Coronavirus Relief Fund Guidance for State, Territorial, Local, and Tribal Governments

Coronavirus Relief Fund Frequently Asked Questions April 22, 2020

Do governments have to return unspent funds to Treasury?

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 Inspector General of the Department of the Treasury of amounts
received from the Coronavirus Relief Fund (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.

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 Inspector General if they have not been used
in a manner consistent with section 601(d) of the Social Security Act.


May governments retain assets purchased with these funds?

Yes, if the purchase of the asset was consistent with the limitations on the eligible use of funds
provided by section 601(d) of the Social Security Act.

What records must be kept by governments receiving payment?

A government should keep records sufficient to demonstrate that the amount of Fund payments 
the government has been used in accordance with section 601(d) of the Social Security Act.

Coronavirus Relief Fund

Guidance for State, Territorial, Local, and Tribal Governments from US Treasury - April 22, 2020

 The purpose of this document is to provide guidance to recipients of the funding available under section 601(a) of the Social Security Act, as added by section 5001 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).  The CARES Act established the Coronavirus Relief Fund (the “Fund”) and appropriated $150 billion to the Fund. Under the CARES Act, the Fund is to be used to make payments for specified uses to States and certain local governments; the District of Columbia and U.S. Territories (consisting of the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands); and Tribal governments.

The CARES Act provides that payments from the Fund may only be used to cover costs that—

  1.  are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19);
  2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and
  3. were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.1

 The guidance that follows sets forth the Department of the Treasury’s interpretation of these limitations on the permissible use of Fund payments.

 Necessary expenditures incurred due to the public health emergency

The requirement that expenditures be incurred “due to” the public health emergency means that expenditures must be used for actions taken to respond to the public health emergency. These may include expenditures incurred to allow the State, territorial, local, or Tribal government to respond directly to the emergency, such as by addressing medical or public health needs, as well as expenditures incurred to respond to second-order effects of the emergency, such as by providing economic support to those suffering from employment or business interruptions due to COVID-19-related business closures.

Funds may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the statute. Although a broad range of uses is allowed, revenue replacement is not a permissible use of Fund payments.

The statute also specifies that expenditures using Fund payments must be “necessary.” The Department of the Treasury understands this term broadly to mean that the expenditure is reasonably necessary for its intended use in the reasonable judgment of the government officials responsible for spending Fund payments.

 Costs not accounted for in the budget most recently approved as of March 27, 2020

The CARES Act also requires that payments be used only to cover costs that were not accounted for in the budget most recently approved as of March 27, 2020. A cost meets this requirement if either

(a) the cost cannot lawfully be funded using a line item, allotment, or allocation within that budget or

(b) the cost is for a substantially different use from any expected use of funds in such a line item, allotment, or allocation.

The “most recently approved” budget refers to the enacted budget for the relevant fiscal period for the particular government, without taking into account subsequent supplemental appropriations enacted or other budgetary adjustments made by that government in response to the COVID-19 public health emergency.

A cost is not considered to have been accounted for in a budget merely because it could be met using a budgetary stabilization fund, rainy day fund, or similar reserve account.

Costs incurred during the period that begins on March 1, 2020, and ends on December 30, 2020

A cost is “incurred” when the responsible unit of government has expended funds to cover the cost.

Nonexclusive examples of eligible expenditures

Eligible expenditures include, but are not limited to, payment for:

A.) Medical expenses such as:

  • COVID-19-related expenses of public hospitals, clinics, and similar
  • Expenses of establishing temporary public medical facilities and other measures to increase COVID-19 treatment capacity, including related construction
  • Costs of providing COVID-19 testing, including serological
  • Emergency medical response expenses, including emergency medical transportation, related to COVID-19.
  • Expenses for establishing and operating public telemedicine capabilities for COVID-19- related

B.) Public health expenses such as:

  • Expenses for communication and enforcement by State, territorial, local, and Tribal governments of public health orders related to COVID-19.
  • Expenses for acquisition and distribution of medical and protective supplies, including sanitizing products and personal protective equipment, for medical personnel, police officers, social workers, child protection services, and child welfare officers, direct service providers for older adults and individuals with disabilities in community settings, and other public health or safety workers in connection with the COVID-19 public health
  • Expenses for disinfection of public areas and other facilities, g., nursing homes, in response to the COVID-19 public health emergency.
  • Expenses for technical assistance to local authorities or other entities on mitigation of COVID-19-related threats to public health and
  • Expenses for public safety measures undertaken in response to COVID-19.
  • Expenses for quarantining

C.) Payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to the COVID- 19 public health

D.) Expenses of actions to facilitate compliance with COVID-19-related public health measures, such as:

  • Expenses for food delivery to residents, including, for example, senior citizens and other vulnerable populations, to enable compliance with COVID-19 public health
  • Expenses to facilitate distance learning, including technological improvements, in connection with school closings to enable compliance with COVID-19
  • Expenses to improve telework capabilities for public employees to enable compliance with COVID-19 public health
  • Expenses of providing paid sick and paid family and medical leave to public employees to enable compliance with COVID-19 public health
  • COVID-19-related expenses of maintaining state prisons and county jails, including as relates to sanitation and improvement of social distancing measures, to enable compliance with COVID-19 public health
  • Expenses for care for homeless populations provided to mitigate COVID-19 effects and enable compliance with COVID-19 public health

E.) Expenses associated with the provision of economic support in connection with the COVID-19 public health emergency, such as:

  • Expenditures related to the provision of grants to small businesses to reimburse the costs of business interruption caused by required
  • Expenditures related to a State, territorial, local, or Tribal government payroll support program.
  • Unemployment insurance costs related to the COVID-19 public health emergency if such costs will not be reimbursed by the federal government pursuant to the CARES Act or otherwise.

F.) Any other COVID-19-related expenses reasonably necessary to the function of government that satisfy the Fund’s eligibility

Nonexclusive examples of ineligible expenditures

The following is a list of examples of costs that would not be eligible expenditures of payments from the Fund.

  1. Expenses for the State share of
  2. Damages covered by
  3. Payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 public health
  1. Expenses that have been or will be reimbursed under any federal program, such as the reimbursement by the federal government pursuant to the CARES Act of contributions by States to State unemployment
  2. Reimbursement to donors for donated items or
  3. Workforce bonuses other than hazard pay or
  4. Severance
  5. Legal

Coronavirus Relief Fund: Treasury Issues Guidance for Governments

On April 22, the Department of Treasury (“Treasury”) issued Guidance for State, Territorial, Local, and Tribal Governments on the Coronavirus Relief Fund and Coronavirus Relief Fund Frequently Asked Questions ("FAQ"), providing important information relating to the $150 billion Coronavirus Relief Fund (the “Fund”) established by the CARES Act. The Guidance followed two virtual consultations held by Treasury and a request for certification from Tribal governments of certain data, including Tribal population, land base, employees, and estimated expenditures.

Under the CARES Act, Treasury is responsible for distributing $150 billion in payments to states, local governments, territorial governments, and Tribal governments to cover necessary unbudgeted expenditures incurred due to the COVID-19 public health emergency. The Act sets aside $8 billion of this amount specifically for payments to Tribal governments. The April 22 Guidance and FAQ is the first direction from Treasury regarding its interpretation of the restrictions and permissible uses of the payments.

Treasury’s Guidance makes clear that Fund payments must be used for actions taken in response to the public health emergency. Such expenditures may be for direct response actions, such as addressing medical or public health needs, or “second-order effects,” such as economic support for those suffering from employment or business disruptions due to business closures. While Treasury interprets “necessary expenditures” broadly to mean that “the expenditure is reasonably necessary for its intended use in the reasonable judgment of the government officials responsible for spending Fund payments,” it cautions that Fund payments may not be used to fill shortfalls in revenues.

Here’s what Eligible CRF Entities receiving Coronavirus Relief Funds need to know:

What Qualifies as an Eligible Expenditure?

Eligible Expenditures will be based upon costs not accounted for in your “most recently approved” budget (as of March 27, 2020).

  • The “most recently approved” budget refers to a particular government’s enacted budget for the relevant fiscal period “without taking into account subsequent supplemental appropriations enacted or other budgetary adjustments made by that government in response to” COVID-19.
  • A cost meets this requirement if either (a) the cost cannot lawfully be funded using a line item, allotment, or allocation within that budget or (b) the cost is for a substantially different use from any expected use of funds in such a line item, allotment, or allocation.
  • Costs are “incurred” when they are expended by the recipient to cover the costs

Examples of Eligible Expenditures Provided by Treasury:

  • Medical Expenses. Including costs for: COVID-19-related expenses of public hospitals and clinics; temporary medical facilities; COVID-19 testing; emergency medical response; and establishing and operating public telemedicine capabilities.
  • Public Health Expenses. Including costs for: communication and enforcement of public health orders; acquisition and distribution of medical and protective supplies for medical personnel, child welfare and public health and safety workers; disinfection of public areas; technical assistance to local authorities on mitigation of COVID-19-related threats; public safety measures; and expenses for quarantining individuals.
  • Certain Payroll Expenses. Including payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to COVID-19.
  • Public Health Compliance Expenses. Including costs for actions to facilitate compliance with COVID-19-related public health measures, such as: food delivery to residents; distance learning, including technological improvements in connection with school closings; telework capabilities for public employees; paid sick and paid family and medical leave to public employees; maintaining state prisons and county jails; and care for homeless populations.
  • Economic Support Expenses. Including costs associated with providing economic support in connection with the COVID-19 public health emergency, such as: grants to small businesses to reimburse the costs of business interruption caused by required closures; payroll support programs; and unemployment insurance costs related to the COVID-19 public health emergency, if not otherwise reimbursed by the federal government.
  • Other Expenses. Including any other COVID-19-related expenses reasonably necessary to the function of government that satisfy the Fund’s eligibility criteria.

Ineligible Expenditures as Defined by Treasury

These are expenses that would not be eligible expenditures for use of Fund Payments. As noted above, importantly, Fund payments may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the statute.

  • Revenue replacement
  • Expenses for the State share of Medicaid;
  • Damages covered by insurance;
  • Payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 public health emergency;
  • Expenses that have been or will be reimbursed under any federal program, such as the reimbursement by the federal government pursuant to the CARES Act of contributions by States to State unemployment funds;
  • Reimbursement to donors for donated items or services;
  • Workforce bonuses other than hazard pay or overtime;
  • Severance pay; and
  • Legal settlements

Accounting Requirements for Payments Related to the Coronavirus Relief Fund – including Returning any Unused Funds.

  • Eligible CRF Entities must keep accounting records sufficient to demonstrate that the amount of Fund payments to the government has been used in accordance with restrictions – although no specific reporting requirement exists.
  • Eligible CRF Entities may retain assets purchased with the funds so long as the purchase of the asset was consistent with eligibility requirements.
  • Eligible CRF Entities are responsible for returning unused funds to the Treasury. As stated in Treasury’s FAQ, the Inspector General of the Department of the Treasury may recoup 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


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