such as tourism, travel, and hospitality

Funds may NOT be used for:

  • Offsetting a reduction in net tax revenue resulting from a change in state or territory law
  • Deposits into a pension fund
  • Debt service or replenishing financial reserves
  • Any program, service, or capital expenditure that conflicts with or violates the statutory purpose of ARPA, such as one that undermines efforts to stop the spread of COVID-19

Recipients should be aware that the funds cannot be used in any manner that would be deemed in violation of the conflict-of-interest requirements contained in the Award Terms and Conditions, including any self-dealing or violation of ethics rules.

Understanding the Program

Government entities have until December 31, 2024 to use the funds. There are many moving parts to this program and understanding the expectations will be key to a government entity’s success in accessing these funds.

These moving parts include:

  • Funds from this program are permitted to be used for expenses incurred on or after March 3, 2021.
  • Government entities that fit in the following categories will need to complete quarterly Project and Expenditure Reports: State and U.S. territories, Tribal governments receiving more than $30 million, metropolitan cities and counties with a population exceeding 250,000 residents, and metropolitan cities and counties with a population below 250,000 residents that are allocated more than $10 million.
  • Government entities that fit in the following categories will need to complete annual Project and Expenditure Reports: Tribal governments that received less than $30 million, metropolitan cities and counties with a population below 250,000 residents that were allocated less than $10 million, and non-entitlement units of local government (NEUs).
  • The due date for all reporting is 30 days after the close of the reporting period. For annual reporters, the first period covered is March 3, 2021 – March 31, 2022.
  • There is no specific deadline for applying for funds for non-Tribal government entities, but, the sooner an application is filed, the sooner it can be approved and the funds distributed.
  • Funding amounts are calculated based on a federally determined formula. Funding amounts for Kansas counties range from a high of $100 million for Sedgwick County to $239,302 for Greeley County. The full list of county allocations can be found here.
  • Though each government entity has until 2024 to spend the money, the plans submitted must include detail as to how the funds will be spent each year, as well as information about contracts that are in place.
  • Counties and municipalities may apply for the funds through an online portal.
  • A broad range of COVID-19 mitigation tactics and public health responses that are eligible uses for the funds includes vaccination programs; medical care; testing; contact tracing; support for isolation or quarantine; support for vulnerable populations to access medical or public health services; public health surveillance; enforcement of public health orders; public communication efforts; 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.

Eligible uses are broadly defined and government entities receiving the funds are given significant latitude in determining expenses that could be eligible, as described in a 35-page FAQ that is available for download.

Revenue Loss

For many Kansas cities and counties, arguably the most important change that the final ruling brought about is the standard allowance for revenue loss. The final rule offers a one-time standard allowance for revenue loss of up to $10 million (or the entity’s allocation, whichever is lower). This allows recipients to select between the standard allowance or completing a full revenue loss calculation.

Any amount noted as revenue loss can then be used for the provision of government services, which are services traditionally provided by recipient governments, unless Treasury has stated otherwise. Examples of such government services include construction of roads and other infrastructure; provision of public safety and other services; construction of schools and hospitals; general government administration, staff, and administrative facilities; provision of police, fire, and other public safety services; and health and educational services.

The provision of government services is a broad category, and it has streamlined reporting requirements. With that in mind, many smaller government entities will be able to make use of their funding more easily.

Two things to note regarding the revenue loss:

  • Any funds used for the provision of government services are still considered federal funding, and, therefore, must meet Uniform Guidance (Single Audit) requirements such as procurement standards.
  • If an entity has already submitted a revenue loss calculation in a prior interim report, they can still take advantage of the standard allowance. The change would need to be made on its next project and expenditure report

Contact your Adams Brown advisor for further discussion of your government entity’s potential use of these Coronavirus State and Local Fiscal Recovery Funds.