SUMMARY OF TREASURY'S ARPA FINAL RULE GUIDELINES

We understand you have choices in the material and resources available to you as you navigate Treasury’s Final Rule. Although there are many useful “high-level” summaries in circulation, we wanted to strike a balance between the lengthy Final Rule and those other quick summary documents. It’s our hope that this document provides a balanced, more inclusive approach including high-level summary, relevant detail, and easy rule navigation.

Table of Contents

1. Background
2. Public Health and Economic Impacts
3. Premium Pay
4. Government Services/Revenue Loss
5. Investments in Infrastructure
6. Other Provisions
7. Definitions
8. Appendix 1: Allowable Use Matrix
9. Appendix 2: Restrictions on Use
10. Appendix 3: Calculation of Revenue Loss

Getting Started:

This document was created to highlight the applicable high-level rules, considerations, and guidance from the U.S. Department of Treasury's Interim Final Rule and now Final Rule. This document builds on the Interim Final Rule and the published WOB document from May 2021.

Additionally, you will see notations of “Previous” throughout the document which will indicate information from The Interim Final Rule and WOB published document, which this document builds onto, denoted as “New” throughout.

Please keep in mind, it is important to read the denoted "Previous" and the denoted "New" conjunctively. The contents from both versions of the rules work symbiotically.

Explicit eligible and ineligible uses of these funds were pulled from the Interim/Final Rule and categorized in an ‘Eligible Uses Matrix’ and ‘Restrictions on Use List’ (See Appendices 1 and 2 beginning on pp. 30 and 40 of this document).

**Please note, this document is a high-level compilation of extrapolations from the Interim Final Rule and Final Rule. This document should not supplant a thorough reading of the Interim Final Rule, Final Rule, relevant legislation, Treasury guidance, or other relevant guidance/materials. **

Background

On March 11, 2021, the American Rescue Plan Act ("ARPA") of 2021 was signed into law. Two signature programs of the ARPA are the Coronavirus State Fiscal Recovery Fund ("SFRF") and the Coronavirus Local Fiscal Recovery Fund (“LFRF”). The following information is a high-level review of the Interim Final Rule issued by the U.S. Department of Treasury on May 10, 2021,1 and the Final Rule issued on January 6, 2022. To address public comments.

[New] the Final Rule “provides broader flexibility and greater simplicity in the program.” (See Final Rule pp. 6).

[Previous]

Primary Uses for ARPA Funds (Per Sec. 602(c)(1) and 603(c)(1):

Considerations:

The primary difference between the two ARPA sections is that Section 602 refers to State, Territories, and Tribal Governments, and Section 603 pertains to metropolitan cities, non-entitlement units of local government, and counties. Both sections speak to the same four categories of eligible uses. (See Interim Final Rule pp. 7).

Four Categories of Eligible Uses:

1. To respond to the public health emergency or its negative economic impacts, including assistance to households, small businesses, and non-profits, or aid to impacted industries such as tourism, travel, and hospitality;
2. To respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers;
3. For the provision of government services to the extent of the reduction in revenue due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency; and,
4. To make necessary investments in water, sewer, or broadband infrastructure. (See Interim Final Rule pp. 7).

[New]

"Recipients should first determine which eligible use category a potential use of funds fits within, then assess whether the potential use of funds meets the eligibility standard or criteria for that category." (See Final Rule pp. 8).

"Treasury does not pre-approve uses of funds; recipients are advised to review the final rule and may pursue eligible projects under it." (See Final Rule pp. 8).

[Previous]

Two Categories of Ineligible Use:

Under 602(c)(2)(B), the following are specifically ineligible:

1. Depositing funds into any pension fund (See Interim Final Rule pp. 7).
2. Directly or indirectly offset[ting] a reduction in the net tax revenue of [the] State or territory resulting from a change in law, regulation, or administrative interpretation. (See Interim Final Rule pp. 7).

Under Section 603(c)(2), ineligible expenses include:

• Depositing funds into any pension fund (See Interim Final Rule pp. 7).

[New]

“Treasury has divided the Restriction on Use section:

(A) statutory restrictions under the ARPA, which include:

1. offsetting a reduction in net tax revenue, and
2. deposits into pension funds, and

(B) other restrictions on use, which include:

1. debt service and replenishing reserves,
2. settlements and judgments, and
3. general restrictions.” (See Final Rule pp. 9-10).

Use of Funds Discretion and CRF Applicability:

Considerations:

[Previous]

• Built into the eligible use categories is a vast amount of discretion provided to State, local and Tribal governments for determining the best use of ARPA funds. (See Interim Final Rule pp. 8).

• These eligible uses build on eligible expenditures under the CRF, including some expansions in eligible uses to respond to the public health emergency, such as vaccination campaigns (See Interim Final Rule pp. 8).

Public Health and Economic Impacts

[New]

1. Treasury has restructured the Final Rule relative to public health and economic impacts "to aid recipients in determining whether a particular response is eligible and how the particular response might be eligible under a particular category. This restructuring reinforces the fundamental criteria that use of funds is eligible based on its responsiveness to the public health or negative economic impact experienced by individuals, households, small businesses, non-profits, or impacted industries (together "beneficiaries")." (See Final Rule pp. 19-20).

Rules:

Determination of Whether a Program or Service is Included in Public Health/Economic Impact Category

[Previous]

1. "In order to determine whether a program or service is included in the public health and economic impact category, the recipient must determine "whether and how the use would respond to the COVID-19 public health emergency." (See Interim Final Rule pp. 10)
2. To determine whether a program or service "responds to" the public health emergency, recipients must conduct a two-pronged test: "First, identify a need or negative impact of the COVID-19 public health emergency and, second, identify how the program, service, or other intervention addresses the identified need or impact." (See Interim Final Rule pp. 10).

Considerations:

Additional Considerations for Assessing Use under Public Health and Economic Impact

[Previous]

1. "Recipients should assess the connection between the negative economic harm and the COVID-19 public health emergency, the nature and extent of that harm, and how the use of this funding would address such harm." (See Interim Final Rule pp. 11).
2. Eligible uses listed under this section of public health build and expand upon permissible expenditures under the CRF but consider the differences between ARPA and CRF. (See Interim Final Rule pp. 17).
3. To assess whether additional uses would be eligible under this category, recipients should identify an effect of COVID-19 on public health, "including either or both of immediate effects or effects that may manifest over months or years and assess how the use would respond to or address the identified need."(See Interim Final Rule pp. 17).

Eligible uses are found on pages 30-34 of Appendix 1: Eligible Use Matrix

Populations Presumed Eligible

Rule:

Regarding Presumption of Eligibility of Services for Populations in Qualified Census Tracts

[Previous]

There is a presumption of eligibility for services when the population served is in a Qualified Census Tract (QCT).4. The most recent mapping information pertaining to QCTs can be found at: https://www.huduser.gov/portal/sadda/sadda_qct.html.

Considerations:

Disproportionately Impacted Populations Other Than Those in Qualified Census Tracts

[Previous]

If using funds for other populations disproportionately impacted by the pandemic, recipients should be able to fully support "their determination that the pandemic resulted in disproportionate public health or economic outcomes to the specific populations." (See Interim Final Rule pp. 22).

[New]

"The final rule maintains the presumptions identified in the interim final rule and defines low- and moderate-income for the purposes of determining which households and populations recipients may presume to have been impacted. To simplify the administration of this presumption, the final rule adopts a definition of low- and moderate-income based on thresholds established and used in other federal programs." (See Final Rule pp. 30).

Eligible uses are found on pages 32-34 of Appendix 1: Eligible Use Matrix

Additional Considerations

[New]

• "Recipients may determine whether to measure income levels for specific households or for a geographic area based on the type of service to be provided." (See Final Rule pp. 31).
• "The final rule maintains the presumptions identified in the interim final rule, as well as recipients' ability to identify other impacted or disproportionately impacted classes." (See Final Rule pp. 37).
• "The final rule presumes that the general public is impacted by and eligible for services to respond to COVID-19 mitigation and prevention needs, as well as a behavioral health need." (See Final Rule pp. 37).
• "…Under the final rule recipients may also presume that households residing in the U.S. territories or receiving services from territorial governments were disproportionately impacted." (See Final Rule pp. 37).
• "By allowing recipients to also presume that low-income households were disproportionately impacted, the final rule provides greater flexibility to serve underserved households or communities." (See Final Rule pp. 39).
• "Tribal and territorial governments may face both disproportionate impacts of the pandemic and administrability challenges with operationalizing the income-based standard; therefore, Treasury has presumed that services provided by these governments respond to disproportionate pandemic impacts." (See Final Rule pp. 39).

Categorical Eligibility

[New]

"Treasury agrees that allowing recipients to identify impacted and disproportionately impacted beneficiaries based on their eligibility for other programs with similar income tests would ease the administrative burden." (See Final Rule pp. 40).

Impacted Households

"Treasury will recognize a household as impacted if it otherwise qualifies for any of the following programs:

• Children's Health Insurance Program (CHIP)
• Childcare Subsidies through the Child Care and Development Fund (CCDF) Program
• Medicaid
• National Housing Trust Fund (HTF), for affordable housing programs only
• Home Investment Partnerships Program (HOME), for affordable housing programs only"

(See Final Rule pp. 41).

Disproportionately Impacted Households

[New]

“Treasury will recognize a household as disproportionately impacted if it otherwise qualifies for any of the following programs:

• Temporary Assistance for Needy Families (TANF)
• Supplemental Nutrition Assistance Program (SNAP) o Free and Reduced-Price Lunch (NSLP) and/or School Breakfast (SBP) programs
• Medicare Part D Low-income Subsidies
• Supplemental Security Income (SSI)
• Head Start and/or Early Head Start
• Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
• Section 8 Vouchers
• Low-Income Home Energy Assistance Program (LIHEAP)
• Pell Grants
• For services to address educational disparities, Treasury will recognize Title I eligible schools as disproportionately impacted and responsive services that support the school generally or support the whole school as eligible."

(See Final Rule pp. 41-42).

Standards for Identifying Other Eligible Populations

[New]

"Consistent with the scope of beneficiaries included in sections 602(c)(1)(A) and 603(c)(1)(A) of the Social Security Act, Treasury is clarifying that a recipient may identify such impacts for a class of households, small businesses, or non-profits.

• In such cases, the recipient need only demonstrate that the household, small business, or non-profit is within the relevant class." (See Final Rule pp. 42).

Public Health

Responding to Public HealthImpacts

[New]

"The final rule streamlines and aligns services and standards that are generally applicable or are provided for public health purposes. Under this approach, eligible uses to respond to the public health emergency are organized based on the type of public health problem:

1. COVID-19 mitigation and prevention,
2. medical expenses,
3. behavioral health care, and
4. preventing and responding to violence." (See Final Rule pp 20).

Designating a Public Health Impact

[New]

"Treasury is clarifying that when assessing whether a program or service is an eligible use to respond to the public health impacts of the COVID–19 public health emergency, the Department will consider two eligibility requirements.” (See Final Rule pp. 21).

1. “There must be a negative public health impact or harm experienced by an individual or a class” (See Final Rule pp. 21).

• Must be reasonably designed to benefit the individual or class that experienced the public health impact or harm. (See Final Rule pp. 22).

2. “The program, service, or other intervention must address or respond to the identified impact, or harm”

• Must also be related and reasonably proportional to the extent and type of public health impact or harm experienced. (See Final Rule pp. 22).

COVID-19 Mitigation and Prevention

[New]

COVID-19 public health response and mitigation tactics:

• "In the final rule, Treasury is maintaining an expansive list of enumerated eligible uses to mitigate and prevent COVID-19, given the wide-ranging activities that governments may take to further these goals, including "other public health responses." (See Final Rule pp. 56).
• "Note that capital expenditures are not considered "programs and services" and are not presumed to be reasonably proportional responses to an identified harm except as provided in section Capital Expenditures in General Provisions: other." (See Final Rule pp. 57).
• "Recipients can provide any COVID-19 prevention or mitigation service to members of the general public without any further analysis of impacts of the pandemic on those individuals and whether the service is responsive." (See Final Rule pp. 57).

Eligible uses are found on page 30 of Appendix 1: Eligible Use Matrix

Vaccination programs and vaccine incentives:

[New]

• "Treasury issued guidance clarifying that "[vaccine] programs that provide incentives reasonably expected to increase the number of people who choose to get vaccinated, or that motivate people to get vaccinated sooner than they otherwise would have, are an allowable use of funds so long as such costs are reasonably proportional to the expected public health benefit." (See Final Rule pp. 59).

Eligible uses are found on page 30 of Appendix 1: Eligible Use Matrix

Capital Expenditures

[New]

"In recognition of the importance of capital expenditures in the COVID-19 public health response," Treasury enumerates a list of capital expenditures that are eligible "as long as they meet the standards for capital expenditures in section Capital Expenditures in General Provisions: Other." (See Final Rule pp. 60).

Eligible uses are found on pages 35-36 of Appendix 1: Eligible Use Matrix

Other clarifications on COVID-19 mitigation:

medical care, supports for vulnerable populations, data systems, carceral settings

[New]

• "These eligible uses should help vulnerable or high-risk populations access services that mitigate COVID-19." (See Final Rule pp. 62).

Eligible uses are found on pages 34 of Appendix 1: Eligible Use Matrix

Assistance to businesses and non-profits to implement COVID-19 mitigation strategies

[New]

• "The final rule consolidates all COVID-19 mitigation and prevention within Public Health" (See Final Rule pp. 63)
• "In other words, recipients can provide any COVID-19 prevention or mitigation service to small businesses, non-profits, and businesses in impacted industries without any further analysis of impacts of the pandemic on those entities and whether the service is responsive" (See Final Rule pp. 63).

Medical Expenses

[Previous]

Rule/Ineligibility:

Medical expenses may not serve as a State or locality's contribution of certain Federal funds. (See Interim Final Rule pp. 19).

Considerations:

General Medical Expense Assessment

The near- and long-term needs may continue, and therefore, State and Local governments may need to provide care and service to address these needs. (See Interim Final Rule pp. 19).

[New]

Final Rule Clarifies “that it covers costs related to medical care provided directly to an individual due to COVID-19 infection (e.g., treatment) or a potential infection (e.g., testing)." (See Final Rule pp. 65).

Behavioral Health Care

[New]

"Covers an expansive array of services for prevention, treatment, recovery, and harm reduction for mental health, substance use, and other behavioral health challenges caused or exacerbated by the public health emergency" (See Final Rule pp. 67).

• "Recipients can identify the impacted population as the general public" (See Final Rule pp. 67).
• "Eligible uses of funds may include services typically billable to insurance or services not typically billable to insurance" (See Final Rule pp. 68).
• "Treasury highlights several ways that funds may be used to respond to opioid use disorder and prevent overdose mortality." (See Final Rule pp. 68-69).

Eligible uses are found on page 31 of Appendix 1: Eligible Use Matrix

Preventing and Responding to Violence

[New]

“The final rule incorporates guidance issued after the interim final rule on specific types of services eligible.” (See Final Rule pp. 71).

Eligible uses are found on pages 31-32 of Appendix 1: Eligible Use Matrix

Rule:

For Determining if Health and Safety Employee Time is Entirely Devoted to Mitigating or Responding to COVID-19.

[Previous]

"For administrative convenience, the recipient may consider public health and safety employees 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 to responding to the COVID-19 public health emergency. " (See Interim Final Rule pp. 20).

Considerations:

Assessing Health and Safety Employee Time:

[Previous]

"Recipients may consider other presumptions for assessing the extent to which an employee, division, or operating unit is engaged in activities that respond to the COVID-19 public health emergency, provided that the recipient reassesses periodically and maintains 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." (See Interim Final rule pp. 19 – 20).

Eligible uses are found on pages 34-35 of Appendix 1: Eligible Use Matrix

Eligible Uses to Address Disparities in Public Health Outcome

Rule:

Services Addressing Health Disparities

[Previous]

"Services to address health disparities are presumed to be responsive to the public health impacts of the pandemic." (See Interim Final Rule pp. 21 – 22).

Eligible uses are found on pages 33-34 of Appendix 1: Eligible Use Matrix

Negative Economic Impacts

Responding to Negative Economic Impacts

[New]

"Eligible uses to respond to the negative economic impacts of the public health emergency are organized based on the type of beneficiary:

1) assistance to households,

2) assistance to small businesses, and

3) assistance to non-profits, alongside a fourth standalone eligibility category for aid to travel, tourism, hospitality, and industries." (See Final Rule pp. 20).

Designating a Negative Economic Impact

[New]

1. There must be a negative economic impact, or economic harm, experienced by an individual or a class.
2. The recipient should assess whether and the extent to which economic harm, such as loss of earnings or revenue, resulted from the COVID–19 public health emergency. (See Final Rule pp. 24).
3. The response must be designed to address the identified economic harm or impact resulting from or exacerbated by the public health emergency.
4. The recipient must assess whether and the extent to which the use would respond to or address this harm or impact. (See Final Rule pp. 25).

"Treasury is clarifying that recipients should assess a potential use of funds based on which beneficiary experienced the negative economic impact, in other words, the households, small businesses, non-profits, or impacted industries that experienced the negative economic impact." (See Final Rule pp. 27).

Impacts on Households and Individuals

[Previous]

"Rates of unemployment are particularly severe among workers of color and workers with lower levels of educational attainment… "As the economy recovers, the effects of the pandemic-related recession may continue to impact households, including a risk of longer-term effects on earnings and economic potential." (See Interim Final Rule pp. 23 – 24).

[New]

"Treasury has determined that several enumerated uses included in the interim final rule for disproportionately impacted communities are directly responsive to negative economic impacts experienced by impacted households. In the final rule, these uses have been moved from "disproportionately impacted" to "impacted" households accordingly, making these services available to both.” (See Final Rule pp. 79).

1. Food Assistance:

[New]

• "Treasury is clarifying that capital expenditures related to food banks and other facilities primarily dedicated to addressing food insecurity are eligible..." (See Final Rule pp. 81)

Eligible uses are found on page 32 of Appendix 1: Eligible Use Matrix

2. Emergency Housing:

Eligible uses are found on pages 32 and 36 of Appendix 1: Eligible Use Matrix

3. Emergency assistance for pressing needs: burials, home repairs, weatherization, or other needs

• No Changes-Maintaining provisions of Interim Final Rule

4. Internet access or digital literacy assistance

[New]

• "Treasury has determined that these services, which expand internet access without constructing new networks, are an appropriate enumerated eligible use as assistance to households to respond to a negative economic impact, and they are permitted under the final rule." (See Final Rule pp. 89).

Eligible uses are found on page 32 of Appendix 1: Eligible Use Matrix

5. Cash Assistance

[New]

• "Cash transfers, like all eligible uses in this category, must respond to the negative economic impacts of the pandemic on a household or class of households" (See Final Rule pp. 91).

Eligible uses are found on page 32 of Appendix 1: Eligible Use Matrix

6. Survivor’s benefits

[New]

• No Changes-Maintaining provisions of Interim Final Rule except:

“The final rule organizes survivor’s benefits under assistance to households to clarify that households are the intended beneficiaries of survivor’s benefits” (See Final Rule pp.92).

Eligible uses are found on page 32 of Appendix 1: Eligible Use Matrix

7. Assistance accessing or applying for public benefits or services

[New]

• “In the final rule, this use is eligible for any impacted household or class of households, not only in disproportionately impacted communities.” (See Final Rule pp. 93).

Eligible uses are found on page 32 of Appendix 1: Eligible Use Matrix

8. Promoting healthy childhood environments

[New]

• “Under the Final Rule childcare and early learning services are available to impacted households or classes of households, not just those disproportionately impacted” (See Final Rule pp.95-96).

• “Given the widespread impact of COVID-19 on pregnant and recently pregnant individuals, Treasury is re-categorizing home visiting services as an eligible use for impacted communities, not just disproportionately impacted communities. Under the final rule, these eligible uses are available to impacted households or classes of households” (See Final Rule pp. 98-99).
• “In the final rule, Treasury is clarifying that services to foster youth, including those aging out of the system, and child welfare-involved families may encompass a wide array of financial, educational, child development, or health supports, or other supports necessary, including supports for kinship care.” (See Final Rule pp. 100).

Eligible uses are found on page 32 of Appendix 1: Eligible Use Matrix

9. Addressing the impacts of lost instructional time

[New]

• “When providing services to address lost instructional time, recipients may presume that any K-12 student who lost access to in-person instruction for a significant period of time has been impacted by the pandemic and is thus eligible for responsive services.” (See Final Rule pp.101).

Eligible uses are found on page 32 of Appendix 1: Eligible Use Matrix

10. Promoting long-term housing security: affordable housing and homelessness

[New]

• Treasury has determined that supportive housing or other programs or services improving access to stable, affordable housing among individuals who are homeless, and the development of affordable housing to increase the supply of affordable and high-quality living units are responsive to the needs of impacted populations, not only disproportionately impacted populations (See Final Rule pp. 103).
• Treasury will presume that any projects that would be eligible for funding under either the National Housing Trust Fund (HTF) or the Home Investment Partnerships Program (HOME) are eligible uses of SLFRF funds (See Final Rule pp. 106).
• Additionally, affordable housing projects provided by a Tribal government are eligible uses of SLFRF if they would be eligible for funding under the Indian Housing Block Grant program, the Indian Community Development Block Grant program, or the Bureau of Indian Affairs Housing Improvement Program. (See Final Rule pp. 106).
• “Recipients may consider offering down payment assistance, such as through contributions to a homeowner’s equity at origination or that establish a post-closing, mortgage reserve account on behalf of the borrower that may be utilized to make a missed or partial mortgage payment at any point during the life of the loan (e.g., if the borrower faces financial stress). Homeownership assistance that would be eligible under the Community Development Block Grant (at 24 CFR 507.201(n)) is also an eligible use of SLFRF funds.” (See Final Rule pp. 107).

Eligible uses are found on pages 32 and 36 of Appendix 1: Eligible Use Matrix

11. Paid sick, medical, or family leave

[New]

• “Under the final rule, creating, expanding, or financially supporting paid sick, medical, or family leave programs is an enumerated eligible use of funds to respond to the negative economic impacts of the pandemic.” (See Final Rule pp. 112).

Eligible uses are found on page 33 of Appendix 1: Eligible Use Matrix

12. Health Insurance

[New]

• “Under the final rule, programs or services to expand access to health insurance coverage are an enumerated eligible use as assistance to households.” (See Final Rule pp. 113).

Eligible uses are found on page 33 of Appendix 1: Eligible Use Matrix

13. Services for the unbanked and underbanked

Eligible uses are found on page 33 of Appendix 1: Eligible Use Matrix

Assistance to Non-profit Organizations

[New]

"The final rule expands the definition of non-profits to mean 501(c)(3) organizations and 501(c)(19) organizations." (See Final Rule pp. 160).

Aid to Impacted Industries

[New]

For the process for identifying an impacted industry. (See Final Rule pp. 164).

"The final rule requires that aid to impacted industries, including to Tribal development districts, be designed to address the harm experienced by the impacted industry." (See Final Rule pp. 168).

Public Sector Capacity and Workforce

[New]

"Indirect costs for administrative, management, and financial management personnel to support public health and safety staff responding to COVID-19 are not permissible under [the provision that allows SLFRF to be used for public health and safety staff], given the relatively greater challenge of differentiating the marginal increase in staff time and workload due to pandemic response for indirect versus direct costs." (See Final Rule pp. 177).

The final rule provides two options to restore pre-pandemic employment:

• "Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis.
• Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire."

"Recipients may choose between these options but cannot use both." (Final Rule pp. 179-180).

Eligible uses are found on pages 34-35 of Appendix 1: Eligible Use Matrix

Capital Projects

[New]

"Treasury will require projects with total expected capital expenditure costs of $1 million or greater to undergo additional analysis to justify their capital expenditure. Projects that are larger in size, and projects that are not enumerated uses, will have increased reporting requirements, including a Written Justification." (See Final Rule pp. 193).

Eligible uses are found on pages 35-36 of Appendix 1: Eligible Use Matrix

Impacts on Businesses

[Previous]

"The pandemic has also severely impacted many businesses, with small businesses hit especially hard." (See Interim Final Rule pp. 26).

Impacts to State, Local, and Tribal Governments

• "As noted above, State, local, and Tribal governments have faced significant revenue shortfalls and remain over 1 million jobs below their pre-pandemic staffing levels. These reductions in staffing may undermine the ability to deliver services effectively, as well as add to the number of unemployed individuals in their jurisdictions." (See Interim Final Rule pp. 27).

Exacerbation of Pre-existing Disparities

• "The COVID-19 public health emergency may have lasting negative effects on economic outcomes, particularly in exacerbating disparities that existed prior to the pandemic." (See pp. 27).
• "Low- and moderate-income jobs make up a substantial portion of both total pandemic job losses, and jobs that require in-person frontline work, which are exposed to greater risk of contracting COVID-19." (See Interim Final Rule pp. 27 – 28).
• "The pandemic's disproportionate economic impacts are also seen in Tribal communities across the country...". (See Interim Final Rule pp. 30).

Eligible uses are found on page 34 of Appendix 1: Eligible Use Matrix.

Ineligible Expenses Include, but are not limited to:

1. Rainy Day Fund

• "Would not address [pandemic response and relief] needs or respond to the COVID-19 public health emergency but would rather constitute savings for future spending needs."

2. Payment of Interest or Principal on Outstanding Debt Instruments

• "Fees or issuance costs associated with the issuance of new debt would also not be covered… because such costs would not themselves have been incurred to address the needs of pandemic response or its negative economic impacts."

(See Interim Final Rule pp. 42-43)

Premium Pay

[Previous]

Fiscal Recovery Funds may be used by recipients to provide premium pay to eligible essential workers during the COVID-19 public health emergency or to provide grants to third-party employers with eligible essential workers.

"…Because premium pay is intended to compensate essential workers for heightened risk due to COVID-19, it must be entirely additive to a worker's regular rate of wages and other remuneration and may not be used to reduce or substitute for a worker's normal earnings. The definition of premium pay also clarifies that premium pay may be provided retrospectively for work performed at any time since the start of the COVID-19 public health emergency, where those workers have yet to be compensated adequately for work previously performed." (See Interim Final Rule pp. 50).

Where possible, the U.S. Treasury encourages recipients to prioritize providing retrospective premium pay.

• Although Treasury does require further justification for premium pay to most essential workers, it would require higher scrutiny for provision of premium pay to higher earners who, even without premium pay, would likely have more significant personal financial resources to cope with the effects of the pandemic.

[New]

Prior to providing premium pay, recipients should:

1. Identify an "eligible worker.”
   1. Treasury published a list of "eligible workers"6 but added that "the chief executive (or equivalent) of a recipient government may designate additional non-public sectors as critical so long as doing so is necessary to protecting the health and wellbeing of the residents of such jurisdictions." (See Final Rule pp. 221).
2. Verify that the eligible worker performed "essential work.” (See Final Rule pp. 225 and 226).
   1. [Previous]Eligible workers must have regular in-person interactions or regular physical handling of items that were also handled by others. (See Interim Final Rule pp. 132).
3. [New] Confirm that the premium pay "responds to" eligible workers performing essential work during the COVID-19 public health emergency. (See Final Rule pp. 226).

[Previous]

In response to essential workers' needs, a grant to an employer may provide premium pay to eligible essential workers, as defined in the Interim Final Rule. The rule imposes some additional reporting requirements for grants to third-party employers to ensure any grants "respond to the needs of essential workers and are made in a fair and transparent manner." (See Interim Final rule pp. 51).

[New]

Employers may provide premium pay to eligible workers, but it may not exceed "$13 per hour or $25,000 over the period of performance." Additionally, "recipients may award premium pay retroactively. However, SLFRF funds may not be used to reimburse a recipient or eligible employer grantee for premium pay or hazard pay already received by the employee." (See Final Rule pp. 230-232).

Government Services/Revenue Loss

[Previous]

ARPA allows recipients facing budget shortfalls to use Fiscal Recovery Funds to avoid cuts in government services. The Interim Final Rule establishes a definition of "general revenue" for calculating a loss in revenue and provides a methodology for calculating revenue lost due to COVID-19.

[New]

Recipients are permitted to calculate their own revenue loss due to COVID-19 or opt for a standard allowance of $10 million to be used over the course of the program for reinvestment in government services. Specifically, in the Final Rule, recipients will be permitted to elect a fixed amount of loss that can then be used to fund government services. This fixed amount, referred to as the "standard allowance," is set at $10 million total for the entire period of performance. This addition will promote administrative efficiency and simplify the revenue loss calculation for most recipients. Treasury intends to amend its reporting forms to provide a mechanism for recipients to elect to utilize either the revenue loss formula or the standard allowance, in addition to other changes made as part of the final rule. (See Final Rule pp. 247).

General Revenue

[Previous]

General revenue for the purpose of revenue includes:

1. Revenues collected by a recipient and generated from its underlying economy would capture a range of different types of tax revenues, as well as other types of revenue that are available to support government services. In calculating revenue, recipients should sum all revenue streams covered as general revenue. (See Interim Final Rule pp. 54).
   1. [New]Treasury has also added liquor store revenue to the definition of general revenue, with the justification that “Treasury believes revenue from government-owned liquor stores is better classified as general revenue than it was as tax revenue.” (See Final Rule pp. 245-246).
2. [Previous] Consistent with the Census Bureau's definition of "general revenue from own sources," the definition of general revenue in the Interim Final Rule would exclude refunds and other correcting transactions, proceeds from the issuance of debt, or the sale of investments agency or private trust transactions. (See Interim Final Rule pp. 55).
3. [New]Revenue from utilities that are “part of (recipient’s) own government… that was used to fund other government services… (and) have declined on the aggregate.” (See Final Rule pp. 245).”Recipients may choose to include revenue from utilities that are part of their own government as general revenue provided the recipient does so consistently over the remainder of the period of performance.” (See Final Rule, pp. 408).
4. [Previous] Finally, the term "general revenue" 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 local government pursuant to the CRF or as part of the Fiscal Recovery Funds. (See Interim Final Rule pp. 56).

Tax Changes

[New]

“Some recipients had increased taxes in order to meet additional demands for government services or to address declines in revenue due to the pandemic. These tax increases have in some cases offset some or all of the actual revenue loss attributable to the public health emergency. Because the Interim Final rule Calculates revenue loss by reference to actual revenue collected, commenters argued that the calculation of revenue loss ‘due to’ the public health emergency needs to take into consideration the effects of tax increases by deducting the effect of these tax increases from actual revenue collected.” (See Final Rule pp. 250). To ease the administrative burden, the Final Rule “will not require recipients to reflect the revenue effects of tax increases or decreases adopted prior to the adoption of the Final Rule” on January 6, 2022. (See Final Rule pp. 257).

Tax policy changes implemented on or after April 1, 2022, must be accounted for in future fiscal or calendar year revenue loss calculations, and recipients are encouraged to use internal budget records such as budget scores, etc. (See Final Rule pp. 254).

Appendix 3: Calculation of Revenue Loss includes the step-by-step revenue loss calculation set forth in the Interim Final Rule and includes notes on where to account for tax policy changes implemented on or after April 1, 2022.

Water, Sewer, and Broadband Infrastructure

Water and Sewer Infrastructure

[Previous]

ARPA recognizes the critical role that clean drinking water and services for the collection and treatment of wastewater and stormwater play in protecting public health. Governments have wide latitude to identify investments in water and sewer infrastructure that are of the highest priority for their own communities, which may include projects on privately-owned infrastructure. (See Interim Final Rule pp. 63).

• Under 602(c)(1)(C) or 603(c)(1)(C), recipients may use funds for maintenance of infrastructure or pay-go spending for the building of new infrastructure as part of the general provision of government services, to the extent of the estimated reduction in revenue due to the public health emergency. (See Interim Final Rule pp. 60).
• Under 602(c)(1)(A) or 603(c)(1)(A), a general infrastructure project typically would not be considered a response to the public health emergency and its negative economic impacts unless the project responds to a specific pandemic-related public health need (e.g., investments in facilities for the delivery of vaccines) or a specific negative economic impact of the pandemic (e.g., affordable housing in a Qualified Census Tract). (See Interim Final Rule pp. 60).

The Interim Final Rule generally aligns eligible uses of the Funds with the wide range of types or categories of projects that would be eligible to receive financial assistance through the Environmental Protection Agency's Clean Water State Revolving Fund (CWSRF) or Drinking Water State Revolving Fund (DWSRF). The CWSRF and DWSRF were designed to provide funding for projects that protect public health and safety by ensuring compliance with wastewater and drinking water health standards. (See Interim Final Rule pp. 64).

[New]

The final rule expands the list of eligible water and sewer infrastructure projects to include certain dam and reservoir rehabilitation projects, additional stormwater projects, private well projects, and a more comprehensive range of projects that remediate lead in water. (See Final Rule pp. 7).

With expanded eligibility provided within the Final Rule, SLFRF funds may be used to fund additional projects. Furthermore, concerning water and sewer infrastructure, SLFRF may be used beyond the CWSRF and DWSRF if the given project is found to be "necessary" according to the definition provided in the Final Rule and outlined below. Also, DWSRF and CWSRF-eligible projects are generally presumed to be necessary investments. (See Final Rule pp. 261 & 266).

A "necessary" investment in infrastructure must be:

1. “Responsive to an identified need to achieve or maintain an adequate minimum level of service, which may include a reasonable projection of increased need, whether due to population growth or otherwise;
2. A cost-effective means for meeting that need, considering available alternatives;
3. For investments in infrastructure that supply drinking water to meet projected population growth, projected to be sustainable over its estimated useful life.”

(See Final Rule pp. 266).

The Final Rule indicates that recipients are required to assess the cost-effectiveness of specific projects, including new drinking water systems, dams, reservoir rehabilitation projects, or projects to extend drinking water services to meet population growth needs. Additional eligible projects generally must be responsive to an identified need to achieve or maintain an adequate minimum level of service. (See Final Rule pp. 267-269).

Eligible uses are found on pages 37-39 of Appendix 1: Eligible Use Matrix

Other Considerations

• [New]Construction can continue past December 31, 2024, if funds have been obligated prior to that date. Projects must be completed by December 31, 2026. (See Final Rule pp. 357).
• [Previous] “Recipients may not use funds as a state match for the CWSRF and DWSRF due to prohibitions in utilizing federal funds as a state match in the authorizing statutes and regulations of the CWSRF and DWSRF.” (See Interim Final Rule Frequently Asked Questions (FAQ) 6.2 pp. 28).

• [New] However, the Final Rule does permit the use of SLFRF funds to meet non-federal matching requirements of any authorized Bureau of Reclamation project, regardless of whether the underlying project would be an eligible use of SLFRF funds under the water and sewer infrastructure eligible use category. (See Final Rule pp. 270 & 291).

• “The National Environmental Policy Act (NEPA) does not apply to the Treasury's administration of the Funds. Projects supported with payments with payments from the Funds may still be subject to NEPA review if they are also funded by other federal financial assistance programs.” (See Interim Final Rule FAQ 6.4 pp. 28-29).

Broadband Infrastructure

[New]

“The COVID-19 public health emergency has underscored the importance of universally available, high-speed, reliable, and affordable broadband coverage as millions of Americans rely on the internet to participate in, among critical activities, remote school, healthcare, and work.” (See Final Rule pp. 86). ARPA provides funds to State, territorial, local, and Tribal governments to make necessary investments in broadband infrastructure.

“The final rule expands eligible areas for investment by requiring recipients to invest in projects designed to provide service to households and businesses with an identified need for additional broadband infrastructure investment, which would include but not be limited to a lack of broadband service reliably delivering certain speeds.” (See Final Rule pp. 296).

Eligible areas for investment in broadband infrastructure include locations where the recipient has identified need for additional broadband investment. Recipients are “encourage to prioritize projects that are designed to provide service to locations not currently served by a wireline connection that reliably delivers at least 100 Mbps of download speed and 20 Mbps of upload speed.” (See Final Rule pp. 296).

“Recipients are encouraged to require that services provided by a broadband infrastructure project include at least one low-cost option offered without data usage caps and at speeds that are sufficient for a household with multiple 298 users to simultaneously telework and engage in remote learning. (See Final Rule pp. 297).

Eligible uses are found on page 39 of Appendix 1: Eligible Use Matrix.

Recipients must ensure that SLFRF funds are designed to address an identified need for additional broadband investment that existing federal or state funding commitments are not met. Recipients must also ensure that SLFRF funds will not be used for costs reimbursed by the other federal or state funding streams. (See Final Rule pp. 311).

Recipients are required to design projects to meet or exceed symmetrical 100 Mbps download and 20 Mbps upload speeds. 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. (See Final Rule pp. 297).

It is encouraged to prioritize investments in fiber-optic infrastructure wherever feasible and 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, non-profits, and co-operatives. (See Final Rule pp. 305-311).

Enrollment in a low-income subsidy program is required, and recipients must require that the service provider for a broadband project that provides service to households to either:

• Participate in the FCC’s Affordable Connectivity Program (ACP); (See Final Rule pp. 396).
• Provide access to a broad-based affordability program to low-income consumers that provides benefits commensurate to ACP.

(See Final Rule pp. 297, 308, 396 & 430).

Treasury encourages broadband services to include at least one low-cost option offered without data usage caps at speeds sufficient for households with multiple users to telework and simultaneously engage in remote learning. Recipients are also encouraged in consult with the community on affordability needs. (See Final Rule pp. 309).

Cybersecurity Investments

SLFRF may be used to modernize cybersecurity for existing and new broadband infrastructure, regardless of their speed delivery standards. This includes the modernization of hardware and software. (See Final Rule pp. 272).

Applicable Standards and Requirements

It is encouraged with water, sewer, and broadband projects that strong labor stands are adhered to, including project labor and community benefits agreements that offer wages at or above the prevailing rate and have local hire provisions. Furthermore, it is also encouraged that recipients prioritize procuring employers who have strong labor standards and pursuing employers who do not have recent federal or state labor and employment law violations. (See Final Rule pp. 262 & 397).

Eligible Expenses

[Previous]

Recipients are also encouraged to prioritize investments in fiber optic infrastructure where feasible, as such advanced technology enables the next generation of application solutions for all communities. Eligible projects are expected to focus on locations that are unserved or underserved. The Interim Final Rule treats users as being unserved or underserved if they lack access to a wireline connection capable of reliably delivering minimum speeds of at least 25 Mbps download and 3 Mbps upload. Households and businesses lacking this level of access are generally not viewed as being able to originate and receive high-quality voice, data, graphics, and video telecommunications.

[New](See Final Rule pp. 294-295, 299-302, & 304-306).

To meet the immediate needs of unserved and underserved households and businesses, recipients are encouraged to focus on projects that deliver a physical broadband connection by prioritizing projects that achieve last-mile connections. Treasury also encourages recipients to prioritize support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to turn profits and with a commitment to serving entire communities. Recipients are also encouraged to consider ways to integrate affordability options into their program design. (

[New] (See Final Rule pp. 295).

Eligible uses are found on page 39 of Appendix 1: Eligible Use Matrix

Other Provisions

[New]

Restrictions on Use

(See Final Rule pp. 314).

Statutory Restrictions under ARPA

• States and territories may not offset a reduction in net tax revenue
• Deposit into pension funds

Other Restrictions (under any eligible use category)

• Debt service
• To replenish financial reserves
• To satisfy any obligation resulting from a judgment or settlement

General Restrictions

• A recipient may not use SLFRF funds for any program, service, or capital expenditure that includes a term or condition that undermines efforts to stop the spread of COVID-19
• Payments from the Fiscal Recovery Funds are subject to the provisions of 2 CFR 200 
• Recipients must be aware of additional federal, state, and local laws that may apply, including federal environmental and civil rights laws.

Offset a Reduction in Net Tax Revenue

[Previous]

For States and territories (recipient governments), section 602(c)(2)(A)—the offset provision—prohibits the use of Fiscal Recovery Funds to offset a reduction directly or indirectly in net tax revenue resulting during the covered period. If a State or territory uses Fiscal Recovery Funds to offset a reduction in net tax revenue, the ARPA provides that the State or territory must repay to the Treasury an amount equal to the lesser of:

1. the amount of the applicable reduction attributable to the impermissible offset; and,
2. the amount received by the State or territory under the ARPA.

Note: A State or territory that chooses to use Fiscal Recovery Funds to offset a reduction in net tax revenue does not forfeit its entire allocation of Fiscal Recovery Funds (unless it misused the full allocation to offset a reduction in net tax revenue) or any non-ARPA funding received. (See Interim Final Rule pp. 81).

The Interim Final Rule recognizes three sources of funds that may offset a reduction in net tax revenue other than Fiscal Recovery Funds — organic growth, revenue increases (e.g., an increase in a tax rate), and certain cuts in spending.

ARPA uses a step-by-step process for determining whether and the extent to which, Fiscal Recovery Funds have been used to offset a reduction in net tax revenue. Based on information reported annually by the recipient government:

• First, each year, each recipient government will identify and value the changes in law, regulation, or interpretation that would reduce net tax revenue, as it would in the ordinary course of its budgeting process.
• Second, the Interim Final Rule recognizes that it may be difficult to predict how a change would affect net tax revenue in future years and, accordingly, provides that if the total value of the changes in the year for which the recipient government is reporting is below a de minimis level, as discussed below, the recipient government need not identify any sources of funding to pay for revenue reducing changes and will not be subject to recoupment.
• Third, a recipient government will consider the amount of actual tax revenue recorded in the year for which they are reporting. Suppose the recipient government's actual tax revenue is greater than the amount of tax revenue received by the recipient for the fiscal year ending 2019, adjusted annually for inflation. In that case, the recipient government will not be considered to have violated the offset provision because there will not have been a reduction in net tax revenue.
• Fourth, suppose the recipient government's actual tax revenue is less than the amount of tax revenue received by the recipient government for the fiscal year ending 2019, adjusted annually for inflation, in the reporting year. In that case, the recipient government will identify any sources of funds that have been used to permissibly offset the total value of covered tax changes other than Fiscal Recovery Funds. These are:
• State or territory tax changes that would increase any source of general fund revenue, such as a change that would increase a tax rate; and,
• Spending cuts in areas not being replaced by Fiscal Recovery Funds. The recipient government will calculate the value of revenue reduction remaining after applying these sources of offsetting funding to the total value of revenue reducing changes—that is, how much of the tax change has not been paid for.
• Fifth, if any amounts could be subject to recoupment, Treasury will notify the recipient government of such amounts. This process is discussed in greater detail in Section IV of this Supplementary Information. (See Interim Final Rule pp. 83 – 84).

The Final Rule updates several definitions that apply to the implementation of the offset provision:

Deposit into Pension Funds

Eligible Expenses:

[Previous]

The statute provides that recipients may not use Fiscal Recovery Funds for "deposit 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, the Interim Final Rule 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 recipient's regular timing for making such payments.

[New]

In the Final Rule, Treasury clarifies that "payment made at the regular time for pension contributions may very well be an extraordinary payment, for example, if it is larger than a regular payment would have been. Such a payment would be a restricted use." (See Final Rule pp. 340).

Additionally, the Final Rule clarifies that deposits into pension funds do not apply to Tribal Governments. (See Final Rule pp. 340).

[Previous]

Note: Under this interpretation, a "deposit" is distinct from a "payroll contribution," which occurs when employers make payments into pension funds at regular intervals, with contribution amounts based on a pre-determined percentage of employees' wages and salaries. (See Interim Final Rule pp. 79).

Payments in Tranches to Local Governments and Certain States

[Previous]

Local Governments

• The Secretary will make payments to local governments in two tranches, with the second being paid twelve months after the first payment.

State Governments

• The Secretary may withhold payment of up to 50% of the total allocated amount to each State and territory for up to 12 months from the certification date based on the unemployment rate in the State or territory as of the date of the certification.
• This threshold will result in the majority of States being paid in two tranches. However, if there is an increase in their unemployment rate over a specified threshold, States and territories may receive a single payment rather than split it in two.

Fiscal Recovery Funds are not subject to the requirements of the Cash Management Improvement Act (CMIA)

(See Interim Final Rule pp. 102)

[New]

The Final Rule has two adjustments:

1. "The final rule makes two adjustments for operational purposes. First, the final rule provides that Treasury expects to make all second tranche payments to states available beginning 12 months from the date that funding was first made available by Treasury (May 10, 2021) regardless of when each individual state submitted its initial certification…" (Final Rule p. 350).
2. Second, to ease recipient states' administrative burden, the final rule strikes a requirement from the interim final rule that states must certify for their second tranche payments and file all required reports at least 30 days prior to the date their second payment is made available. The final rule simply requires that states certify for their second tranche payment and file all required reports before receiving their second tranche payment…" (Final Rule p. 350).

Payments to Non-entitlement Units of Government (NEUs) and Units of Local Government (UGLGs) within Non-UGLG Counties

[Previous]

• States and territories are required to distribute Fiscal Recovery Funds to NEUs based on population within 30 days of receipt unless granted an extension by the Secretary.
• States and territories are required to allocate funding to NEUs in the amount that bears the same proportion as the population of the NEU bears to the total population of all NEUs in the State or territory (subject to a cap).
• No additional requirements or conditions may be placed on NEUs by States and territories beyond the requirements in ARPA and Treasury's regulations and guidance.
• Distributions to NEUs may not exceed 75% of the NEU's most recent budget (as of January 27, 2020).

(See Interim Finale Rule pp. 108; [New] Final Rule pp. 350)

Timeline for the Use of Fiscal Recovery Funds

[Previous]

The guidance below, provided by the Interim Final Rule, has not changed in the Final Rule.

• Payments from the Fiscal Recovery Fund can only be used to cover costs incurred by December 31, 2024. Treasury is interpreting the requirement that costs be incurred by December 31, 2024, to require only those recipients have obligated the Fiscal Recovery Funds by that date.
• The Interim Final Rule uses a definition of "obligation" that is based on the definition used for purposes of Uniform Guidance

The use of Fiscal Recovery Funds is forward-looking:

• The Interim Final Rule permits funds to be used to cover costs incurred beginning on March 3, 2021;
• Recipients are not permitted to use funds to cover pre-award costs (those incurred prior to March 3, 2021);
• The period of performance is from March 3, 2021, to December 31, 2026.

A recipient must return any funds not obligated by December 31, 2024, and any funds not expended to cover such obligations by December 31, 2026.

Transfer of Funds

[Previous]

The Statue authorizes State, territorial, and Tribal governments to transfer amounts paid from the Fiscal Recovery Funds to the following entities (subrecipients):

• Private non-profit organizations
• Tribal organizations
• Public benefit corporations involved in the transportation of passengers or cargo
• Special-purpose districts (fire, water, sewer, mosquito abatement districts)
• The list is not exclusive

Recipients remain responsible for monitoring and overseeing subrecipients' use of funds and activities. Recipients are also responsible for reporting to Treasury on their subrecipients' use of payments from the Funds.

• [New]Subrecipients must agree to "comply with Award Terms and Conditions, and other applicable requirements, including the Uniform Guidance at C.F.R. §§ 200.331-200.333." (See Final Rule pp. 358).
• [Previous]Transfers must qualify as an eligible use of Fiscal Recovery Funds by the transferor.
• [New] Pooling Funds: "…recipients may pool SLFRF funds for projects, provided that the project is itself an eligible use of SLFRF funds for each recipient that is contributing to the pool of funds and that recipients are able to track the use of funds in line with the reporting and compliance requirements of the SLFRF." (See Final Rule pp. 359).
• [New] Blending and Braiding of Funds: "…recipients may fund a project with both SLFRF funds and other sources of funding, provided that the costs are eligible costs under each source program and are compliant with all other related statutory and regulatory requirements and policies." (See Final Rule pp. 360).

(See [Previous]Interim Final Rule pp. 105; [New]Final Rule pp. 357)

Reporting Schedule

[Previous]

Note: Treasury will provide additional guidance and instructions on reporting requirements at a later date.

(See Interim Final Rule pp. 110)

Administrative Expenses

[New]

• Direct and indirect administrative expenses are permissible uses of SLFRF funds
• Details on allowable direct and indirect expenses are found in Treasury's Compliance and Reporting Guidance.

(See Final Rule pp. 364).

Treatment of Loans

[New]

(See Final Rule pp. 366-368).

Use of Fund for Match or Cost-Share Requirements

[New]

• The Interim Final Rule stated that payments from the Fiscal Recovery Funds could not be used as non-Federal match for other Federal programs
• Updated guidance in the Final Rule states that federal funds available for the provision of government services, up to the amount of the recipient's reduction in revenue due to the public health emergency, generally may be used to meet the non-federal cost-share or matching requirements of other federal programs.
• SLFRF funds may not be used as the non-federal share for purposes of a state's Medicaid and CHIP programs because the Office of Management and Budget has approved a waiver pursuant to 2 CFR 200.102 of the Uniform Guidance and related regulations.
• SLFRF funds beyond those available for the provision of government services may not be used to meet the non-federal match or cost-share requirements of other federal programs other than as expressly provided for by statute.

(See Final Rule pp. 368-370).

Reporting

[New]

• Guidance on reporting requirements can be found in Treasury's Compliance and Reporting Guidance and in the User Guide: Treasury's Portal for Recipient Reporting
• Treasury will continue to issue updated guidance prior to each reporting period to clarify any modifications to report content
• Treasury is retaining the reporting deadline of 30 days after the close of the reporting period
• Recipients of SLFRF funds are subject to the provisions of the Uniform Guidance (2 CFR Part 200) from the date of award to the end of the period of performance on December 31, 2026, unless otherwise specified
• Costs must follow the requirements in 2 CFR 200 Subpart E, Cost Principles, including procurement standards
• Recipients that receive an aggregate amount of federal financial assistance in a given fiscal year that exceeds the Single Audit threshold are subject to the requirements in 2 CFR 200 Subpart F, Audit Requirements unless otherwise specified in program-specific guidance
• SLFRF funds transferred to subrecipients are also subject to reporting and Uniform Guidance requirements
• The Assistance Listing provides details on the specific provisions of the Uniform Guidance that do not apply to SLFRF funds
• To elevate administrative burden, Treasury has created tiered reporting requirements respective to the amount of SLFRF funding received.

(See Final Rule pp. 370).

Remediation and Recoupment

[Previous]

Under the ARPA, failure to comply with the restrictions on use contained in sections 602(c) and 603(c) of the Act may result in the recoupment of funds. [New] The Final Rule includes several adjustments for further clarity.

Recoupment Process: 

Identification and Notice of Violations 

• [Previous]Treasury will collect information regarding eligible uses on a quarterly basis and on the tax offset provision on an annual basis. If a violation is identified, Treasury will provide written notice to the recipient, including explaining such amounts. 
• [New] Treasury may request additional information before initiating the recoupment process. (See Final Rule pp. 377).
• [New]Treasury may pursue other forms of remediation and monitoring in conjunction with, or as an alternative to, recoupment. (See Final Rule pp. 378).

Request for Consideration 

• [Previous] A recipient may submit a request for reconsideration of any amounts identified in the notice from the Treasury within 60 calendar days of receiving the notice, including the opportunity to submit additional information that supports the recipient's request. 
• [New]A recipient must exhaust the procedures available under section 35.10 of the final rule prior to seeking judicial review of a recoupment decision. (See Final Rule pp. 376-377).
• [Previous] Treasury's decision to affirm, withdraw, or modify the notice of recoupment will be provided within 60 calendar days of the recipient's request for reconsideration. 

Repayment

• [Previous] Amounts subject to recoupment must be repaid within 120 calendar days of receipt of final notice of recoupment. 
• [New]If a state or territory is required to repay funds pursuant to the Secretary's recoupment authority, the Secretary may reduce the amount payable to the state or territory in a second tranche payment by the state or territory's amount required to repay as recoupment. (See Final Rule pp. 377).

[New]

Although general timelines set forth in the interim final rule are maintained in the final rule. Treasury retains the ability to expedite or extend timelines in the adjudication or pre-adjudication process

(See Interim Final Rule pp. 100; See Final Rule pp. 374-378)

Executive Order 13132

[Previous]

This Interim Final Rule and Final Rule do not have federalism implications within the meaning of the Executive Order and do not impose substantial, direct compliance costs on State, local, and Tribal governments or preempt state law within the meaning of the Executive Order.

[New]

The compliance costs are imposed on state, local, and Tribal governments by sections 602 and 603 of the Social Security Act, as enacted by the ARPA. (See Final Rule pp. 400).

The Administrative Procedure Act (APA)

[Previous]

5 U.S.C. 551 et seq., generally requires public notice and an opportunity for comment before a rule becomes effective. APA also provides an exception to ordinary notice-and-comment procedures "when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest." 5 U.S.C. 553(b)(3)(B); see also 5 U.S.C. 123 553(d)(3). (See Interim Final Rule pp. 123)

[New]

After carefully considering the comments received, this final rule adopts the May 17, 2021, interim final rule with the revisions discussed in this Supplementary Information. See the "Supplementary Information" section of the May 17, 2021, interim final rule for the applicability of the requirements of 5 U.S.C. 553. (See Final Rule pp. 400-401).

Reservation of Authority, Reporting

[Previous]

Extensions or Accelerations of Timing. The Secretary may extend or accelerate any deadline or compliance date of this part, including reporting requirements that implement this subpart. The Secretary may request other additional information as may be necessary or appropriate.

Interim Final Rule

[Previous]

The Interim Final Rule is issued without advance notice and public comment to allow for immediate implementation of the program. (5 U.S.C. 553(a)(2)). Although the Interim Final Rule is effective immediately, comments are being solicited from the public and government agencies. These comments must be submitted on or before 60 days from the publication date or by July 10, 2021.

Executive Order 12866

[New]

The Final Rule is a significant regulatory action likely to have an annual effect on the economy of $100 million or more, as defined by Section 3(f) of Executive Order 12866, and is subject to review by the Office of Management and Budget. (See Final Rule pp. 379).

Executive Order 13563

[New]

The Final Rule is subject to requirements under Section 1(b) of Executive Order 13563 supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. (See Final Rule pp. 379-380).

Government Employment

[New]

The Final Rule allows for a broader set of eligible uses to restore and support public sector employment relative to the Interim Final Rule. The Interim Final Rule included hiring government employees up to the pre-pandemic baseline; The Final Rule has increased this provision by allowing funds for payroll and covered benefits associated with increasing public sector employment up to 7.5% above its pre-pandemic baseline (See Final Rule pp. 383). Additional funds for employees that experienced pay reductions or were furloughed are permissible under the Final Rule. Recipients may also use funds to avoid layoffs, provide worker retention incentives, and hire new employees. (See Final Rule pp. 184).

Additional Enumerated Uses

[New]

Impacted Populations

• In support of addressing the burden of the COVID-19 public health emergency on impacted populations, the Final Rule has expanded enumerated eligible uses for impacted populations, including paid sick, medical, or family leave; health insurance subsidies; and services for the unbanked and underbanked (See Final Rule pp. 389).

Eligible uses formerly restricted to disproportionately impacted communities, such as community violence intervention, assistance accessing or applying to public benefits and services, affordable housing development, and services to promote healthy childhood environments like childcare and early learning, have been expanded to impacted communities. Further enumerated eligible uses for disproportionately impacted communities include investments in parks and other public outdoor recreation spaces to address social determinants of health. (See Final Rule pp. 389).

Capital Expenditures

• Treasury has allowed for an expanded set of capital expenditures under the Final Rule while requiring written justification for projects at or over $1 million. This approach will help offset gaps in recipients' response to the pandemic and provide generated benefits beyond the period of performance while meeting appropriate risk-based compliance requirements (see Final Rule p. 390).

Labor Standards

• The Final Rule encourages recipients to ensure strong labor standards in project labor agreements and community benefits agreements for capital expenditures and/or infrastructure projects, such as offering wages at or above the prevailing rate and including local hire provisions to aid economic recovery. (See Final Rule pp. 397).

Splitting Payments to Recipients

• Recipients receive funding in two tranches separated by at least twelve months, as described above, to ensure that recipient spending plans encompass economic conditions and benefits realized in 2022 or later. However, if a recipient expresses a pressing need for aid, Treasury has prepared an immediate, one-time payment, and that subset of state governments, such as those experiencing significantly high unemployment rates, will be provided funds at once. (See Final Rule pp. 397-398).

Definitions

[Previous]

Capital Expenditures: “Expenditures to acquire capital assets or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life.” (See 2 CFR 200.1).

[New]

Disproportionately Impacted: “Households, communities, small businesses, and nonprofits that experienced disproportionate public health or negative economic impacts of the pandemic, particularly populations in Qualified Census Tracts (QCTs) and those served by Tribal governments experiencing pre-existing health, economic, and social disparities.” (See Final Rule pp. 16).

[Previous]

Eligible Workers: “Workers needed to maintain continuity of operations of essential critical infrastructure sectors, including health care; emergency response; sanitation, disinfection, and cleaning work; maintenance work; grocery stores, restaurants, food production, and food delivery; pharmacy; biomedical research; behavioral health work; medical testing and 131 diagnostics; home- and community-based health care or assistance with activities of daily living; family or child care; social services work; public health work; vital services to Tribes; any work performed by an employee of a State, local, or Tribal government; educational work, school nutrition work, and other work required to operate a school facility; laundry work; elections work; solid waste or hazardous materials management, response, and cleanup work; work requiring physical interaction with patients; dental care work; transportation and warehousing; work at hotel and commercial lodging facilities that are used for COVID-19 mitigation and containment; work in a mortuary; work in critical clinical research, development, and testing necessary for COVID-19 response.” (See Interim Final Rule, pp. 131-132).

[New]

General Revenue: “Money that is received from tax revenue, current charges, and miscellaneous general revenue, excluding refunds and other correcting transactions and proceeds from the issuance of debt or the sale of investments, agency or private trust transactions, and intergovernmental transfers from the Federal Government, including transfers made pursuant to section 9901 of the ARPA. General revenue also includes revenue from liquor stores that are owned and operated by state and local governments. General revenue does not include revenues from utilities, except recipients may choose to include from utilities that are part of their own government as general revenue provided the recipient does so consistently over the remainder of the period of performance. Revenue from Tribal business enterprises must be included in general revenue.” (See Final Rule pp. 408).

Impacted: “Households, communities, small businesses, nonprofits, and industries that experienced public health or negative impacts of the pandemic.” (See Final Rule pp. 16).

Low Income Household: “A household with income (i) at or below 185 percent of the Federal Poverty Guidelines (FPG) for the size of its household based on the most recently published poverty guidelines by the Department of Health and Human Services (HHS) or at or below 40 percent of the Area Median Income (AMI) for its county and size of household based on the most recently published data by the Department of Housing and Urban Development (HUD)." (See Final Rule pp. 408).

Micro-business: “A small business with five or fewer employees, one or more of whom owns the small business.” (See Final Rule pp. 409).

Moderate Income Household: “A household with an income (i) at or below 300 percent of the FPG for the size of its household based on the most recently published poverty guidelines by HHS or (ii) at or below 65 percent of the AMI for its county and size of household based on the most recently published data by HUD." (See Final Rule pp. 409).

Period of performance: “Time period described in § 35.5 during which a recipient may obligate and expend funds in accordance with sections 602(c)(1) and 603(c)(1) of the Social Security Act and this subpart.” (See Final Rule pp. 410).

Tax Revenue: “Revenue received from a compulsory contribution that is exacted by a government for public purposes excluding refunds and corrections and, for purposes of § 35.8, intergovernmental transfers. Tax revenue does not include payments for a special privilege granted or service rendered, employee or employer assessments and contributions to finance retirement and social insurance trust systems, or special assessments to pay for capital improvements.” (See Final Rule pp. 411).

Title I Eligible Schools: “Schools eligible to receive services under section 1113 of Title I, Part A of the Elementary and Secondary Education Act of 1965, as amended (20 U.S.C. 6313), including schools served under section 1113(b)(1)(C) of that Act.” (See Final Rule pp. 412).

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Qualified Census Tracts: “A common, readily-accessible, and geographically granular method of identifying communities with a large proportion of low-income residents.” (See Interim Final Rule pp. 21).

Appendix 1: Eligible Uses Matrix

** Please Note: This matrix only lists those uses explicitly spelled out by Treasury and only includes categories and subcategories if specifically included in the Final Rule (see Final Rule pp. 404, 414-431). There may be other uses not listed on this matrix. Please refer to Appendix 2: Restrictions on Use, the Final Rule original text, and FAQs for further clarification. **

Appendix 2: Restrictions on Use

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This ‘Restrictions on Use’ section describes limitations and restrictions on the use of funds. (Please See, Final Rule pp. 314-348) for more comprehensive descriptions on ineligible uses.)

(A) statutory restrictions under the ARPA, which include

1) offsetting a reduction in net tax revenue, and

2) deposits into pension funds, and

(B) other restrictions on use, which include

1) debt service and replenishing reserves,

2) settlements and judgments, and

3) general restrictions.

These restrictions apply to all eligible use categories; however, some restrictions apply only to certain types of recipient governments, and recipients are advised to review the Final Rule to determine which restrictions apply to their type of government (e.g., state, territory, tribal government, county, metropolitan city, or non-entitlement unit of government).

To reiterate, for recipient governments covered by a specific restriction, that restriction applies to all eligible use categories and any use of funds under the SLFRF program. Specifically:

• For states and territories only, funds may not be used to offset directly or indirectly a reduction in net tax revenue resulting from a change in state or territory law.

• For all recipients except Tribal governments, funds may not be used for deposits into a pension fund.

• For all recipients, funds may not be used for debt service or replenishing financial reserves.

• All recipients must also comply with three general restrictions.

1. First, a recipient may not use SLFRF funds for a program, service, or capital expenditure that conflicts with or contravenes the statutory purpose of ARPA, including a program, service, or capital expenditure that includes a term or condition that undermines efforts to stop the spread of COVID-19.

2. Second, recipients may not use SLFRF funds in violation of the conflict-of-interest requirements contained in the Award Terms and Conditions, including any self-dealing or violation of ethics rules.

3. Lastly, recipients should be aware that federal, state, and local laws and regulations, outside of SLFRF program requirements, also apply, including, for example, environmental laws and federal civil rights and nondiscrimination requirements, which include prohibitions on discrimination based on race, color, national origin, sex (including sexual orientation and gender identity), religion, disability, age, or familial status (having children under the age of 18).

The Program Administration Provisions section describes the processes and requirements for administering the program on an ongoing basis, specifically as it relates to the following:

• distribution of funds,
• timeline for using funds,
• transfer of funds from a recipient to different organizations,
• use of funds for program administration,
• reporting on the use of funds, and
• remediation and recoupment of funds used for ineligible purposes.

Of note, SLFRF funds may only be used for costs incurred within a specific time period, beginning March 3, 2021, with all funds obligated by December 31, 2024, and all funds spent by December 31, 2026. Recipients are also advised to consult Treasury’s Reporting and Compliance Guidance for additional information on program administration processes and requirements, including the applicability of the Uniform Guidance. (See Final Rule pp. 9-11).

SLFRF funds may only be used for costs incurred within a specific period, beginning March 3, 2021, with all funds obligated by December 31, 2024, and spent by December 31, 2026. Recipients are also advised to consult Treasury’s Reporting and Compliance Guidance for additional information on program administration processes and requirements, including the applicability of the Uniform Guidance. (See Final Rule pp. 11).”