On January 6, the US Treasury Department released the final rule for State and Local Governments’ use of ARPA (American Rescue Plan Act) funds. The new rules are simpler and allow somewhat broader use of the funds than did the May interim rule.
Even so, there is a lot here, and it’s still very complicated. The rule itself is over 400 pages long. Even the summary document is 44 pages long.
This final rule replaces the interim rule issued in May 2021. Language added in the final rule clarifies that relief funds could be granted to nonprofits both as ‘relief’ for the organization’s own needs and to provide services for the relief of community needs – in part to address uncertainty or hesitancy of state or local governments over whether these were allowable uses.
The rule relates to one component of ARPA – the Coronavirus State and Local Fiscal Relief Fund (SLFRF). This fund totals $360 billion nationally. Maryland’s share is over $6.3 billion. The recipients of the funding are the state government, the 23 counties, and over 150 municipal governments (including Baltimore City, which get the state’s largest funding allocation). Much of this funding has already been allocated by state and local governments, and some has already been spent.
Governments have begun spending and granting these funds based on the interim guidance while the final rule has been in the works. The final rule legally takes effect on April 1. However, the Treasury has announced that governments can rely on the more flexible provisions of the final rule right away. The Treasury will not enforce provisions of the interim rule that are more stringent than the final rule.
State and Local Governments are the recipients of these funds, and they are the main audience for this rule. However, it’s important for nonprofit organizations to be knowledgeable about the rules so they can know what they can ask for and expect.
Where Do Nonprofit Organizations Fit In?
There are two ways a nonprofit organization can get CSLFRF funding: as a BENEFICIARY or as a SUBGRANTEE. If the government is giving your organization funds to address the health or economic effects of Covid on your organization, you are a beneficiary. If the government is paying you to conduct activities that will help individuals, families, or communities that have been impacted by Covid, then you are a sub-grantee.
It’s important to remember that the state and local governments receive, allocate, and oversee these funds – within the limits defined by the federal law and the Treasury rule. The state agency, county, or municipality that is paying you gets to decide how they want you to spend the funds, and to place additional requirements and conditions on the funding.
Maryland Nonprofits has developed a “Model Grant Program” to assist local governments or intermediaries in developing programs of grants to nonprofits as part of their ARPA funding. (Note that these models were based on the previous, Interim Rule).
Nonprofits as beneficiaries
The state or a local government may provide grants for the specific purpose of assisting nonprofit organizations that have been impacted by Covid.
Nonprofits are “impacted” if they experienced decreased revenue, financial insecurity, or increased costs. Governments should consider the nonprofits’ capacity to weather financial hardship, and challenges covering payroll and other operating costs. Assistance from CSLFRF funds may take the form of grants, loans, technical assistance, and in-kind assistance.
Nonprofits as Subgrantees
The government is using a nonprofit as a partner in accomplishing another purpose of ARPA.
Helping individuals, communities, or businesses: Governments can use ARPA funds to pay nonprofits to address health effects, for example, vaccination and testing, public communication, transportation for vaccination or testing, behavioral health services, and treatment, including telemedicine-related expenses. They can also address the economic effects of Covid. The Final Rule has a long list of eligible services, including food assistance, emergency housing, benefits to surviving families of Covid victims, job training and readiness, childcare, programs to address learning loss, and many more (see pages 14-20 of the Overview).
In each case, there is a broader list of eligible services for “disproportionate impacts” of Covid. The Final Rule provides specific guidelines for what determines a “disproportionately impacted” household or community – generally low-income, located in designated “Qualified Census Tracts,” or qualifying for mother forms of Federal assistance.
Premium Pay for Direct Care Employees
Governments may use ARPA funds to provide premium pay for workers who perform “essential work during the pandemic.” Although this provision has mainly been used for government employees, third-party employees – including nonprofit workers – are eligible. Again, it’s at the discretion of the state or local government.
The premium may be up to $13 per hour, and may not exceed $25,000 for a worker over the whole period of the ARPA funding. Essential workers include healthcare, behavioral health, family and childcare, social services, and maintenance among many others. The worker’s earnings (including the premium) must not be more than 150% of the average wages in their area.
CSLFRF funds must be “obligated” by December 31, 2024, and “expended” by December 31, 2026. Nonprofit organizations should incur and pay all the expenses covered by their funding before the end of 2026.
The rule requires local governments to file regular reports, either annually or quarterly, depending on the size of the jurisdiction. The next quarterly report is due very shortly, on January 31. Governments providing funds to nonprofits will need to require a level of financial and performance/outcome reporting from the nonprofit recipients in order to meet their federal reporting requirements.
Here are the links to the new Treasury documents.