Although the program was funded in March 2021, Treasury released the final rule on January 6, 2022, providing detailed guidance on the use of these funds. The final rule is effective April 1, 2022, and Treasury has issued guidance stating you can use the final rule now without any repercussions. There are four key eligible-use categories for this program; public sector revenues, public health and economic response, premium pay for essential workers, and water, sewage and broadband infrastructure.
With public sector revenue, governments are allowed to replace revenues losses due to the pandemic. The interim guidance required a calculation that must be completed on a calendar year basis. With the final rule, Treasury has provided a couple of options. Option one, skip the calculation and choose to take off up to $10 million of your total CSLFRF allotment as the standard revenue loss amount. Option two, use the calculation originally created by Treasury. Option two would be beneficial if you expect to have losses of more than $10 million. If experienced a strong decline in revenue during the course of the pandemic and your total CSLFRF allotment exceeds $10 million, option two may be the best choice.
Before making your selection, know Treasury changed two key things with the calculation. They increased the inflation rate to 5.2%, and allow you to complete your calculation either on a calendar year or a fiscal year. It is important to note, that once you select the type of year you’ll be using, you cannot switch.
There are several subcategories where funds are available for a broad range of needs to respond to the impacts of the pandemic for households, communities, businesses and the public sector.
The Treasury expects state or local governments to identify a public health or economic impact, and design a related, and reasonably proportional, response. Eligible uses are broad but must fit the needs of the area, impacted individuals, or classes. Subcategories include:
Assistance can be provided to impacted and disproportionally impacted households. The guidance defines an impacted household as one with low and moderate-income, experiencing unemployment or food or housing insecurity. Low and moderate-income households have an income that is 55% of the area’s median income or 300% of the federal poverty guidelines.
A disproportionately impacted household is one with low income, households in Qualified Census Tracts (QCTs), households receiving assistance from Tribal governments, located in U.S. territories, and/or those that qualify for certain federal programs. These households have an income of 40% of their area’s median income or 185% of the federal poverty guidelines.
Impacted small businesses are defined as those that experienced decreased revenue or gross receipts, financial insecurity, increased costs, and similar impacts. Disproportionately impacted small businesses are defined as those that experience losses, increased costs, operate in a QCT, operated by a Tribal government or on Tribal Lands, or operating in the U.S. territories.
Assistance to impacted businesses can include loans or grants to mitigate financial hardship and technical assistance, counseling or other business support services. Assistance to disproportionately impacted businesses can also include rehabilitation of commercial properties, storefronts, facades, technical assistance, business incubators, and grants for start-up or expansion.
Non-profits have the same criteria as small businesses with the addition of having an increased need for services. Assistance to impacted non-profits can include loans or grants to mitigate financial hardship, and technical or in-kind assistance or other assistance to mitigate negative economic impact. Disproportionately impacted non-profits can also receive responses that are related, and reasonably proportional, to addressing disparities that led to disproportionate impacts.
Impacted industries automatically include the travel, tourism, and hospitality sectors. Other industries can be considered impacted if they experienced an 8% or greater employment loss or are experiencing comparable or worse economic impacts to the travel, tourism, and hospitality sectors. Assistance can include loans or grants to mitigate financial hardship, COVID-19 mitigation and infection prevention measures, and technical assistance, counseling or other services to support business planning.
The final rule allows for premium pay for certain public sector roles and third-party employers performing essential work in your community. Essential work involves regular in-person interactions or physical handling of items handled by others. Roles in health care, emergency response services, child care, dental care, transportation, warehousing, maintenance, sanitation, grocery stores, and restaurants are all part of the list. The pay can be flexibly awarded up to $13 per hour in installments or lump sums. It may not exceed $25,000 for any single worker and workers cannot be exempt from FLSA overtime rules.
If a worker fails to meet either of these requirements, you're going to have to submit written justification to Treasury of how the pay would meet needs. Treasury clearly wants to benefit those workers in sectors that had to stay open during the pandemic, who typically receive lower pay, and operate at greater risk due to regular public interactions.
Treasury’s guidance supports a wide variety of water, sewer, and broadband infrastructure projects. The final rule specifies eligible projects such as those eligible under the Clean Water and Drinking Water Acts as well as projects such as lead remediation, stormwater infrastructure, residential wells, and certain dam and reservoir rehabilitation.
Broadband infrastructure received a lot of attention during the early chaos of the pandemic. Between remote work, part-time or full-time virtual schooling and the impact on the lower-income communities who didn’t have reliable access, broadband infrastructure was added to the final rule and is considered crucial to the ongoing recovery.
In part two of this blog, I will dive into the differences between CRF and CSLFRF funding and discuss unallowable costs and limitations, match and cost-share, procurement, reporting requirements and impacts to single audits. Visit the Brown Edwards YouTube channel to watch my full presentation.