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Treasury releases summer 2021 FAQ on Coronavirus State and Local Fiscal Recovery Funds

Aug 09, 2021

On July 19, 2021, the Department of the Treasury issued an FAQ document to clarify how the Coronavirus State Fiscal Recovery Fund (CSFRF) and the Coronavirus Local Fiscal Recovery Fund (CLFRF) can be used. The funds were established as part of the American Rescue Plan Act of 2021 (ARPA), which provides $350 billion in aid to state, local and tribal governments. 

We covered broader guidelines and some specific rules in previous articles. Here, we’ll focus on the clarifying examples from the recent Treasury release.

Employment incentives: Funds can be used to address negative economic impacts of COVID-19. Assistance can include job training or other efforts to accelerate rehiring, including childcare assistance, transportation assistance and incentives for newly employed workers. 

Travel, tourism and hospitality: Aid to this sector should address economic impacts of the recession. For example, this may include aid to support safe reopening of those businesses and to support planned expansions or upgrades that were delayed due to the pandemic.

Aid for other industries: Recipients may provide aid to other industries and business districts impacted by the pandemic, as long as they are doing so in consideration of and comparison to the impact on travel, tourism and hospitality.  

Recipients are advised to keep records to support their impact assessments and rationalize use of the funds. Further, recipients should consider whether the impact was truly due to COVID-19, rather than some other economic trend. 

Loans for small business and infrastructure: Recovery funds may be used to make loans for an eligible use, provided the cost of the loan is tracked and reported. For example, recovery funds may be used to make loans to small businesses or to finance a necessary investment in water, sewer or broadband. Funds must be used to cover “costs incurred” between March 3, 2021, and December 31, 2024, and must be expended by December 31, 2026. 

Infrastructure, street repairs: Funds can be used for road repairs or upgrades that occur in connection with an eligible water or sewer project.

Essential worker premium pay: Funds can be used to provide premium pay to essential workers in critical infrastructure sectors who regularly perform in-person work, interact with others at work or physically handle items handled by others. 

Critical infrastructure sectors include healthcare, education and childcare, transportation, sanitation, grocery and food production, and public health and safety, among others. Governments may add additional sectors as long as they are considered critical to protect health and safety.

Recipients must prioritize premium pay for lower income workers. Premium pay that would increase a worker’s total pay above 150% of the greater of the state or county average annual wage requires specific justification for how it responds to the needs of these workers.

Recipients are further encouraged to provide premium pay retroactively for work performed during the pandemic, recognizing that many essential workers have not yet received additional compensation for their service.

Continued eligible uses: Generally, if fund usage was allowable under the Coronavirus Relief Fund (CRF), recipients can presume it’s allowable under CRFRF/CLFRF, with two exceptions: 1) the standard for public health and safety payrolls has been updated, and 2) expenses related to the issuance of tax-anticipation notes are not approved.

Revenue loss: When using funds to cover government revenue loss, recipients should calculate revenue on an entity-wide basis using the following formula: 

A reduction in a recipient’s General Revenue equals: 

Max {[Base Year Revenue* (1+Growth Adjustment)(12)]-Actual General Revenue; 0}

  • Base Year Revenue is General Revenue collected in the most recent full fiscal year prior to the COVD-19 public health emergency. 
  • Growth Adjustment is equal to the greater of 4.1% (or 0.041) and the recipient’s average annual revenue growth over the three full fiscal years prior to the COVID-19 public health emergency. 
  • n equals the number of months elapsed from the end of the base year to the calculation date. 
  • Actual General Revenue is a recipient’s actual general revenue collected during 12-month period ending on each calculation date. 
  • Subscript t denotes the calculation date.


Governments are to keep financial records and supporting documents for a period of five years after all funds have been expended or returned to the Treasury. 

Most provisions of the Uniform Guidance apply to this program, including the Cost Principles and Single Audit Act requirements. Recipients should refer to the Assistance Listing for detail on provisions that do not apply.

How Wipfli can help

If you have any questions about how to use money from the Coronavirus State Fiscal Recovery Fund or the Coronavirus Local Fiscal Recovery Fund, contact us. We’re here to help your government spend the funds appropriately, including properly tracking and reporting your spend.

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How governments can spend Coronavirus State and Local Fiscal Recovery Funds
American Rescue Plan Act provides billions in relief to state and local governments


Matthew J. Schueler, CPA
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Brian M. Anderson, CPA
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