The American Rescue Plan Act was signed into law by President Biden on March 11, 2021, it guaranteed direct relief to cities, towns and villages in the United States. The U.S. Department of the Treasury is responsible for overseeing this unprecedented program. NLC has identified your frequently asked questions about Coronavirus Local Fiscal Recovery Fund grants. These answers will be updated as additional
information becomes available. We’ve organized the frequently asked questions in sections to help guide you. Introduction to the American Rescue Plan Act Receiving Funds Compliance and Reporting Eligible Users Introduction to the American Rescue Plan ActWhere can we find in-depth information on the American Rescue Plan Act (ARPA)?The following list includes some of the available resources that provide guidance on ARPA, compliance, and reporting requirements:
In addition, NLC has created and continues to develop resources for members on specific ARPA-related questions/issues. A number of these are referenced throughout the answers to these Frequently Asked Questions. What is the Final Rule?The Final Rule was released on January 6, 2022 and took effect on April 1, 2022. State and local funding allocated in the American Rescue Plan is subject to the specifications outlined in the Final Rule. The Final Rule provides a comprehensive list of eligible expenditures, encouraged expenditures, and prohibited expenditures. The Final Rule Overview provides a non-exhaustive list of provisions in the Final Rule and serves as a guide for some of the actions municipalities may take in utilizing their recovery funds. Learn more about what the Final Rule means for local government leaders here. What guidance is available?The U.S. Department of Treasury provides guidance for cities on determining eligible uses, allocating funds, and reporting and compliance of their local fiscal recovery funds. There are additional resources available for Non-Entitlement Units (NEUs), or municipalities with a population under 50,000, as well. This guidance from Treasury includes information states used to allocate funding to NEUs, as well as guidelines for crucial reporting and compliance measures. The Compliance and Reporting Guidance, released in February 2022, provides an overview of the Project and Expenditure Report and Recovery Plan Performance Report required to be submitted by cities, towns and villages to Treasury. Additional guidance, including a webinar series on compliance and reporting, can be found here for cities and NEUs. Treasury has released a series of webinars on State and Local Fiscal Recovery Funds, which outline the most important details from the Final Rule, while also covering expenditure reporting. Finally, NLC has released a variety of blogs and webinars on the Final Rule and ARPA compliance to help ensure municipalities are equipped to spend their funds as efficiently and effectively as possible. Receiving FundsHow was my city allocated funds?MethodologyThe Act provides that the Secretary shall substitute “all metropolitan cities” for “all metropolitan areas” in each place it appears. This substitution removes urban counties, which are provided for separately under the Act, 4 from the ratios used in the calculation of allocations for metropolitan cities. The Act also provides that the Secretary shall allocate and pay to each metropolitan city an amount determined for the city “consistent with” the CDBG formula. As noted, the CDBG formula uses six weighted variables.5 This formula reflects an approach taken since the 1970s on how to assess communities’ needs for funds to provide suitable living environments and expanded economic opportunities, particularly for low-income communities. But applying the formula solely by substituting “all metropolitan cities” for “all metropolitan areas” has the effect of changing the relative importance of the variables: in particular, it alters the weight normally assigned to “population growth lag.” While substituting “all metropolitan cities” for “all metropolitan areas” ensures that all of the metropolitan cities’ allocation will be distributed, a substitution that changes the relative importance of the variables that drive the underlying CDBG formula would produce results that are not “consistent with” with the formula, as the statute requires. To achieve the statutorily mandated consistency with the CDBG formula, while still “substitut[ing] ‘all metropolitan cities’ for ‘all metropolitan areas’ each place it appears,” Treasury has adjusted the relative weights of the ratios that make up the formula to reflect the same relative importance of the ratios absent the substitution. Coronavirus Local Fiscal Recovery Fund grants are formula grants and under the formula, every municipal government is entitled to receive a calculated share of the $65.1 billion for cities, towns, and villages. These are not competitive grants and local governments will never need to submit an application or justify their needs in advance to receive funding. There are, however, steps to be taken to ensure local governments receive their grants. Metropolitan cities (population >50,000) should ensure they have a valid UEI number, an active SAM registration, and payment information in preparation for future filing requirements. It is important to note that some cities with a population fewer than 50,000 received their allocations as a metropolitan city, if they were a principal city in their metropolitan statistical area. How were NEUs allocated funds?Non-entitlement units of local government (NEUs), or generally municipalities with fewer than 50,000 residents, received their ARPA funding through their state government. States calculated the funding using the following equation, and a spreadsheet of funding designated to each NEU in your state should be available online:  The second tranche of remaining funding would be dispersed by the state based on the following calculation: Non-entitlement units of local government (population <50,000) must have a valid UEI number and active SAM registration to meet reporting requirements. When will my city receive the second tranche of funding?Depending on the state, cities began allocating the first tranche of funding on May 10, 2021 and funding distribution continued throughout the Summer. The second tranche with the remaining balance of funds will be released no sooner than 12 months after distribution of the initial funds. Compliance and ReportingWhat are SLERF reporting requirements?For metropolitan cities and non-entitlement units to receive their SLFRF funding, they must abide by the following reporting requirements:
What is a UEI Number?A Unique Entity Identifier (UEI) number is a unique 12-digit number assigned to each municipality for use in reporting their fiscal recovery funding on SAM.gov. As of April 4, 2022, the federal government switched from the DUNS number to the UEI number . If you have an existing registered entity but do not know your UEI number, you will find your UEI number on SAM.gov. New entities will receive their UEI number when registering on SAM.gov. What is an active SAM registration?SAM is the official government-wide database to register with in order to do business with the U.S. government. All Federal financial assistance recipients must register on SAM.gov and renew their SAM registration annually to maintain an active status to be eligible to receive Federal financial assistance. There is no charge to register or maintain your entity SAM registration. Metropolitan cities and NEUs will need an active SAM registration to receive funds, and ALL cities will need an active SAM registration to submit reports through the Treasury reporting portal. NEUs who have not previously registered with SAM.gov may do so after receipt of the award, but before the submission of mandatory reporting. If an entity does not have an active SAM registration, please visit SAM.gov to begin the entity registration or renewal process. Please note that SAM registration can take up to three weeks; a delay in registering in SAM could impact timely payment of funds. How do I submit my funding reports?Each designated individual in a jurisdiction should register with a login.gov account, which will give each registered individual access to Treasury’s Reporting and Compliance Portal. Some municipalities may have already registered to report through ID.me. If that is the case, there is a separate Portal through which municipalities may submit their expenditure reports. If you need assistance submitting your reports, please contact . When do I submit my funding reports?Specifications for future deadlines depend on the type and size of municipality, as outlined below: Project and Expenditure Reports were due on January 31, 2022 and then 30 days after the end of each quarter thereafter for:
Project and Expenditure Reports were due on April 30, 2022 and then annually thereafter for:
Recovery Plan and Performance Reports were due by August 31, 2021 or 60 days after receiving funding and annually thereafter by July 31 for:
Is there a deadline to report or spend the funds?SLFRF funding is not required to be obligated until December 31, 2024 and jurisdictions have until December 31, 2026 to fully expend their funds. Spending should be used for costs incurred after March 3, 2021. How do I calculate my city’s lost revenue?If you are not using the standard allowance up to $10 million in revenue loss, the funding your city receives will be based on its lost revenue. Lost revenue is equal to counterfactual revenue – actual revenue (adjusted for tax changes). If counterfactual revenue is greater than actual revenue, the loss is set at $0. Counterfactual revenue can be calculated using the following equation: n is the number of months elapsed since the end of the base year to the calculation date. The growth adjustment is the greater of either a 5.2% standard growth rate, or the recipient’s average annual revenue growth in the last full three fiscal years prior to the COVID-19 pandemic. Actual revenue is the total revenue collected over the 12 months immediately preceding the calculation date. There is an example of this calculation in the Revenue Loss section of the Final Rule, which may be helpful if your municipality is still looking to calculate revenue loss during the pandemic. What is the standard allowance?Treasury has encouraged NEUs to accept the “standard allowance” of SLFRF funds, which allocates up to $10M in revenue loss funding to each community, regardless of actual loss of revenue. Municipalities had to choose whether they were going to use the Standard Allowance by the April 30, 2022 reporting deadline. Municipalities will receive grant allotments under the State and Local Fiscal Recovery Fund, up to the amount of $10M, but not exceeding that amount. Local governments may spend these funds on government services. For example, if SLFRF grant allotments from the state grants a local government $2.5M, then they may still choose the “standard allowance,” but will receive only $2.5M of revenue loss funding, not a full $10M, as other communities may receive. Filing using the standard allowance streamlines the process of reporting and compliance. If an NEU chooses not to receive their funding under the standard allowance, it must classify its projects under one of the expenditure categories outlined by Treasury, rather than generally under revenue loss. Learn more about using the standard allowance here. Eligible UsesWhat are eligible uses for funding?Municipalities are granted flexibility in choosing how they will spend their ARPA funds. As outlined in the Final Rule, funding must fit into one of the following categories:
Responding to the public health and negative economic impacts of the pandemic includes:
The allowance to provide premium pay to workers includes:
Funding to provide government services to the extent of revenue loss due to the pandemic includes:
The commitment to make investments in water, sewer, and broadband infrastructure includes:
All SLFRF funding must fit into one of the general categories listed above. The Final Rule provides further detail on the allowances for funding and information on compliance responsibilities. However, the Final Rule provides a non-exhaustive list of uses and municipalities may use their funds in any way that responds directly to a pandemic impact. Spending for each category has its own distinct reporting requirements. Can recovery funds be used to fund lost revenue?Yes, recipients can use SLFRF dollars to fund lost revenue. This is one of the eligible uses of ARPA funds. The definition of General Revenue draws on the Census definition of General Revenue of Own Sources (excluding utilities). The fiscal relief funds give recipients broad latitude to use funds to provide government services to the extent of the reduction in revenue or the standard allowance. Government services can include but are not limited to, maintenance of infrastructure, modernization of cybersecurity, health services, school or educational services, and public safety services. When calculating lost revenue, recipients should sum across all revenue streams covered as general revenue, for administrative ease. Can recovery funds be used for stormwater projects and expenses?Recipients may use Coronavirus State and Local Fiscal Recovery Funds to invest in necessary improvements to their water and sewer infrastructures, including projects that address the impacts of climate change. Recipients may use this funding to invest in an array of drinking water infrastructure projects, such as building or upgrading facilities and transmission, distribution, and storage systems, including the replacement of lead service lines. Recipients may also use this funding to invest in wastewater infrastructure projects, including constructing publicly-owned treatment infrastructure, managing and treating stormwater or subsurface drainage water, facilitating water reuse, and securing publicly-owned treatment works. To help jurisdictions expedite their execution of these essential investments, Treasury’s Final Rule aligns types of eligible projects with the wide range of projects that can be supported by the Environmental Protection Agency’s Clean Water State Revolving Fund and Drinking Water State Revolving Fund. Recipients retain substantial flexibility to identify those water and sewer infrastructure investments that are of the highest priority for their own communities. Can my city decrease taxes after receiving these funds?The rule that would prohibit tax decreases is a restriction only on states. The local government section of the bill contains no prohibition on lowering taxes. What infrastructure projects can funds be used on?State and local fiscal relief funds may be used for capital expenditures to assist in an eligible COVID-19 economic response. This means the development of infrastructure projects like healthcare and childcare facilities, schools, and housing will be covered by the Final Rule, as long as the projects are consistent with the eligible use requirements. In addition, NLC has created resources on using funds for infrastructure projects:
Can recovery funds be used to cover administrative costs?Yes, funds may be used to pay administrative costs, including payment to consultants and/or payroll to assist with the implementation of ARPA projects. This includes costs of consultants to ensure effective project management, as well as legal and regulatory compliance. Funds may be used to increase staff capacity in order to stabilize government operations. Can recovery funds be used to relieve other payroll costs?The statute provides that recipients may not use Fiscal Recovery Funds for “deposit into any pension fund.” For the reasons discussed below, 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, the final rule does not permit this assistance to be used to make a payment into a pension fund if both:
Under this interpretation, a “deposit” is distinct from a “payroll contribution,” which occurs when employers make payments into pension funds on regular intervals, with contribution amounts based on a pre-determined percentage of employees’ wages and salaries. Can recovery funds be used for pensions?The statute provides that recipients may not use Fiscal Recovery Funds for “deposit into any pension fund.” For the reasons discussed below, 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, the final rule does not permit this assistance to be used to make a payment into a pension fund if both:
Under this interpretation, a “deposit” is distinct from a “payroll contribution,” which occurs when employers make payments into pension funds on regular intervals, with contribution amounts based on a pre-determined percentage of employees’ wages and salaries. Are infrastructure projects subject to the Davis-Bacon Act?40 U.S.C. 3141, known as the “Davis-Bacon Act”, is a federal law which requires the payment of prevailing wages on public works projects. These requirements do not apply to projects funded solely with award funds from the SLFRF program, except for SLFRF-funded construction projects undertaken by the District of Columbia. Recipients may be subject to the requirements of the Davis-Bacon Act when funds are used on a construction project in conjunction with funds from another federal program that requires the enforcement of the Davis-Bacon Act. Corollary state prevailing-wage-in-construction laws (commonly known as “baby Davis-Bacon Acts”) may apply to projects. Treasury indicated in the IRF that infrastructure projects should be carried out to produce high-quality infrastructure, avert disruptive and costly delays, and promote efficiency. Treasury is encouraging recipients to ensure that these projects use strong labor standards, including labor and community benefit agreements that offer at or above the prevailing rate and include local hire provisions. Treasury also indicated in reporting guidance that recipients must document wages and labor standards for projects over $10 million, and these requirements can be met with certifications that the project is in compliance with the Davis-Bacon Act. More information on the reporting requirement may be found on page 21 of the Reporting and Compliance Guidance. Can cities transfer their allotted funds to counties?The statute provides four categories in which a city can transfer funds.
The statute is silent on transferring funds to a county. Who can I contact for more information if I still have questions?If you have additional questions about your SLFRF funds, you may contact the US Treasury at . If you would like assistance from the National League of Cities, please contact our Federal Advocacy team at . Don’t see your question answered above? Let us know in this feedback form. Stay InformedSign up for the latest updates to support your virus response efforts! You may also like:What type of grant is given to a state by the federal government?The three general types of federal grants to state and local governments are categorical grants, block grants, and general revenue sharing (see Table 1). Categorical grants can be used only for a specifically aided program and usually are limited to narrowly defined activities.
How does the federal government provide money and resources to the states?The federal government also provides financial support to state and local governments through the tax system. That support takes the form of tax credits or deductions that make it less expensive for state and local governments to borrow money or to raise revenues through taxes.
Which type of grant gives states more freedom in how they spend the money?Block grants provide state and local governments funding to assist them in addressing broad purposes, such as community development, social services, public health, or law enforcement, and generally provide them more control over the use of the funds than categorical grants.
What is the most common form of federal aid that state and local governments get?Most often Federal grants are award- ed as direct cash assistance, but Federal grants can also include in-kind assistance—non-monetary aid, such as commodities purchased for the National School Lunch Program—and Federal revenues or assets shared with State and local governments. Budget Officers, 2021.
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What are the grants of federal money or other resources to the states and or their cities counties or other local units called?
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