As Congress deliberates another round of funding to address the economic impacts of the COVID-19 pandemic, we’ve continued to receive more questions from governments across the state, local, and tribal levels regarding the Coronavirus Relief Fund from the CARES Act. We have a previous blog post addressing the top COVID-19 FAQs for governments.In this article, we’ve highlighted some of the most important questions from the U.S. Department of Treasury’s latest supplemental guidance to address frequently asked questions regarding the Coronavirus Relief Fund.
The Guidance says that a cost was not accounted for in the most recently approved budget if the cost is for a substantially different use from any expected use of funds in such a line item, allotment, or allocation. What would qualify as a “substantially different use” for funding eligibility?
Costs incurred for a “substantially different use” include, but are not necessarily limited to, costs of personnel and services that were budgeted for in the most recently approved budget but which (due to the COVID-19 public health emergency) have been diverted to substantially different functions. This would include costs like:
- Redeploying corrections facility staff to enable compliance with COVID-19 public health precautions, i.e. enhanced sanitation or enforcing social distancing measures;
- Redeploying police to support management and enforcement of stay-at-home orders;
- Diverting educational support staff or faculty to develop online learning capabilities, i.e. providing IT support that is not part of the staff or faculty’s ordinary responsibilities.
It’s important to note that a public function does not become a “substantially different use” merely because it’s provided from a different location or through a different manner.
May a State receiving a payment transfer funds to a local government?
Yes, provided that the transfer qualifies as a necessary expenditure incurred due to the public health emergency and meets the other criteria of section 601(d) of the Social Security Act. Such funds would be subject to recoupment by the Treasury Department if they have not been used in a manner consistent with section 601(d) of the Social Security Act.
May a unit of local government receiving a Fund payment transfer funds to another unit of government?
Yes. For example, a county may transfer funds to a city, town, or school district within the county and a county or city may transfer funds to its State, provided that the transfer qualifies as a necessary expenditure incurred due to the public health emergency and meets the other criteria of section 601(d) of the Social Security Act outlined in the Guidance. For example, a transfer from a county to a constituent city would not be permissible if the funds were intended to be used simply to fill revenue shortfalls that would not otherwise qualify.
Is a Fund payment recipient required to transfer funds to a smaller, constituent unit of government within its borders?
No. For example, while it can, a county recipient is not required to transfer funds to smaller cities within the county’s borders.
Are recipients required to use other federal funds or seek reimbursement under other federal programs before using Fund payments to satisfy eligible expenses?
No. Recipients may use Fund payments for any expenses eligible under section 601(d) of the Social Security Act outlined in the Guidance. Fund payments are not required to be used as the source of funding of last resort. However, recipients may not use payments from the Fund to cover expenditures for which they will receive reimbursement. While not required, the grantee or recipient may request a budget revision from the federal agency to re-allocate funding to COVID-related activities. Again, this requires prior approval and will not increase a recipient's award.
May Fund payments be used to replace foregone utility fees? If not, can Fund payments be used as a direct subsidy payment to all utility account holders?
Yes and No. Fund payments may not be used for government revenue replacement, including the replacement of unpaid utility fees. However, Fund payments may be used for subsidy payments to electricity account holders to the extent that the subsidy payments are deemed by the recipient to be necessary expenditures incurred due to the COVID-19 public health emergency and meet the other criteria of section 601(d) of the Social Security Act. For example, if determined to be a necessary expenditure, a government could provide grants to individuals facing economic hardship to allow them to pay their utility fees and, thereby, continue to receive essential services.
May counties pre-pay with CARES Act funds for expenses such as one or two-year facility lease, such as to house staff hired in response to COVID-19?
A government should not make prepayments on contracts using payments from the Fund to the extent that doing so would not be consistent with its ordinary policies and procedures.
Do governments have to return unspent funds to the Treasury Department?
Yes. Section 601(f)(2) of the Social Security Act, as added by section 5001(a) of the CARES Act, provides for recoupment by the Department of the Treasury of amounts received from the Fund that have not been used in a manner consistent with section 601(d) of the Social Security Act. If a government has not used funds it has received to cover costs that were incurred by December 30, 2020, as required by the statute, those funds must be returned to the Department of the Treasury.
What records must be kept by governments receiving payment?
A government should keep records that can sufficiently demonstrate that the amount of Fund payments received have been used in accordance with section 601(d) if the Social Security Act.
For more information, you can also check out the Treasury Departments’ page here.
Have more questions? Need help managing your grants during these turbulent times? Reach out to one of our grants management experts at firstname.lastname@example.org.
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