Sneak Preview: SLFRF FAQ Updated To Address Added Categories

(The following was excerpted from a recent Thompson Grants Compliance Expert article.) The Department of the Treasury recently updated its State and Local Fiscal Recovery Fund (SLFRF) Frequently Asked Questions document to address the three newest eligible use categories — eligible natural disaster emergency relief efforts, surface transportation projects and Title I community development projects — that were included in the 2023 SLFRF interim final rule. Of note, the document emphasizes that funds spent in relation to the latter two of these eligible use categories should be used to supplement, not supplant, other funds.

The SLFRF interim final rule, which became effective Sept. 20, 2023, updated provisions in a 2022 final rule (31 C.F.R. Part 35) (see “Treasury Issues 2023 SLFRF Interim Final Rule,” October 2023). Under the 2022 rule, recipients are allowed to use SLFRF funds under several categories: to replace public sector revenue lost due to the COVID-19 pandemic; respond to the public health and negative economic impacts of the pandemic; provide premium pay for essential workers in critical sectors; and invest in water, sewer and broadband infrastructure. In December 2022, Congress amended the SLFRF program through the Consolidated Appropriations Act (CAA) of 2023 (Pub. L. 117-328), to provide additional flexibility for how recipients can use SLFRF funds.

Under the three eligible use categories added in the interim final rule, funds may be used for the following:

• Emergency relief from natural disasters — SLFRF funds may be used for emergency relief (e.g., financial assistance needed to save lives or protect property) that responds to the physical or negative economic impacts, or potential physical or negative economic impacts, of the identified natural disaster. The emergency relief must be related and reasonably proportional to the impact identified.
• Surface transportation projects — SLFRF funds may be used for eligible projects under 26 surface transportation programs under three “pathways” specified in the 2023 CAA.
• Title I projects — Recipients may use SLFRF funds for activities that are eligible under section 105(a) of the Housing and Community Development Act of 1974 (Pub. L. 93-383) (Title I projects), which are the eligible activities under the Community Development Block Grant and Indian Community Development Block Grant programs.

The updated SLFRF FAQ includes 42 questions under newly added sections 14 through 16 to address these eligible use categories, and also revises other various questions in the existing FAQ to respond to updated guidance. Under new question 14.3, Treasury states that recipients who had previously used SLFRF funds under the “revenue loss” eligible use category for costs that would otherwise be eligible under the three new eligible uses may choose to use their SLFRF funds under the new eligible use categories, as long as these costs meet the requirements of the 2023 interim final rule and were not incurred prior to Dec. 29, 2022. For Surface Transportation and Title I projects, the revenue loss funds must not supplant other federal, state, territorial, tribal and local government funds (as applicable) otherwise available for such uses. Recipients choosing to use their SLFRF funds under a new eligible use category must reflect the change in their project and expenditure reports that they submit to Treasury.

(The full version of this story has now been made available to all for a limited time here.)

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