Sneak Preview: Treasury Launches ‘Non-entitlement Units’ Concept
(The following was excerpted from a recent Thompson Grants 360 article.) Small local governments may receive federal funding directly under some grant programs; however, they more often obtain federal funds under a grant program as part of a subrecipient agreement executed with their state government. However, the Department of the Treasury’s $350 billion Coronavirus State and Local Fiscal Recovery Fund under the American Rescue Plan Act (ARPA) (Pub. L. 117-2) includes the concept of “non-entitlement units of local government” (NEUs), which are small communities that receive direct dollars from Treasury under this program, where the funds are allocated and disbursed by their state without the usual subrecipient arrangement.
The goal of the program, which includes separate funding under the Coronavirus State Fiscal Recovery Fund (CSFRF) and the Coronavirus Local Fiscal Recovery Fund (CLFRF) is to provide a large infusion of federal dollars to state, local, territorial and tribal governments to respond to the COVID-19 public health emergency, replace lost revenue and offer premium pay to eligible workers to retain jobs. The program provides a level of flexibility to enable each government to meet local needs. In comparison, Treasury’s Coronavirus Relief Fund under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136) provided funds only to state governments.
Within the CLFRF, Treasury is providing $19.53 billion to support tens of thousands of NEUs, which are defined in section 603(g)(g) of the Social Security Act, as amended by ARPA, as local governments typically serving a population under 50,000. Treasury will make specific allocations to states and territories, which will distribute amounts to eligible NEUs in their jurisdiction in accordance with Treasury guidelines. Award amounts are based on the population of the NEU, and Treasury expects to make payments to states for distribution to NEUs in two equal tranches about 12 months apart. However, each NEU’s total award under the two tranches will be capped at 75% of its annual total operating budget, including its general fund and other funds, in effect as of Jan. 27, 2020.
Metropolitan cities larger than 50,000 in population may be eligible for direct federal payments without going through the state under the CLFRF.
Treasury notes that states distributing these funds to NEUs may not place additional conditions or requirements beyond those established under ARP and Treasury implementing regulations. In addition, states may not provide funding on a reimbursement basis (e.g., requiring NEUs to pay for project costs up front before being reimbursed with CLFRF payments). However, states, if necessary, may use program funds to support the administrative costs of allocating and distributing money to NEUs.
(The full version of this story has now been made available to all for a limited time here.)
Join us for our following Thompson Grants event:
Virtual Workshop: Internal Controls - What They Are and How to Ensure Compliance | June 30, 2021
Federal Grants Forum For Institutions of Higher Education | July 21 - 22, 2021
