U.S. Department of the Treasury Issues Final Rule for Coronavirus State & Local Fiscal Recovery Funds








Lori A. Lordo, CPA

On January 6th, the U.S. Department of the Treasury issued its Final Rule for Coronavirus State and Local Fiscal Recovery Funds (SLFRF) as part of the 2021 American Rescue Plan Act. The final rule is effective April 1, 2022. Until that time, the interim final rule remains in effect. However, recipients can choose to take advantage of the Final Rule’s flexibilities and simplifications now, even ahead of the effective date. The U.S. Treasury has offered a summary document of the Final Rule, which we encourage you to review.

The Final Rule offers key changes and clarifications in several areas:

Changes In Requirements for Replacing Lost Public Sector Revenue

The Final Rule provides a standard allowance for a loss up to $10 million in revenue depending on the amount of the award. This allows local governments to choose between a standard amount of revenue loss or to complete a revenue loss calculation.

Recipients who elect the standard allowance may use that amount (in many cases their full award) for government services, with streamlined reporting requirements. Government services are defined as any service traditionally provided by a government.  This includes programs such as road construction and other infrastructure, public safety programs, and health and educational activities.

Note that the Final Rule has modified the definition of ‘general revenue’ to allow recipients operating utilities as part of their own government to choose whether to include revenue from those utilities in their revenue loss calculation. Furthermore, for utilities or other entities (e.g., certain service districts) that are not part of the recipient government, a transfer from the utility to the recipient constitutes an intergovernmental transfer and therefore is included in the definition of “general revenue.” The U.S. Treasury has also added liquor store revenue to the definition of general revenue.

Funding recipients have two options for the determination of revenue loss. Note that only one of these approaches may be used after a choice is made.

  1. Recipients may choose a ‘standard allowance’ of $10 million to spend on government services through the period of performance. Recipients may choose to use this standard allowance instead of calculating lost revenue, including those with total allocations of $10 million or lower. Electing to accept the standard allowance of $10 million will not increase or decrease the recipient’s total allocation.
  2. Recipients may calculate their actual revenue loss according to the formula detailed in the Final Rule. Under this option, recipients calculate revenue loss at four distinct points in time, either at the end of each calendar year (e.g., December 31 for years 2020, 2021, 2022, and 2023) or the end of each fiscal year of the recipient. Recipients can select whether to use calendar or fiscal year dates but must be consistent throughout the performance period. Below is the process for calculating revenue loss:

-Calculate revenues generated in the most recent full fiscal year prior to the pandemic (i.e., last full fiscal year before January 27, 2020), called the base year revenue.

-Estimate counterfactual revenue, which is equal to the following formula, where n is the number of months elapsed since the end of the base year to the calculation date:

𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 × (1 + 𝑔𝑟𝑜𝑤𝑡ℎ 𝑎𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡) 𝑛/12

The growth adjustment is the greater of either a standard growth rate—5.2%—or the recipient’s average annual revenue growth in the last full three fiscal years prior to the pandemic.  Treasury increased the growth rate to 5.2% from 4.1% in the Interim Rule due to availability of 2019 published data.

Identify actual revenue, which equals revenues collected over the twelve months immediately preceding the calculation date. Under the final rule, recipients must adjust actual revenue totals for the effect of tax cuts and tax increases that are adopted after January 6, 2022 (date of adoption of the Final Rule). Specifically, the estimated fiscal impact of tax cuts and tax increases adopted after January 6th must be added or subtracted to the calculation of actual revenue for purposes of calculation dates that occur on or after April 1, 2022. Recipients may subtract from their calculation of actual revenue the effect of tax increases enacted prior to January 6th. Note that recipients that elect to remove the effect of tax increases enacted before January 6th must also remove the effect of tax decreases enacted before January 6th, such that they are accurately removing the effect of tax policy changes on revenue.

Revenue loss for the calculation date is equal to counterfactual revenue minus actual revenue (adjusted for tax changes) for the twelve-month period. If actual revenue exceeds counterfactual revenue, the loss is set to zero for that twelve-month period. Revenue loss for the period of performance is the sum of the revenue loss on for each calculation date.

For further guidance on the calculation, please refer to the supplementary information in the Final Rule which provides an example of this calculation in the Revenue Loss section (refer to page 237).

Public Health and Economic Impacts

The Final Rule clarifies recipients can use funds for capital expenditures in support of eligible COVID-19 public health or economic response. As an example, eligible expenses would be certain affordable housing projects, childcare facilities, schools, hospitals, and other projects consistent with final rule requirements.

Recipients must complete and meet the requirements of a written justification for capital expenditures equal to or greater than $1 million. For large-scale capital expenditures ($10 million or more), which have high costs and may require an extended length of time to complete, as well as most capital expenditures for non-enumerated uses of funds, the U.S. Treasury requires recipients to submit their written justification as part of regular reporting.

The Final Rule also has expanded the definition of households and communities considered to be “impacted” and “disproportionately impacted” by the pandemic, thereby allowing recipients to provide a broader response without required additional analysis. The Final Rule has expanded programs of affordable housing, childcare, early learning, as eligible services in all impacted communities along with making certain community development and neighborhood revitalization activities eligible for disproportionately impacted communities.

Lastly, the Final Rule has broadened the activities to support government employment, including hiring above a recipient’s pre-pandemic baseline, providing funds to employees that experienced pay cuts or furloughs, avoiding layoffs, and offering incentives for employee retention.

Premium Pay

The Final Rule provides more streamlined options for premium pay by broadening the share of eligible workers eligible to receive premium pay without a written justification while maintaining a focus on lower-income and front-line workers performing essential work.

Water, Sewer & Broadband Infrastructure

The Final Rule expands eligible broadband infrastructure investments to address challenges with broadband access, affordability, and reliability, and adds additional eligible water and sewer infrastructure investments, including an increased range of lead remediation and stormwater management projects.

If you have any questions regarding the clarifications and changes outlined in the Final Rule, please contact us.



Ins and Outs of the American Rescue Plan








Lori A. Lordo, CPA

As local governments begin to take advantage of the 2021 American Rescue Plan Act, we would like to provide an overview of the funding applicable to local governments, eligible expenditures and reporting requirements.

What is the Coronavirus Local Fiscal Recovery Fund and What Activities are Unallowed for Reimbursement?

The Coronavirus Local Fiscal Recovery Fund (FRF) divides $130.2 billion evenly between counties, municipalities, and metropolitan cities, with $65.1 billion allocated to counties, $45.47 billion allocated to metropolitan cities, and $19.53 billion allocated to non-entitlement units (NEU) or municipalities. A metropolitan city is defined as having a population of 50,000 or more whereas a non-entitlement unit (NEU) or municipality is defined as having a population of 50,000 or less. FRF can be used to cover eligible expenditures obligated by December 31, 2024 and performed by December 31, 2026.

What activities are unallowable?

  • FRF recipients are not eligible for reimbursement for extraordinary pension fund contributions. (However, FRF can be used to fund routine payroll contributions for pensions of employees whose wages or salaries are an eligible use.)
  • Funding debt service, legal settlements, or judgements
  • Deposits to rainy day funds or financial reserves
  • FRF cannot be used as non-federal match for federal programs whose statute bans other federal funds to meet matching requirements.
  • States have an additional restriction that they can’t use the money to offset a net tax reduction.

Can FRF be transferred?

Yes. FRF funds can be transferred by a metropolitan city, NEU, or county to the following entities:

  • Private nonprofits as defined in the McKinney-Vento Homeless Assistance Act at 42 U.S.C. 11360. (This is a federal law that provides federal money for homeless shelter programs.)
  • Public benefit corporation involved in the transportation of passengers or cargo
  • Special-purpose unit of a state or local government
  • To the state which such entity is located

Recently, there have been several FAQ clarifications regarding eligible expenditures. You should expect that guidance and FAQ’s will be updated frequently throughout the year by the Treasury. Failure to comply with restrictions on use contained within the guidance will result in recoupment of funds by the U.S. Treasury.

There are five categories of allowable uses of funds as further explained below.

Category #1: Support the Public Health Response

Funding may be used to address a broad range of public health needs including COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and public health and safety staff with the covered period beginning March 3, 2021. Specific examples of mitigation efforts eligible for funding include (but are not limited to) vaccination programs, medical expenses, testing, contact tracing, isolation or quarantine, PPE purchases, support for vulnerable populations to access medical or public health services, public health surveillance, enforcement of public health orders, public communication efforts, enhancement of healthcare capacity, including alternative care facilities, support for prevention, mitigation or other services in congregate living, enhancement of public health data systems, capital investments in public facilities to meet pandemic operational needs, and ventilation improvements in key settings like healthcare facilities and public facilities.

Funding may also support behavioral healthcare needs including mental health treatment, substance misuse treatment, other behavioral health services, crisis intervention, services, or outreach to promote access to health and social services, and hotlines or warmlines. Additionally, funding can be used to cover payroll costs and covered benefit expenses for employees involved in public health, healthcare, human services, public safety, and similar employees if their services are devoted to mitigating or responding to the pandemic. Public health and public safety workers may be considered entirely devoted to mitigating or responding to the pandemic, and therefore fully covered, if the employee or their unit or division is considered primarily dedicated to responding to the pandemic. FRF recipients in this classification should reassess their workers’ responsibilities periodically and maintain records to support this assessment. Support would include payroll records, attestations from supervisors or staff, or regular work products demonstrating work on COVID-19 response.

Category #2: Responding to Negative Economic Impacts

Eligible uses that respond to the negative economic impacts of the pandemic must be designed to address an economic harm resulting from or exacerbated by the public health emergency. Responses must be related and reasonably proportional to the extent and type of harm experienced; uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses.

What are eligible uses to respond to negative economic impacts?

  • Assistance to unemployed workers
  • Assistance to households
  • Expenses to improve efficacy of economic relief programs
  • Small businesses and non-profits
  • Rehiring state and local government staff
  • Aid to impacted industries

Additionally, the following are eligible expenses in QCT’s or other areas disproportionately impacted by the pandemic:

  • Building stronger communities through investments in housing and neighborhoods
  • Addressing educational disparities
  • Promoting healthy childhood environments

What are eligible uses to address disparities in disproportionately impacted communities?

Additional services are deemed eligible when provided in a Qualified Census Tract (QCT) or to others disproportionately impacted by the pandemic. Services must facilitate access to resources that improve health outcomes, including services that connect residents with health care resources and public assistance programs and build healthier environments. This includes:

  • Funding community health workers to help community members access health services and services to address the social determinants of health
  • Funding public benefits navigators to assist community members with navigating and applying for available federal, state, and local public benefits or services
  • Housing services to support healthy living environments and neighborhoods conducive to mental and physical wellness
  • Remediation of lead paint or other lead hazards to reduce risk of elevated blood lead levels among children; and
  • Evidence-based community violence intervention programs to prevent violence and mitigate the increase in violence during the pandemic

Category #3: Provide Government Services to the Extent of Reduction in Revenue

Recipients may use payments from the FRF for government services to the extent of the reduction in revenue experienced due to the pandemic. Reduction in revenue is measured relative to revenue collected in the most full fiscal year prior to the emergency.  If on a calendar year, revenue is measured from 2019.

How is general revenue defined?

General revenue includes revenues collected by the recipient and generated from the underlying economy.

  • It’s loosely based on the Census Bureau’s definition of general revenue.
  • It includes a range of different tax revenues as well as other types of revenue that are available to support government services.
  • In calculating revenue, the recipient should sum it across revenue streams covered as general revenue on an entity-wide basis.
  • It includes intergovernmental transfers between state and local governments that are non-federal revenues.

What categories are excluded from general revenue?

  • Refunds or recoveries spent in the same fiscal year, which are deducted from expenditures
  • Other correcting transactions
  • Proceeds from issuance of debt or sale of investments
  • Agency or private trust transactions
  • All Intergovernmental transfers from the federal government including amounts passed through the state or other local governments
  • Revenue from utilities and insurance trusts

To measure growth, use the higher of 4.1% or the recipient’s average annual revenue growth over the 3 full fiscal years prior to the pandemic.

What are eligible government services expenditures to offset revenue loss?

Government services can include but not be limited to:

  • Maintenance of infrastructure or pay-go spending for building new infrastructure, including roads and bridges
  • Modernization of cybersecurity, including hardware, software, and protection of critical infrastructure
  • Health services
  • Environmental remediation
  • School or educational services; and
  • Police, first responders, and other public safety services

What are ineligible government services to offset revenue loss?

  • Interest or principal on any outstanding debt instrument
  • Generally, satisfaction of any obligation arising under or pursuant to a settlement agreement, judgment, consent decree
  • Replenishing financial reserves (e.g., rainy day or other reserve funds)
  • Any pension fund contributions not directly related to eligible salaries charged to FRF

Category #4: Premium Pay

Premium pay can be paid to eligible workers performing essential work. “Premium pay” means an additional amount up to $13 per hour that is paid to an eligible worker during the pandemic. A cap of $25,000 is imposed for any single eligible worker. Premium pay also includes grants to third-party employers that have eligible workers who perform essential work. Premium pay can be retroactive back to January 27, 2020 (double dipping is not allowed).

How is premium pay defined?

Essential Work is defined as work involving regular in-person interactions or regular physical handling of items that were also handled by others. Essential work does not include telework performed from a residence

Eligible workers are defined as workers needed to maintain continuity of operations of essential critical infrastructure sectors. This includes any work performed by an employee of a state or local government.

Note that if premium pay increases worker’s total pay above 150% of the residing state’s average annual wage for all occupations, the FRF recipient must provide the Treasury and make widely available a written justification of how the premium pay is responsive to workers performing essential work during the public health emergency.

What are examples of premium pay for eligible workers?

  • Any work performed by an employee of the state, or local government
  • Staff at nursing homes, hospitals, and home care settings
  • Workers at farms, food production facilities, grocery stores, and restaurants
  • Janitors and sanitation workers
  • Truck drivers, transit staff, and warehouse workers
  • Public health and safety staff
  • Childcare workers, educators, and other school staff; and
  • Social service and human services staff

Category #5: Make Necessary Investments in Water, Sewer, Stormwater, or Broadband Infrastructure

This category allows for a broad range of necessary investments in projects that improve access to clean drinking water, improve wastewater and stormwater infrastructure systems, and provide access to high-quality broadband service. Necessary investments are designed to provide an adequate minimum level of service and are unlikely to be made using private sources of funds.

Necessary investments include projects that are required to maintain a level of service that, at least, meets applicable health-based standards, considering resilience to climate change, or establishes or improves broadband service to unserved or underserved populations to reach an adequate level to permit a household to work or attend school, and that are unlikely to be met with private sources of funds.

Projects should include strong labor standards, project labor agreements, offer wages at or above prevailing wage rates, and include local hire provisions.

What are eligible infrastructure projects?

  • Includes stormwater infrastructure that improves access to clean drinking water
  • Infrastructure projects selected for FRF would also need to qualify for financial assistance through the Environmental Protection Agency (EPA) through the Clear Water State Revolving Fund (CWSRF) or Drinking Water State Revolving Fund (DWSRF). Types of projects eligible for CWSRF assistance include projects to construct, improve, and repair wastewater treatment plants; control non-point sources of pollution; improve resilience of infrastructure to severe weather events, create green infrastructure; protect waterbodies from pollution; and develop effective cybersecurity practices and measures. Projects may invest in the following DWSRF projects to improve drinking water infrastructure such as building or upgrading facilities and transmission, distribution and storage systems and the replacement of lead service lines.
  • Wastewater infrastructure projects can consist of the construction of publicly owned treatment infrastructure, management and treatment of stormwater or subsurface drainage water, facilitation of water reuse, or securing of publicly owned treatment works.
  • Broadband should support households and businesses that do not deliver 25 Mbps download/3 Mbps upload.
  • Fund projects that deliver reliable services a minimum 100Mbps download/100 Mbps upload speed unless impracticable due to geography, topography or excessive costs.
  • May also develop effective cybersecurity practices and measures.

Reporting Requirements for NEU’s

  • NEU’s first reporting deadline will be April 30, 2022.
  • NEU’s will be required to submit an annual project and expenditure report to the Treasury until 12/31/26.
  • The initial report will cover activity from the date of award to September 30, 2021.

The first report should include the following:

  • NEU Recipient Number (unique identification code; assigned by the state to the NEU as part of the request for funding)
  • Copy of signed award terms and conditions agreement
  • Copy of signed assurances of compliance with Title VI of Civil Rights Act of 1964
  • Copy of actual budget documents validating top-line budget total provided to the state as part of the request for funding (should be the same as submitted to the state).
  • States, territories, counties, and cities, and Tribal governments will be required to report project and expenditure data next on January 31, 2022.

Reporting Requirements – Project & Expenditure Reports

Reports are to be filed quarterly for states, counties, and metropolitan cities that receive more than $5 million in FRF. The initial report will cover 3 quarters and will be due on January 31, 2022. The report will be filed annually for counties and metropolitan cities that receive less than $5 million FRF and NEU’s. Annual filers first reporting deadline will be on April 30, 2022 and will be due on October 31st in subsequent years. Subsequent reports must be submitted within 30 days after end of the reporting period. FRF recipients are required to report by expenditure category and projects. The Expenditure Category (EC) is a coding system to track how funding is used and is used to identify where additional programmatic data is required.

-Appendix 1 of the Treasury Compliance & Reporting Guidance lists 66 expenditure categories.

-EC’s with a * require evidence-based intervention reporting.

-EC’s with a ^ must report on whether projects are primarily serving disadvantaged communities.

-Project reporting is defined as closely related activities toward a common purpose/goal. Each project must align to one Expenditure Category. FRF recipients will be required to report on project status (not started; less than 50%; 50% or more; and completed).

What other reporting is required?

  • Project inventory
  • Project demographic distribution – funding in economically disadvantaged communities
  • Civil rights compliance
  • Subawards – obligations & expenditures ≥ $50,000
  • Programmatic data

Recovery Plan Performance Report

This is a strategic plan on how a FRF recipient will spend the money and is required for states, counties and metropolitan cities with more than 250,000 in population. This report will include key performance indicators as well as programmatic data. The initial report is due August 31st and will be submitted annually thereafter.

Does an FRF recipient have to comply with Single Audit requirements?

Possibly, since federal funding is being provided under this Act. CFDA number 21.027 has been assigned to the Coronavirus State and Local Fiscal Recovery Funds with reporting required based upon when the expenditures were incurred not when cash has been received. A Single Audit will need to be completed if total federal funds (including Coronavirus Local Fiscal Recovery Funds) are over the $750,000 threshold. The audit will be subject to the provisions of the Uniform Administrative Requirements, Cost Principles, and Uniform Guidance including the cost principles and restrictions on general provisions for selected items of cost. If FRF are the only federal funds received in 2021, an FRF recipient should consider a program specific audit instead of a single audit if they qualify. To qualify, the FRF can only have one CFDA number and permission must be obtained from the grantor (federal/state).


Preparing for Your Allocation from The Coronavirus State and Local Fiscal Recovery Funds Program

Direct payments from the U.S. Treasury will soon be available for states, territories, tribal governments, counties, and metropolitan cities. These entities should prepare certain information in advance as outlined below. By undertaking these preparatory steps, eligible entities will be better positioned to receive payments from the Treasury in a more timely manner after the program is launched. As soon as possible, take the steps listed below to access funds for your entity if you are a county or metropolitan city.

1. Ensure your organization has a valid DUNS number. A DUNS number is a unique nine-character number used to identify an organization and is issued by Dun & Bradstreet. The federal government uses the DUNS number to track how federal money is allocated. A DUNS number is required prior to registering with the SAM database, which is outlined below. Registering for a DUNS number is free of charge. If your entity does not have a valid DUNS number, please visit or call 1-866-705-5711 to begin the registration process.

2. Ensure your organization has 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 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. If your organization does not have an active SAM registration, please visit to begin the entity registration or renewal process. Please note that SAM registration can take up to three weeks; delay in registering in SAM could impact timely payment of funds.

3. Gather your organization’s payment information, including:

-Entity Identification Number (EIN), name, and contact information
-Name and title of an authorized representative of the entity
-Financial institution information (e.g., routing and account number, financial institution name and contact information)

If your organization is an eligible non-entitlement unit of Local Government, such as a township, borough, or city with a population of less than 50,000, you will receive a distribution of funds from the Commonwealth of Pennsylvania. Non-entitlement units must have a valid DUNS number to meet reporting the requirements under the program. If your entity does not have a valid DUNS number, please visit or call 1-866-705-5711 to begin the registration process.

For additional information and updates please refer to the program page on the U.S. Treasury web-site. Please contact us if you have any questions.