Upcoming deadlines for tribal State and Local Fiscal Recovery Funds
March 29 update to article:
On March 27, 2024, the U.S. Treasury released an update extending the April 30, 2024, reporting deadline for administrative costs estimates.
The notice stated: “As a reminder, recipients are considered to have incurred an obligation by December 31, 2024, with respect to a requirement under federal law or regulation or a provision of the SLFRF award terms and conditions to which the recipient becomes subject as a result of receiving or expending SLFRF funds. Recipients may submit to Treasury an estimate of SLFRF funds that it will use to cover such costs. Recipients are not required to submit estimates for all administrative costs associated with their projects; rather, they must submit an estimate if they want to cover such costs using SLFRF funds that they would otherwise have to return to Treasury after 2024 as unobligated. Treasury is extending the deadline for recipients to report this estimate of costs to meet legal and administrative requirements to July 31, 2024, for quarterly reporters, or April 30, 2025, for annual reporters. Previously, the deadline was April 30, 2024.”
Original article:
The U.S. Treasury has released the Obligation Interim Final Rule (IFR) effective November 2023.
The IFR is a new regulation issued by the U.S. Treasury that affects how tribal governments can use the State and Local Fiscal Recovery Funds (SLFRF) they received from the American Rescue Plan Act.
The IRF addresses the definition of an “obligation” in regard to spending SLFRF, as well as certain deadlines for the obligation of those funds. The revised definition of the term “obligation,” based on the uniform guidance definition, still means an order placed for property or services or contracts, subawards or similar agreements that require a payment.
Here’s what your tribal government needs to know to prepare for obligating your SLFRF:
Obligation deadline
The main deadline to “obligate” the SLFRF funds is December 31, 2024.
However, there is one earlier deadline regarding these funds and how these funds are considered obligated. Tribal governments will need to report administrative costs estimates by April 30, 2024. This earlier deadline covers SLFRF funds used for allowable expenditures that are not for hard goods, including all long-term construction projects, including water, sewer or broadband projects.
Tribal governments need to comply with the IFR to avoid losing or returning any of the SLFRF money they received. (The IFR did not change the December 31, 2024, and December 31, 2026, deadlines for obligating and spending the SLFRF.)
Tribal governments should review the IFR carefully and plan to ensure they obligate and spend their SLFRF funds in accordance with the rules and timelines.
Obligation criteria
All transactions that meet the definition must be obligated by December 31, 2024.
Some examples of an obligation that meets the criteria are:
- A signed contract for services covering a period of time not to exceed December 31, 2026.
- A signed construction contract for large construction projects with an explicit price stated for the project.
- An order placed for materials, like the materials to build a home set for delivery on a set schedule.
- A subaward granted to a sub-awardee.
- Indirect costs being charged to the SLFRF funds.
Some examples that are not considered an obligation for this purpose include:
- A purchase order that does not have an actual order of material or services attached.
- A budget appropriation of funds for a project that has not begun.
- A budget or allocation of SLFRF funds.
The IFR also set a secondary definition of an “obligation” for the following activities:
- Reporting and compliance requirements, including subrecipient monitoring
- Single audit costs
- Record retention and internal control requirements
- Property standards
- Environmental compliance requirements
- Civil rights and nondiscrimination requirements
Many of these costs could be payroll and related costs that have yet to be obligated via a contract or similar document. However, the IFR gives recipients a little flexibility in these allowable costs. Each recipient must:
- Estimate the costs it will use to cover these allowable administrative and compliance-related costs.
- Document a reasonable justification for the estimate.
- Report the amount to the U.S. Treasury by April 30, 2024.
- Report at award closeout the final amount expended for these costs.
Keep in mind that all expenditures, excluding administrative expenditures necessary to close out the SLFRF, must be expended by December 31, 2026.
Key questions
As you navigate these new updates, your tribal government may run into questions including:
What happens if my tribal government overestimates the administrative costs?
Any unexpended funds must be returned to the Treasury. They cannot be reallocated to another cost.
Are tribal governments allowed to reallocate obligated costs after December 31, 2024?
In general, no. After December 31, 2024, a recipient is not allowed to re-obligate or obligate additional funds. However, there are a few instances where recipients are allowed to replace a contract or subaward entered into before December 31, 2024.
These exceptions include:
- If a recipient terminates a contract or subaward due to a contractor or subrecipient’s (contractor) default, the contractor goes out of business or if the recipient determines the contractor will be unable to perform
- The recipient and contractor mutually agree to terminate the contract for convenience
- The recipient terminated the contract if the contract was improperly awarded. There must be clear evidence the award was improper (i.e., the contractor wasn’t allowed to receive a contract).
Next steps
As your organization continues moving forward in 2024, it’s important to remember the December 31, 2024, deadline to obligate funds and the April 30, 2024, deadline to report administrative cost estimates to the Treasury.
The Treasury has stated that it will update the SLFRF Compliance and Reporting Guidance prior to the first quarter reporting period due no later than April 30, 2024.
How Wipfli can help
Wipfli is dedicated to supporting your tribe’s people, growth and prosperity. We help you stay ahead of the latest regulations so that you can focus on enhancing your operations and the services you offer your members. Contact us today to learn more about how we can help your tribe thrive.
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