Key Updates from U.S. Treasury’s 2023 Interim Final Rule for ARPA State & Local Fiscal Recovery

On August 10, 2023, the U.S. Treasury issued the 2023 Interim Final Rule (“IFR”) implementing the amendments to the ARPA State and Local Fiscal Recovery Funds (SLFRF) program made by the Consolidated Appropriations Act, 2023 to provide additional flexibility for recipients to use SLFRF funds to respond to natural disasters, build critical infrastructure, and support community development.

While the 2023 Interim Final Rule did not make any changes to the existing eligible uses of the SLFRF Program provided in the 2022 Final Rule, there are several new eligible uses, including:

• Emergency Relief from Natural Disasters
• Surface Transportation Projects
• Title 1 Projects

Emergency Relief from Natural Disasters

SLFRF recipients may now use their SLFRF funds to provide emergency relief from natural disasters or the negative economic impacts of natural disasters. To use SLFRF funds under this new eligible use, recipients should undertake the following two step process:

1. Identify a natural disaster that has occurred, is expected to occur, or is threatened to occur in the future.
2. Identify emergency relief that responds to the physical or negative economic impacts of the identified natural disaster and is related and reasonably proportional to the impact identified.

Examples of eligible emergency relief provided by the U.S. Treasury include: 

• Temporary emergency housing
• Food assistance;
• Supplemental financial assistance for lost wages;
• Other immediate needs including emergency protective measures, debris removal, and forms of cash assistance; and,
• Mitigation activities to respond to the threat of future natural disasters.

The 2023 Interim Final Rule does not add any new authority to use funds under the emergency relief from natural disasters eligible use category to satisfy the non-federal matching requirements of other federal programs, such as FEMA Public Assistance (PA).  Additionally, duplication of benefits requirements apply.

Surface Transportation Projects

The new eligible use category for surface transportation projects has been organized by the U.S. Treasury into three pathways.

Under pathway one, recipients may use SLFRF funds on certain projects receiving Department of Transportation funding to: 

• Expand the project scope;
• Cover additional unexpected costs associated with the project; or
• For projects that have not yet received DOT funding but will prior to December 31, 2024, supplement (not supplant) DOT funding in other ways.

Under pathway two, recipients may use a “streamlined framework” to fund surface transportation projects that are not receiving Department of Transportation funding and meet ALL of the following criteria:

• The project would be eligible under the DOT RAISE Program;
• No more than $10 million of SLFRF funds will be used on the project; and
• The project scope is limited to activities deemed a “categorical exclusion” by DOT.

Under pathway three, recipients may use SLFRF funding to repay a loan under the TIFIA Program or satisfy non-federal share requirements of projects under the following programs:

• INFRA Grants;
• Fixed Guideway Capital Investment Grants;
• Mega Grants; and/or
• Projects eligible for credit assistance under the TIFIA program.

Title I Projects

Under the 2023 Interim Final Rule, recipients may now generally use SLFRF funds for Title I projects eligible under the HUD CDBG and ICDBG programs, including to meet the non-federal match requirements of a federal assistance program.

However, activities available under CDBG supplemental assistance programs, such as CDBG-DR and CDBG-MIT, are not eligible activities under the SLFRF Program.

Additional Requirements of Surface Transportation and Title I Projects

Use of SLFRF funds under the surface transportation and Title I Projects categories is limited to the greater of $10 million or 30% of a recipient’s total SLFRF allocation.

The U.S. Treasury has also shortened the SLFRF expenditure deadline for surface transportation and Title I projects to September 30, 2026. The standard SLFRF expenditure deadline of December 31, 2026, still applies to all other eligible use categories.

In addition, the U.S. Treasury has provided a “supplement, not supplant” requirement for surface transportation and Title I projects under the SLFRF Program, which provides that recipients may not:

• Replace previously obligated funds with SLFRF funds for eligible surface transportation project or Title I project activities, or
• Use SLFRF funds to replace federal or non-federal funds identified in a federal commitment, such as an award agreement.

Have Questions?

EisnerAmper professionals are committed to helping our clients understand and leverage the expanded eligible uses of the State & Local Fiscal Recovery provided in Treasury’s 2023 Interim Final Rule. Contact us below to discuss your organization’s questions, concerns, and unique situation.