American Rescue Plan Act & CSLFRF: Compliance & reporting part 2

In June 2021, the U.S. Department of the Treasury (Treasury) issued guidance on Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) compliance and reporting requirements, including specific guidance on Uniform Administrative Requirements, reporting requirements, and principles and eligible uses.

This article — part two of a two-part series on the compliance and reporting requirements applicable to CSLFRF — focuses on the principles and eligible uses of funds, including compliance requirements based on the Treasury guidelines issues June 24, 2021. See part one for Uniform Administrative and Reporting requirements.

Principles and eligible uses of CSLFRF

Treasury views recipients and subrecipients of CSLFRF award funds as the first line of defense and gives them responsibility to ensure funds are not used for ineligible purposes and to protect against fraud, waste, and abuse associated with their CSLFRF award. Funded projects should advance shared interests and promote equitable delivery of government benefits and opportunities to underserved communities. Transparency and public accountability are key tenants of CSLFRF and serve as the framework for developing compliance and reporting requirements. 

There are four broad categories of eligible uses of CSLFRF:

• Public health & economic impacts
• Premium pay
• Revenue loss
• Investments in water, sewer, or broadband infrastructure

While most eligibility requirements are established as guidelines, Treasury does provide several examples of ineligible uses. For example, recipients are prohibited from using the funds for deposit into any pension fund. In addition, states and territories may not use the funds to either directly or indirectly offset a reduction in net tax revenue resulting from a change in law, regulation, or administrative interpretation during the covered period. 

The compliance categories detailed below highlight some of the significant compliance responsibilities for recipients of CSLFRF payments under the current guidance. It’s important to note that unlike the Coronavirus Relief Fund provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the administration of CSLFRF payments must comply with the requirements of Uniform Guidance.

All eligible recipients are required to have an active registration with the System for Award Management (SAM). Recipients must also maintain records and financial documents for five years after all funds have been expended or returned to Treasury.

Treasury closed the comment period for the IFR on July 16. While the final ruling hasn’t yet been issued, it’s important for recipients to evaluate current processes and internal controls to ensure compliance with the requirements outlined by Treasury. As additional guidance is issued, we strongly recommend that internal control processes include documentation of the rationale to support compliance with the requirements.

As you work through the compliance requirements, we’re here and ready to help! Please don’t hesitate to reach out.