US Treasury Issues Final Rule for State and Local Fiscal Recovery Funds

On January 6, 2022, the Department of Treasury (Treasury) issued the final rule for the Coronavirus State and Local Fiscal Recovery Funds (SLFRF).

The final rule adopts the interim final rule, published on May 17, 2021, with amendments. The amendments are in response to the over 1,500 public comments the Treasury received and are intended to provide broader flexibility and greater simplicity in administering the program.

The following article summarizes key provisions in the final rule as well as the more significant changes for which Tribes will want to be aware:

Calculation of Lost Revenue

One significant change made to the final rule is that it now allows Tribes to either:

  • Calculate actual lost revenue
  • Use a standard allowance of $10 million

This change is great news for Tribes that previously had smaller or no lost revenue. The $10 million allowance must be made as a one-time, irrevocable election, and it covers the entire period of performance of the award. If elected, the Tribe isn’t required to calculate or substantiate actual lost revenue.

For Tribes that find it beneficial to use an actual calculation of lost revenue, the amended guidance in the final rule included the following changes impacting the calculation of lost revenue:

  • The generic average annual growth rate eligible to be used to calculate counterfactual revenues was increased from 4.1% to 5.2%.
  • Tribes may now elect to calculate lost revenue on either a calendar year-end or fiscal year-end basis, which must be used consistently each year.
  • Revisions were made to the definition of general revenues—for example, utility revenue and liquor store revenue are no longer required to be excluded.
  • Lost revenue calculations in one year don’t affect the calculation of lost revenue in prior or future years. In other words, the calculation is on a year-by-year basis and not cumulative.
  • Recipients must now adjust the calculation of actual revenue for the effect of tax changes adopted by recipients after January 6, 2022.

No other significant changes were made, and the calculation still allows Tribes to include revenue from Tribal businesses in the calculation of general revenue. It also continues to require that the calculation be made on aggregate total general revenue.

With all these proposed changes it’s very important for Tribes to reperform their analysis of lost revenue to determine the most beneficial calculation. This is a critical step as the amount calculated can be used for the provision of government services, which continues to provide the broadest flexibility for Tribes to design programs and expend funds under the SLFRF.

Provision of Government Services

No changes were made to the guidance or prohibitions on using lost revenue for the provision of government services.

The only additional clarification provided indicates that “generally speaking, services provided by the recipient government are “government services” under the interim final rule and final rule, unless the Treasury has stated otherwise.”

This is further reiterated in the regulations indicating that government services would “generally include any service traditionally provided by a government.” Treasury staff also indicated that economic development would be considered a government service under this section.

As a reminder, expenditures under this section don’t need to meet the narrower requirements that follow, and may include the following:

  • Operating costs
  • New programs
  • Capital and infrastructure projects

Public Health and Negative Economic Impact

The Treasury has restructured this area of the guidance to clarify what services and programs can be provided to impacted beneficiaries as well as disproportionately impacted beneficiaries.

The Treasury has also updated the guidance with additional allowable uses as detailed below. In general, the process will require the Tribe to evaluate whether a proposed program meets the following criteria:

  1. Responds to identified harms or impacts to a beneficiary, or class of beneficiaries, that were caused or exacerbated by the public health emergency or its negative economic impacts—collectively referred to as pandemic impacts
  2. Provides benefits that respond to and address the harm or impact identified and are reasonably proportionate to the extent and type of harm or impact experienced
  3. Addresses the pre-existing conditions that exacerbated or disproportionately affected health and economic impacts for disproportionately impacted beneficiaries, including households, individuals, and small businesses

Who Is Eligible to Receive Benefits and Services

Beneficiaries may include the following:

  • Households and individuals
  • Small businesses with fewer than 500 employees
  • Not-for-profit organizations
  • Businesses in certain impacted industries, including large Tribal casinos

For these purposes, services provided to households and populations by Tribal governments as well as small businesses and not-for-profit organizations operated by a Tribal government or located on Tribal lands are presumed to be disproportionately impacted.

Assistance to Households and Individuals

Because services provided by Tribal governments to individuals and households are presumed to be disproportionately impacted, Tribes are eligible to develop programs addressing the following allowable uses.

Allowable Uses
  • Assistance for food, emergency housing needs, burials, home repairs, internet access, or digital literacy
  • Cash assistance
  • Assistance accessing public benefits
  • Childcare, early learning services, home visiting, or assistance for child welfare-involved families or foster youth
  • Learning losses for K–12 students
  • Development, repair, and operation of affordable housing and service or programs to increase long-term housing security
  • Benefits for surviving family members of individuals who have died from COVID-19
  • Assistance to unemployed or underemployed
  • Services to address health disparities
  • Housing vouchers and relocation assistance
  • Investment in communities to promote improved health outcomes and public safety, including parks, recreation facilities, and access to healthy foods
  • Services to address education disparities

The following allowable uses were also added to the final rule:

  • Paid sick, medical, or family leave programs or assistance to expand access to health insurance
  • Financial services for unbanked and underbanked
  • Addressing vacant or abandoned properties

The final rule also provides new definitions for low- and moderate-income individuals and households to better identify additional disproportionately impacted beneficiaries. Because services provided by Tribes are automatically presumed to be provided to disproportionately impacted beneficiaries, however, we believe these limitations and income guidelines do not affect programs developed by Tribes.

Assistance to Small Businesses

Tribes may develop programs or services to Tribal small businesses, including loans or grants, in the following allowable use categories.

Allowable Use Categories
  • Financial hardship mitigation
  • Technical assistance, counseling, or other services that support business planning

The following allowable use categories were also added to the final rule:

  • Rehabilitation of commercial properties, including storefront and façade improvements
  • Technical assistance, business incubators, and grants for start-up or expansions
  • Support for microbusinesses

Assistance to Not-for-Profit Organizations

Direct assistance can be provided to not-for-profit entities to mitigate financial hardships, such as declines in revenue or increased costs. Tribes can also provide funds to not-for-profits as sub-recipients to deliver services to small business, individuals, or households.

Assistance to Tourism, Travel, Hospitality, and Other Impacted Industries

Tribes can provide beneficiary assistance to the hospitality industry, including Tribal development districts. Tribal development districts are considered the commercial centers for Tribal hospitality, gaming, tourism, and entertainment and include businesses owned by the Tribe.

Unlike the guidance for small businesses noted above, these services can be provided to larger businesses and aren’t subject to the 500-employee rule for small businesses. Businesses must have been operating prior to the pandemic, however, and been affected by required closures and other efforts to contain the pandemic.

Services can include development of programs to address pandemic impacts.

Allowable Support Categories

  • Payroll costs and covered benefits for employees
  • Compensation for returning employees
  • Operations and maintenance or equipment and facilities
  • COVID-19 mitigation and infection prevention measures
  • Technical assistance, counseling, and other services to support business planning

Expenses to Support Public Sector Capacity and Workforce

Tribes are allowed to cover certain areas of the Tribal government’s expenses:

Public Services

This includes public safety, public health, human services, and similar employees. Programs can involve payroll and covered benefits during performance period. This coverage is limited to the portion of the employee’s time spent mitigating or responding to COVID-19, and reasonable estimates may be made to determine share of employee time. This means actual timesheets or activity logs may not be required.

Government Services

This includes government employment, rehiring, and retaining employees and can take the following forms:

  • Hiring or rehiring staff to bill budgeted full-time employees that existed on January 27, 2020, but were unfilled or eliminated as of March 3, 2021
  • Restoring employment by hiring up to 7.5% above pre-pandemic baseline

The following allowable uses were added to the final rule:

  • Funding for employees who experienced pay reductions or were furloughed
  • Maintaining current compensation level to prevent layoffs
  • Providing worker retention incentives, including reasonable increases in compensation
Program Improvement

Allowable expenses include improving the design and execution of programs responding to COVID-19 and administering or improving the efficacy or programs addressing the public health emergency or its negative economic impact.

Administrative Needs

Expenses may also be used to support administrative needs of recipient governments that were caused or exacerbated by the pandemic.

Capital Expenditures

The final rule added new guidelines around allowable capital expenditures, some of which are more restrictive than those in the interim final rule.

Capital-expenditure projects funded under the eligible-use category of public health and negative economic impacts could be deemed an allowable use but must be related and reasonably proportional to addressing a pandemic impact.

Not all capital expenditures may be evaluated as being reasonably proportional to the harm or impact caused by the pandemic. This is due to the fact that other types of responses may be made more quickly and are typically more cost effective than constructing a new facility for the purpose of mitigating spread of COVID-19.

However, certain capital projects presumed to be eligible may include the following:

  • Testing and lab equipment
  • Emergency operations centers and equipment
  • Affordable housing
  • Childcare facilities, schools, primary-care health clinics, and hospitals

Tribes aren’t required to prepare a written justification for projects, but documentation should be maintained to demonstrate how the Tribe determined it was an allowable use.

Additional Uses

The enumerated uses above aren’t intended to be exclusive. Tribes may use the general criteria to develop additional programs that respond to an identified harm caused or exacerbated by the pandemic as long as the planned response is reasonably proportionate to the extent and type of harm.

The final rule also provided a number of examples of other potentially eligible uses as well as the Treasury’s rationale for including or excluding certain uses. For example, the Treasury explained why general economic development or workforce development—providing additional employment opportunities for unemployed and underemployed workers, for example—wouldn’t be reasonably proportional to the negative economic impacts of the pandemic.

It also wouldn’t be considered an allowable use under public health and economic impacts, but it may still be allowable under the uses laid out in government services from lost revenue.

Premium Pay

There were no significant changes to the allowable use requirements for providing premium pay for essential employees. These continue to be available for employees of a Tribal workforce. However, a clarification was provided that for this use area only, the term Tribal government includes any employee of a Tribal enterprise.

Making Necessary Investments in Water, Sewer, and Broadband

In general, the final rule didn’t make significant changes other than to expand the use of funds to cover additional types of infrastructure projects: water, sewer, and broadband.

Water and Sewer Investments

  • Projects eligible under EPA Clean Water State Revolving Fund
  • Projects eligible under EPA Drinking Water State Revolving Fund

The following allowable uses were also added to the final rule:

  • Lead remediation activities
  • Stormwater infrastructure
  • Residential wells
  • Certain dam and reservoir rehabilitation
  • Rehabilitation of private wells

Broadband Investments

Recipients are encouraged to invest in locations without reliable wireline service, but they’re broadly able to invest in locations where there’s an identified need for additional investment. Consideration of need can include the following:

  • Lack of access to high speeds
  • Affordability
  • Reliability

Restrictions on Use

For Tribes, restrictions on use of SLFRF funds apply to the following categories of use:

  • General government services from lost revenue
  • Infrastructure
  • Programs to address public health
  • Economic impact

Prohibited uses include the following:

  • Debt service costs
  • Replenishment of financial reserves and rainy-day funds
  • Payments pursuant to settlements and judgments

Recipients may also not use funds to undermine efforts to stop the spread of COVID-19 or discourage compliance with CDC recommendations and guidelines.

Additionally, Tribes must follow conflict-of-interest requirements and other laws and regulations as detailed in the award terms and conditions. It’s worth noting that Tribes aren’t included in the restriction on making deposits into pension funds.

Clarification of Requirements


The final rule indicates that the terms should and must refer to requirements, except when used in summarizing opinions expressed in public comments. Statements using the term encourage refer to recommendations not requirements.

Applicability of Davis-Bacon Act and Prevailing Wage Requirements

The final rule indicates that the Davis-Bacon Act and prevailing wage requirements don’t apply to this funding. Recipients are instead encouraged to use strong labor standards in construction and infrastructure projects.

However, projects that don’t comply with the Davis-Bacon Act must track and report additional information in their Project and Expenditure reports:

  • The number of contractors and sub-contractors working on the project
  • The number of employees hired directly and through a third-party
  • The wages and benefits of workers on the project by classification
  • Whether wages are set at less-than-prevailing rates

As a result, you’ll either need to implement a process to collect this additional information or comply with the Davis-Bacon Act.

Applicability of Uniform Guidance

No changes were made. All sections of the Uniform Guidance—procurement, allowable cost principles, capital assets, and more—still apply to all potential program areas, including expenditures made for the provision of government services from lost revenue.

Implementation of the Final Rule and Effective Dates

The Treasury has issued a Statement Regarding Compliance with the Coronavirus SLFRF Interim Final Rule and Final Rule to assist recipients in understanding the implementation and effective dates of the revised guidance.

Funds obligated and expended from March 3, 2021, through March 31, 2022, are considered allowable if they meet the guidance and criteria noted in either the interim final rule or final rule. Funds obligated and expended starting April 1, 2022, must meet the requirements of the final rule, except as noted below.

The Treasury recognized that some recipients may have already taken steps to use SLFRF funds for projects in a manner consistent with the interim final rule. To the extent that a recipient has taken significant steps toward obligating SLFRF funds in a manner consistent with the interim final rule prior to January 6, 2022, the Treasury will generally not take action to enforce provisions contained in the final rule that are more restrictive.

Such significant steps may include the following:

  • Initiation of procurement or grantmaking actions
  • Detailed planning of projects or programs
  • Appropriation of funds

If significant steps haven’t been taken, project planning will likely need to be revised to meet the requirements of the final rule. Otherwise, Tribes will want to ensure that all project costs are obligated and expended prior to April 1, 2022. The Statement includes detailed guidance around specific scenarios.

Treasury Interim Final Rule FAQs

The Treasury has indicated that the previous FAQs provided apply to the interim final rule. The Treasury anticipates issuing separate FAQs for the final rule at a later date.

Project and Expenditure Reports

As noted in guidance released November 15, 2021, Tribes receiving more than $30 million in SLFRF funding are required to submit quarterly project and expenditure reports. The first quarterly report covering expenditures from March 3, 2021, through December 31, 2021, is due by January 31, 2022.

Tribes that received less than $30 million in SLFRF funding are required to submit annual project and expenditure reports. The first annual report covering expenditures from March 3, 2021, through March 31, 2022, is due to be submitted by April 30, 2022.

The SLFRF Compliance and Reporting Guidance provides information on the required information expected to be submitted for these reports. The Treasury has also recently released a user guide that includes an FAQ section to assist with submissions through the Grant Solutions Portal.

The majority of items required to be reported will now be eligible for upload through the Grant Solutions Portal.

We’re Here to Help

For more information about how this final rule impacts your Tribe, contact your Moss Adams professional.

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