By Stacey Powell, CPA, and Sam Thompson, CPA
The Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) provide $350 billion in emergency funding for eligible state, local, territorial and tribal governments. The U.S. Department of the Treasury (Treasury) has published an Interim Final Rule that implements and details the provisions of this program. This guidance is applicable to state and local governments. However, it may have an impact on nonprofits, healthcare organizations and institutions of higher education since these funds may be passed through to them from state and local governments.
Key program provisions include:
Use of Funds
Recipients of CSLFRF funds may use funds to:
- Support public health expenditures, by, for example, funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff.
- Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries and the public sector.
- Replace lost public sector revenue, using this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic.
- Provide premium pay for essential workers, offering additional support to those who have and will bear the greatest health risks because of their service in critical infrastructure sectors.
- Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet.
Within these overall categories, recipients have broad flexibility to decide how best to use this funding to meet the needs of their communities.
Funds may not be used to directly or indirectly offset a reduction in net tax revenue due to a change in law from March 3, 2021 through the last day of the fiscal year in which the funds provided have been spent or to make a deposit into a pension fund.
Distribution and Timing of Payments
Treasury expects to distribute these funds directly to each state, territorial, metropolitan city, county and tribal government. Local governments that are classified as non-entitlement units will receive this funding through their applicable state government.
Local governments will receive funds in two tranches, with 50% of the funds provided beginning in May 2021 and the balance delivered approximately 12 months later. However, states that have experienced a net increase in the unemployment rate of more than two percentage points from February 2020 to the latest available data as of the date of certification will receive their full allocation of funds in a single payment. Governments of U.S. territories will receive a single payment. Tribal governments will receive two payments, with the first payment available in May 2021 and the second payment, based on employment data, to be delivered in June 2021.
Additional Guidance and Resources
Additional Treasury guidance and resources including a summary fact sheet, frequently asked questions, a Quick Reference Guide, as well as additional updates as they are released, are available on the CSLFRF page on the Treasury website.
This article originally appeared in BDO USA, LLP’s “Nonprofit Standard” newsletter (Summer 2021). Copyright © 2021 BDO USA, LLP. All rights reserved. www.bdo.com