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AGENDA
TEMECULA CITY COUNCIL
REGULAR MEETING
COUNCIL CHAMBERS
41000 MAIN STREET
TEMECULA, CALIFORNIA
AUGUST 22, 2023 - 6:00 PM
CLOSED SESSION - 5:00 PM
CONFERENCE WITH REAL PROPERTY NEGOTIATORS. The City Council will meet in closed
session pursuant to Government Code Section 54956.8 regarding the acquisition of certain property
interests from the real property located at 39622 Leifer Road in the City of Temecula (APN
957-090-023). Specifically, the City seeks to acquire an approximate 31,168 square foot temporary
construction easement with a term of 12 months, covenant authorizing the construction of certain
permanent improvements in portions of that 31,168 square foot area. This acquisition is in connection
with the proposed extension of Nicolas Road from its current termination at Calle Girasol easterly to
Butterfield Stage Road, Project Number LD20-1114 ("Project"). The negotiating parties are the City of
Temecula and the property owners Isaac G. Navejar and Isabel L. Navejar, as Co -Trustees of the
Navejar Living Trust, U/A dated July 18, 2019. Negotiators for the City are Patrick Thomas and Ron
Moreno. Under negotiations are price and terms of the acquisition of these property interests.
CONFERENCE WITH LEGAL COUNSEL - PENDING LITIGATION. The City Council will meet in
closed session with the City Attorney and Special Counsel pursuant to Government Code Section
54956.9(d)(1) with respect to two matters of pending litigation: 1) City of Temecula v Sohan Singh, et
al. (Riverside Superior Court Case No. CVSW2303952); and 2) Solana Winchester, LLC, v. City of
Temecula (Riverside Superior Court Case No. CVRI2304109).
CALL TO ORDER: Mayor Zak Schwank
PRELUDE MUSIC: Temecula Valley Youth Symphony
INVOCATION: Pastor Steve Redden of Crosspoint Church Temecula
FLAG SALUTE: Mayor Zak Schwank
ROLL CALL: Alexander, Brown, Kalfus, Schwank, Stewart
PRESENTATIONS
Award of Recognition to Former Council Member Maryann Edwards
Page 1
City Council Agenda August 22, 2023
BOARD / COMMISSION REPORTS
Community Services Commission and Race, Equity, Diversity and Inclusion Commission
PUBLIC SAFETY REPORT
County of Riverside, Riverside County Sheriffs Department
PUBLIC COMMENTS - NON -AGENDA ITEMS
A total of 30 minutes is provided for members of the public to address the City Council on matters not
listed on the agenda. Each speaker is limited to 3 minutes. Public comments may be made in person at
the meeting by submitting a speaker card to the City Clerk. Speaker cards will be called in the order
received. Still images may be displayed on the projector. All other audio and visual use is prohibited.
Public comments may also be submitted by email for inclusion into the record. Email comments must
be received prior to the time the item is called for public comments and submitted to
CouncilComments@temeculaca.gov. All public participation is governed by Council Policy regarding
Public Participation at Meetings adopted by Resolution No. 2021-54.
CITY COUNCIL REPORTS
Reports by the members of the City Council on matters not on the agenda will be made at this time. A
total, not to exceed, ten minutes will be devoted to these reports.
CONSENT CALENDAR
All matters listed under Consent Calendar are considered to be routine and all will be enacted by one
roll call vote. There will be no discussion of these items unless members of the City Council request
specific items be removed from the Consent Calendar for separate action. A total of 30 minutes is
provided for members of the public to address the City Council on matters on the Consent Calendar.
Each speaker is limited to 3 minutes. Public comments may be made in person at the meeting by
submitting a speaker card to the City Clerk. Speaker cards will be called in the order received. Still
images maybe displayed on the projector. All other audio and visual use is prohibited. Public comments
may also be submitted by email for inclusion into the record. Email comments must be received prior to
the time the item is called for public comments and submitted to CouncilComments@temeculaca.gov.
All public participation is governed by Council Policy regarding Public Participation at Meetings
adopted by Resolution No. 2021-54.
1. Waive Reading of Title and Text of All Ordinances and Resolutions Included in the Agenda
Recommendation: That the City Council waive the reading of the title and text of all
ordinances and resolutions included in the agenda.
Attachments: Agenda Report
2. Approve Action Minutes of August 8, 2023
Recommendation
Attachments
That the City Council approve the action minutes of August 8, 2023.
Action Minutes
Page 2
City Council Agenda August 22, 2023
3. Approve List of Demands
4.
5.
Recommendation
Attachments
That the City Council adopt a resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS AS
SET FORTH IN EXHIBIT A
Agenda Report
Resolution
List of Demands
Approve City Treasurer's Report as of May 31, 2023
Recommendation: That the City Council approve and file the City Treasurer's Report as of
May 31, 2023.
Attachments: Agenda Report
May Treasurer's Report
Amend the Capital Improvement Program Budget for Fiscal Years 2024-28 for Various Projects
Recommendation:
That the City Council:
1. Adopt a resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA TO AMEND THE CAPITAL IMPROVEMENT
PROGRAM BUDGET FOR FISCAL YEARS 2024-28 FOR VARIOUS
PROJECTS
2. Approve an appropriation of $1,500,000 from Transportation Uniform
Mitigation Fee, from Western Riverside Council of Governments in
Fiscal Year 2023-24 for the I-15 / French Valley Parkway Improvements -
Phase III project; and
3. Approve an appropriation and corresponding fund transfer of $200,000
from Measure S for Fiscal Year 2023-24 to the I-15 / French Valley
Parkway Improvements - Phase III project; and
4. Approve an appropriation of $1,000,000 grant funding from California
Page 3
City Council
Agenda August 22, 2023
State Assembly Bill 102 as amended in Senate on June 24, 2023 for Fiscal
Year 2023-24 for the Ynez Road Improvements - Phase I project; and
5. Approve a fund Transfer of $1,000,000 of Development Impact Fee -
Street Improvements from Ynez Road Improvements, Phase I to Fiscal
Year 2025-26 of the Rancho California Road Median Improvements
project; and
6. Approve a fund transfer of $594,524 from Fiscal Year 2023-24 of the
Sidewalks - Citywide project to Fiscal Year 2023-24 of a separately
established project, Sidewalks - Pauba Road; and
7. Approve an appropriation of $362,600 grant funding from California
Senate Bill 821 for Fiscal Year 2023-24 for the Sidewalks - Pauba Road;
and
8. Approve an appropriation of $200,000 grant funding from American
Rescue Plan Act, signed into law March 11, 2021, through the County of
Riverside for Fiscal Year 2023-24 to the Dog Park Renovation project;
and
9. Approve an appropriation and corresponding fund transfer of $100,000
from Measure S for Fiscal Year 2023-24 to the Dog Park Renovation
project.
Attachments: Agenda Report
Resolution
Amended CIP Budget Sheets
CIP Budget Amendment Summary
6. Approve Form of Rancho California Water District Recycled Water Agreements and Authorize
the City Manager to Execute Said Agreements on Behalf of the City
Recommendation: That the City Council adopt a resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA APPROVING THE FORM OF RECYCLED WATER
AGREEMENTS AND AUTHORIZING THE CITY MANAGER TO
EXECUTE SAID AGREEMENTS ON BEHALF OF THE CITY
Attachments: Agenda Report
Resolution
Agreement - City Version
Agreement - Private Version
Page 4
City Council Agenda August 22, 2023
7. Approve First Amendment to the Agreement for On Call Services with Keyser Marston and
Associates, Inc.
8.
9.
Recommendation:
AttaehmPntc
That the City Council approve the first amendment to the agreement with
Keyser Marston Associates, Inc., in the amount of $110,000, for a total
agreement of $275,000, for on call services.
Agenda Report
Amendment
Adopt Resolution to Approve the Administering Agency - State Agreement - Master Agreement
No. 08-5459521 with the State of California, Department of Transportation
Recommendation: That the City Council adopt a resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA TO APPROVE THE ADMINISTERING AGENCY -
STATE AGREEMENT - MASTER AGREEMENT NO. 08-5459521
AND AUTHORIZE THE CITY MANAGER TO EXECUTE THE
AGREEMENT AND ALL PERTINENT PROGRAM SUPPLEMENT
AGREEMENTS FOR STATE FUNDED PROJECTS
Attachments: Agenda Report
Resolution
Master Agreement No. 08-5459521
Programpplement Agreement No. OOOOOA212
Program�Sgpplement Agreement No. OOOOOA213
Approve Increase to the Professional Services Contingency Authorization for the Margarita
Recreation Center Project, PW 17-21
Recommendation: That the City Council:
1. Approve an increase to the contingency for professional services for the
Margarita Recreation Center Project, PW 17-21 by $43,000; and
2. Increase the City Manager's authorized contingency by $43,000.
Attachments: Agenda Report
Project Description
10. Approve the Funding Agreement with the County of Riverside for the Michael "Mike" Naggar
Park Dog Park Renovation Project, PW21-14 and Authorize the City Manager to Execute the
Agreement
Page 5
City Council Agenda August 22, 2023
11.
12.
Recommendation: That the City Council:
1. Approve the "Funding Agreement for City of Temecula Michael
"Mike" Naggar Community Park Expansion Project" (Agreement) with
the County of Riverside; and
2. Authorize the City Manager to execute the Agreement.
Attachments: Agenda Report
Funding_ Agreement
Project Description
Approve Specifications and Authorize Solicitation of Construction Bids for Citywide Slurry Seal
Program - Fiscal Year 2022-23, PW23-16
Recommendation: That the City Council:
1. Approve the specifications and authorize the Department of Public
Works to solicit construction bids for the Citywide Slurry Seal Program -
Fiscal Year 2022-23, PW23-16; and
2. Make a finding that this project is exempt from CEQA per Article 19,
Categorical Exemption, Section 15301, Existing Facilities, of the CEQA
Guidelines.
Attachments: Agenda Report
Slurry Seal Street Name List
Project Location Maps
Accept Improvements and File the Notice of Completion for the Traffic Signal - Park and Ride
Access Improvements, PW18-11
Recommendation:
Attachments:
That the City Council:
1. Accept the construction of the Traffic Signal - Park and Ride Access
Improvements, PW18-11, as complete; and
2. Direct the City Clerk to file and record the Notice of Completion.
Agenda Report
Notice of Completion
Project Description
Project Map
13. Receive and File Temporary Street Closures for 2023 Autumnfest Events
Recommendation: That the City Council receive and file the temporary closure of certain
streets for the following 2023 Autumnfest events:
Page 6
City Council
Agenda August 22, 2023
GOLDEN ERA RUNWAY SHOW
NATIONAL EMERGENCY PREPAREDNESS FAIR
ARTFEST
HEALTH & COMMUNITY RESOURCE FAIR
CYCLE FOR HOPE
GREEK FESTIVAL
HALLOWEEN CARNIVAL
VETERAN'S DAY
PECHANGA PU'ESKA MOUNTAIN DAY
Attachments: Agenda Report
Exhibit A
Exhibit B
RECESS CITY COUNCIL MEETING TO SCHEDULED MEETINGS OF THE TEMECULA
COMMUNITY SERVICES DISTRICT, THE SUCCESSOR AGENCY TO THE TEMECULA
REDEVELOPMENT AGENCY, THE TEMECULA HOUSING AUTHORITY, AND/OR THE
TEMECULA PUBLIC FINANCING AUTHORITY
Page 7
City Council Agenda August 22, 2023
TEMECULA COMMUNITY SERVICES DISTRICT MEETING
CALL TO ORDER: President James Stewart
ROLL CALL: Alexander, Brown, Kalfus, Schwank, Stewart
CSD PUBLIC COMMENTS - NON -AGENDA ITEMS
A total of 30 minutes is provided for members of the public to address the Board of Directors on matters
not listed on the agenda. Each speaker is limited to 3 minutes. Public comments may be made in person
at the meeting by submitting a speaker card to the City Clerk. Speaker cards will be called in the order
received. Still images may be displayed on the projector. All other audio and visual use is prohibited.
Public comments may also be submitted by email for inclusion into the record. Email comments must
be received prior to the time the item is called for public comments and submitted to
CouncilComments@temeculaca.gov. All public participation is governed by Council Policy regarding
Public Participation at Meetings adopted by Resolution No. 2021-54.
CSD CONSENT CALENDAR
All matters listed under Consent Calendar are considered to be routine and all will be enacted by one
roll call vote. There will be no discussion of these items unless members of the Community Services
District request specific items be removed from the Consent Calendar for separate action. A total of 30
minutes is provided for members of the public to address the Board of Directors on items that appear on
the Consent Calendar. Each speaker is limited to 3 minutes. Public comments may be made in person at
the meeting by submitting a speaker card to the City Clerk. Speaker cards will be called in the order
received. Still images may be displayed on the projector. All other audio and visual use is prohibited.
Public comments may also be submitted by email for inclusion into the record. Email comments must
be received prior to the time the item is called for public comments and submitted to
CouncilComments@temeculaca.gov. All public participation is governed by Council Policy regarding
Public Participation at Meetings adopted by Resolution No. 2021-54.
14. Approve Action Minutes of August 8, 2023
Recommendation: That the Board of Directors approve the action minutes of August 8,
2023.
Attachments: Action Minutes
15. Approve Agreement with Titan Rental Group, Inc. for Event and Program Rental Items
Recommendation: That the Board of Directors approve the agreement with Titan Rental
Group, Inc. for event and program rental items.
Attachments: Agenda Report
Agreement
16. Approve Annexation of Tract Map Numbers 37341 and 37341-17, Within Sommers Bend, to
Service Level B (Residential Street Lights) Rates and Charges Located on East Side of
Butterfield Stage Road and North of Long Valley Wash)
Page 8
City Council
Agenda August 22, 2023
Recommendation: That the Board of Directors adopt the following resolutions entitled:
RESOLUTION NO. CSD
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
TEMECULA COMMUNITY SERVICES DISTRICT OF THE CITY OF
TEMECULA, DECLARING INTENTION TO ANNEX PROPERTY
(TRACT MAP 37341 AND 37341-17) TO SERVICE LEVEL B -
RESIDENTIAL STREET LIGHTS AND TO LEVY ASSESSMENTS
ON SUCH PROPERTY FOR FISCAL YEAR 2024-25, APPROVING
THE ENGINEER'S REPORT, AND SETTING THE DATE, TIME AND
PLACE OF A PUBLIC HEARING ON THE PROPOSED
ANNEXATION AND ASSESSMENTS
RESOLUTION NO. CSD
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
TEMECULA COMMUNITY SERVICES DISTRICT OF THE CITY OF
TEMECULA, INITIATING PROCEEDINGS TO ANNEX PROPERTY
(TRACT MAP 37341 AND 37341-17) TO SERVICE LEVEL B FOR
FISCAL YEAR 2024-25
Attachments: Agenda Report
Vicinity Maps - Tract Maps 37341 and 37341-17
Resolution of Intention
Resolution of Initiatiating Proceedings
Preliminary Annexation Engineer's Report
CSD DIRECTOR OF COMMUNITY SERVICES REPORT
CSD GENERAL MANAGER REPORT
CSD BOARD OF DIRECTOR REPORTS
CSD ADJOURNMENT
The next regular meeting of the Temecula Community Services District will be held on Tuesday,
September 12, 2023, at 4:30 p.m., for a Closed Session, with regular session commencing at 6:00 p.m.,
at the Council Chambers located at 41000 Main Street, Temecula, California.
Page 9
City Council Agenda August 22, 2023
SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY - NO
MEETING
TEMECULA HOUSING AUTHORITY - NO MEETING
TEMECULA PUBLIC FINANCING AUTHORITY - NO MEETING
RECONVENE TEMECULA CITY COUNCIL
PUBLIC HEARING
Any person may submit written comments to the City Council before a public hearing or may appear
and be heard in support of or in opposition to the approval of a project at the time of the hearing. If you
challenge a project in court, you may be limited to raising only those issues you or someone else raised
at the public hearing or in written correspondence delivered to the City Clerk at or prior to the public
hearing. For public hearings each speaker is limited to 5 minutes. Public comments may be made in
person at the meeting by submitting a speaker card to the City Clerk or by submitting an email to be
included into the record. Email comments must be submitted to CouncilComments@temeculaca.gov.
Email comments on all matters, including those not on the agenda, must be received prior to the time
the item is called for public comments. At public hearings involving land use matters, the property
owner and/or applicant has the burden of proof and, therefore, shall be allowed 15 minutes for an initial
presentation, and an additional 10 minutes for rebuttal by its development team following other
comments on the matter. An appellant, other than the property owner and/or applicant, and the
spokesperson for an organized group of residents residing within the noticed area of the property, which
is the subject of the public hearing, shall be allowed 15 minutes to present the appellant's position to the
Council. The Mayor may allow more time if required to provide due process for the property owner,
applicant or appellant. All other members of the public may speak during the public hearing for a
maximum period of 5 minutes each. Deferral of one speaker's time to another is not permitted. In the
event of a large number of speakers, the Mayor may reduce the maximum time limit for members of the
public to speak. All public participation is governed by the Council Policy regarding Public
Participation at Meetings adopted by Resolution No. 2021-54.
17. Introduce Ordinance Amending Titles 5, 8, and 17 of the Temecula Municipal Code, and Adopt
a Resolution Setting the Fee for a Tobacco Shop Permit and Find that this Ordinance is Exempt
from the California Environmental Quality Act (CEQA) Pursuant to CEQA Guidelines Section
15061 (b)(3)
Recommendation
That the City Council:
1. Introduce and read by title only an ordinance entitled:
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
TEMECULA AMENDING TITLES 5, 8, AND 17 OF THE TEMECULA
MUNICIPAL CODE TO (1) AMEND MASSAGE ESTABLISHMENT
REGULATIONS, (2) ADD DEFINITIONS FOR TOBACCO SHOP,
Page 10
City Council Agenda August 22, 2023
TOBACCO SHOP PERMIT AND UPDATE DEFINITIONS OF
TOBACCO PRODUCT AND TOBACCO PARAPHERNALIA, (3)
IMPLEMENT A TOBACCO SHOP PERMIT PROGRAM TO
INCLUDE STRUCTURAL AND OPERATIONAL REQUIREMENTS,
(4) UPDATE TOBACCO RETAILERS LICENSE PROCESSES, (5)
AMEND REGULATIONS ON SMOKING IN HOTEL ROOMS, (6)
REMOVE TOBACCO SHOP AS A CONDITIONALLY PERMITTED
USE IN TABLE 17.08.030, (7) IMPLEMENT TOBACCO SHOP
PERMIT REQUIREMENTS IN PLANNED DEVELOPMENT
OVERLAY ZONING DESIGNATIONS 1 AND 4, AND (8) MAKE A
FINDING THAT THIS ORDINANCE IS EXEMPT FROM THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)
PURSUANT TO CEQA GUIDELINES SECTION 15061 (B)(3)
2. Adopt Resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA ESTABLISHING A TOBACCO SHOP PERMIT FEE
Attachments: Agenda Report
Ordinance
Resolution
Planning Commission Resolution No. 2023-14
Notice of Public Hearing
Notice of Exemption
DEPARTMENTAL REPORTS (RECEIVE AND FILE)
18. Community Development Department Monthly Report
Attachments: Agenda Report
Planning Activity Report
19. Fire Department Monthly Report
Attachments: Agenda Report
Monthly Report - July
20. Police Department Monthly Report
Attachments: Agenda Report
21. Public Works Department Monthly Report
Page 11
City Council Agenda August 22, 2023
Attachments: Agenda Report
Project Status Report
ITEMS FOR FUTURE CITY COUNCIL AGENDAS
Any Council Member, including the Mayor, may request an item be placed on a future agenda. Any
such request will be discussed under this section. In making the request, a Council Member may briefly
describe the topic of the proposed agenda item and any timing associated with the placement of the item
on the agenda. This description shall not exceed 3 minutes. No substantive discussion on the subject of
the motion may occur. Items may only be placed on the agenda by Council Members pursuant to policy
or by the City Manager based on administrative or operational needs of the City. Public comments on
the placement of these agenda items shall be limited to a maximum of 30 minutes. Individual comments
shall not exceed 3 minutes. All public participation is governed by the Council Policy regarding Public
Participation at Meetings and Agenda Placements by Council Members adopted by Resolution No.
2021-54.
CITY MANAGER REPORT
CITY ATTORNEY REPORT
ADJOURNMENT
The next regular meeting of the City Council will be held on Tuesday, September 12, 2023, at 4:30
p.m., for a Closed Session, with regular session commencing at 6:00 p.m., at the Council Chambers
located at 41000 Main Street, Temecula, California.
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The full agenda packet (including staff reports, public closed session information, and any supplemental material
available after the original posting of the agenda), distributed to a majority of the City Council regarding any
item on the agenda, will be available for public viewing in the main reception area of the Temecula Civic Center
during normal business hours at least 72 hours prior to the meeting. The material will also be available on the
City's website at TemeculaCa.gov. and available for review at the respective meeting. If you have questions
regarding any item on the agenda, please contact the City Clerk's Department at (951) 694-6444.
Page 12
Item No. 1
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Randi Johl, Director of Legislative Affairs/City Clerk
DATE: August 22, 2023
SUBJECT: Waive Reading of Title and Text of All Ordinances and Resolutions Included in
the Agenda
PREPARED BY: Randi Johl, Director of Legislative Affairs/City Clerk
RECOMMENDATION: That the City Council waive the reading of the title and text of all
ordinances and resolutions included in the agenda.
BACKGROUND: The City of Temecula is a general law city formed under the laws of
the State of California. With respect to adoption of ordinances and resolutions, the City adheres to
the requirements set forth in the Government Code. In accordance with Government Code Section
34934, the title of each ordinance is included on the published agenda and a copy of the full
ordinance has been available to the public online on the City's website and will be available in
print at the meeting prior to the introduction or passage of the ordinance. Unless otherwise
required, the full reading of the title and text of all ordinances and resolutions is waived.
FISCAL IMPACT: None
ATTACHMENTS: None
Item No. 2
ACTION MINUTES
TEMECULA CITY COUNCIL
REGULAR MEETING
COUNCIL CHAMBERS
41000 MAIN STREET
TEMECULA, CALIFORNIA
AUGUST 8, 2023 - 6:00 PM
CALL TO ORDER at 6:00 PM: Mayor Zak Schwank
PRELUDE MUSIC: Temecula Conservatory of Music
INVOCATION: Chaplain Themba M. Mzizi of Riverside County Sheriffs Department
FLAG SALUTE: Commissioner Robert Carter
ROLL CALL: Alexander, Brown, Kalfus, Schwank, Stewart
BOARD / COMMISSION REPORTS
Traffic Safety Commission
PUBLIC SAFETY REPORT
County of Riverside, Fire Department (CAL FIRE)
PUBLIC COMMENTS - NON -AGENDA ITEMS
The following individual(s) addressed the City Council:
• Brad Bohn • Supervisor Karen Spiegel
CITY COUNCIL REPORTS
CONSENT CALENDAR
Unless otherwise indicated below, the following pertains to all items on the Consent Calendar.
Approved the Staff Recommendation (5-0): Motion by Stewart, Second by Alexander. The vote
reflected unanimous approval.
1. Waive Reading of Title and Text of All Ordinances and Resolutions Included in the Agenda
Recommendation: That the City Council waive the reading of the title and text of all
ordinances and resolutions included in the agenda.
2. Approve Action Minutes of July 25, 2023
Recommendation: That the City Council approve the action minutes of July 25, 2023.
3. Approve List of Demands
Recommendation: That the City Council adopt a resolution entitled:
RESOLUTION NO. 2023-69
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS AS
SET FORTH IN EXHIBIT A
4. Receive Report Regarding Status of Upcoming Vacancies on Commissions
Recommendation: That the City Council receive the report regarding the status of
upcoming vacancies on Commissions.
Receive and file only, no action.
RECESS:
At 6:16 PM, the City Council recessed and convened as the Temecula Community Services District
and Temecula Public Financing Authority Meetings. At 6:18 PM the City Council resumed with the
remainder of the City Council Agenda.
RECONVENE TEMECULA CITY COUNCIL
BUSINESS
7. Receive Report Regarding Senate Bill 329 Pertaining to City Council Compensation and
Provide General Direction Regarding the Same (At the Request of Council Member Brown)
Recommendation:
That the City Council receive a report regarding Senate Bill 329
pertaining to City Council compensation and provide general direction
regarding the same.
Motion to bring ordinance to future meeting reflecting Council compensation adjustment from
$600 to $1,900 per month (3-2): Motion by Brown, Second by Schwank. The vote reflected
unanimous approval with Alexander and Stewart opposing.
ITEMS FOR FUTURE CITY COUNCIL AGENDAS
The City Council approved the placement of the following topic on a future agenda — Board and
Commission Compensation.
CITY MANAGER REPORT
CITY ATTORNEY REPORT
ADJOURNMENT
At 6:32 PM, the City Council meeting was formally adjourned to Tuesday, August 22, 2023, at 4:30
PM for Closed Session, with regular session commencing at 6:00 PM, City Council Chambers, 41000
Main Street, Temecula, California.
Adjourned in Memory of
Assistant Chief Josh Bischof, Fire Captain Tim Rodriguez and Pilot Tony Sousa
Zak Schwank, Mayor
ATTEST:
Randi Johl, City Clerk
[SEAL]
Item No. 3
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Jennifer Hennessy, Director of Finance
DATE: August 22, 2023
SUBJECT: Approve List of Demands
PREPARED BY: Pam Espinoza, Senior Accounting Technician
RECOMMENDATION: That the City Council adopt a resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS
AS SET FORTH IN EXHIBIT A
BACKGROUND: All claims and demands are reported and summarized for review
and approval by the City Council on a routine basis at each City Council meeting. The attached
claims represent the paid claims and demands since the last City Council meeting.
FISCAL IMPACT: All claims and demands were paid from appropriated funds or
authorized resources of the City and have been recorded in accordance with the City's policies
and procedures.
ATTACHMENTS: 1. Resolution
2. List of Demands
RESOLUTION NO.2023-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF TEMECULA ALLOWING CERTAIN CLAIMS AND
DEMANDS AS SET FORTH IN EXHIBIT A
THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS
FOLLOWS:
Section 1. That the following claims and demands as set forth in Exhibit A, on file in
the office of the City Clerk, has been reviewed by the City Manager's Office and that the same are
hereby allowed in the amount of $ 12,333,895.73.
Section 2. The City Clerk shall certify the adoption of this resolution.
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula
this 22"d day of August, 2023.
Zak Schwank, Mayor
ATTEST:
Randi Johl, City Clerk
[SEAL]
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing
Resolution No. 2023- was duly and regularly adopted by the City Council of the City of
Temecula at a meeting thereof held on the 22"d day of August, 2023, by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
Randi Johl, City Clerk
CITY OF TEMECULA
LIST OF DEMANDS
7/27/2023 - 8/3/2023 TOTAL CHECK RUN:
7/20/2023 TOTAL PAYROLL RUN:
11,401,787.30
932,108.43
TOTAL LIST OF DEMANDS FOR 08/22/2023 COUNCIL MEETING: g 12,333,895.73
apChkLst Final Check List Page: 1
07/25/2023 1:46:08PM CITY OF TEMECULA
Bank: union UNION BANK
Check # Date Vendor
15052 6/12/2023 000246 PERS EMPLOYEES
RETIREMENT
15085 7/6/2023 014486 VERIZON WIRELESS
Description
PERS RETIREMENT PAYMENT
Amount Paid
2,175.35
5/16-6/15 11,384.24
CELLULAR/BROADBAND:CITYWIDE
Grand total for UNION BANK:
Check Total
2,175.35
11,384.24
13,559.59
Page:1
apChkLst Final Check List Page: 2
07/25/2023 1:46:08PM CITY OF TEMECULA
Bank: eunion EFT UNION BANK
Check #
Date
Vendor
Description
Amount Paid
Check Total
505185
7/27/2023
004240
AMERICAN FORENSIC NURSES
DRUG/ALCOHOL ANALYSIS: TEM
343.94
343.94
AFN
SHERIFF
505186
7/27/2023
021400
AYERS ELECTRIC INC
ELECTRICAL REPAIRS: IWTCM: PW
500.00
ELECTRICAL REPAIRS: CRC
100.00
ELECTRICAL REPAIRS: OLD TOWN I
100.00
ELECTRICAL REPAIRS: OLD TOWN I
1,000.00
1,700.00
505187
7/27/2023
001323
BLUETRITON BRANDS INC,
WATER DLVRY SVCS: HELP CTR
2.16
DBA READYREFRESH
WATER DLVRY SVCS: FOC
178.90
181.06
505188
7/27/2023
022670
BROWN JAMAL DEON, DBA
TCSD INSTRUCTOR EARNINGS
315.00
JDB TRAINING
TCSD INSTRUCTOR EARNINGS
2,030.00
2,345.00
505189
7/27/2023
023248
CORTEZ GASTELUM, MARIA
NEWSPAPER SUBSCRIPTION: MPSC:
118.75
118.75
VICTORIA
TCSD
505190
7/27/2023
001393
DATATICKET INC, DBA
JUN CITATIONS PROCESSING: POLICE
1,268.58
1,268.58
REVENUE EXPERTS
505191
7/27/2023
012217
DUDEK
CONSULTANT SVCS: CITYWIDE
9,813.75
9,813.75
DRAINAGE PLAN
505192
7/27/2023
020904
ECONOMIC ALTERNATIVES INC
BOILER HOT LOOP FILTER: CIVIC CTR
2,817.35
2,817.35
505193
7/27/2023
018098
ELITE CLAIMS MANAGEMENT
JUN '23 3RD PARTY CLAIM ADMIN: WC
1,250.00
1,250.00
INC
505194
7/27/2023
014819
FLATIRON WEST INC
1-15/FV PKWY IMPROVEMENTS: PH II:
1,306,238.71
1,306,238.71
CIP
505195
7/27/2023
010028
GOFORTH & MART, DBA GM
FURNITURE: BOOKSHELVES: LIBRARY
16,246.18
BUSINESS INTERIORS
FURNITURE: BOOKSHELVES: LIBRA
14,582.87
30,829.05
505196
7/27/2023
004890
GOLDEN STATE FIRE
FIRE INSPECTION REPAIR: CIVIC CTR
2,270.00
2,270.00
PROTECTION
505197
7/27/2023
017334
HOUSE OF AUTOMATION INC
GARAGE DOOR REPAIR: CIVIC
476.44
CENTER
GARAGE DOOR REPAIR: CIVIC CEN
760.60
1,237.04
505198
7/27/2023
006914
INNOVATIVE DOCUMENT
JUN COPIER MAINT/REPAIR/USAGE:
4,850.90
SOLUTIONS
CITYWIDE
JUN COPIER MAI NT/REPAI R/U SAGE
379.91
5,230.81
505199
7/27/2023
000482
LEIGHTON CONSULTING INC
Geotechnical Review for FORE Temecula
3,831.00
GEOTECH & MATERIALS TESTING E
410.60
4,241.60
Paget
apChkLst Final Check List Page: 3
07/25/2023 1:46:08PM CITY OF TEMECULA
Bank: eunion EFT UNION BANK
(Continued)
Check # Date Vendor
Description
Amount Paid
Check Total
505200 7/27/2023 022664 MARIPOSA TREE
TREE SVCS: S-24 ACACIS: PARKS
202.00
MANAGEMENT INC
TREE SVCS: S-13 EMERGENCY: PAf
535.13
TREE SVCS: F-06 OLD TOWN: PARK
6,363.00
TREE SVCS: S-10 EMERGENCY: PAf
4,848.00
TREE SVCS: S-01 EMERGENCY: PAf
4,600.30
TREE SVCS: MEDIANS: PARKS
173.80
TREE SVCS: S-05 & S-24 EMERGEN,
4,136.60
TREE SVCS: S-12 EMERGENCY: PAf
3,176.25
TREE SVCS: S-10 PALM PRUNING: F
7,726.95
TREE SVCS: S-05 EMERGENCY: PAf
1,651.65
TREE SVCS: F-03 FOC: PARKS
1,107.75
TREE SVCS: S-13 PRESLEY SLOPE:
354.22
TREE SVCS: S-12 VINTAGE HILLS: P
3,801.75
38,677.40
505201 7/27/2023 018675 MDG ASSOCIATES INC
JUN ADA LABOR COMPLIANCE:
151.26
PW22-08
JUN ADA LABOR COMPLIANCE SVC
1,415.76
JUN ADA LABOR COMPLIANCE: PW'
128.13
1,695.15
505202 7/27/2023 018314 MICHAEL BAKER
CONSULT SVCS: I-15/79 INTRCHG
5,570.00
5,570.00
INTERNATIONAL
17-19
505203
7/27/2023
004951
MIKE'S PRECISION WELDING
HAND RAIL REPAIRS: CRC: PW
3,880.00
3,880.00
INC
505204
7/27/2023
004043
MISSION ELECTRIC SUPPLY
ELECTRICAL SUPPLIES: OLD TOWN
28.75
28.75
INC
MAINT
505205
7/27/2023
022599
NIEVES LANDSCAPE INC
LANDSCAPE MAINT SVCS: FIRE STA 84
191.71
LDSCP REPAIRS: SERENA HILLS: S-
900.00
IRRIGATION REPAIRS: DATE STREE
197.42
1,289.13
505206
7/27/2023
023204
OMB ELECTRICAL ENGINEERS
CONSULTANT SVCS: STREETLIGHTS:
285.00
285.00
INC, SALAS OBRIEN
PW22-17
505207
7/27/2023
005075
PRUDENTIAL OVERALL
UNIFORM SVCS: STREETS: PW
52.44
SUPPLY
UNIFORM SCS: PARKS MAINT: PW
4.62
57.06
Page:3
apChkLst Final Check List Page: 4
07/25/2023 1:46:08PM CITY OF TEMECULA
Bank: eunion EFT UNION BANK
Check # Date Vendor
505208 7/27/2023 002412 RICHARDS WATSON AND
GERSHON
505209 7/27/2023 004274 SAFE AND SECURE
LOCKSMITH SRVC
505210 7/27/2023 000519 SOUTH COUNTY PEST
CONTROL INC
(Continued)
Description
Amount Paid Check Total
JUN 2023 LEGAL SERVICES
1,291.00
JUN 2023 LEGAL SERVICES
1,268.50
JUN 2023 LEGAL SERVICES
12,643.00
JUN 2023 LEGAL SERVICES
2,597.00
JUN 2023 LEGAL SERVICES
5,876.00
JUN 2023 LEGAL SERVICES
430.00
JUN 2023 LEGAL SERVICES
2,407.00
JUN 2023 LEGAL SERVICES
147.50
JUN 2023 LEGAL SERVICES
4,929.00
JUN 2023 LEGAL SERVICES
76.50
JUN 2023 LEGAL SERVICES
5,251.00
JUN 2023 LEGAL SERVICES
287.00
JUN 2023 LEGAL SERVICES
59.00
JUN 2023 LEGAL SERVICES
1,207.00
JUN 2023 LEGAL SERVICES
7,728.00
JUN 2023 LEGAL SERVICES
142.50
JUN 2023 LEGAL SERVICES
8,569.80
JUN 2023 LEGAL SERVICES
1,913.50
JUN 2023 LEGAL SERVICES
2,001.50
JUN 2023 LEGAL SERVICES
5,018.50
JUN 2023 LEGAL SERVICES
206.50
JUN 2023 LEGAL SERVICES
3,331.00
JUN 2023 LEGAL SERVICES
3,331.00
JUN 2023 LEGAL SERVICES
678.50
JUN 2023 LEGAL SERVICES
635.00
JUN 2023 LEGAL SERVICES
265.50
JUN 2023 LEGAL SERVICES
69.00
JUN 2023 LEGAL SERVICES
2,162.00
JUN 2023 LEGAL SERVICES
5,220.50
JUN 2023 LEGAL SERVICES
531.00
JUN 2023 LEGAL SERVICES
6,506.40
JUN 2023 LEGAL SERVICES
59.00
JUN 2023 LEGAL SERVICES
2,150.00 88,988.70
LOCKSMITH SVCS: CIVIC CTR
46.13 46.13
PEST CONTROL SVCS: CRC 268.00
PEST CONTROL SVCS:
MARG SPLA
94.00
PEST CONTROL SVCS:
TES POOL
59.00
PEST CONTROL SVCS:
CRC
90.00
PEST CONTROL SVCS:
CRC IRRIGA
94.00
PEST CONTROL SVCS:
THEATER
90.00
PEST CONTROL SVCS:
MARG SPLA
49.00 744.00
Page:4
apChkLst Final Check List Page: 5
07/25/2023 1:46:08PM CITY OF TEMECULA
Bank: eunion EFT UNION BANK
(Continued)
Check #
Date
Vendor
Description
Amount Paid
Check Total
505211
7/27/2023
006145
STENO SOLUTIONS
JUN TRANSCRIPTION SVCS: TEM
105.84
105.84
TRANSCRIPTION, SRVCS INC
SHERIFF
505212
7/27/2023
003849
TERRYBERRY COMPANY
EMPLOYEE SERVICE RECOGNITION:
238.27
238.27
HR
505213
7/27/2023
016311
TIERCE, NICHOLAS
GRAPHIC DESIGN SVCS: THEATER
6,420.00
6,420.00
505214
7/27/2023
014866
TWM ROOFING INC
ROOF REPAIRS: JRC & CIVIC CENTER
19,345.00
19,345.00
505215
7/27/2023
023055
VAN OTTERLOO INC
EQUIP REPAIR: STREET MAINT: PW
1,059.68
1,059.68
Grand total for EFT UNION BANK:
1,538,315.75
Page:5
apChkLst Final Check List Page: 6
07/25/2023 1:46:08PM CITY OF TEMECULA
33 checks in this report.
Grand Total All Checks: 1,551,875.34
Page:6
apChkLst
07/27/2023
10:56:47AM
Final Check List
CITY OF TEMECULA
Page: 1
Bank:
union UNION BANK
Check #
Date
Vendor
Description
Amount Paid
Check Total
212984
7/25/2023
013935
SOUTHERN CALIFORNIA
TRAFFIC SIGNAL: RING ROAD:
3,400.47
3,400.47
EDISON CO
PW21-15
212985
7/27/2023
003951
ALL AMERICAN ASPHALT
CONSTRUCTION CONTRACT SVCS:
1,282,457.25
PAVMT REHAB
CONSTRUCTION CONTRACT SVCS: PAV
418,285.00
1,700,742.25
212986
7/27/2023
017795
ALTA LANGUAGE SERVICES
LANGUAGE SVCS: HR
132.00
132.00
INC
212987
7/27/2023
022888
ARAMARK SERVICES INC, DBA
RFRSHMNTS SVCS: CIVIC CTR
113.74
113.74
ARAMARK REFRESHMENT
212988
7/27/2023
015592
BAMM PROMOTIONAL
UNIFORMS: EMBROIDERY: CODE ENF
201.19
201.19
PRODUCTS INC
212989
7/27/2023
004262
BIO TOX LABORATORIES
PHLEBOTOMY SERVICES: TEM
3,189.01
SHERIFF
PHLEBOTOMY SERVICES: TEM SHERIFF
2,245.13
5,434.14
212990
7/27/2023
023447
BRIGHT PLANET SOLAR
REFUND: PERMIT CANCELLED
133.92
133.92
212991
7/27/2023
023446
BUCKLIN, KIMBERLY
REFUND: PERMITS CANCELLED
137.60
137.60
212992
7/27/2023
007794
CAL PASEO DEL SOL LLC
REIMB: DIF FEES: MEADOWS
237,426.00
237,426.00
PKWY/PAUBA
212993
7/27/2023
021851
CALIF NEWSPAPERS
LEGAL PUBLICATIONS: CITY CLERK
1,860.35
PARTNERSHIP, DBA SO CALIF
NEWS GROUP
LEGAL PUBLICATIONS: PW
1,009.66
2,870.01
212994
7/27/2023
023391
CLARK COUNTY, LAS VEGAS
PRESENTATION: EMERGENCY
644.25
644.25
METROPOLITAN
MANAGMENT
212995
7/27/2023
011922
CORELOGIC INC, DBA
JUN SOFTWARE SUBSCRIPTION:
411.00
411.00
CORELOGIC SOLUTIONS
CODE ENF
212996
7/27/2023
000864
CORONA CLAY COMPANY
SPECIALTY MIX BRICKDUST: PARKS
4,825.31
4,825.31
212997
7/27/2023
012600
DAVID EVANS AND
APR DSGN SVCS: DIAZ RD PROJ:
13,782.99
ASSOCIATES INC
PW17-25
ENG SVCS: PICKLEBALL COURTS: PW21
10,025.50
MAY DSGN SVCS: DIAZ RD PROJ: PW17-
6,870.52
CONST SPPRT SVC: MPSC OUTDOOR R
1,225.50
CONST SUPPORT SVC: RECYCLED WTR
480.50
32,385.01
212998
7/27/2023
002990
DAVID TURCH AND
JUN FEDERAL LOBBYING SVCS: CITY
5,500.00
5,500.00
ASSOCIATES
MGR
Page-1
apChkLst
07/27/2023
10:56:47AM
Final Check List
CITY OF TEMECULA
Page: 2
Bank:
union UNION BANK
(Continued)
Check #
Date
Vendor
Description
Amount Paid
Check Total
212999
7/27/2023
022798
DS SERVICES OF AMERICA
WATER DELIVERY: CMO
69.13
69.13
INC, SPARKLETTS
213000
7/27/2023
012066
GEOCON WEST INC
GEOTECHNICAL REVIEW: ALTAIR
542.50
FAULT: PLNG
GEOTECHNICAL REVIEW: ALTAIR FAULT:
514.50
1,057.00
213001
7/27/2023
019177
GOSCH FORD TEMECULA
VEHICLE REPAIRS: STREET MAINT:
5,376.20
5,376.20
PW
213002
7/27/2023
000186
HANKS HARDWARE INC
MISC MAINT SUPPLIES: CIVIC CTR
2,008.40
MISC HARDWARE SUPPLIES: FIRE DEPI
1,327.20
MAINT SUPPLIES: PARKS: PW
743.71
MAINT MAINT SUPPLIES: HARVESTON
609.45
HARDWARE SUPPLIES: LIBRARY
475.38
MISC HRDWR SUPPLIES: CODE ENFOR(
453.40
MISC MAINT SUPPLIES: OLD TOWN
209.94
MISC SMALL TOOLS & EQUIP: NPDES: P'
180.49
6,007.97
213003
7/27/2023
013749
HELIXSTORM INC
IT INFRASTRUCTURE SUPPORT: INFO
2,250.00
2,250.00
TECH
213004
7/27/2023
013321
HESS, JOHN PAUL
VIDEOGRAPHY SVCS: CITY MGR
957.50
957.50
213005
7/27/2023
003198
HOME DEPOT
HARDWARE SUPPLIES: STREET
978.63
978.63
MAINT: PW
213006
7/27/2023
011049
HOSPICE OF THE VALLEYS SC
CDBG REIMBURSEMENT: APR - JUN
997.14
997.14
'23
213007
7/27/2023
023448
IPERMITS
REFUND: PERMITS: BLDG & SAFETY
987.04
987.04
213008
7/27/2023
001282
KNORR SYSTEMS INC
POOL HEATER REBUILD: CRC
21,090.92
21,090.92
213009
7/27/2023
017118
KRACH BREE B, DBA
EMPLOYEE RECOGNITION: NEW HIRE
54.38
TEMECULA TROPHY& DES
EMPLOYEE RECOGNITION: AWARDS
53.29
107.67
213010
7/27/2023
019691
L C PAVING AND SEALING INC
RET REL: CONCRETE REPAIRS:
16,943.82
16,943.82
PW22-01
213011
7/27/2023
003782
MAIN STREET SIGNS, DBA
VARI SIGNS & SUPPLIES: PARKS: PW
115.82
115.82
ATHACO INC
213012
7/27/2023
023292
MGG TECHNOLOGIES INC
HELP DESK TICKETING & ASSET MNG
1,058.00
1,058.00
SW: IT
Paget
apChkLst Final Check List Page: 3
07/27/2023 10:56:47AM CITY OF TEMECULA
Bank:
union UNION BANK
(Continued)
Check #
Date
Vendor
Description
213013
7/27/2023
018099
NATIONAL SAFETY
DOT TESTING: HR
COMPLIANCE INC
213014
7/27/2023
022585
NORMAN A TRAUB &
WORKPLACE INVESTIGATIONS: HR
ASSOCIATES, LLC
213015
7/27/2023
000209
NUTRIEN AG SOLUTIONS INC
TOOL & EQUIP: STREET MAINT: PW
213016
7/27/2023
003964
OFFICE DEPOT BUSINESS SVS
MISC OFC SUPPLIES: LAND DEV: PW
DIV
MISC OFC SUPPLIES: NPDES: PW
MISC OFC SUPPLIES: CIP: PW
MISC OFC SUPPLIES: NPDES: PW
213017
7/27/2023
003663
PECHANGA BAND OF
MONITORING SVCS: I-15/FVP IMPRV:
LUISENO, MISSION INDIANS
PW16-01
213018
7/27/2023
022476
RICHERSON ANTHONY,
BLINDS: FIRE STA73
BUDGET BLINDS OF
TEMECULA
213019
7/27/2023
022715
RIVERSIDE CO PUBLIC
JUN EMERG RADIO RENTALS: POLICE
SAFETY, ENTERPRISE
COMMUNICATION
JUN EMERG RADIO RENTALS: CODE EN
213020
7/27/2023
000406
RIVERSIDE CO SHERIFFS
5/1-6/1 YOUTH COURT SVCS
DEPT
213021
7/27/2023
001097
ROADLINE PRODUCTS INC
TRAFFIC PAINT: STREET MAINT: PW
213022
7/27/2023
016778
ROW TRAFFIC SAFETY INC
TYPE 1 BARRICADES: PARKS: PW
213023
7/27/2023
013911
SANTA ROSA PLATEAU
FY 22/23 COMMUNITY SERVICE
FOUNDATION, DBASANTA
FUNDING
ROSA PLATEAU
213024
7/27/2023
019250
ST FRANCIS ELECTRIC LLC
ON -CALL TRAFFIC SIGNAL MAINT:
TRAFFIC: P
213025
7/27/2023
019018
SUNRUN INSTALLATION
REFUND: BLDG PERMITS: BLDG &
SRVCSINC
SAFETY
213026
7/27/2023
023445
T MOBILE WEST TOWER LLC
REFUND: LEASE OVERPAYMENT
213027
7/27/2023
008379
THE THEATER FOUNDATION
FY 22/23 COMMUNITY SERVICE
FUNDING
Amount Paid Check Total
407.80
407.80
6,815.00
6,815.00
890.79
890.79
100.30
78.28
30.44
13.23
222.25
16,943.60
16,943.60
4,227.81 4,227.81
1,893.31
388.35
2,281.66
274.16
274.16
4,452.19
4,452.19
2,925.61
2,925.61
5,000.00
5,000.00
8,020.76
8,020.76
1,473.60
1,473.60
144.48
144.48
33,750.00
33,750.00
Page3
apChkLst Final Check List Page: 4
07/27/2023 10:56:47AM CITY OF TEMECULA
Bank:
union UNION BANK
Check #
Date
Vendor
213028
7/27/2023
002702
USPS POC, ACCOUNT
8089685
213029
7/27/2023
014486
VERIZON WIRELESS
213030
7/27/2023
020670
WEBB MUNICIPAL FINANCE
LLC
213031
7/27/2023
017366
WESTERN FLOORING, INC.
(Continued)
Description
MAY'23 POSTAGE METER DEPOSIT
JUN '23 POSTAGE METER DEPOSIT
6/11-7/10 TASK FORCE TABLETS:
POLICE
PROF SVCS: TEMECULA COMM
MAILING: PW
REFINISH FLOOR: CRC: PW
Amount Paid Check Total
4,995.14
1,355.24
6,350.38
462.35
462.35
2,069.59
2,069.59
4,308.20
4,308.20
Grand total for UNION BANK:
2,153,373.96
Page:4
apChkLst Final Check List Page: 5
07/27/2023 10:56:47AM CITY OF TEMECULA
48 checks in this report.
Grand Total All Checks: 2,153,373.96
Page:5
apChkLst
08/01/2023
5:24:48PM
Final Check List
CITY OF TEMECULA
Page: 1
Bank : union UNION BANK
Check #
Date Vendor
Description
Amount Paid Check Total
15086
7/11/2023 021434
MATRIX TELECOM LLC DBA
JUN 800 SERVICES: CIVIC CENTER
67.50 67.50
LINGO
15087
7/14/2023 000262
RANCHO CALIF WATER
VARIOUS WATER JUN BATCH 1
52,368.39 52,368.39
DISTRICT
Grand total for UNION BANK: 52,435.89
Page:1
apChkLst
08/01/2023
5:24:48PM
Final Check List
CITY OF TEMECULA
Page: 2
Bank: eunion EFT UNION BANK
Check #
Date
Vendor
Description
Amount Paid
Check Total
505216
8/3/2023
023335
ASTER CONSTRUCTION,
CONST CONTRACT SVCS: MPSC
24,656.06
24,656.06
SERVICES INC
OUTDOOR REC AR
505217
8/3/2023
004248
CALIF DEPT OF JUSTICE
JUN FINGERPRINTING SVCS: POLICE
2,281.00
ACCTING
JUN FINGERPRINTING SVCS: TCSD
2,220.00
JUN BLOOD & ALCOHOL ANALYSIS:
1,295.00
JUN FINGERPRINTING SVCS: HR
196.00
5,992.00
505218
8/3/2023
022790
CLEARSTAR INC
PRE -EMPLOYMENT SCREENINGS: HR
811.71
PRE -EMPLOYMENT SCREENINGS: F
330.72
1,142.43
505219
8/3/2023
011870
CRIME SCENE STERI CLEAN
BIO-HAZARD CLEANUP: TEM SHERIFF
850.00
850.00
LLC
505220
8/3/2023
020648
DG INVESTMENT HOLDINGS 2
CITY SECURITY CAMERA SYST:
61,925.41
61,925.41
INC, CONVERGINT
FRIENDSHIP PA
TECHNOLOGIES
505221
8/3/2023
012217
DUDEK
CONSTRUCTION MGT SVCS: MPSC:
20,880.00
20,880.00
PW20-13
505222
8/3/2023
014865
FREIZE UHLER KIMBERLY DBA,
PROMOTIONAL ITEMS: SPEC EVENTS:
567.75
567.75
CLEAR BLUE PROMOTIONS
FIRE
505223
8/3/2023
021365
GEORGE HILLS COMPANY INC
SUBROGATION RECOVERY FEE: RISK
1,750.00
1,750.00
MGMT
505224
8/3/2023
015534
GOVERNMENT JOBS.COM INC,
REGIST: NEOGOV CONFERENCE: HR
3,972.00
3,972.00
DBA NEOGOV
505225
8/3/2023
006914
INNOVATIVE DOCUMENT
COLOR COPIER: WELCOME CENTER:
2,115.51
2,115.51
SOLUTIONS
INFO TECH
505226
8/3/2023
022671
JFL ELECTRIC INC
CNSTRCTN CONTRACT SVCS: FIBER
7,461.14
7,461.14
OPTIC SYS
505227
8/3/2023
004905
LIEBERT CASSIDY AND
JUN HR LEGAL SVCS FOR TE060-00001
892.50
892.50
WHITMORE
505228
8/3/2023
022664
MARIPOSA TREE
TREE SVCS: M-13 REDHAWK PARKWAY
34,843.61
34,843.61
MANAGEMENT INC
505229
8/3/2023
021370
MARK THOMAS AND COMPANY
JUN DSGN CONSULTANT SVCS:
7,147.50
7,147.50
INC
CHERRY ST EXT
505230
8/3/2023
004040
MORAMARCO ANTHONY J,
2ND SAT ART ROOM ACTIVITY: TVM
400.00
400.00
DBA BIGFOOT GRAPHICS
Paget
apChkLst Final Check List Page: 3
08/01/2023 5:24:48PM CITY OF TEMECULA
Bank: eunion EFT UNION BANK
Check # Date Vendor
505231 8/3/2023 002412 RICHARDS WATSON AND
GERSHON
505232 8/3/2023 005329 SAFE FAMILY JUSTICE
CENTERS
(Continued)
Description
Amount Paid Check Total
JUN 2023 LEGAL SERVICES
24,912.03
JUN 2023 LEGAL SERVICES
20,968.56
JUN 2023 LEGAL SERVICES
20,678.83
NOV 2022 LEGAL SERVICES
7,300.90
JUN 2023 LEGAL SERVICES
6,809.87
JUN 2023 LEGAL SERVICES
1,317.00
JUN 2023 LEGAL SERVICES
531.00
JUN 2023 LEGAL SERVICES
299.00 82,817.19
FY 2022-23 CDBG Subrecipient 3,719.82 3,719.82
505233
8/3/2023
023341
SMER RESEARCH 1 LLC
JUN SOLAR GENERATION: VARI
29,832.69
LOCATIONS
505234
8/3/2023
020545
SOCIAL WORK ACTION GROUP
JUN HOMELESS/STREET OUTREACH:
32,848.75
TCSD
JUN BRIDGE HOUSING/CDBG -CV: T
9,166.67
505235
8/3/2023
000519
SOUTH COUNTY PEST
PEST CONTROL SVCS: RYCREST &
94.00
CONTROL INC
VAILBROOK
505236
8/3/2023
010046
TV CONVENTION &VISITORS
MAY'23 BUS. IMPRV DISTRICT ASMNTS
228,300.47
BUREAU, DBA VISIT TEMECULA
VALLEY
505237
8/3/2023
020399
VOICES FOR CHILDREN
CDBG REIMBURSEMENT: APR-MAR'23
871.02
505238
8/3/2023
020275
WALLACE & ASSOC
JUN CONSTRUCTION MGMT SVCS:
378.00
CONSULTING LLC, ANSER
PW18-05
ADVISORY MNGMT LLC
Grand total for EFT UNION BANK:
29,832.69
42,015.42
94.00
228.300.47
871.02
378.00
562,624.52
Page:3
apChkLst Final Check List Page: 4
08/01/2023 5:24:48PM CITY OF TEMECULA
25 checks in this report.
Grand Total All Checks: 615,060.41
Page:4
apChkLst
08/03/2023
2:21:31PM
Final Check List
CITY OF TEMECULA
Page: 1
Bank:
union UNION BANK
Check #
Date
Vendor
Description
Amount Paid
Check Total
213032
8/3/2023
000101
APPLEONE INC, DBA
JUN TEMP HELP: COMM DEV
3,472.56
3,472.56
APPLEONE
213033
8/3/2023
021689
ASCENT ENVIRONMENTAL INC
SEIR: TEM VLY HOSPITAL: PA22-0105
430.00
430.00
213034
8/3/2023
004262
BIO TOX LABORATORIES
PHLEBOTOMY SERVICES: TEM
51.55
51.55
SHERIFF
213035
8/3/2023
003048
BOYS AND GIRLS CLUB, OF
CDBG FY 2022-23 Subrecipient Before
7,226.00
7,226.00
SOUTHWEST COUNTY
and
213036
8/3/2023
005970
BUTTERFIELD STAGE
FY 22/23 COMMUNITY SERVICE
12,000.00
12,000.00
PLAYERS, DBA TEMECULA
FUNDING
VALLEY
213037
8/3/2023
021851
CALIF NEWSPAPERS
LEGAL PUBLICATION NOTICES:
2,330.82
2,330.82
PARTNERSHIP, DBA SO CALIF
PLANNING
NEWS GROUP
213038
8/3/2023
009640
CERTIFION CORP DBA
JUN ONLINE DATABASE SUBSCR:
200.00
200.00
ENTERSECT
POLICE
213039
8/3/2023
016530
COMMUNITY MISSION OF
CDBG REIMBURSEMENT: JUL'22 - JUN
7,226.00
7,226.00
HOPE
'23
213040
8/3/2023
008943
DEPT OF GENERAL SERVICES
APPEALS: CITY CLERK
7,751.25
DGS
APPEALS: CITY CLERK
3,644.00
APPEALS: CITY CLERK
810.50
APPEALS: CITY CLERK
16,246.50
28,452.25
213041
8/3/2023
000164
ESGIL LLC
MAY PLAN CK SVCS: COMDEV
18,646.32
18,646.32
213042
8/3/2023
015330
FAIR HOUSING COUNCIL, OF
JUN SUB -RECIPIENT: FAIR HOUSING
1,502.71
1,502.71
RIVERSIDE COUNTY INC
SVCS
213043
8/3/2023
019469
FALCON ENGINEERING
CNSTCTN MGMT SVCS: I-15/FVP
345,539.32
345,539.32
SERVICES
IMPROV PH II
213044
8/3/2023
020474
JULIE NGO AGENCY
TEM GRANT PRGM: COMM
10,000.00
10,000.00
REINVESTMENT
213045
8/3/2023
002187
LAKE ELSINORE ANIMAL
JUN ANIMAL CONTROL SVCS:
10,500.00
10,500.00
FRIENDS, DBAANIMAL
TEMECULA
FRIENDS OF
Page:1
apChkLst Final Check List Page: 2
08/03/2023 2:21:31PM CITY OF TEMECULA
Bank: union UNION BANK
(Continued)
Check #
Date
Vendor
Description
Amount Paid
Check Total
213046
8/3/2023
005690
MICHELLES PLACE CANCER,
FY 22/23 COMMUNITY SERVICE
18,000.00
18,000.00
RESOURCE CENTER
FUNDING
213047
8/3/2023
007409
OLD TOWN DINING LLC
TEM GRANT PRGM: COMM
10,000.00
10,000.00
REINVESTMENT
213048
8/3/2023
020127
QUINN COMPANY
GENERATOR MAINT: STA73: FIRE
558.87
GENERATOR MAINT: STA92: FIRE
558.87
GENERATOR MAINT: STA84: FIRE
558.87
1,676.61
213049
8/3/2023
000418
RIVERSIDE CO CLERK AND,
CEQA FILINGS: CIP: PW18-16
50.00
50.00
RECORDER
213050
8/3/2023
014027
RIVERSIDE CO ECO DEV
STAFFING: LIBRARY
34,580.00
34,580.00
AGENCY, LIBRARY DIV
213051
8/3/2023
000406
RIVERSIDE CO SHERIFFS
06/01/23-06/30/23 LAW ENFORCEMENT
3,146,725.63
DEPT
05/04-05/31 LAW ENFORCEMENT
2,887,103.01
6,033,828.64
213052
8/3/2023
008910
ROSENSTEIN & ASSOCIATES
TEM GRANT PRGM: COMM
10,000.00
10,000.00
APLC
REINVESTMENT
213053
8/3/2023
019997
SPURLOCK LANDSCAPE
ARCHITECTURAL SVCS: TOC-231:
850.00
850.00
ARCHITECTS
PLNG
213054
8/3/2023
017814
STC TRAFFIC INC
TRAFFIC ENG SVCS: CITYWIDE
10,013.00
SIGNAL REVIEW
TRAFFIC ENG SVCS: SUPPORT SVC
2,625.00
TRAFFIC ENG SVCS: SUPPORT SVC
750.00
13,388.00
213055
8/3/2023
023221
SWCA INCORPORATED
CONSULT SVCS: WILDFIRE
8,901.75
8,901.75
PROTECTION PLAN
213056
8/3/2023
003599
T Y LIN INTERNATIONAL
JUN CONSULTING SVCS: FV
779.35
779.35
PKWY/I-15: PH II
213057
8/3/2023
000919
TEMECULA VALLEY UNIFIED
FY22/23 JOINT USE FIELD RENO
25,617.12
25,617.12
SCHOOL, DISTRICT
AGRMNT PMT
213058
8/3/2023
004124
TRUELINE CONSTRUCTION
TENNIS COURT MAINT: TV HIGH
70,152.84
70,152.84
AND, SURFACING INC
SCHOOL: PARK
213059
8/3/2023
014866
TWM ROOFING INC
ROOF REPAIRS: JRC & CIVIC CENTER
19,345.00
19,345.00
213060 8/3/2023 020670 WEBB MUNICIPAL FINANCE SPECIAL TAXADMIN FY 22/23 4TH QTR 11,441.05
LLC
SPECIAL TAX ADMIN: TCSD SRVC LE 10,083.38 21,524.43
Paget
apChkLst Final Check List Page: 3
08/03/2023 2:21:31PM CITY OF TEMECULA
Bank: union UNION BANK (Continued)
Check # Date Vendor Description Amount Paid Check Total
213061 8/3/2023 000339 WEST PUBLISHING JUN CLEAR SUBSCRIPTION: TEM 1,179.86 1,179.86
CORPORATION, DBATHOMSON SHERIFF
REUTERS
Grand total for UNION BANK: 6,717,451.13
Page:3
apChkLst Final Check List Page: 4
08/03/2023 2:21:31PM CITY OF TEMECULA
30 checks in this report.
Grand Total All Checks: 6,717,451.13
Page:4
Check# Check Date
Vendor# Vendor
Description
Invoice Net
600006 07/27/2023
2238 79 FIELD HOCKEY INC
TCSD INSTRUCTOR EARNINGS
$724.50
300024 08/03/2023
1411 AB MAILING SOLUTIONS
MAILING SVCS: THEATER BROCHURE: TCSD
$4,413.11
600020 08/03/2023
1512 ALLEGRO MUSICAL VENTURES
PIANO SVCS:THEATER:TCSD
$380.00
600021 08/03/2023
2233 ANN M HOWELL
GRAPHIC DESIGN SVCS: ECO DEV
$85.00
600007 07/27/2023
1805 AQUA CHILL OF SAN DIEGO
DRINKING WATER SRVCS:IT
$28.55
600008 07/27/2023
1980 B G P RECREATION INC
TCSD INSTRUCTOR EARNINGS
$2,821.70
600008 07/27/2023
1980 B G P RECREATION INC
TCSD INSTRUCTOR EARNINGS
$1,362.20
600008 07/27/2023
1980 B G P RECREATION INC
TCSD INSTRUCTOR EARNINGS
$300.30
600022 08/03/2023
1980 B G P RECREATION INC
TCSD INSTRUCTOR EARNINGS
$2,720.90
600022 08/03/2023
1980 B G P RECREATION INC
TCSD INSTRUCTOR EARNINGS
$1,913.56
600022 08/03/2023
1980 B G P RECREATION INC
TCSD INSTRUCTOR EARNINGS
$273.00
300005 07/27/2023
1383 BALLET FOLKLORICO
TCSD INSTRUCTOR EARNINGS
$150.00
600009 07/27/2023
3122 BEARD, RYAN
TCSD INSTRUCTOR EARNINGS
$1,764.00
600023 08/03/2023
3122 BEARD, RYAN
TCSD INSTRUCTOR EARNINGS
$1,690.50
600023 08/03/2023
3122 BEARD, RYAN
TCSD INSTRUCTOR EARNINGS
$1,764.00
300025 08/03/2023
2935 BETTS, KENNETH
TCSD INSTRUCTOR EARNINGS
$700.00
300025 08/03/2023
2935 BETTS, KENNETH
TCSD INSTRUCTOR EARNINGS
$700.00
600010 07/27/2023
2541 BRIGHTON HILL ACADEMY SPORTS & LEARNING ACADEMY
TCSD INSTRUCTOR EARNINGS
$1,960.00
600024 08/03/2023
2541 BRIGHTON HILL ACADEMY SPORTS & LEARNING ACADEMY
TCSD INSTRUCTOR EARNINGS
$1,764.00
600011 07/27/2023
2622 BROWN JAMAL DEON
TCSD INSTRUCTOR EARNINGS
$1,566.25
600011 07/27/2023
2622 BROWN JAMAL DEON
TCSD INSTRUCTOR EARNINGS
$1,449.00
600011 07/27/2023
2622 BROWN JAMAL DEON
TCSD INSTRUCTOR EARNINGS
$1,071.00
600011 07/27/2023
2622 BROWN JAMAL DEON
TCSD INSTRUCTOR EARNINGS
$1,837.50
600025 08/03/2023
2622 BROWN JAMAL DEON
TCSD INSTRUCTOR EARNINGS
$1,260.00
600025 08/03/2023
2622 BROWN JAMAL DEON
TCSD INSTRUCTOR EARNINGS
$2,100.00
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$1,680.00
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$627.20
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$588.00
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$735.00
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$686.00
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$1,008.00
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$1,243.20
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$621.60
600027 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$336.00
600027 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$362.60
600027 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$358.40
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$448.00
600027 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$327.04
600026 08/03/2023
2836 BRYANT, ROBERT
TCSD INSTRUCTOR EARNINGS
$2,576.00
300026 08/03/2023
3178 CARDOSO DENYS CA
PERF: CULTURE DAY: 07/07/23
$500.00
300006 07/27/2023
1280 CDW LLC
MISC SMALL TOOLS& EQUIP:IT
$82.05
600012 07/27/2023
1280 CDW LLC
MISC SMALL TOOLS& EQUIP:IT
$384.98
300007 07/27/2023
3138 CHING-YUN HU
DEPOSIT FOR PERFORMACE
$2,750.00
600028 08/03/2023
2030 CIVICPLUS LLC
RECREATION MNG SOFTWARE:TCSD
$32,201.34
600029 08/03/2023
1771 COSSOU, CELINE
TCSD INSTRUCTOR EARNINGS
$1,487.50
600029 08/03/2023
1771 COSSOU, CELINE
TCSD INSTRUCTOR EARNINGS
$2,100.00
300008 07/27/2023
1268 COSTCO TEMECULA 491
MISCSUPPLIES: MRC, MPSC & SFSP
$380.79
300008 07/27/2023
1268 COSTCOTEMECULA491
MISC SUPPLIES: SFSP
$1,017.58
300008 07/27/2023
1268 COSTCO TEMECULA 491
MISC SUPPLIES: SFSP
$1,333.77
300027 08/03/2023
1268 COSTCOTEMECULA 491
MISCSUPPLIES: MRC MPSC & SFSP
$1,617.35
600013 07/27/2023
2004 COX, KRISTI LYN
TCSD INSTRUCTOR EARNINGS
$75.00
600014 07/27/2023
1254 DOWNS ENERGY FUEL
FUEL FOR CITY VEHICLES: PARK MAINT: PW
$2,110.25
600030 08/03/2023
1254 DOWNS ENERGY FUEL
FUEL FOR CITY VEHICLES: STREETS: PW
$1,409.97
600030 08/03/2023
1254 DOWNS ENERGY FUEL
FUEL FOR CITY VEHICLES: PARK MAINT
$2,542.23
600030 08/03/2023
1254 DOWNS ENERGY FUEL
FUEL FOR CITY VEHICLES: TCSD
$557.84
600030 08/03/2023
1254 DOWNS ENERGY FUEL
FUEL FOR CITY VEHICLES: INFO TECH
$93.77
600030 08/03/2023
1254 DOWNS ENERGY FUEL
FUEL FOR CITY VEHICLES: STREET MAINT
$1,756.63
600031 08/03/2023
1243 ECALDRE MANALILI DE VILLA AILEEN
TCSD INSTRUCTOR EARNINGS
$150.00
300028 08/03/2023
3210 EMH SPORTS USA INC
TCSD INSTRUCTOR EARNINGS
$2,730.00
300028 08/03/2023
3210 EMH SPORTS USA INC
TCSD INSTRUCTOR EARNINGS
$2,240.00
300028 08/03/2023
3210 EMH SPORTS USA INC
TCSD INSTRUCTOR EARNINGS
$3,360.00
300029 08/03/2023
1703 FAITH AUTO GLASS & TINTING
WINDOWSHIELD REPAIR: HUMAN SVCS VAN
$340.29
300030 08/03/2023
1005 FEDERAL EXPRESS INC
EXPRESS MAIL SVCS: THEATER: TCSD
$13.85
600032 08/03/2023
1219 FINE ARTS NETWORK
TICKET SALES ADVANCE: LITTLE MERMAID
$17,000.00
600033 08/03/2023
1219 FINE ARTS NETWORK THEATRE CO, AND BALLET THEATER
STTLMNT: DISNEY'S LITTLE MERMAID
$2,608.71
300009 07/27/2023
1497 FULL COMPASS SYSTEMS
SOUND/LIGHTING SUPPLIES:THEATER:TCSD
$768.05
300010 07/27/2023
2239 GRANICUS LLC
AGENDA MGMT RENEWAL: CITY CLERK
$64,428.34
300011 07/27/2023
1791 HELIXSTORM INC
SECURITY SYSTEM SWITCHES SUPPORT: IT
$14,270.00
600015 07/27/2023
1585 1 P C INDUSTRIES INC
GOLF CART RENTALS: TCSD
$2,572.10
600015 07/27/2023
1585 1 P C INDUSTRIES INC
GOLF CART RENTALS: TCSD
$978.75
300031 08/03/2023
2076 ICMA
MEMBERSHIP RENEWAL CITY MGR OFC
$1,200.00
300013 07/27/2023
1934 MID AMERICA ARTS ALLIANCE
TVM EXHIBIT: WALKING IN ANTARTICA
$5,250.00
600016
07/27/2023
1241
MISSION ELECTRIC SUPPLY INC
ELECTRICAL SUPPLIES: CITY HALL: PW
$114.19
600016
07/27/2023
1241
MISSION ELECTRIC SUPPLY INC
ELECTRICAL SUPPLIES: LIBRARY: PW
$67.21
600016
07/27/2023
1241
MISSION ELECTRIC SUPPLY INC
ELECTRICAL SUPPLIES: CRC: PW
$249.04
600034
08/03/2023
1241
MISSION ELECTRIC SUPPLY INC
ELECTRICAL SUPPLIES: SENIOR CENTER: PW
$23.84
600017
07/27/2023
1118
MIYAMOTO JURKOSKY SUSAN
TCSD INSTRUCTOR EARNINGS
$318.50
600035
08/03/2023
1118
MIYAMOTO JURKOSKY SUSAN
TCSD INSTRUCTOR EARNINGS
$364.00
600035
08/03/2023
1118
MIYAMOTO JURKOSKY SUSAN
TCSD INSTRUCTOR EARNINGS
$364.00
600036
08/03/2023
1240
MORAMARCO ANTHONYJ
TCSD INSTRUCTOR EARNINGS
$500.00
600036
08/03/2023
1240
MORAMARCO ANTHONYJ
TCSD INSTRUCTOR EARNINGS
$2,522.63
600036
08/03/2023
1240
MORAMARCO ANTHONYJ
TCSD INSTRUCTOR EARNINGS
$2,658.25
600036
08/03/2023
1240
MORAMARCO ANTHONYJ
TCSD INSTRUCTOR EARNINGS
$1,519.00
600036
08/03/2023
1240
MORAMARCO ANTHONYJ
TCSD INSTRUCTOR EARNINGS
$500.00
300013
07/27/2023
1375
NORTH JEFFERSON BUSINESS PARK
JUL-SEP'23 ASSN DUES 8329 #17: FV
$531.43
300013
07/27/2023
1375
NORTH JEFFERSON BUSINESS PARK
JUL-SEP ASSN DUES 8358 #20: FV
$722.04
300013
07/27/2023
1375
NORTH JEFFERSON BUSINESS PARK
JUL-SEP'23 ASSN DUES 1810 #16: fv
$571.82
300013
07/27/2023
1375
NORTH JEFFERSON BUSINESS PARK
JUL-SEP'23 ASSN DUES 0155 #19: FV
$694.58
300014
07/27/2023
1835
PROQUEST LLC
ANCESTRY SOFTWARE RENEWAL:LIBRARY
$1,262.58
300015
07/27/2023
1134
RANCHO CALIF BUS PK ASSOC
JUL SEP BUS PK ASSN DUE DIAZ RD
$2,236.38
300015
07/27/2023
1134
RANCHO CALIF BUS PK ASSOC
JUL SEP BUS PK ASSN DUE FOC
$2,027.49
300015
07/27/2023
1134
RANCHO CALIF BUS PK ASSOC
JUL SEP BUS PK ASSN DUE DIAZ RD
$2,457.55
300032
08/03/2023
2431
EMPLOYEE # 00590
TEAM PACE PRIZE CLAIM: FINANCE
$196.26
600037
08/03/2023
2008
SARNOWSKI SHAWNA M PRESTON
PHOTOGRAPHY SVCS: MUSEUM/ACE
$275.00
600037
08/03/2023
2008
SARNOWSKI SHAWNA M PRESTON
PHOTOGRAPHY SVCS: MUSEUM/ACE
$275.00
600037
08/03/2023
2008
SARNOWSKI SHAWNA M PRESTON
PHOTOGRAPHY SVCS: SPECIAL EVENTS
$400.00
300016
07/27/2023
1168
SEA WORLD OF CALIFORNIA
SUMMER DAY CAMP EXCURSION: TCSD
$3,058.30
600038
08/03/2023
1780
SILVERMAN ENTERPRISES INC
SECURITY: SPECIAL EVENTS: TCSD
$5,731.50
600018
07/27/2023
1061
SMART AND FINAL INC
MISC SUPPLIES: MPSC: TCSD
$352.45
600018
07/27/2023
1061
SMART AND FINAL INC
MISC SUPPLIES: SFSP: TCSD
$285.75
600039
08/03/2023
1061
SMART AND FINAL INC
MISC SUPPLIES: SFSP: TCSD
$262.58
600039
08/03/2023
1061
SMART AND FINAL INC
MISC SUPPLIES: WORKFORCE DEV: TCSD
$183.48
300019
07/27/2023
1028
STADIUM PIZZA
RFRSHMNTS: CRC: TCSD
$285.35
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$198.64
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$175.85
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$185.94
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$172.34
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$159.25
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$76.56
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$215.06
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$181.18
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$58.61
300018
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$67.74
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$69.34
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$146.62
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$150.93
300017
07/27/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: WORKFORCE DEV: TCSD
$206.59
300033
08/03/2023
1028
STADIUM PIZZA INC
RFRSHMNTS: AQUATICS: TCSD
$525.83
300034
08/03/2023
1452
STAPLES BUSINESS CREDIT
MISC OFC SUPPLIES: OPERATIONS: TCSD
$225.38
300035
08/03/2023
1495
STURDIVANT, ANGELA P
TCSD INSTRUCTOR EARNINGS
$2,352.00
300020
07/27/2023
1453
SUNBELT RENTALS INC
LIGHT TOWER/ POWER RENTALS: TCSD
$3,288.01
300036
08/03/2023
1453
SUNBELT RENTALS INC
LIGHT TOWER/ POWER RENTALS: TCSD
$11,761.57
300037
08/03/2023
3179
TEMECULA AUTO GLASS INC
WINDSHIELD INSTALL: STREET MAINT: PW
$560.31
600040
08/03/2023
1063
TIMMY D PRODUCTIONS INC
DJ SVCS: CULTURE DAYS AND ART NIGHTS MUSIC
$850.00
600040
08/03/2023
1063
TIMMY D PRODUCTIONS INC
DJ/MC/SOUND SERVICES: SPECIAL EVENTS
$1,000.00
600040
08/03/2023
1063
TIMMY D PRODUCTIONS INC
DJ/MC/SOUND SERVICES: SPECIAL EVENTS
$45,012.00
600041
08/03/2023
2421
TITAN RENTALS GROUP INC
TITAN RENTALS: CANOPIES & EQUIPMENT: SPECIAL EVENI
$4,076.86
600041
08/03/2023
2421
TITAN RENTALS GROUP INC
TITAN RENTALS: CANOPIES & EQUIPMENT: SPECIAL EVENI
$4,974.65
600019
07/27/2023
2089
TNT ENTERTAINMENT GROUP LLC
DJ/MC/SOUND SERVICES: TCSD
$4,300.00
600042
08/03/2023
2410
EMPLOYEE # 00534
REIMB: TEAM PACE
$139.84
300038
08/03/2023
2827
TRANSPORTATION CHARTER SRVS
SDC TRANSPORTATION 7/6/23
$4,851.54
600043
08/03/2023
2142
URBANE CAFE
RFRSHMNTS: TVM/ACE EVENTS
$308.19
600043
08/03/2023
2142
URBANE CAFE
RFRSHMNTS: WORKSHOPS: TVE2
$265.23
600043
08/03/2023
2142
URBANE CAFE
REFRESHMNTS: MEETINGS: TVE2
$188.68
600044
08/03/2023
2077
VILLANUEVA, CHRISTOPHER
TCSD INSTRUCTOR EARNINGS
$1,417.50
600044
08/03/2023
2077
VILLANUEVA, CHRISTOPHER
TCSD INSTRUCTOR EARNINGS
$1,512.00
600044
08/03/2023
2077
VILLANUEVA, CHRISTOPHER
TCSD INSTRUCTOR EARNINGS
$1,134.00
600044
08/03/2023
2077
VILLANUEVA, CHRISTOPHER
TCSD INSTRUCTOR EARNINGS
$850.50
600045
08/03/2023
2034
WADDLETON, JEFFREY L
TCSD INSTRUCTOR EARNINGS
$1,059.10
600045
08/03/2023
2034
WADDLETON, JEFFREY L
DJ/MC: SPECIAL EVENTS: TCSD
$525.00
300021
07/27/2023
1439
WALMART
MISC SUPPLIES: CRC: TCSD
$576.22
300021
07/27/2023
1439
WALMART
MISC SUPPLIES: CRC: TCSD
$152.26
300021
07/27/2023
1439
WALMART
MISC SUPPLIES: CRC: TCSD
$58.33
300022
07/27/2023
1439
WALMART
MISC SUPPLIES: CRC: TCSD
$684.12
300021
07/27/2023
1439
WALMART
MISC SUPPLIES: RESPONSIBLE COMPASSION: TCSD
$483.44
300021
07/27/2023
1439 WALMART
MISC SUPPLIES: WORKFORCE DEV PROGRAM: TCSD
$376.12
300039
08/03/2023
1439 WALMART
MISC SUPPLIES: CRC: TCSD
$635.51
300039
08/03/2023
1439 WALMART
MISC SUPPLIES: CRC: TCSD
$26.46
300039
08/03/2023
1439 WALMART
MISC SUPPLIES: CRC: TCSD
$386.78
300039
08/03/2023
1439 WALMART
MISC SUPPLIES: CRC: TCSD
$814.93
300023
07/27/2023
2069 WONDER SCIENCE
TCSD INSTRUCTOR EARNINGS
$4,816.00
300023
07/27/2023
2069 WONDER SCIENCE
TCSD INSTRUCTOR EARNINGS
$4,620.00
300023
07/27/2023
2069 WONDER SCIENCE
TCSD INSTRUCTOR EARNINGS
$4,732.00
300040
08/03/2023
2069 WONDER SCIENCE
TCSD INSTRUCTOR EARNINGS
$4,704.00
Total Munis
$364,026.46
Item No. 4
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Jennifer Hennessy, Director of Finance
DATE: August 22, 2023
SUBJECT: Approve City Treasurer's Report as of May 31, 2023
PREPARED BY: Jordan Snider, Senior Accountant
RECOMMENDATION: That the City Council approve and file the City Treasurer's Report
as of May 31, 2023.
BACKGROUND: Government Code Sections 53646 and 41004 require reports to the
City Council regarding the City's investment portfolio, receipts, and disbursements respectively.
Adequate funds will be available to meet budgeted and actual expenditures of the City for the next
six months. Current market values are derived from the Local Agency Investment Fund (LAIF)
reports, Union Bank of California trust and custody statements, and from US Bank trust statements.
Attached is the City Treasurer's Report that provides this information.
The City's investment portfolio is in compliance with the statement of investment policy and
Government Code Sections 53601 and 53635 as of as of May 31, 2023.
FISCAL IMPACT: None
ATTACHMENTS: City Treasurer's Report as of May 31, 2023
'tll
LLJ149
Investments
City of Temecula
Portfolio Managment Treasury Report 41000 Main Street
Portfolio Management Temecula, 92590
g (951)694-6430
Portfolio Summary
May 31, 2023
Par
Market
Book
% of
Days to
YTM
YTM
Value
Value
Value
Portfolio
Term Maturity
360 Equiv.
365 Equiv.
Managed Pool Accounts
34,223,086.64
34,223,086.64
34,223,086.64
16.52
1
1
4.051
4.108
Letter of Credit
3.00
3.00
3.00
0.00
1
1
0.000
0.000
Trust Accounts
14,145,986.69
14,145,986.69
14,145,986.69
6.83
1
1
0.533
0.540
Local Agency Investment Funds
102,553,388.43
101,169,976.97
102,553,388.43
49.52
1
1
0.249
0.252
Money Market
6,907,992.90
6,907,992.90
6,907,992.90
3.34
1
1
2.091
2.120
Medium Term Notes
12,000,000.00
11,673,170.00
11,638,260.00
5.62
717
490
4.691
4.756
Federal Agency Callable Securities
17,000,000.00
15,569,730.00
16,997,500.00
8.21
1,590
868
0.723
0.733
Treasury Coupon Securities
15,000,000.00
14,763,620.00
14,705,937.51
7.10
493
286
4.415
4.476
Federal Agency Bullet Securities
5,000,000.00
4,892,550.00
4,945,480.00
2.39
898
191
1.969
1.996
Supranational
1,000,000.00
981,030.00
985,430.00
0.48
634
396
4.069
4.126
207,830,457.66
204,327,146.20
207,103,065.17
100.00%
231
126
1.601
1.624
Investments
Cash
Passbook/Checking 27,993,101.78 27,993,101.78 27,993,101.78 1 1 0.000 0.000
(not included in yield calculations)
Total Cash and Investments 235,823,559.44 232,320,247.98 235,096,166.95 231 126 1.601 1.624
Total Earnings
Current Year
Average Daily Balance
Effective Rate of Return
May 31 Month Ending
223,286.75
215,386,448.40
1.22%
Fiscal Year To Date
2,019,032.45
217,774,984.78
1.01 %
Reporting period 05/01/2023-05/31/2023 Portfolio TEME
Data Updated: SET_MTH: 08/07/2023 09:09 NL! CP
Run Date: 08/07/2023 - 09:09 PM (PRF_PM1) 7.3.0
Report Ver. 7.3.6.1
Portfolio Managment Treasury Report
Portfolio Management
Portfolio Details - Investments
May 31, 2023
Page 1
Average
Purchase
Stated
YTM
YTM
Days to Maturity
CUSIP
Investment #
Issuer Balance
Date
Par Value
Market Value
Book Value
Rate
360
365 Maturity Date
Managed Pool Accounts
233358001-6
01-2 BOND F
First Amer Govt Oblig Fund Cl
57.11
57.11
57.11
4.920
4.853
4.920
1
233358006-6
01-2 REF RES
First Amer Govt Oblig Fund Cl
503,823.01
503,823.01
503,823.01
4.930
4.862
4.930
1
233358000-6
01-2 REF ST
First Amer Govt Oblig Fund Cl
185,996.79
185,996.79
185,996.79
4.930
4.862
4.930
1
233358005-1
01-2 SPECF
First Amer Govt Oblig Fund Cl
09/30/2022
12,238.41
12,238.41
12,238.41
4.930
4.862
4.930
1
276213009-6
03-02 COI
First Amer Govt Oblig Fund Cl
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
276213008-6
03-02 IMPR
First Amer Govt Oblig Fund Cl
748.58
748.58
748.58
4.930
4.862
4.930
1
276213006-6
03-02 RES
First Amer Govt Oblig Fund Cl
762,380.15
762,380.15
762,380.15
4.930
4.862
4.930
1
164741029-0
03-03 22 COI
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
4.060
4.004
4.060
1
164741028-0
03-03 22 IF
First Amer Govt Oblig Fund Cl
199,849.28
199,849.28
199,849.28
4.930
4.862
4.930
1
164741010-0
03-03 22 SPE
First Amer Govt Oblig Fund Cl
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
164741026-6
03-03 22 SRB
First Amer Govt Oblig Fund Cl
424,497.27
424,497.27
424,497.27
4.930
4.862
4.930
1
164741020-0
03-03 22 STIR
First Amer Govt Oblig Fund Cl
598,924.39
598,924.39
598,924.39
4.930
4.862
4.930
1
164741002-6
03-03 BOND F
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.620
0.612
0.620
1
164741022
03-03 STRB
First Amer Govt Oblig Fund Cl
08/01/2022
2.20
2.20
2.20
5.000
4.932
5.000
1
164741008-6
03-03IMP
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.620
0.612
0.620
1
164741006-6
03-03RES
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.180
0.178
0.180
1
164741000-6
03-03SPEC
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.620
0.612
0.620
1
164742002-6
03-06 BOND F
First Amer Govt Oblig Fund Cl
88.12
88.12
88.12
4.920
4.853
4.920
1
164742000-6
03-06SPEC
First Amer Govt Oblig Fund Cl
155,574.65
155,574.65
155,574.65
4.930
4.862
4.930
1
229462007-6
03-1 2012 RF
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
229462002--6
03-1 BOND FD
First Amer Govt Oblig Fund Cl
0.01
0.01
0.01
4.330
4.271
4.330
1
229462009-6
03-1 COI
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
229462006-6
03-1 RESERV
First Amer Govt Oblig Fund Cl
17,723.29
17,723.29
17,723.29
4.930
4.862
4.930
1
229462000-6
03-1 SPECF
First Amer Govt Oblig Fund Cl
389,310.28
389,310.28
389,310.28
4.930
4.862
4.930
1
94669921-6
03-1ACQ11
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.870
0.858
0.870
1
94669911-6
03-1ACQA11
First Amer Govt Oblig Fund Cl
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
94669917-6
03-1 RES
First Amer Govt Oblig Fund Cl
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
94669916-6
03-1 RESB11
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
94669000-6
03-1 SPTAX11
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
276213002-6
03-2 REFU
First Amer Govt Oblig Fund Cl
2.32
2.32
2.32
4.740
4.675
4.740
1
276213000-6
03-2 SPEC
First Amer Govt Oblig Fund Cl
325,210.32
325,210.32
325,210.32
4.930
4.862
4.930
1
94686001-6
034ADMIN11
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.060
0.059
0.060
1
94686005-6
034PREP11
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.070
0.069
0.070
1
94686000-6
034RED11
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.050
0.049
0.050
1
94686006-6
034RES11
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.060
0.059
0.060
1
276213022-6
16-01 BOND F
First Amer Govt Oblig Fund Cl
0.18
0.18
0.18
5.560
5.484
5.560
1
Data Updated: SET_MTH: 08/07/2023 09:09
Run Date: 08/07/2023 - 09:09
Portfolio TEME
NL! CP
PM (PRF_PM2) 7.3.0
Report Ver. 7.3.6.1
Portfolio Managment Treasury Report
Portfolio Management
Portfolio Details - Investments
May 31, 2023
Page 2
Average
Purchase
Stated
YTM
YTM
Days to Maturity
CUSIP
Investment #
Issuer Balance
Date
Par Value
Market Value
Book Value
Rate
360
365 Maturity Date
Managed Pool Accounts
276213033
16-01 CAPIN2
First Amer Govt Oblig Fund Cl
03/01/2023
138,689.50
138,689.50
138,689.50
4.930
4.862
4.930
1
276213023-6
16-01 CAPINT
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.870
0.858
0.870
1
276213029-6
16-01 COI
First Amer Govt Oblig Fund Cl
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
276213039
16-01 C012
First Amer Govt Oblig Fund Cl
03/01/2023
102,961.51
102,961.51
102,961.51
4.930
4.862
4.930
1
276213028-6
16-01 IMP
First Amer Govt Oblig Fund Cl
1,955,009.76
1,955,009.76
1,955,009.76
4.930
4.862
4.930
1
276213038
16-01 IMPF2
First Amer Govt Oblig Fund Cl
03/01/2023
7,569,834.24
7,569,834.24
7,569,834.24
4.930
4.862
4.930
1
276213026-6
16-01 RESERV
First Amer Govt Oblig Fund Cl
3,212,813.33
3,212,813.33
3,212,813.33
4.930
4.862
4.930
1
276213020-6
16-01SPECF
First Amer Govt Oblig Fund Cl
1,149,860.03
1,149,860.03
1,149,860.03
4.930
4.862
4.930
1
276213025-1
16-01 SPECTF
First Amer Govt Oblig Fund Cl
09/30/2022
22,408.39
22,408.39
22,408.39
4.930
4.862
4.930
1
276213036
16-01 RESF2
First Amer Govt Oblig Fund Cl
03/01/2023
247,211.45
247,211.45
247,211.45
4.930
4.862
4.930
1
218848001-6
2017A&B INT
First Amer Govt Oblig Fund Cl
0.97
0.97
0.97
5.150
5.079
5.150
1
218848008-6
2017ABPRIORP
First Amer Govt Oblig Fund Cl
18,488.64
18,488.64
18,488.64
4.930
4.862
4.930
1
218848013-2
2017B COI
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
218848000-6
2017B DS
First Amer Govt Oblig Fund Cl
1,461,689.66
1,461,689.66
1,461,689.66
4.930
4.862
4.930
1
218848002-6
2017B PRIN
First Amer Govt Oblig Fund Cl
6.80
6.80
6.80
5.000
4.932
5.000
1
218848009-6
2017B_PROJ
First Amer Govt Oblig Fund Cl
5,327,651.57
5,327,651.57
5,327,651.57
4.930
4.862
4.930
1
233358009-6
233358009-6
First Amer Govt Oblig Fund Cl
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
94434160-6
RDA-021NT
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
94434161-6
RDA-02PRIN
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
107886000-6
RDA-06AINT
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
107886001-6
RDA06APRIN
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
107886010-6
RDA06BINT
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
107886011-6
RDA06BPRIN
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.680
0.671
0.680
1
107886016-6
RDA06BRES
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.940
0.927
0.940
1
107886020-6
RDA071NT
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
107886021-6
RDA07PRIN
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.930
0.917
0.930
1
107886028-6
RDA07PROJ
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.940
0.927
0.940
1
107886026-6
RDA07RES
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.940
0.927
0.940
1
136343008-6
RDA10APROJ
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
136343018-6
RDA10BPROJ
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
136343000-6
RDA10INT
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
136343001-6
RDA10PRIN
First Amer Govt Oblig Fund Cl
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
136343006-6
RDA10RSRV
First Amer Govt Oblig Fund Cl
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
146161000-6
RDA11AINT
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
146161001-6
RDA11APRIN
First Amer Govt Oblig Fund Cl
0.00
0.00
0.00
0.000
0.000
1
94669902-3
03-1 BOND3
First American Treasury
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
Data Updated: SET_MTH: 08/07/2023 09:09
Run Date: 08/07/2023 - 09:09
Portfolio TEME
NL! CP
PM (PRF_PM2) 7.3.0
Portfolio Managment Treasury Report
Portfolio Management
Portfolio Details - Investments
May 31, 2023
Page 3
CUSIP
Investment #
Average
Issuer Balance
Purchase
Date
Par Value
Market Value
Book Value
Stated
Rate
YTM
360
YTM Days to Maturity
365 Maturity Date
Managed Pool Accounts
94434160-1
RDA 02 INT1
First American Treasury
0.00
0.00
0.00
0.010
0.010
0.010
1
94434161-2
RDA 02 PRIN2
First American Treasury
0.00
0.00
0.00
0.010
0.010
0.010
1
136343018-2
RDA 10B CIP2
First American Treasury
0.00
0.00
0.00
0.010
0.010
0.010
1
146161008-3
RDA11APROJ
Federated Institutional Tax Fr
0.00
0.00
0.00
0.800
0.789
0.800
1
146161006-3
RDA11ARSRV
Federated Institutional Tax Fr
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
94669921-5
03-01 ACQ11
Federated Tax Free Obligations
0.00
0.00
0.00
0.250
0.247
0.250
1
94669911-5
03-01 ACQA11
Federated Tax Free Obligations
0.00
0.00
0.00
0.250
0.247
0.250
1
94669917-5
03-01 RES
Federated Tax Free Obligations
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
94669906-5
03-01 RESA11
Federated Tax Free Obligations
0.00
0.00
0.00
0.001
0.001
0.001
1
94669916-5
03-01 RESB11
Federated Tax Free Obligations
0.00
0.00
0.00
0.250
0.247
0.250
1
94669000-5
03-01SPTAX11
Federated Tax Free Obligations
0.00
0.00
0.00
0.250
0.247
0.250
1
164742006-5
03-06 RES
Federated Tax Free Obligations
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
164742000-5
03-06 SPEC
Federated Tax Free Obligations
0.00
0.00
0.00
0.250
0.247
0.250
1
94669902-5
03-1 bond fd
Federated Tax Free Obligations
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
94686001-5
034 ADMIN11
Federated Tax Free Obligations
0.00
0.00
0.00
0.250
0.247
0.250
1
94686005-5
034 PREP11
Federated Tax Free Obligations
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
94686006-5
034 RES11
Federated Tax Free Obligations
0.00
0.00
0.00
0.250
0.247
0.250
1
94669917-1
03-01-1 RES
CA Local Agency Investment Fun
0.00
0.00
0.00
0.339
0.334
0.339
1
276213008-1
03-02 IMP
CA Local Agency Investment Fun
8,296,399.88
8,296,399.88
8,296,399.88
2.010
1.982
2.010
1
164742006-1
03-06 RES-1
CA Local Agency Investment Fun
312,326.88
312,326.88
312,326.88
4.930
4.862
4.930
1
229462007-1
03-1 2012 RE
CA Local Agency Investment Fun
831,306.78
831,306.78
831,306.78
0.221
0.218
0.221
1
94669911-1
03-1 ACQ A2
CA Local Agency Investment Fun
0.00
0.00
0.00
0.339
0.334
0.339
1
94669921-1
03-1 ACQ B2
CA Local Agency Investment Fun
0.00
0.00
0.00
0.339
0.334
0.339
1
744727011-1
03-3 ACQ 2
CA Local Agency Investment Fun
0.00
0.00
0.00
0.339
0.334
0.339
1
164741006-1
0303-1 RES
CA Local Agency Investment Fun
0.00
0.00
0.00
0.620
0.612
0.620
1
107886028-1
RDA 07 PRO-1
CA Local Agency Investment Fun
0.00
0.00
0.00
0.339
0.334
0.339
1
107886026-1
RDA 07 RES-1
CA Local Agency Investment Fun
0.00
0.00
0.00
0.339
0.334
0.339
1
136343018-1
RDA 10B CIP1
CA Local Agency Investment Fun
0.00
0.00
0.00
0.339
0.334
0.339
1
229462020-0
03-01 CASH
USBANK
0.89
0.89
0.89
0.000
0.000
1
164742006-0
03-06 Cash
USBANK
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
233358050-1
01-2 SPECESC
U.S. Treasury
0.00
0.00
0.00
0.360
0.355
0.360
1
Subtotal
and Average 33,203,682.11
34,223,086.64
34,223,086.64
34,223,086.64
4.051
4.108
1
Retention Escrow Account
NOBEL COMPANY
3354
Banner Bank
0.00
0.00
0.00
0.150
0.148
0.150
1
Portfolio TEME
Data Updated: SET_MTH:
08/07/2023
09:09
NL! CP
Run Date: 08/07/2023 - 09:09
PM (PRF_PM2) 7.3.0
Portfolio Managment Treasury Report
Portfolio Management
Portfolio Details - Investments
May 31, 2023
Page 4
Average
Purchase
Stated
YTM
YTM
Days to Maturity
CUSIP
Investment # Issuer Balance
Date
Par Value
Market Value
Book Value Rate
360
365 Maturity Date
Retention Escrow
Account
218848050-0
2002 ESCROW USBANK
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
218848060-0
2006AESCRO USBANK
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
218848070-0
2006BESCRO USBANK
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
218848080-0
2007ESCROW USBANK
07/01/2022
0.00
0.00
0.00
0.000
0.000
1
229462020-2
03-01 ESCROW U.S. Treasury
0.00
0.00
0.00 0.063
0.062
0.063
1
Subtotal and Average 0.00
0.00
0.00
0.00
0.000
0.000
0
Letter of Credit
164741026-1
03-03 22 Res ASSURED GUARANTY MUNICIPAL COR
07/01/2022
1.00
1.00
1.00
0.000
0.000
1
218848006-1
2017B RESER ASSURED GUARANTY MUNICIPAL COR
07/01/2022
1.00
1.00
1.00
0.000
0.000
1
233358006-1
01-2 REFRESI ASSURANCE CO BOND INSURANCE
07/01/2022
1.00
1.00
1.00
0.000
0.000
1
Subtotal and Average 3.00
3.00
3.00
3.00
0.000
0.000
1
Trust Accounts
6746058700 PARS Pension US Bank Trust 14,145,986.69 14,145,986.69 14,145,986.69 0.540 0.533 0.540 1
Subtotal and Average 14,236,428.00 14,145,986.69 14,145,986.69 14,145,986.69 0.533 0.540 1
Local Agency Investment Funds
SYSCITY CITY CA Local Agency Investment Fun
72,909,366.30
71,925,842.94
72,909,366.30
0.206 0.203
0.206
1
SYSRDA RDA CA Local Agency Investment Fun
1,927.61
1,901.61
1,927.61
0.365 0.360
0.365
1
SYSTCSD TCSD CA Local Agency Investment Fun
29,642,094.52
29,242,232.42
29,642,094.52
0.365 0.360
0.365
1
Subtotal and Average 102,553,388.43
102,553,388.43
101,169,976.97
102,553,388.43
0.249
0.252
1
Money Market
31846V542
Money Mkt
USBANK
08/31/2022
6,907,992.90
6,907,992.90
6,907,992.90
2.120
2.091
2.120
1
Subtotal and Average 5,085,941.45
6,907,992.90
6,907,992.90
6,907,992.90
2.091
2.120
1
Medium Term Notes
04685A3J8
01285
Athene Global Funding
10/06/2022
2,000,000.00
1,929,380.00
1,920,360.00
2.514
5.385
5.460
281 03/08/2024
06406RAJ6
01282
Bank of NY Mellon Corp
09/27/2022
1,000,000.00
996,580.00
994,200.00
3.450
4.100
4.157
71 08/11/2023
14913Q21-2
01276
Caterpillar Financial Service
08/31/2022
0.00
0.00
0.00
3.450
3.398
3.445
15 05/15/2023
25160PAM9
01292
Deutsche Bank NY
11/14/2022
1,000,000.00
987,450.00
961,560.00
5.371
6.220
6.306
1,561 09/09/2027
46849LSQ5
01294
Jackson Natl Life Global
12/23/2022
2,000,000.00
1,849,600.00
1,879,480.00
3.050
4.957
5.026
1,063 04/29/2026
594918BQ6
01279
Microsoft Corp
09/07/2022
2,000,000.00
1,990,320.00
1,973,940.00
2.000
3.403
3.451
68 08/08/2023
21688AAU6
01284
Cooperat Rabobank UA/NY
09/30/2022
2,000,000.00
1,964,400.00
1,968,180.00
3.875
4.696
4.761
448 08/22/2024
Portfolio TEME
Data Updated: SET_MTH:
08/07/2023 09:09
NL! CP
Run Date: 08/07/2023 - 09:09
PM (PRF_PM2) 7.3.0
Portfolio Managment Treasury Report
Portfolio Management
Portfolio Details - Investments
May 31, 2023
Page 5
Average
Purchase
Stated
YTM
YTM
Days to Maturity
CUSIP
Investment # Issuer
Balance
Date
Par Value
Market Value
Book Value
Rate
360
365 Maturity Date
Medium Term Notes
89236TJX4
01288
Toyota Motor Credit Corp
10/14/2022
2,000,000.00
1,955,440.00
1,940,540.00
2.500
4.595
4.659
295 03/22/2024
Subtotal and Average
12,541,485.81
12,000,000.00
11,673,170.00
11,638,260.00
4.691
4.756
490
Federal Agency Callable Securities
3133EMQGO
01259
Federal Farm Credit Bank
02/10/2021
1,000,000.00
922,130.00
1,000,000.00
0.320
0.316
0.320
620 02/10/2025
3133EMK92
01265
Federal Farm Credit Bank
06/23/2021
1,000,000.00
917,430.00
1,000,000.00
0.580
0.572
0.580
753 06/23/2025
3133EMN57
01266
Federal Farm Credit Bank
06/28/2021
1,000,000.00
948,660.00
1,000,000.00
0.440
0.434
0.440
393 06/28/2024
3133EMP22
01267
Federal Farm Credit Bank
06/30/2021
1,000,000.00
894,590.00
1,000,000.00
0.910
0.898
0.910
1,125 06/30/2026
3133ENAP5
01273
Federal Farm Credit Bank
10/14/2021
1,000,000.00
913,910.00
1,000,000.00
0.800
0.789
0.800
866 10/14/2025
313OAKQ41
01258
Federal Home Loan Bank
01/28/2021
1,000,000.00
907,270.00
1,000,000.00
0.520
0.513
0.520
972 01/28/2026
3130ALEU4
01260
Federal Home Loan Bank
02/25/2021
1,000,000.00
930,460.00
1,000,000.00
0.350
0.345
0.350
543 11/25/2024
3130ALWV2
01261
Federal Home Loan Bank
04/21/2021
1,000,000.00
917,410.00
1,000,000.00
0.550
1.011
1.025
1,055 04/21/2026
3130AM2V3
01262
Federal Home Loan Bank
04/29/2021
1,000,000.00
934,190.00
1,000,000.00
0.700
0.690
0.700
698 04/29/2025
3130AMNMO
01263
Federal Home Loan Bank
05/27/2021
1,000,000.00
911,390.00
1,000,000.00
0.500
0.493
0.500
1,091 05/27/2026
3130AMM90
01264
Federal Home Loan Bank
06/10/2021
1,000,000.00
911,360.00
1,000,000.00
0.500
1.973
2.000
1,105 06/10/2026
3130AN4N7
01268
Federal Home Loan Bank
07/14/2021
1,000,000.00
918,690.00
1,000,000.00
0.720
0.710
0.720
774 07/14/2025
3130ANAZ3
01269
Federal Home Loan Bank
07/28/2021
1,000,000.00
930,650.00
1,000,000.00
0.600
0.592
0.600
697 04/28/2025
3130AP3M5
01270
Federal Home Loan Bank
09/28/2021
1,000,000.00
928,380.00
1,000,000.00
0.550
0.542
0.550
666 03/28/2025
3134GXJL9
01257
Federal Home Loan Mtg Corp
12/30/2020
1,000,000.00
899,560.00
1,000,000.00
0.500
0.493
0.500
943 12/30/2025
3130APBV6
01271
Union Bank
10/07/2021
1,000,000.00
891,030.00
999,000.00
1.000
1.007
1.021
1,224 10/07/2026
3130APAM7
01272
Union Bank
10/14/2021
1,000,000.00
892,620.00
998,500.00
0.900
0.918
0.931
1,231 10/14/2026
Subtotal and Average
16,997,500.00
17,000,000.00
15,569,730.00
16,997,500.00
0.723
0.733
868
Treasury Coupon Securities
912828T26
01281
U.S. Treasury
09/26/2022
2,000,000.00
1,973,760.00
1,945,703.13
1.375
4.088
4.145
121 09/30/2023
91282CEX5
01283
U.S. Treasury
09/29/2022
2,000,000.00
1,954,760.00
1,960,312.50
3.000
4.126
4.184
395 06/30/2024
91282CEX5
01287
U.S. Treasury
10/13/2022
2,000,000.00
1,954,760.00
1,955,312.50
3.000
4.304
4.364
395 06/30/2024
9128285P1
01289
U.S. Treasury
10/19/2022
2,000,000.00
1,976,480.00
1,966,093.75
2.875
4.387
4.448
182 11/30/2023
9128285UO
01290
U.S. Treasury
10/19/2022
2,000,000.00
1,969,540.00
1,957,265.63
2.625
4.412
4.473
213 12/31/2023
91282CFQ9
01291
U.S. Treasury
11/04/2022
2,000,000.00
1,987,180.00
1,988,281.25
4.375
4.622
4.687
518 10/31/2024
912828V23
01295
U.S. Treasury
02/09/2023
3,000,000.00
2,947,140.00
2,932,968.75
2.250
4.778
4.844
213 12/31/2023
Subtotal and Average
14,705,937.51
15,000,000.00
14,763,620.00
14,705,937.51
4.415
4.476
286
Data Updated: SET_MTH: 08/07/2023 09:09
Run Date: 08/07/2023 - 09:09
Portfolio TEME
NL! CP
PM (PRF_PM2) 7.3.0
Portfolio Managment Treasury Report
Portfolio Management
Portfolio Details - Investments
May 31, 2023
Page 6
Average
Purchase
Stated
YTM
YTM
Days to Maturity
CUSIP
Investment #
Issuer Balance
Date
Par Value
Market Value
Book Value
Rate
360
365 Maturity Date
Federal Agency
Bullet Securities
3133ELMA9
01254
Federal Farm Credit Bank
02/07/2020
1,000,000.00
992,860.00
1,000,000.00
1.420
1.401
1.420
67 08/07/2023
3133ELTU8
01256
Federal Farm Credit Bank
03/18/2020
1,000,000.00
968,000.00
1,000,000.00
0.920
0.907
0.920
291 03/18/2024
3133ENCA6
01274
Federal Farm Credit Bank
10/25/2021
1,000,000.00
942,910.00
1,000,000.00
0.700
0.690
0.700
512 10/25/2024
3135GO5G4
01278
Federal National Mtg Assn
09/02/2022
2,000,000.00
1,988,780.00
1,945,480.00
0.250
3.464
3.512
39 07/10/2023
Subtotal and Average 4,945,480.00
5,000,000.00
4,892,550.00
4,945,480.00
1.969
1.996
191
Supranational
4581XOEE4
01286 Inter -American Devel Bk
Subtotal and Average
Total and Average
985,430.00
215,386,448.40
10/06/2022
1,000,000.00
1,000,000.00
207,830,457.66
981,030.00
981,030.00
204, 327,146.20
985,430.00
3.250 4.069
4.126
396 07/01/2024
985,430.00
4.069
4.126
396
207,103,065.17
1.601
1.624
126
Portfolio TEME
Data Updated: SET_MTH: 08/07/2023 09:09 NL! CP
Run Date: 08/07/2023 - 09:09
PM (PRF_PM2) 7.3.0
Portfolio Managment Treasury Report
Portfolio Management
Portfolio Details - Cash
May 31, 2023
Page 7
Average
Purchase
Stated
YTM
YTM
Days to
CUSIP
Investment #
Issuer Balance
Date
Par Value
Market Value
Book Value Rate
360
365 Maturity
Passbook/Checking
Accounts
1453718479
WORKERS
BANK OF AMERICA MERRILL LYNC
07/01/2022
21,242.22
21,242.22
21,242.22
0.000
0.000
1
SYSPetty Cash
Petty Cash
City of Temecula
07/01/2022
3,911.00
3,911.00
3,911.00
0.000
0.000
1
SYSGen Ck Acct
Gen Ck Acct
Union Bank of California
27,954,161.56
27,954,161.56
27,954,161.56
0.000
0.000
1
SYSParking Ck
PARKING CITA
Union Bank of California
07/01/2022
13,787.00
13,787.00
13,787.00
0.000
0.000
1
Average Balance 0.00
Total Cash and Investments
215,386,448.40
0
235,823,559.44 232,320,247.98 235,096,166.95 1.601 1.624 126
Portfolio TEME
Data Updated: SET_MTH: 08/07/2023 09:09 NL! CP
Run Date: 08/07/2023 - 09:09
PM (PRF_PM2) 7.3.0
Cash and Investments Report
CITY OF TEMECULA
Through May 2023
Fund 9 Fund Name Beginning Balance Receipts Disbursements Fund Total
001
GENERAL FUND
$
46,614,378.88 $
10,904,125.58 $
5,345,598.58
$
52,172,905.88
002
MEASURE S FUND
41,104,154.48
3,300,656.98
44,404,811.46
006
FIRE FACILITY ACQUISITION FUND
1,518,755.18
5,304.84
$
1,524,060.02
100
STATE GAS TAX FUND
2,349,905.37
171,973.24
2,521,878.61
102
RMRA-ROAD MAINTENANCE REHABILITATION ACT
3,399,294.07
188,712.28
3,588,006.35
103
STREETS MAINTENANCE FUND
7,000,416.04
18,931.76
7,019,347.80
105
NPDES
175,821.35
512.56
176,333.91
106
UPTOWN TEMECULA NEW STREETS IN LIEU FEES
899,948.74
2,620.80
902,569.54
110
COVID-19 PANDEMIC COMMUNITY REINVESTMENT
12,247,507.25
10,000.00
391,623.40
11,865,883.85
120
DEVELOPMENT IMPACT FUND
13,546,335.93
224,585.36
-
13,770,921.29
125
PEG PUBLIC EDUCATION & GOVERNMENT
798,854.95
45,561.37
844,416.32
145
TEMECULA ENERGY EFFICIENCY ASSET TEAM
844,091.99
2,948.32
847,040.31
150
AB 2766 FUND
352,145.29
1,148.40
353,293.69
160
SUPPLEMENTAL LAW ENFORCEMENT SERVICES
172,706.19
8,869.89
181,576.08
161
TEMECULA MAJOR CRIMES REWARD FUND
53.44
-
-
53.44
165
AFFORDABLE HOUSING
5,358,531.70
18,931.98
9,957.24
5,367,506.44
170
MEASURE A FUND
8,912,364.34
34,041.57
359,541.98
8,586,863.93
190
TEMECULA COMMUNITY SERVICES DISTRICT
2,088,887.34
2,349,469.92
1,016,779.19
3,421,578.07
191
TCSD SERVICE LEVEL "B" STREET LIGHT REPLACEMENT
863,506.08
3,016.14
-
866,522.22
192
TCSD SERVICE LEVEL "B" STREET LIGHTS
371,639.75
290,704.73
26,464.50
635,879.98
194
TCSD SERVICE LEVEL "D" REFUSE/RECYCLING
827,101.47
4,313,588.87
4,781.84
5,135,908.50
195
TCSD SERVICE LEVEL "R" STREET/ROAD MAINT
30,518.19
2,208.37
-
32,726.56
196
TCSD SERVICE LEVEL "L" LAKE PARK MAINT.
372,499.13
117,480.97
70,770.91
419,209.19
197
TEMECULA LIBRARY FUND
652,422.31
11,740.17
55,385.00
608,777.48
198
PUBLIC ART
196,394.56
4,332.77
-
200,727.33
210
CAPITAL IMPROVEMENT PROJECT FUND
1,339,086.00
438,116.78
2,425,223.91
(648,021.13)
275
CFD 03-3 WOLF CREEK IMPROVEMENT FUND
216,464.44
822.08
217,286.52
277
CFD-RORIPAUGH
8,386,419.45
56,130.99
8,442,550.44
278
CFD-RORIPAUGH II
9,481,054.14
43,789.86
-
9,524,844.00
300
INSURANCE FUND
1,220,989.13
4,333.10
16,887.92
1,208,434.31
305
WORKER'S COMPENSATION
1,300,844.04
34,757.58
70,409.54
1,265,192.08
310
VEHICLES AND EQUIPMENT FUND
3,330,176.24
11,200.12
2,019.22
3,339,357.14
320
INFORMATION TECHNOLOGY
1,770,972.89
11,207.26
447,525.09
1,334,655.06
325
TECHNOLOGY REPLACEMENT FUND
2,648,962.77
8,752.30
-
2,657,715.07
330
CENTRAL SERVICES
23,949.52
94.52
31,768.96
(7,724.92)
335
CENTRAL SERVICES
341,919.36
1,171.70
-
343,091.06
340
FACILITIES
542,653.12
19,386.39
157,447.21
404,592.30
350
FACILITY REPLACEMENT FUND
951,926.78
2,915.28
-
954,842.06
380
SARDA DEBT SERVICE FUND
4,286,316.79
2,223,496.61
1,433,905.37
5,075,908.03
381
REDEVELOPMEN PROPERTY TAX TRUST
-
3,685,096.00
769,118.71
2,915,977.29
460
CFD 88-12 DEBT SERVICE FUND
95,894.33
334.94
-
96,229.27
472
CFD 01-2 HARVESTON A&B DEBT SERVICE
944,069.71
443,884.44
1,387,954.15
473
CFD 03-1 CROWNE HILL DEBT SERVICE FUND
1,249,693.15
375,418.17
1,625,111.32
474
AD 034 JOHN WARNER ROAD DEBT SERVICE
7,227.35
25.24
7,252.59
475
CFD 03-3 WOLF CREEK DEBT SERVICE FUND
1,053,467.08
808,901.50
1,862,368.58
476
CFD 03-6 HARVESTON 2 DEBT SERVICE FUND
498,974.84
142,270.74
641,245.58
477
CFD 03-02 RORIPAUGH DEBT SERVICE FUND
1,101,926.09
355,008.74
1,456,934.83
478
CFD-RORIPAUGH II
4,854,676.94
1,138,016.91
5,992,693.85
481
CFD 20-01 ALTAIR
150,000.00
-
-
150,000.00
501
SERVICE LEVEL"C"ZONE 1 SADDLEWOOD
7,908.63
17,441.50
2,317.65
23,032.48
502
SERVICE LEVEL"C"ZONE 2 WINCHESTER CREEK
121,628.84
20,454.12
16,562.38
125,520.58
503
SERVICE LEVEL"C"ZONE 3 RANCHO HIGHLANDS
52,192.18
21,027.84
2,108.91
71,111.11
504
SERVICE LEVEL"C"ZONE 4 THE VINEYARDS
5,306.32
3,007.61
336.21
7,977.72
505
SERVICE LEVEL"C"ZONE 5 SIGNET SERIES
21,848.84
17,147.52
2,173.35
36,823.01
506
SERVICE LEVEL"C"ZONE 6 WOODCREST COUNTRY
44,027.61
12,781.42
1,023.85
55,785.18
507
SERVICE LEVEL"C"ZONE 7 RIDGEVIEW
7,645.51
7,105.38
794.04
13,956.85
508
SERVICE LEVEL"C"ZONE 8 VILLAGE GROVE
90,143.65
61,399.95
9,026.56
142,517.04
509
SERVICE LEVEL"C"ZONE 9 RANCHO SOLANA
28,905.43
2,381.75
156.80
31,130.38
510
SERVICE LEVEL"C"ZONE 10 MARTINIQUE
14,521.12
4,518.40
458.07
18,581.45
511
SERVICE LEVEL"C"ZONE 11 MEADOWVIEW
3,149.48
1,061.72
107.34
4,103.86
512
SERVICE LEVEL"C"ZONE 12 VINTAGE HILLS
66,185.67
43,205.45
4,920.80
104,470.32
513
SERVICE LEVEL"C"ZONE 13 PRESLEY DEVELOP
29,556.27
15,508.14
1,793.73
43,270.68
514
SERVICE LEVEL"C"ZONE 14 MORRISON HOMES
8,971.23
6,579.18
744.24
14,806.17
515
SERVICE LEVEL"C"ZONE 15 BARCLAY ESTATES
11,742.58
4,943.64
530.52
16,155.70
516
SERVICE LEVEL"C"ZONE 16 TRADEWINDS
79,314.60
17,634.78
7,127.99
89,821.39
517
SERVICE LEVEL"C"ZONE 17 MONTE VISTA
2,409.49
879.46
108.74
3,180.21
518
SERVICE LEVEL"C"ZONE 18 TEMEKU HILLS
46,328.37
40,636.50
4,587.75
82,377.12
519
SERVICE LEVEL"C"ZONE 19 CHANTEMAR
74,126.23
27,308.27
11,158.91
90,275.59
520
SERVICE LEVEL"C"ZONE 20 CROWNE HILL
251,260.75
82,923.93
35,723.65
298,461.03
521
SERVICE LEVEL"C"ZONE 21 VAIL RANCH
144,776.08
105,496.09
23,446.24
226,825.93
522
SERVICE LEVEL"C"ZONE 22 SUTTON PLACE
10,900.23
2,126.92
203.17
12,823.98
523
SERVICE LEVEL"C"ZONE 23 PHEASENT RUN
26,178.41
3,999.88
313.24
29,865.05
524
SERVICE LEVEL"C"ZONE 24 HARVESTON
47,549.40
71,631.78
8,664.80
110,516.38
525
SERVICE LEVEL"C"ZONE 25 SERENA HILLS
64,882.65
20,945.61
1,925.42
83,902.84
526
SERVICE LEVEL"C"ZONE 26 GALLERYTRADITION
2,012.21
952.50
122.84
2,841.87
527
SERVICE LEVEL"C"ZONE 27 AVONDALE
9,583.47
4,132.84
668.21
13,048.10
528
SERVICE LEVEL"C"ZONE 28 WOLF CREEK
581,270.18
108,886.63
12,435.58
677,721.23
529
SERVICE LEVEL"C"ZONE 29 GALLERY PORTRAIT
8,037.73
1,590.46
171.09
9,457.10
530
SERVICE LEVEL"C"ZONE 30 FUTURE ZONES
36,485.77
127.44
-
36,613.21
701
PENSION RATE STABILIZATION FUND
$
14,239,442.71
-
93,456.02
$
14,145,986.69
Grand Total:
$
212,634,189.82 $
32,564,434.83 $
12,878,376.67
$
232,320,247.98
Journal Entries completed after April's Treasurer's Report was issued are reflected in the Receipts / Disbursements columns.
Item No. 5
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick A. Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Amend the Capital Improvement Program Budget for Fiscal Years 2024-28 for
Various Projects
PREPARED BY: Amer Attar, Engineering Manager
RECOMMENDATION: That the City Council:
1. Adopt a resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA TO AMEND THE CAPITAL IMPROVEMENT
PROGRAM BUDGET FOR FISCAL YEARS 2024-28 FOR
VARIOUS PROJECTS
2. Approve an appropriation of $1,500,000 from Transportation Uniform Mitigation
Fee, from Western Riverside Council of Governments in Fiscal Year 2023-24 for
the I-15 / French Valley Parkway Improvements — Phase III project; and
3. Approve an appropriation and corresponding fund transfer of $200,000 from
Measure S for Fiscal Year 2023-24 to the I-15 / French Valley Parkway
Improvements — Phase III project; and
4. Approve an appropriation of $1,000,000 grant funding from California State
Assembly Bill 102 as amended in Senate on June 24, 2023 for Fiscal Year 2023-24
for the Ynez Road Improvements — Phase I project; and
5. Approve a fund Transfer of $1,000,000 of Development Impact Fee — Street
Improvements from Ynez Road Improvements, Phase I to Fiscal Year 2025-26 of
the Rancho California Road Median Improvements project; and
6. Approve a fund transfer of $594,524 from Fiscal Year 2023-24 of the Sidewalks —
Citywide project to Fiscal Year 2023-24 of a separately established project,
Sidewalks — Pauba Road; and
7. Approve an appropriation of $362,600 grant funding from California Senate Bill
821 for Fiscal Year 2023-24 for the Sidewalks — Pauba Road; and
8. Approve an appropriation of $200,000 grant funding from American Rescue Plan
Act, signed into law March 11, 2021, through the County of Riverside for Fiscal
Year 2023-24 to the Dog Park Renovation project; and
9. Approve an appropriation and corresponding fund transfer of $100,000 from
Measure S for Fiscal Year 2023-24 to the Dog Park Renovation project.
BACKGROUND: On June 13, 2023, the City Council adopted the Capital Improvement
Program (CIP) Budget for Fiscal Years 2024-28. Since the adoption of the CIP Budget, the City
received information that it has been approved to receive funds from several outside fund sources
for the benefit of several projects.
This amendment to the CIP Budget will cover the following changes:
1- I-15 / French Valley Parkway Improvements — Phase III — Add an appropriation of
$1,500,000 from Transportation Uniform Mitigation Fee (TUMF), from Western Riverside
Council of Governments (WRCOG) in Fiscal Year 2023-24. WRCOG has approved this
appropriation and it was included in the Fiscal Year 2023-24 Southwest Zone 5-Year
Transportation Improvement Program. This appropriation will be used to acquire one
parcel needed for this phase of the project. Existing Agreement No. 20-SW-TEM-1197
between the City and WRCOG will be amended to add this amount.
In addition, add an appropriation and corresponding fund transfer of $200,000 from
Measure S for Fiscal Year 2023-24 to the 1-15 / French Valley Parkway Improvements —
Phase III project. This amount is needed to look at various options to break this phase of
the project to multiple phases and coordinating this work with Caltrans.
2- Ynez Road Improvements — Phase I - Add an appropriation of $1,000,000 grant funding
the City received from California State Assembly Bill (AB) 102 as amended in Senate on
June 24, 2023. This appropriation is for Fiscal Year 2023-24.
3- Rancho California Road Median Improvements — Transfer $1,000,000 of Development
Impact Fee (DIF) — Street Improvements from Ynez Road Improvements, Phase I to Fiscal
Year 2025-26 of the Rancho California Road Median Improvements project. This will
close the funding gap for this project
4- Sidewalks - Citywide — Transfer the entire approved appropriation for Fiscal Year 2023-
24, $594,524 to a separate project called Sidewalks — Pauba Road. This appropriation is
for the current Fiscal Year 2023-24.
5- Sidewalks — Pauba Road — Add this project as a separate project and transfer the entire
approved appropriation for Fiscal Year 2023-24, $594,524, of the Sidewalks — Citywide
project to Fiscal Year 2023-24 of this project. The City was awarded grant funding from
California Senate Bill (SB) 821 for this project in the amount of $362,600. The separation
of this project from the Sidewalks — Citywide is necessary for tracking and reporting
purposes of the grant funds.
6- Dog Park Renovation — Add an appropriation of $200,000 grant funding from American
Rescue Plan Act (ARPA), signed into law March 11, 2021, through the County of Riverside
for Fiscal Year 2023-24.
In addition, add an appropriation and corresponding fund transfer of $100,000 from
Measure S for Fiscal Year 2023-24 to the Dog Park Renovation project. The grant funding
and the additional requested Measure S appropriation will be used to add American with
Disability Act (ADA) access to the Dog Park and administer the grant including reporting
requirements.
This amendment to the Capital Improvement Program (CIP) is consistent with the City of
Temecula General Plan and all its elements.
FISCAL IMPACT: The net result of this amendment to the Capital Improvement
Program (CIP) Budget for Fiscal Years 2024-28 is an increase of Transportation Uniform
Mitigation Fee (TUMF) appropriation from Western Riverside Council of Governments
(WRCOG) in the amount of $1,500,000, an increase of appropriation of grant funding in the
amount of $1,562,600, and an appropriation increase from Measure S in the amount of $300,000.
ATTACHMENTS: 1. Resolution
2. Amended CIP Budget Sheets
3. CIP Budget Amendment Summary
RESOLUTION NO. 2023-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF TEMECULA TO AMEND THE CAPITAL
IMPROVEMENT PROGRAM BUDGET FOR FISCAL
YEARS 2024-28 FOR VARIOUS PROJECTS
THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS
FOLLOWS:
Section 1. The City Council finds, determines, and declares that:
A. On June 13, 2023, the City Council adopted the Capital Improvement Program
Budget for Fiscal Years 2024-28.
B. Since the adoption of the Capital Improvement Program (CIP) Budget, the City has
been approved to receive funds from several outside fund sources for the benefit of several
projects.
C. These changes have made it necessary to amend the CIP Budget for I-15 / French
Valley Parkway Improvements — Phase III, Rancho California Road Median Improvements, Ynez
Road Improvements — Phase I, Sidewalks — Citywide, and Dog Park Renovation projects.
D. Receiving SB 821 funds for the sidewalk project on Pauba Road, from Elinda to
Showalter will necessitate establishing a standalone project and separating it from the Sidewalks
— Citywide project.
E. The Capital Improvement Program (CIP) as amended by this Resolution is
consistent with the City of Temecula General Plan and each element thereof.
Section 2. Amendment of the Capital Improvement Program (CIP)
A. The Capital Improvement Program (CIP) for Fiscal Years 2024-28 is hereby
amended as follows:
1) I-15 / French Valley Parkway Improvements — Phase III — Add an
appropriation of $1,500,000 from Transportation Uniform Mitigation Fee
(TUMF), from Western Riverside Council of Governments (WRCOG) in Fiscal
Year 2023-24. WRCOG has approved this appropriation and it was included in
the Fiscal Year 2023-24 Southwest Zone 5-Year Transportation Improvement
Program. This appropriation will be used to acquire one parcel needed for this
phase of the project. Existing Agreement No. 20-SW-TEM-1197 between the
City and WRCOG will be amended to add this amount.
In addition, add an appropriation and corresponding fund transfer of $200,000
from Measure S for Fiscal Year 2023-24 to the I-15 / French Valley Parkway
Improvements — Phase III project. This amount is needed to look at various
options to break this phase of the project to multiple phases and coordinating
this work with Caltrans.
2) Ynez Road Improvements — Phase I - Add an appropriation of $1,000,000
grant funding the City received from California State Assembly Bill (AB) 102
as amended in Senate on June 24, 2023. This appropriation is for Fiscal Year
2023-24.
3) Rancho California Road Median Improvements — Transfer $1,000,000 of
Development Impact Fee (DIF) — Street Improvements from Ynez Road
Improvements, Phase I to Fiscal Year 2025-26 of the Rancho California Road
Median Improvements project. This will close the funding gap for this project
4) Sidewalks - Citywide — Transfer the entire approved appropriation for Fiscal
Year 2023-24, $594,524 to a separate project called Sidewalks — Pauba Road.
This appropriation is for the current Fiscal Year, 2023-24.
5) Sidewalks — Pauba Road — Add this project as a separate project and transfer
the entire approved appropriation for Fiscal Year 2023-24, $594,524, of the
Sidewalks — Citywide project to Fiscal Year 2023-24 of this project. The City
was awarded grant funding from California Senate Bill (SB) 821 for this project
in the amount of $362,600. The separation of this project from the Sidewalks —
Citywide is necessary for tracking and reporting purposes of the grant funds.
6) Dog Park Renovation — Add an appropriation of $200,000 grant funding from
American Rescue Plan Act (ARPA), signed into law March 11, 2021, through
the County of Riverside for Fiscal Year 2023-24.
In addition, add an appropriation and corresponding fund transfer of $100,000
from Measure S for Fiscal Year 2023-24 to the Dog Park Renovation project.
The grant funding and the additional requested Measure S appropriation will be
used to add American with Disability Act (ADA) access to the Dog Park and
administer the grant including reporting requirements.
B. The net result of this amendment to the Capital Improvement Program (CIP)
Budget for Fiscal Years 2024-28 is an increase of Transportation Uniform Mitigation Fee (TUMF)
appropriation from Western Riverside Council of Governments (WRCOG) in the amount of
$1,500,000, an increase of appropriation of grant funding in the amount of $1,562,600, and an
appropriation increase from Measure S in the amount of $300,000.
C. Projects that are part of this amendment without an impact to Measure "S" and
other City funds are funded with external sources, either reimbursements to the City or a direct
grant.
Section 3. The City Clerk shall certify the adoption of this Resolution.
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula
this 22nd day of August, 2023.
Zak Schwank, Mayor
ATTEST:
Randi Johl, City Clerk
[SEAL]
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing
Resolution No. 2023- was duly and regularly adopted by the City Council of the City of
Temecula at a meeting thereof held on the 22"d day of August, 2023, by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
Randi Johl, City Clerk
Adk
The Heart of Southern California
Wine Country
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
1-15 / FRENCH VALLEY PARKWAY IMPROVEMENTS - PHASE III
Circulation Project
Project Description: This project includes the design and construction of the French
Valley Parkway Interchange and the southbound collector/distributor road system.
Benefit: This project will address and improve traffic circulation in the City's
northern area by providing a full service interchange with on and off ramps in both
directions.
Core Value: Transportation Mobility and Connectivity
Project Status: Design will begin once funds are available.
Department: Public Works - Account No. 210.265.999.5800.PW19-03 / 728
2023-24
Prior Years
2022-23
Amended 2024-25
2025-26 2026-27
2027-28
Total Project
Project Cost:
Actuals
Adjusted
Budget Projected
Projected Projected
Projected
Cost
5801-Ad ministration
89,491
237,509
454,000
874,000
1,655,000
5807-Caltrans Oversight
17,250,000
17,250,000
5804-Construction
102,500,000
102,500,000
5805-Construction Engineering
2,050,000
2,050,000
5802-Design & Environmental
200,000
8,500,000
8,700,000
5700-Land Acquisition
2,979,147
270,647
1,500,000
7,390,000
12,139,794
Total Expenditures
1 3,068,6381
508,156
1,700,000
8,954,000 -
130,064,000
144 294 794
Sours of Funds•
4165-Affordable Housing
1,669,794
1,669,794
4001-General Fund
30,000
30,000
4002-Measure S
150,000
61,817 200,000
411,817
4076-Reimbursements
165,183
165,183
4472-TUMF (WRCOG)
1,500,000 1,500,000
3,000,000
4452-Unspecified
8,954,000 130,064,000
139,018,000
Total Fundine
1 180,0001
3.396.794 1,700,000 8,954,000 - 130,064,0001
144,294,794
Future Operating & Maintenance Costs:
Total Operating Costs
Notes:
1. TUMF (WRCOG) - TUMF Zone Funding is eligible for construction of Winchester Interchange pursuant to 2009 Nexus - $9,822,980.00
2. TUMF (WRCOG) - TUMF Zone Funding is eligible for construction of French Valley Interchange pursuant to 2009 Nexus - $43,480,000.00
3. TUMF (WRCOG) -TUMF Zone Funding for right-of-way (ROW) pursuant to Agreement No. 20-SW-TEM-1197 - $1,500,000
4. TUMF (WRCOG) - TUMF Zone Funding for right-of-way (ROW as approved by WRCOG for FY 2023-24, $1,500,000) - Amendment of Agreement No. 20-SW-TEM
1197 is pending
Alk
The Heart of Southern California
Wine Country
YNEZ ROAD IMPROVEMENTS - PHASE I
Circulation Project
Project Description: This project includes widening the easterly side of Ynez Road,
from Rancho Vista Road north roughly 1600 feet, to two lanes in each direction,
and the completion of missing segments of curb and gutter, sidewalk, and striped
medians, in coordination with adjacent development.
Benefit: This project improves traffic circulation by widening an important arterial
road in this part of the City.
Core Value: Transportation Mobility and Connectivity
Project Status: Design is initiated in FY 2022-23.
Department: Public Works - Account No. 210.265.999.5800.PW23-02 / 534
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
2023-24
Prior Years
2022-23 Amended 2024-25 2025-26 2026-27 2027-28
Total Project
Project Cost:
Actuals
Adjusted Budget Projected Projected Projected Projected
Cost
5801-Administration
90,000 342,500
432,500
5804-Construction
1,299,628
1,299,628
5805-Construction Engineering
158,172
158,172
5802-Design & Environmental
510,000 495,500
1,005,500
5806-MSHCP
1
54,200
54,200
Total Expenditures
1
600,000 2,350,000
2 950 000
Source of Funds:
4666-Developer Contribution
435,750
435,750
4242-DIF-Street Improvements
600,000 (560,750)
39,250
4025-Grants
1,475,000
1,475,000
4025-Grants
1,000,000
1,000,000
Total Funding
2
2
Future Operating & Maintenance Costs:
Total Operating Costs
Notes :
1. Grants Funding of $1,475,000 reflects the 2023 RCTC Western Riverside County Regional call for projects using Measure A Regional Arterial (MARA) grant funds
2. Developer Contribution reflects fees paid by the Rancho Highlands Development for this project.
3. Grant Funding of $1,000,000 reflects California State Assembly Bill (AB) 102 as amended in Senate June 24, 2023.
Adk
The Heart of Southern California
Wine Country
RANCHO CALIFORNIA ROAD MEDIAN IMPROVEMENTS
Circulation Project
Project Description: This project will design and construct missing raised medians
on Rancho California Road between Humber Drive and Butterfield Stage Road in
accordance with the City's General Plan. In addition, missing street improvements
will be constructed on the north side of Rancho California Road between Riesling
Court and Promenade Chardonnay Hills. The improvements will include median
curbs, curb and gutter, sidewalks, and landscape and irrigation.
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
Benefit: The raised medians will enhance the safety of the street. In addition, the `�
landscaping of the proposed medians will improve the aesthetics of this road for "�
motorists.
Core Value: A Safe and Prepared Community
2023-24
Prior Years
2022-23
Amended
2024-25 2025-26 2026-27
2027-28 Total Project
Project Cost:
Actuals
Adjusted
Budget
Projected Projected Projected
Projected Cost
5801-Administration
105,000
60,000
40,000 300,000
505,000
5804-Construction
2,512,000
2,512,000
5805-Construction Engineering
85,000
85,000
5802-Design & Environmental
113,000
585,000
698,000
5240-Utilities
55.000
55,000
Snurra of Fundc
4666-Developer Contribution
57,200
57,200
4242-DIF-Street Improvements
10,800 700,000 40,000 1,720,750
2,471,550
4002-Measure S
150,000
150,000
4452-Unspecified
1,176, 250
1,176,250
Total Funding
218,000 700,000 40 00 22 897,000
3 855 000
Future Operating & Maintenance Costs:
Total Operating Costs
Notes :
1. Developer Contribution represents the Pervis Development's fair share of the medians.
Adk
The Heart of Southern California
Wine Country
SIDEWALKS - CITYWIDE
Infrastructure Project
Project Description: This project will include the construction of sidewalks at
various locations throughout the City.
Benefit: This project will provide walking surfaces for pedestrians.
Core Value: Transportation Mobility and Connectivity
Project Status: A study to identify areas with missing sidewalks and prioritize them
was completed as part of the Trails and Bikeways Master Plan Update in Fiscal Year
2015-16. Based on the study and the available resources, sidewalks will be
constructed in the selected areas considering economy of scale and proximity to
private development.
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
Prior Years
2022-23 Amended
2024-25
2025-26
2026-27
2027-28
Total Project
Project Cost:
Actuals
Adjusted Budget
Projected
Projected
Projected
Projected
Cost
5801-Administration
551,869
50,476
50,000
50,000
50,000
50,000
802,345
5804-Construction
146,315
879,541
320,000
320,000
320,000
320,000
2,305,856
5805-Construction Engineering
4,412
155,588
60,000
60,000
60,000
60,000
400,000
5802-Design & Environmental
225,808
161,121
70,000
70,000
70,000
70,000
666,929
4001-General Fund 371,000 1 37.1,000
4002-Measure 5 1 736.533 1.063.596 500.000 500.000 500.000 500.000 3.800.129
Future Operating & Maintenance Costs:
Total Operating Costs
Alk
R
The Heart of Southern California
Wine Country
SIDEWALKS - PAUBA ROAD
Infrastructure Project
Project Description: This project will include the construction of sidewalks along
Pauba Road from Elinda Road to Showalter Road.
Benefit: This project will provide walking surfaces for pedestrians.
Core Value: Transportation Mobility and Connectivity
Project Status: This section Pauba Road was identified in the City's Sidewalk Gap
Study. Construction is anticipated to commence in Fiscal Year 2023-2024.
Department: Public Works - Account No. 210.265.999.PW19-20
Level: I
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
2023-24
Prior Years
2022-23 Amended 2024-25 2025-26 2026-27 2027-28
Total Project
Project Cost:
Actuals
Adjusted Budget Projected Projected Projected Projected
Cost
Administration
75,000
75,000
Construction
752,124
752,124
Construction Engineering
60,000
60,000
Design & Environmental
70,000
70,000
Total Ex enditures
957,124
957 124
SB 821 Funds
Measure S I I 594,524 594,524
Future Operating & Maintenance Costs:
Total Operating Costs
Adk
The Heart of Southern California
Wine Country
DOG PARK RENOVATION
Parks/Recreation Project
Project Description: This project is to design and construct a dog park at Michael
"Mike" Naggar Community Park. The dog park will include small and large dog
pens, seating, drinking fountains, shade and an agility dog course feature in
addition to ADA access.
Benefit: This project protects the City's vast investment in parks and open space
facilities. In addition, this project satisfies the City's Core Values of a Healthy and
Livable City and Responsive City Government.
Core Value: Healthy and Livable City
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
Project Status: Design is currently at 90%. The project is estimated to be complete "s
in Fiscal Year 2023-24.
Prior Years
2022-23 Amended 2024-25 2025-26 2026-27 2027-28
Total Project
Project Cost:
Actuals
Adjusted Budget Projected Projected Projected Projected
Cost
5801-Ad ministration
25,000 150,000
175,000
5804-Construction
533,484 260,000
793,484
5802-Design & Environmental
15,116
56,400
71,516
cnurro of Funrfc-
4025-Grants 1
247,126
247,126
4002-Measure 5
25,000
357,874 210,000
592,874
4025-GrantS2
200,000
200,000
Total Funding
25,000
605,000 410,000
1 040 000
Future Operating & Maintenance Costs:
Total Operating Costs
Notes :
1. Proposition 68 Grant from the California Department of Parks and Recreation
2. American Rescue Plan Act (ARPA), signed into law March 11, 2021, grant through the County of Riverside
Fiscal Years 2024-28 Capital Improvement Program (CIP) Budget Amendment Summary for Various Projects
August 22, 2023
Adopted
Proposed
Proposed
Amended
Proposed
Project Name
FY 2024-28
Amendment
Amendment
FY 2024-28
Source
Budget
City Funds
External Fund Source
Budget
of Fund
1
I-15 / French Valley Parkway Improvements - Phase III
F$144,094,794
$200,000
$1,500,000
$144,294,794
> City -Measure S
> External -TUMF
> City - Move to Rancho
2
Ynez Road Improvements - Phase I
$2,950,000
-$1,000,000
$1,000,000
$2,950,000
California Medians
> External - State AB 102
> City - Moved from Ynez,
3 Rancho California Road Median Improvements $3,855,000 $1,000,000 $0 $3,855,000 Phase 1 to reduced funding
gap
-IF
FP
oved to Sidewalks -
4 Sidewalks - Citywide $4,769,653-$594,524 $0 $4,175,129 uba Road
> City - Moved from
5
Sidewalks - Pauba Road
$0
$594,524
$362,600
$957,124
Sidewalks - Citywide
> External - SB 821
16��t
City - Measure S I Dog Park Renovation $740,000 $100,000 $200,000 $1,040,000 External - ARPA
$300,000 11 $3,062,600
Total New Appropriation from Measure "S" $300,000
Move D/F - Streets from Ynez Road, Phase 1 to
$1,000,000
Rancho California Road Medians
Move Measure S from Sidewalks - Citywide to
$594,524
Sidewalks - Pauba Road
External Fund Sources - Grants
$1,562,600
External Fund Sources - TUMF
$1,500,000
Item No. 6
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Approve Form of Rancho California Water District Recycled Water Agreements
and Authorize the City Manager to Execute Said Agreements on Behalf of the City
PREPARED BY: Anissa Sharp, Management Assistant
Ron Moreno, Assistant Director of Public Works
RECOMMENDATION: That the City Council adopt a resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA APPROVING THE FORM OF RECYCLED
WATER AGREEMENTS AND AUTHORIZING THE CITY
MANAGER TO EXECUTE SAID AGREEMENTS ON BEHALF
OF THE CITY
BACKGROUND: The Santa Rosa Regional Resources Authority ("SRRRA"), a Joint
Powers Authority formed by several water districts including the Rancho California Water District
("RCWD"), owns and operates a Regional Water Reclamation System which is a sewage
interceptor, transmission, treatment, disposal, and water reclamation facilities. Water that has been
completely treated through RCWD's Regional Water Reclamation System is considered recycled
water. In accordance with RCWD's policies, the recycled water, which results from the operation
of the Regional Water Reclamation System, has been made available for approved uses. Given the
availability, some projects could stand to benefit from utilizing recycled water while constructing
improvements.
In order to facilitate the ability for sites to gain access to recycled water, RCWD developed their
Recycled Water Agreement ("Agreement"). The Agreement was created for execution by RCWD
for any projects located within the City where a recycled water system is operated. There are two
versions of the Agreement. One version of the Agreement is used in cases where the User is a
developer or private entity. The other version of the Agreement is used in cases where the User is
a public entity. The Agreement specifies whether the Property on which the recycled water system
will be operated is owned by a public entity or by another party.
An Agreement in which the City is the User or owner of the Property on which the recycled water
system will be operated, would be reviewed and approved by the City Engineer and City Attorney
prior to routing said Agreement for execution, with such changes as mutually agreed to between
the Public Works Department and City Attorney.
All costs will be billed to the User on monthly basis. An Agreement in which the User of the
recycled water system is a developer or private entity would result in no fiscal impact to the City.
An Agreement in which the User is the City of Temecula would result in costs relating to the
operation and use of the recycled water system. Such costs for the recycled water commodity and
applicable service charges will be included in the current Fiscal Year Operating Budget.
RCWD will have the right to modify or adjust the rate schedule(s) for providing recycled water to
reflect changes in the RCWD's operation costs, if any, as determined by RCWD. All of the costs
will be based on actual quantities of recycled water deliveries made during the preceding month,
based on meter reading at the Point of Delivery. The Recycled Water Agreement sets forth the
obligations of all parties with respect to purchase price, quantity, and all terms and conditions.
City Staff recommends that the City Council authorize the City Manager to execute that certain
agreement entitled "Recycled Water Agreement" on behalf of the City in the form attached to this
Resolution, with such provisions that apply to the specific project, Property, or recycled water
system that are the subject of the Agreement, and with any non -substantive changes and completed
exhibits as may be approved by the Public Works Department and the City Attorney as necessary
and convenient to implement the purposes of the Agreement.
FISCAL IMPACT: No fiscal impact for agreements where the User is a developer or
private entity. For agreements where the User is the City of Temecula, costs of the recycled water
commodity and applicable service charges will be included in the current Fiscal Year Operating
Budget.
ATTACHMENTS: 1. Resolution
2. Agreement - City Version
3. Agreement - Private Version
RESOLUTION NO.2023-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF TEMECULA APPROVING THE FORM OF RECYCLED
WATER AGREEMENTS AND AUTHORIZING THE CITY
MANAGER TO EXECUTE SAID AGREEMENTS ON
BEHALF OF THE CITY
THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS
FOLLOWS:
Section 1. Rancho California Water District ("RCWD"), as a part of Santa Rosa
Regional Resources Authority ("SRRRA"), a Joint Powers Authority, owns and operates a
Regional Water Reclamation System which is a sewage interceptor, transmission, treatment,
disposal, and water reclamation facilities.
Section 2. Water that has been completely treated through RCWD's Regional Water
Reclamation System is considered recycled water. In accordance with RCWD's policies, the
recycled water, which results from the operation of the Regional Water Reclamation System, has
been made available for approved uses.
Section 3. RCWD prepared two versions of a Recycled Water Agreement
("Agreement") for use on any projects located within the City that will operate a recycled water
system. One version of the Agreement is used in cases where the User is a developer or private
entity. The other version of the Agreement is used in cases where the User is a public entity. The
Agreement specifies whether the Property on which the recycled water system will be operated is
owned by a public entity or by another party.
Section 4. An Agreement in which the City is the User or owner of the Property on
which the recycled water system will be operated, would be reviewed and approved by the City
Engineer and City Attorney prior to routing said Agreement for execution, with such changes as
mutually agreed to between the Public Works Department and City Attorney.
Section 5. An Agreement in which the User of the recycled water system is a developer
or private entity would result in no fiscal impact to the City. An Agreement in which the User is
the City of Temecula would result in costs relating to the operation and use of the recycled water
system. Such costs for the recycled water commodity and applicable service charges will be
included in the current Fiscal Year Operating Budget.
Section 6. The City Council hereby authorizes the City Manager to execute that certain
agreement entitled "Recycled Water Agreement" on behalf of the City in the form attached to this
Resolution, with such provisions that apply to the specific project, Property, or recycled water
system that are the subject of the Agreement, and with any non -substantive changes and completed
exhibits as may be approved by the Public Works Department and the City Attorney as necessary
and convenient to implement the purposes of the Agreement.
Section 7. The City Manager is hereby authorized to execute such Recycled Water
Agreement, subject to City Attorney's final review.
Section 8. This Resolution shall take effect immediately upon its adoption.
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula
this 22"d day of August, 2023.
Zak Schwank, Mayor
ATTEST:
Randi Johl, City Clerk
[SEAL]
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing
Resolution No. 2023- was duly and regularly adopted by the City Council of the City of
Temecula at a meeting thereof held on the 22"d day of August, 2023, by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
Randi Johl, City Clerk
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
RANCHO CALIFORNIA WATER DISTRICT
42135 Winchester Road
Temecula, CA 92590-4800
Exempt from Recording Fee (Gov. Code §6103)
LOCATION NO.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
RECYCLED WATER
AGREEMENT
RANCHO CALIFORNIA WATER DISTRICT
RA — —
THIS AGREEMENT is made and entered into this day of 20 by and between
Rancho California Water District, a public agency ("DISTRICT"), and the City of Temecula, a municipal
corporation ("Owner"). The Owner of Lot No. of Tract Map
No. APN Owner shall hereinafter be referred to as
"USER."
A. The Santa Rosa Regional Resources Authority ("SRRRA"), a Joint Powers Authority
formed by several water districts including the DISTRICT, owns and operates a major
system of sewage interceptor, transmission, treatment, disposal, and water reclamation
facilities, hereafter referred to as DISTRICT'S Regional Water Reclamation System; and
B. Water that has been completely treated through the DISTRICT'S Regional Water
Reclamation System shall hereinafter be referred to as recycled water; and
C. Pipelines conveying recycled water shall hereinafter be referred to as recycled water
mains; and
D. In accordance with DISTRICT policies, the recycled water, which results from the
operation of the DISTRICT'S Regional Water Reclamation System, has been made
available for approved uses; and
E. USER desires to purchase, accept delivery of, control, and use the quantity of recycled
water provided for in Paragraph 4 herein for approved irrigation purposes within the
boundaries of the DISTRICT, under the terms and conditions set forth below; and
F. Such sales and deliveries would be in accordance with the DISTRICT'S policy of using
recycled water for beneficial purposes; and
G. DISTRICT is willing to sell and deliver recycled water for irrigation purposes under the
terms and conditions set forth below.
M
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
In consideration of the mutual covenants herein contained, it is mutually agreed as follows:
1. SALE AND DELIVERY TERMS AND CONDITIONS
A. Point of Delivery
The recycled water delivered pursuant to this Agreement shall be measured through the
DISTRICT -owned, -operated, and -maintained metering facilities located at the Point of Delivery
shown on the attached Exhibit "A." Any facilities that have been or shall be installed by DISTRICT
at USER'S request shall be paid for by the USER, in accordance with applicable DISTRICT Rules
and Regulations.
B. Availability Acknowledgment
The USER acknowledges that the DISTRICT does not guarantee the availability of
recycled water throughout the term of this Agreement due to possible changes in
regulatory agency requirements, reduction in plant flow, demands from other
recycled water use areas, and/or other conditions beyond DISTRICT'S control.
USER holds DISTRICT free and harmless from any and all legal liabilities and/or
economic losses that it may sustain as the result of discontinuance or reduction in
amount of delivery of recycled water as specified above.
C. Pressure
The recycled water to be delivered pursuant to this Agreement shall, as far as
possible, be delivered at the Point of Delivery shown on the attached Exhibit "A."
USER shall be responsible for, at its cost, providing any and all devices to increase or
decrease delivery pressure, and/or any and all conveyance equipment (e.g. piping,
pumps, etc.) required to deliver the recycled water to the point(s) of use.
USER agrees not to operate its recycled water system in a fashion that may cause
surge pressures to propagate past the Point of Delivery into the DISTRICT'S recycled
water mains.
D. Facility Provision and Operational Responsibility
(1) DISTRICT shall be responsible for providing and operating its Regional Water
Reclamation System facilities, up to and including the Point of Delivery, in
compliance with the applicable requirements of DISTRICT, federal, state, and
local regulatory agencies.
DISTRICT shall be responsible for supplying recycled water, which meets or
exceeds all applicable federal, state, and local regulatory agency quality
standards.
DISTRICT shall monitor recycled water deliveries and use sites as it deems
necessary and in accordance with applicable federal, state, and local
regulatory agency requirements.
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
(2) USER shall:
■ Make application for recycled water service.
■ Pay all fees and deposits for recycled water service.
■ Post all required warning signs informing the public and all on -site
and off -site personnel (employees, tenants, occupants, and CITY
staff) that recycled water is being used on -site and off -site for
irrigation purposes.
■ Install and maintain a certified backflow device on all potable water
sources including, but not limited to, the DISTRICT'S potable water
meters, all exterior sources of potable water on- and offsite, and all
potable water supplies to fountains, ponds, and/or swimming pools.
■ Designate a Site Supervisor. The Site Supervisor must/will:
a) Be knowledgeable about recycled water and how it is
manufactured.
b) Be the contact person at USER's site, and be available at all
times to contact and respond in the event of an emergency.
c) Be knowledgeable about the practices and procedures of using
recycled water.
d) Be responsible for the safe and efficient use of recycled water.
e) Provide instruction and training to on -site and off -site
personnel in the proper handling of recycled water and the
potential health hazards involved with its use.
f) Submit plans to the DISTRICT for all proposed changes to the
irrigation system on the USER's site(s) for review and approval
prior to any modifications being made.
g) Have all proposed changes approved by the DISTRICT inspected
by the DISTRICT'S staff during construction.
h) Maintain irrigation system record drawings of USER's site(s).
i) Communicate all recycled water rules and regulations to on -site
and off -site personnel.
j) Be knowledgeable of all on -site and off -site potable water
systems, and take appropriate measures to prevent cross -
connection with the recycled water system.
k) Inform DISTRICT of all system failures or cross -connection
events so that appropriate measures may be taken to mitigate
the contamination or pollution.
If the USER desires to designate another person as Site Supervisor,
then the USER is responsible for notifying DISTRICT in writing of
such action. In the event that someone other than the USER is
designated as the Site Supervisor and this person is no longer
associated with the property, the USER shall again be considered
the Site Supervisor and will assume the above -listed requirements
until an approved Site Supervisor is designated.
M
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
■ Identify all above -ground fittings and appurtenances, etc. as
containing recycled water and not suitable for human consumption.
Signs shall be painted or otherwise permanently affixed to
equipment.
■ Altogether avoid introducing recycled water into any
potable/domestic water piping system and no connection shall be
made between equipment containing, or having contained, recycled
water and/or any part of a domestic water system until such time as
equipment has been properly disinfected.
■ Take full responsibility for providing, operating, maintaining, and
repairing USER pipelines, together with all appurtenant facilities, as
are necessary to accept, convey, control, and use the recycled water
in compliance with the applicable requirements of DISTRICT, federal,
state, CITY's Conditions of Approval, and local regulatory agencies on
their respective owned or controlled lands.
■ Allow recycled water to be used only on the areas depicted on the
attached exhibit and irrigation construction plans.
■ Allow recycled water use between the hours of 9:00 p.m. and 6:00
a.m.
E. USER Acknowledgment
USER acknowledges it is understood that:
(1) DISTRICT'S Regional Water Reclamation System's purpose is to control the
biological quality of the recycled water resulting from its operation.
(2) Said System is not equipped to detect, treat, or remove harmful chemicals or
toxic materials, except as required to meet federal, state, and local
regulatory agency discharge standards.
F. Indemnification
USER, CITY, and the DISTRICT each agree, to the fullest extent permitted by law, to
indemnify and hold the other party, and its directors, officers, employees, or
authorized volunteers harmless from any claims, damage, liability, or cost
(including attorneys' fees and costs of defense) to the extent caused by the
indemnifying party's negligent acts, errors, or omissions in the performance of this
agreement, including such negligent acts, errors, or omissions by sub -contractors
or others for whom the indemnifying party is legally liable; provided, however,
that this indemnity shall not apply to any acts, errors, or omissions attributable to
the indemnified party, its directors, officers, employees, authorized volunteers,
sub -contractors, or to any others for whom the indemnified party is legally liable.
M
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
2. USE TERMS AND CONDITIONS
Use of the recycled water delivered pursuant to this Agreement shall be subject to the
following terms and conditions:
A. Rules and Regulations
All recycled water delivered pursuant to this Agreement shall be used only for
approved uses on the specified use site, as shown and depicted as USER and CITY
lands on attached Exhibit "A," in compliance with applicable rules and regulations of
DISTRICT, federal, state, and local regulatory agencies, including CITY's Conditions of
Approval.
This Agreement has no application to the operation of the DISTRICT'S sewer and
domestic water operation, including the assessment of fees and the enforcement of
rules and regulations pertaining thereto. USER must comply with all rules and
regulations of the DISTRICT pertaining to any properties owned or maintained by
USER that connect to the DISTRICT'S Regional Water Reclamation System.
Failure to observe all regulations governing the use of recycled water will result in
the immediate termination of recycled water service until such time as the
deficiencies are corrected to the satisfaction of the DISTRICT.
Failure to observe said regulations shall be subject to Unauthorized Use Charges
established by the DISTRICT.
B. Reclamation Requirements
USER shall apply to the DISTRICT for all applicable use permits. DISTRICT shall apply
for all required Permits of Reclamation Requirements from the California Regional
Water Quality Control Board, hereinafter referred to as the Regional Board, covering
the use of the disinfected recycled water to be delivered and used pursuant to this
Agreement. USER shall comply with the provisions of such Reclamation
Requirements. USER shall use recycled water on only those areas specified in such
Reclamation Requirements, unless otherwise provided for in future amendments to
said Reclamation Requirements.
C. Responsibility for Conveyance and Control
(1) DISTRICT
DISTRICT shall be solely responsible for conveying and controlling the
recycled water up to and including the Point of Delivery provided for in
Paragraph LA., above.
(2) USER
USER shall be responsible for conveying and controlling, in compliance with
applicable regulatory agency requirements, the recycled water delivered
through USER's facilities, from the Point of Delivery as shown on the attached
Exhibit "A," and the DISTRICT shall have no responsibility whatsoever relative
to said USER's facilities.
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
3. PURCHASE PRICE
During the term of this Agreement, the USER shall pay to the DISTRICT the in -effect
commodity and applicable service charges, which are modified from time to time, as
published in the DISTRICT'S Customer Guide to Rates and Charges.
* The District reserves the right to modify or adjust the rate schedule(s) for providing recycled water to reflect
changes in the District's operating costs, if any, as determined by the District.
4. QUANTITY
DISTRICT agrees to sell and deliver and USER agrees to purchase, accept delivery of, control,
and use recycled water at an average basic quantity in the amount of ( ) gallons per
day. Said quantity shall be delivered on an "as available" basis.
5. BILLING FOR RECYCLED WATER
DISTRICT will render monthly billings for recycled water deliveries made during the
preceding month to the USER, based on the meter reading at the Point of Delivery. Billings,
in accordance with the DISTRICT'S prevailing rules and regulations, shall be paid within thirty
days of the date thereof. Any late payments shall be considered delinquent and shall be
subject to the DISTRICT'S standard penalty charges and disconnection procedures then in
effect.
6. ASSIGNMENT
Except as provided below, the USER shall not assign any of its individual or collective rights
under this Agreement to any person or entity, or become associated with any other party
involving, in anyway, the recycled water to be delivered pursuant to this Agreement without
the prior written consent of the DISTRICT and of any regulatory agencies having jurisdiction,
which consent shall not be unreasonably withheld.
In the event USER desires to enter into a transaction for the sale or financing of the use site,
DISTRICT will not unreasonably withhold its consent to continue to provide recycled water
contingent upon the new owner complying with the terms of this Agreement.
7. TERM OF AGREEMENT
The term of this Agreement shall begin with the date of Agreement (first written above) and
shall continue until terminated by the USER or DISTRICT.
E ��1enL��wer7L�P►1
A. USER or DISTRICT shall have the right to terminate this Agreement, with no financial
liability to the other party or CITY, by giving thirty working days' written notice, as
long as both parties mutually agree.
B. DISTRICT shall have the right to terminate this Agreement, with no financial liability
to the USER or CITY, for USER'S noncompliance with applicable use and/or payment
requirements.
IL/
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
C. Notwithstanding Paragraph 1.13., the DISTRICT shall also have the right to terminate
this Agreement by giving the USER and CITY ten days' written notice in the event the
wastewater treatment criteria under which the DISTRICT currently operates is
changed by operation of law, or by any regulatory agency having jurisdiction, such
that the DISTRICT'S Regional Water Reclamation System, as it presently exists,
cannot produce wastewater that complies with such changes without incurring
additional costs or modifications to said facilities.
D. Upon termination of this Agreement by either the USER or the DISTRICT, within thirty
calendar days of termination, the USER shall make a payment to the DISTRICT for all
costs to remove recycled water service from the Point of Delivery to the DISTRICT'S
recycled water main (hereinafter referred to a "Service Lateral"). After thirty
calendar days, if a payment has not been made by the USER, the DISTRICT may elect
to remove the Service Lateral and lien the USER lands for the amount due.
9. RECORDATION AGAINST TITLE
This Agreement shall be recorded against the title to the real property for which recycled
water is used pursuant to this Agreement in the county in which the real property is situated.
The obligations set forth herein shall accordingly transfer to subsequent purchasers of the
real property.
10. ATTORNEYS' FEES
In the event of litigation or arbitration between the parties hereto arising out of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees and costs to
be fixed by the court or by arbitration.
11. PREPARATION OF THIS AGREEMENT
This Agreement shall not be construed against the party preparing it, but shall be construed
as if both parties prepared it.
12. CAPTIONS
Captions to Paragraph/Subparagraphs of this Agreement are for convenience purposes only
and are not part of this Agreement.
13. PROVISIONS BINDING
This Agreement and Exhibit "A" attached shall be binding upon and shall inure to the heirs,
representatives, successors, and assigns of the parties of this Agreement. The DISTRICT, CITY
and USER intend that the benefits and burdens described herein constitute covenants
running with the land for the benefit of the USER lands.
M
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
14. CERTIFICATION
The undersigned PROPERTY OWNER and RECYCLED WATER SITE SUPERVISOR hereby certify
compliance with all operational responsibilities contained in Section 1.D.(2) above.
15. AUTHORITY TO SIGN AGREEMENT
The undersigned individuals hereby warrant and represent that they each have full legal
authority to sign this Agreement and bind the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed as of the day, month, and year first above
written.
RANCHO CALIFORNIA WATER DISTRICT
By:
Robert S. Grantham, General Manager Date
CITY OF TEMECULA
By:
Zak Schwank, Mayor Date
Attest:
By:
Randi Johl, City Clerk
Approved as to form:
By:
Peter M. Thorson, City Attorney
Rancho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
Exhibit "A"
Point of Delivery
Rancho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
RANCHO CALIFORNIA WATER DISTRICT
APPLICATION FOR
USE OF RECYCLED WATER
PROJECT NAME:
PROJECT ADDRESS:
LOCATION:
DEVELOPER:
CONTACT PERSON:
ADDRESS:
PHONE:
*SITE SUPERVISOR:
PHONE: (DAY)
(NIGHT)
PAGER:
DESCRIPTION OF RECYCLED WATER USE
START DATE:
END DATE:
QUANTITY (GALLONS PER DAY):
MEANS OF DISTRIBUTION:
DEVELOPER SIGNATURE CUSTOMER SIGNATURE
DATE DATE
*MUST BE ABLE TO CONTACT 24 HOURS/DAY
M
nchn California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
RANCHO CALIFORNIA WATER DISTRICT
42135 Winchester Road
Temecula, CA 92590-4800
Exempt from Recording Fee (Gov. Code §6103)
LOCATION NO.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
RECYCLED WATER
AGREEMENT
RANCHO CALIFORNIA WATER DISTRICT
RA — —
THIS AGREEMENT is made and entered into this day of 20 by and between
Rancho California Water District, a public agency ("DISTRICT"), and (Property Owner[s]lAgency
Name) ("Owner"), the owner of Parcel No. of Parcel Map No. ,
APN , and the City of Temecula, a public agency ("CITY"). Owner shall
hereinafter be referred to as "USER."
A. The Santa Rosa Regional Resources Authority ("SRRRA"), a Joint Powers Authority
formed by several water districts including the DISTRICT, owns and operates a major
system of sewage interceptor, transmission, treatment, disposal, and water reclamation
facilities, hereafter referred to as DISTRICT'S Regional Water Reclamation System; and
B. Water that has been completely treated through the DISTRICT'S Regional Water
Reclamation System shall hereinafter be referred to as recycled water; and
C. Pipelines conveying recycled water shall hereinafter be referred to as recycled water
mains; and
D. In accordance with DISTRICT policies, the recycled water, which results from the
operation of the DISTRICT'S Regional Water Reclamation System, has been made
available for approved uses; and
E. USER desires to purchase, accept delivery of, control, and use the quantity of recycled
water provided for in Paragraph 4 herein for approved irrigation purposes within the
boundaries of the DISTRICT, under the terms and conditions set forth below; and
F. Such sales and deliveries would be in accordance with the DISTRICT'S policy of using
recycled water for beneficial purposes; and
G. DISTRICT is willing to sell and deliver recycled water for irrigation purposes under the
terms and conditions set forth below.
M
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
In consideration of the mutual covenants herein contained, it is mutually agreed as follows:
1. SALE AND DELIVERY TERMS AND CONDITIONS
A. Point of Delivery
The recycled water delivered pursuant to this Agreement shall be measured through the
DISTRICT -owned, -operated, and -maintained metering facilities located at the Point of Delivery
shown on the attached Exhibit "A." Any facilities that have been or shall be installed by DISTRICT
at USER'S request shall be paid for by the USER, in accordance with applicable DISTRICT Rules
and Regulations.
B. Availability Acknowledgment
The USER acknowledges that the DISTRICT does not guarantee the availability of
recycled water throughout the term of this Agreement due to possible changes in
regulatory agency requirements, reduction in plant flow, demands from other
recycled water use areas, and/or other conditions beyond DISTRICT'S control.
USER holds DISTRICT free and harmless from any and all legal liabilities and/or
economic losses that it may sustain as the result of discontinuance or reduction in
amount of delivery of recycled water as specified above.
C. Pressure
The recycled water to be delivered pursuant to this Agreement shall, as far as
possible, be delivered at the Point of Delivery shown on the attached Exhibit "A."
USER shall be responsible for, at its cost, providing any and all devices to increase or
decrease delivery pressure, and/or any and all conveyance equipment (e.g. piping,
pumps, etc.) required to deliver the recycled water to the point(s) of use.
USER agrees not to operate its recycled water system in a fashion that may cause
surge pressures to propagate past the Point of Delivery into the DISTRICT'S recycled
water mains.
D. Facility Provision and Operational Responsibility
(1) DISTRICT shall be responsible for providing and operating its Regional Water
Reclamation System facilities, up to and including the Point of Delivery, in
compliance with the applicable requirements of DISTRICT, federal, state, and
local regulatory agencies.
DISTRICT shall be responsible for supplying recycled water, which meets or
exceeds all applicable federal, state, and local regulatory agency quality
standards.
DISTRICT shall monitor recycled water deliveries and use sites as it deems
necessary and in accordance with applicable federal, state, and local
regulatory agency requirements.
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
(2) USER shall:
■ Make application for recycled water service.
■ Pay all fees and deposits for recycled water service.
■ Post all required warning signs informing the public and all on -site
and off -site personnel (employees, tenants, occupants, and CITY
staff) that recycled water is being used on -site and off -site for
irrigation purposes.
■ Install and maintain a certified backflow device on all potable water
sources including, but not limited to, the DISTRICT'S potable water
meters, all exterior sources of potable water on- and offsite, and all
potable water supplies to fountains, ponds, and/or swimming pools.
■ Designate a Site Supervisor. The Site Supervisor must/will:
a) Be knowledgeable about recycled water and how it is
manufactured.
b) Be the contact person at USER's site, and be available at all
times to contact and respond in the event of an emergency.
c) Be knowledgeable about the practices and procedures of using
recycled water.
d) Be responsible for the safe and efficient use of recycled water.
e) Provide instruction and training to on -site and off -site
personnel in the proper handling of recycled water and the
potential health hazards involved with its use.
f) Submit plans to the DISTRICT for all proposed changes to the
irrigation system on the USER's site(s) for review and approval
prior to any modifications being made.
g) Have all proposed changes approved by the DISTRICT inspected
by the DISTRICT'S staff during construction.
h) Maintain irrigation system record drawings of USER's site(s).
i) Communicate all recycled water rules and regulations to on -site
and off -site personnel.
j) Be knowledgeable of all on -site and off -site potable water
systems, and take appropriate measures to prevent cross -
connection with the recycled water system.
k) Inform DISTRICT of all system failures or cross -connection
events so that appropriate measures may be taken to mitigate
the contamination or pollution.
If the USER desires to designate another person as Site Supervisor,
then the USER is responsible for notifying DISTRICT in writing of
such action. In the event that someone other than the USER is
designated as the Site Supervisor and this person is no longer
associated with the property, the USER shall again be considered
the Site Supervisor and will assume the above -listed requirements
until an approved Site Supervisor is designated.
IL/
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
■ Identify all above -ground fittings and appurtenances, etc. as
containing recycled water and not suitable for human consumption.
Signs shall be painted or otherwise permanently affixed to
equipment.
■ Altogether avoid introducing recycled water into any
potable/domestic water piping system and no connection shall be
made between equipment containing, or having contained, recycled
water and/or any part of a domestic water system until such time as
equipment has been properly disinfected.
■ Take full responsibility for providing, operating, maintaining, and
repairing USER pipelines, together with all appurtenant facilities, as
are necessary to accept, convey, control, and use the recycled water
in compliance with the applicable requirements of DISTRICT, federal,
state, CITY's Conditions of Approval, and local regulatory agencies on
their respective owned or controlled lands.
■ Allow recycled water to be used only on the areas depicted on the
attached exhibit and irrigation construction plans.
■ Allow recycled water use between the hours of 9:00 p.m. and 6:00
a.m.
E. USER Acknowledgment
USER acknowledges it is understood that:
(1) DISTRICT'S Regional Water Reclamation System's purpose is to control the
biological quality of the recycled water resulting from its operation.
(2) Said System is not equipped to detect, treat, or remove harmful chemicals or
toxic materials, except as required to meet federal, state, and local
regulatory agency discharge standards.
F. Indemnification
USER, CITY, and the DISTRICT each agree, to the fullest extent permitted by law, to
indemnify and hold the other party, and its directors, officers, employees, or
authorized volunteers harmless from any claims, damage, liability, or cost
(including attorneys' fees and costs of defense) to the extent caused by the
indemnifying party's negligent acts, errors, or omissions in the performance of this
agreement, including such negligent acts, errors, or omissions by sub -contractors
or others for whom the indemnifying party is legally liable; provided, however,
that this indemnity shall not apply to any acts, errors, or omissions attributable to
the indemnified party, its directors, officers, employees, authorized volunteers,
sub -contractors, or to any others for whom the indemnified party is legally liable.
M
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
2. USE TERMS AND CONDITIONS
Use of the recycled water delivered pursuant to this Agreement shall be subject to the
following terms and conditions:
A. Rules and Regulations
All recycled water delivered pursuant to this Agreement shall be used only for
approved uses on the specified use site, as shown and depicted as USER and CITY
lands on attached Exhibit "A," in compliance with applicable rules and regulations of
DISTRICT, federal, state, and local regulatory agencies, including CITY's Conditions of
Approval.
This Agreement has no application to the operation of the DISTRICT'S sewer and
domestic water operation, including the assessment of fees and the enforcement of
rules and regulations pertaining thereto. USER must comply with all rules and
regulations of the DISTRICT pertaining to any properties owned or maintained by
USER that connect to the DISTRICT'S Regional Water Reclamation System.
Failure to observe all regulations governing the use of recycled water will result in
the immediate termination of recycled water service until such time as the
deficiencies are corrected to the satisfaction of the DISTRICT.
Failure to observe said regulations shall be subject to Unauthorized Use Charges
established by the DISTRICT.
B. Reclamation Requirements
USER shall apply to the DISTRICT for all applicable use permits. DISTRICT shall apply
for all required Permits of Reclamation Requirements from the California Regional
Water Quality Control Board, hereinafter referred to as the Regional Board, covering
the use of the disinfected recycled water to be delivered and used pursuant to this
Agreement. USER shall comply with the provisions of such Reclamation
Requirements. USER shall use recycled water on only those areas specified in such
Reclamation Requirements, unless otherwise provided for in future amendments to
said Reclamation Requirements.
C. Responsibility for Conveyance and Control
(1) DISTRICT
DISTRICT shall be solely responsible for conveying and controlling the
recycled water up to and including the Point of Delivery provided for in
Paragraph 1.A., above.
(2) USER
USER shall be responsible for conveying and controlling, in compliance with
applicable regulatory agency requirements, the recycled water delivered
through USER's facilities, from the Point of Delivery as shown on the attached
Exhibit "A," and the DISTRICT shall have no responsibility whatsoever relative
to said USER's facilities.
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
K 01C%l:/-M4:1.1140
During the term of this Agreement, the USER shall pay to the DISTRICT the in -effect
commodity and applicable service charges, which are modified from time to time, as
published in the DISTRICT'S Customer Guide to Rates and Charges.
* The District reserves the right to modify or adjust the rate schedule(s) for providing recycled water to reflect
changes in the District's operating costs, if any, as determined by the District.
4. QUANTITY
DISTRICT agrees to sell and deliver and USER agrees to purchase, accept delivery of, control,
and use recycled water at an average basic quantity in the amount of ( ) gallons per
day. Said quantity shall be delivered on an "as available" basis.
5. BILLING FOR RECYCLED WATER
DISTRICT will render monthly billings for recycled water deliveries made during the
preceding month to the USER, based on the meter reading at the Point of Delivery. Billings,
in accordance with the DISTRICT'S prevailing rules and regulations, shall be paid within thirty
days of the date thereof. Any late payments shall be considered delinquent and shall be
subject to the DISTRICT'S standard penalty charges and disconnection procedures then in
effect.
6. ASSIGNMENT
Except as provided below, the USER shall not assign any of its individual or collective rights
under this Agreement to any person or entity, or become associated with any other party
involving, in any way, the recycled water to be delivered pursuant to this Agreement without
the prior written consent of the DISTRICT and of any regulatory agencies having jurisdiction,
which consent shall not be unreasonably withheld.
In the event USER desires to enter into a transaction for the sale or financing of the use site,
DISTRICT will not unreasonably withhold its consent to continue to provide recycled water
contingent upon the new owner complying with the terms of this Agreement.
7. TERM OF AGREEMENT
The term of this Agreement shall begin with the date of Agreement (first written above) and
shall continue until terminated by the USER or DISTRICT.
8. CANCELLATION
A. USER or DISTRICT shall have the right to terminate this Agreement, with no financial
liability to the other party or CITY, by giving thirty working days' written notice, as
long as both parties mutually agree.
B. DISTRICT shall have the right to terminate this Agreement, with no financial liability
to the USER or CITY, for USER'S noncompliance with applicable use and/or payment
requirements.
IL/
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
C. Notwithstanding Paragraph 1.13., the DISTRICT shall also have the right to terminate
this Agreement by giving the USER and CITY ten days' written notice in the event the
wastewater treatment criteria under which the DISTRICT currently operates is
changed by operation of law, or by any regulatory agency having jurisdiction, such
that the DISTRICT'S Regional Water Reclamation System, as it presently exists,
cannot produce wastewater that complies with such changes without incurring
additional costs or modifications to said facilities.
D. Upon termination of this Agreement by either the USER or the DISTRICT, within thirty
calendar days of termination, the USER shall make a payment to the DISTRICT for all
costs to remove recycled water service from the Point of Delivery to the DISTRICT'S
recycled water main (hereinafter referred to a "Service Lateral"). After thirty
calendar days, if a payment has not been made by the USER, the DISTRICT may elect
to remove the Service Lateral and lien the USER lands for the amount due.
9. RECORDATION AGAINST TITLE
This Agreement shall be recorded against the title to the real property for which recycled
water is used pursuant to this Agreement in the county in which the real property is situated.
The obligations set forth herein shall accordingly transfer to subsequent purchasers of the
real property.
10. ATTORNEYS' FEES
In the event of litigation or arbitration between the parties hereto arising out of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees and costs to
be fixed by the court or by arbitration.
11. PREPARATION OF THIS AGREEMENT
This Agreement shall not be construed against the party preparing it, but shall be construed
as if both parties prepared it.
12. CAPTIONS
Captions to Paragraph/Subparagraphs of this Agreement are for convenience purposes only
and are not part of this Agreement.
13. PROVISIONS BINDING
This Agreement and Exhibit "A" attached shall be binding upon and shall inure to the heirs,
representatives, successors, and assigns of the parties of this Agreement. The DISTRICT, CITY
and USER intend that the benefits and burdens described herein constitute covenants
running with the land for the benefit of the USER lands.
14. CERTIFICATION
IL/
ncho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
The undersigned PROPERTY OWNER and RECYCLED WATER SITE SUPERVISOR hereby certify
compliance with all operational responsibilities contained in Section 1.D.(2) above.
15. AUTHORITY TO SIGN AGREEMENT
The undersigned individuals hereby warrant and represent that they each have full legal
authority to sign this Agreement and bind the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed as of the day, month, and year first above
written.
RANCHO CALIFORNIA WATER DISTRICT
By:
Robert S. Grantham, General Manager Date
CITY OF TEMECULA
By:
(Signature) Date
(Print Nome)
Its:
(Title/Position)
(OWNER NAME)
Rancho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
By:
(Signature) Date
(Print Nome)
Its:
(Title/Position)
Rancho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
Exhibit "A"
Point of Delivery
Rancho California Water District
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
RANCHO CALIFORNIA WATER DISTRICT
APPLICATION FOR
USE OF RECYCLED WATER
PROJECT NAME:
PROJECT ADDRESS:
LOCATION:
DEVELOPER:
CONTACT PERSON:
ADDRESS:
PHONE:
*SITE SUPERVISOR:
PHONE: (DAY)
(NIGHT)
PAGER:
DESCRIPTION OF RECYCLED WATER USE
START DATE:
END DATE:
QUANTITY (GALLONS PER DAY):
MEANS OF DISTRIBUTION:
DEVELOPER SIGNATURE CUSTOMER SIGNATURE
DATE DATE
*MUST BE ABLE TO CONTACT 24 HOURS/DAY
M
nchn California Water Distr
42135 Winchester Road • Temecula, California 92590-4800 • (951) 296-6900 • FAX (951) 296-6860 • www.ranchowater.com
Item No. 7
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Luke Watson, Deputy City Manager
DATE: August 22, 2023
SUBJECT: Approve First Amendment to the Agreement for On Call Services with Keyser
Marston and Associates, Inc.
PREPARED BY: Brandon Rabidou, Principal Management Analyst
RECOMMENDATION: That the City Council approve the first amendment to the agreement
with Keyser Marston Associates, Inc., in the amount of $110,000, for a total agreement of
$275,000, for on call services.
BACKGROUND: From time to time, Keyser Marson and Associates, Inc. provides
various on call services to the City of Temecula to support affordable housing analysis, land use
scenario planning, fiscal impact analysis, and other similar services. These services help the City
Council, staff, and the community understand potential impacts to various proposals that come
before the City of Temecula.
FISCAL IMPACT: There are sufficient funds budgeted in the Planning line item
001.161.999.5248 for these services.
ATTACHMENTS: Amendment
FIRST AMENDMENT TO AGREEMENT BETWEEN
CITY OF TEMECULA AND KEYSER MARSTON ASSOCIATES, INC.
ON CALL CONSULTANT SERVICES
THIS FIRST AMENDMENT is made and entered into as of August 8, 2023, by and
between the City of Temecula, a municipal corporation (hereinafter referred to as "City"), and
Keyser Marston Associates, Inc., a Corporation (hereinafter referred to as "Consultant"). In
consideration of the mutual covenants and conditions set forth herein, the parties agree as
follows:
1. This Amendment is made with the respect to the following facts and purposes
a. On March 1, 2020, the City and Consultant entered into that certain
Agreement entitled "Agreement for Consultant Services between City of Temecula and
Keyser Marston Associates, Inc.," in the amount of $165,000.00.
b. The parties now desire to extend the term of the agreement to June 30,
2025, increase the payment in the amount of $110,000.00 and to amend the Agreement as set
forth in this Amendment.
2. Section 1 of the Agreement entitled "TERM" is hereby amended to read as follows:
"This Agreement shall remain and continue in effect until tasks herein are
completed, but in no event later than June 30, 2025, unless sooner
terminated pursuant to the provisions of this Agreement.
3. Section 4 of the Agreement entitled "PAYMENT" at paragraph "a" is hereby
amended to read as follows:
The City agrees to pay Consultant monthly, in accordance with the
payment rates and schedules and terms set forth in Exhibit B, Payment
Rates and Schedule, attached hereto and incorporated herein by this
reference as though set forth in full, based upon actual time spent on the
above tasks. Any terms in Exhibit B, other than the payment rates and
schedule of payment, are null and void. The First Amendment amount
shall not exceed one hundred ten thousand dollars and zero cents
($110,000.00), for a total Agreement amount of two hundred seventy-
five thousand dollars and zero cents ($275,000.00).
4. Except for the changes specifically set forth herein, all other terms and conditions
of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
CITY OF TEMECULA
By:
Aaron Adams, City Manager
ATTEST:
By:
Randl Johl, City Clerk
APPROVED AS TO FORM:
By:
Peter M. Thorson, City Attorney
KEYSER MARSTON ASSOCIATES, INC.
By: flcLA,'e
Paul C. Marra, Vice President
By:
CONSULTANT
Keyser Marston Associates, Inc.
Attn: Paul Marra
655 West Beech Streetr Suite 460
619 718-9600 _W--
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Initials
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OBI09 MI
Item No. 8
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Adopt Resolution to Approve the Administering Agency - State Agreement -
Master Agreement No. 08-5459S21 with the State of California, Department of
Transportation
PREPARED BY: Julie Tarrant, Principal Management Analyst
RECOMMENDATION: That the City Council adopt a resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA TO APPROVE THE ADMINISTERING AGENCY
- STATE AGREEMENT - MASTER AGREEMENT NO. 08-
5459S21 AND AUTHORIZE THE CITY MANAGER TO
EXECUTE THE AGREEMENT AND ALL PERTINENT
PROGRAM SUPPLEMENT AGREEMENTS FOR STATE
FUNDED PROJECTS
BACKGROUND: On March 8, 2011, City Council adopted Resolution No. 11-24 to
approve the Administering Agency -State Agreement for State -Funded Projects, Master Agreement
No. 00325S. Periodically, the Legislature of the State of California may enact new legislation by
which certain State Funds are made available for use on local transportation related projects public
entities qualified to act as recipients of these state funds. Before State Funds will be made available
for projects, the Administering Agency and State are required to enter into an agreement to
establish terms and conditions applicable to public entities when receiving State Funds.
Relevant to the City's grant award of $1,502,000 in Active Transportation Program -Senate Bill 1
(ATP-SB 1) program funds for the Santa Gertrudis Creek Phase II — Margarita Road Undercrossing
from the California Transportation Commission (CTC), we are required to enter into a new Master
Agreement, Administering Agency -State Agreement for State Funded Project, Agreement No. 08-
5459S21. The Master Agreement has been revised to incorporate the various changes in
regulations and policies, as defined in the Local Assistance Program Guidelines (LAPG) and/or in
the current CTC Guidelines, for use on local authorized transportation related projects as a local
administered project(s).
In addition to the Master Agreement, Administering Agency - State Agreement for State Funded
Project, Agreement No. 08-5459521, this Agreement shall have no force or effect with respect to
any program project unless and until a project -specific Program Supplement to the Agreement for
State funded projects has been fully executed by both State and Administering Agency.
Therefore, the Administering Agency agrees to execute the project -specific Program Supplement
Agreement No's. OOOOOA212 and OOOOOA213, for State Only Funds in the amount of $1,462,000,
and $40,000, respectively. The Program Supplement Agreement (PSA) sets out special covenants
and a condition for the Administering Agency to receive State Funds for designated projects. The
PSA also show these State fund that have been initially encumbered for the Project, along with the
match funds to be provided by the administering Agency. Execution of the PSA by all parties shall
cause Administering Agency to adopt all terms of the Master Agreement, as though fully set forth
therein in the PSA.
FISCAL IMPACT: The Santa Gertrudis Creek Phase II — Margarita Road
Undercrossing project is identified in the City's Capital Improvement Program for Fiscal Years
2024-28. Adequate funds are available to include ATP-SB 1 program funds in the amount of
$1,502,000, and Measure S. There is no fiscal impact to approve and execute the Master
Agreement and Program Supplement Agreements.
ATTACHMENTS: 1. Resolution
2. Master Agreement No. 08-5459521
3. Program Supplement Agreement No. OOOOOA212
4. Program Supplement Agreement No. OOOOOA213
RESOLUTION NO. 2023-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF TEMECULA TO APPROVE THE ADMINISTERING
AGENCY - STATE AGREEMENT - MASTER AGREEMENT
NO. 08-5459521 AND AUTHORIZE THE CITY MANAGER
TO EXECUTE THE AGREEMENT AND ALL PERTINENT
PROGRAM SUPPLEMENT AGREEMENTS FOR STATE
FUNDED PROJECTS
THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS
FOLLOWS:
Section 1. The Legislature of the State of California has enacted legislation by which
certain State funds are made available for use on local transportation related projects of public
entities qualified to act as recipients of these state funds; and
Section 2. The Administering Agency has applied to the California Transportation
Commission (CTC) and/or State for funding from a State - funded program, as defined in the Local
Assistance Program Guidelines (LAPG) and/or in the respective CTC Guidelines, for use on local
authorized transportation related projects as a local administered project(s), hereinafter referred to
as "PROJECT"; and
Section 3. Said PROJECT will not receive any federal funds; and
Section 4. Before State funds will be made available for PROJECT, Administering
Agency and State are required to enter into an agreement to establish terms and conditions
applicable to the Administering Agency with receiving State funds for a designated PROJECT
facility and to the subsequent operation and maintenance of the completed facility; and
Section 5. The Program Supplement sets out special covenants as a condition for the
Administering Agency to receive State Funds from/through State for designated project(s) and
shall also show these State Funds that have been initial encumbered for PROJECT along with the
matching funds to be provided by the Administering Agency; and
Section 6. Program Supplement Agreement Nos. OOOOOA212 and OOOOOA213
encumber State Funds in the amount of $1,462,000 and $40,000, respectively, for the Santa
Gertrudis Creek Phase II — Margarita Road Undercrossing, Lighting, Signage, and Public Outreach
Campaign; and
Section 7. The City Council approve the Administering Agency - State Agreement for
State Funded Projects — Master Agreement No. 08-5459521 and authorize the City Manager to
execute the Agreement and all Pertinent Program Supplement Agreements for State Funded
Projects.
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula
this 22nd day of August, 2023.
Zak Schwank, Mayor
ATTEST:
Randi Johl, City Clerk
[SEAL]
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing
Resolution No. 2023- was duly and regularly adopted by the City Council of the City of
Temecula at a meeting thereof held on the 22nd day of August, 2023, by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
Randi Johl, City Clerk
MASTER AGREEMENT
ADMINISTERING AGENCY -STATE AGREEMENT
STATE -FUNDED PROJECTS
08 City of Temecula
-------- ----------------------------------------------
District Administering Agency
Agreement No. 08-5459521
This AGREEMENT, is entered into effective this day of , 20 , by and
between the City of Temecula, hereinafter referred to as "ADMINISTERING AGENCY,"
and the State of California, acting by and through its Department of Transportation
(Caltrans), hereinafter referred to as "STATE", and together referred to as "PARTIES" or
individually as a "PARTY."
RECITALS:
1. WHEREAS, the Legislature of the State of California has enacted legislation by which
certain State funds are made available for use on local transportation related projects
of public entities qualified to act as recipients of these state funds; and
2. WHEREAS, ADMINISTERING AGENCY has applied t
Commission (CTC) and/or STATE for funding from a
referred to as STATE FUNDS), as defined in the Local
(LAPG) and/or in the respective CTC Guidelines,
transportation related projects as a local administered
to as "PROJECT"; and
the California Transportation
State -funded program (herein
Assistance Program Guidelines
for use on local authorized
project(s), hereinafter referred
3. WHEREAS, said PROJECT will not receive any federal funds; and
4. WHEREAS, before STATE FUNDS will be made available for PROJECT,
ADMINISTERING AGENCY and STATE are required to enter into an agreement to
establish terms and conditions applicable to the ADMINISTERING AGENCY when
receiving STATE FUNDS for a designated PROJECT facility and to the subsequent
operation and maintenance of that completed facility.
NOW, THEREFORE, the PARTIES agree as follows:
Page 1 of 15
ARTICLE I - PROJECT ADMINISTRATION
1. This AGREEMENT shall have no force or effect with respect to any program project
unless and until a project- specific Program Supplement to this AGREEMENT for state
funded projects, hereinafter referred to as "PROGRAM SUPPLEMENT", has been fully
executed by both STATE and ADMINISTERING AGENCY.
2. The State approved project -specific allocation notification letter and approved CTC
allocation documentation designate the party responsible for implementing PROJECT,
type of work, and location of PROJECT for projects requiring CTC allocation by PROJECT
component of work.
3. The PROGRAM SUPPLEMENT sets out special covenants as a condition for the
ADMINISTERING AGENCY to receive STATE FUNDS from/through STATE for designated
PROJECT. The PROGRAM SUPPLEMENT shall also show these STATE FUNDS that have
been initially encumbered for PROJECT along with the matching funds to be provided
by ADMINISTERING AGENCY and/or others. Execution of PROGRAM SUPPLEMENT by
the PARTIES shall cause ADMINISTERING AGENCY to adopt all the terms of this
AGREEMENT as though fully set forth therein in the PROGRAM SUPPLEMENT. Unless
otherwise expressly delegated in a resolution by the governing body of
ADMINISTERING AGENCY, and with written concurrence by STATE, the PROGRAM
SUPPLEMENT shall be approved and managed by the governing body of
ADMINISTERING AGENCY.
4. ADMINISTERING AGENCY agrees to execute and return each project -specific
PROGRAM SUPPLEMENT. The PARTIES agree that STATE may suspend future
allocations, encumbrances and invoice payments for any on- going or future STATE
FUNDED PROJECT performed by ADMINISTERING AGENCY if any project -specific
PROGRAM SUPPLEMENT is not returned, unless otherwise agreed by STATE in writing.
5. ADMINISTERING AGENCY further agrees, as a condition to the release and payment
of STATE FUNDS encumbered for the PROJECT described in each PROGRAM
SUPPLEMENT, to comply with the terms and conditions of this AGREEMENT and all the
agreed -upon Special Covenants or Remarks incorporated within the PROGRAM
SUPPLEMENT, and Cooperative/Contribution Agreement where appropriate, defining
and identifying the nature of the specific PROJECT.
6. STATE FUNDS will not participate in any portion of PROJECT work performed in
advance of the effective date of allocation by CTC, or by STATE for allocations
delegated to STATE by CTC, for said PROJECT.
7. Projects allocated with STATE FUNDS will be administered in accordance with the
current CTC STIP Guidelines, applicable chapter(s) of the LAPG, LAPM and/or any other
instructions published by STATE.
8. ADMINISTERING AGENCY agrees to ensure compliance with all relevant State laws
and requirements for work related to PROJECT, including the California Environmental
Quality Act (CEQA).
9. ADMINISTERING AGENCY's eligible costs for preliminary engineering work includes
all preliminary work directly related to PROJECT up to contract award for construction,
including, but not limited to, environmental studies and permits (E&P), preliminary
surveys and reports, laboratory work, soil investigations, the preparation of plans,
specifications and estimates (PS&E), advertising for bids, awarding of a contract and
project development contract administration.
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10. ADMINISTERING AGENCY's eligible costs for construction engineering include
actual inspection and supervision of PROJECT construction work; construction staking;
laboratory and field testing; and the preparation and processing of field reports,
records, estimates, final reports, and allowable expenses of employees/consultants
engaged in such activities.
11. Unless the PARTIES agree otherwise in writing, ADMINISTERING AGENCY's
employees or its contracted engineering consultant shall be responsible for all
PROJECT engineering work.
12. ADMINISTERING AGENCY shall not proceed with final design of PROJECT until final
environmental approval of PROJECT. Final design entails the design work necessary to
complete the PS&E and other work necessary for a construction contract but not
required earlier for environmental clearance of that PROJECT.
13. If PROJECT is not on STATE -owned right-of-way, PROJECT shall be constructed in
accordance with Chapter 11 of the LAPM that describes minimum statewide design
standards for local agency streets and roads. The design standards for projects off the
National Highway System (NHS) allow STATE to accept either the current Caltrans
Highway Design Manual standards, the current FHWA-adopted American Association of
State Highway and Transportation Officials (AASHTO) A Policy on Geometric Design of
Highways and Streets standards, or the approved geometric design standards of
ADMINISTERING AGENCY. Additionally, for projects off the NHS, STATE will accept
ADMINISTERING AGENCY -approved standard specifications, standard plans, materials
sampling and testing quality assurance programs that meet the conditions described
in the then current Local Assistance Procedures Manual.
14. If PROJECT involves work within or partially within STATE -owned right-of-way, that
PROJECT shall also be subject to compliance with the policies, procedures and
standards of the STATE Project Development Procedures Manual and Highway Design
Manual and where appropriate, an executed cooperative agreement between STATE
and ADMINISTERING AGENCY that outlines the PROJECT responsibilities and respective
obligations of the PARTIES. ADMINISTERING AGENCY and its contractors shall each
obtain an encroachment permit through STATE prior to commencing any work within
STATE rights -of -way or work which affects STATE facilities.
15. When PROJECT is not on the State Highway System (SHS) but includes work to be
performed by a railroad, the contract for such work shall be prepared by
ADMINISTERING AGENCY or by STATE, as the PARTIES may hereafter agree. In either
event, ADMINISTERING AGENCY shall enter into an agreement with the railroad
providing for future maintenance of protective devices or other facilities installed
under the contract.
16. ADMINISTERING AGENCY shall comply with the provisions of sections 4450 and
4454 of the California Government Code, as well as other Department of General
Services guidance, if applicable, for the contract PS&E for the construction of
buildings, structures, sidewalks, curbs and related facilities for accessibility and
usability. Further requirements and guidance are provided in Title 24 of the California
Code of Regulations.
17. ADMINISTERING AGENCY shall provide a full-time public employee to be in
responsible charge of each PROJECT. ADMINISTERING AGENCY shall provide or arrange
for adequate supervision and inspection of each PROJECT. ADMINISTERING AGENCY
may utilize consultants to perform supervision and inspection work for PROJECT with a
Page 3 of 15
fully qualified and licensed engineer. Utilization of consultants does not relieve
ADMINISTERING AGENCY of its obligation to provide a full-time public employee to be
in responsible charge of each PROJECT.
18. Unless otherwise provided in the PROGRAM SUPPLEMENT, ADMINISTERING
AGENCY shall advertise, award, and administer the PROJECT construction contract or
contracts.
19. The cost of maintenance, security, or protection performed by ADMINISTERING
AGENCY or contractor forces during any temporary suspension of PROJECT or at any
other time may not be charged to the PROJECT.
20. ADMINISTERING AGENCY shall submit PROJECT -specific award information to
STATE's District Local Assistance Engineer, within sixty (60) days after contract award.
21. ADMINISTERING AGENCY shall submit the final report documents that collectively
constitute a "Final Project Expenditure Report", LAPM Exhibit 17-M, within one hundred
eighty (180) days of PROJECT completion. Failure by ADMINISTERING AGENCY to
submit a "Final Project Expenditure Report", within 180 days of project completion will
result in STATE imposing sanctions upon ADMINISTERING AGENCY in accordance with
the Local Assistance Procedures Manual.
22. ADMINISTERING AGENCY shall comply with the Americans with Disabilities Act
(ADA) of 1990 that prohibits discrimination on the basis of disability and all applicable
regulations and guidelines issued pursuant to the ADA.
23. The Governor and the Legislature of the State of California, each within their
respective jurisdictions, have prescribed certain nondiscrimination requirements with
respect to contract and other work financed with public funds. ADMINISTERING
AGENCY agrees to comply with the requirements of the FAIR EMPLOYMENT PRACTICES
ADDENDUM, attached hereto as Exhibit A and further agrees that any agreement
entered into by ADMINISTERING AGENCY with a third party for performance of work
connected with PROJECT shall incorporate Exhibit A (with third party's name replacing
ADMINISTERING AGENCY) as parts of such agreement.
24. ADMINISTERING AGENCY shall include in all contracts and subcontracts awarded
when applicable, a clause that requires each subcontractor to comply with California
Labor Code requirements that all workers employed on public works aspects of any
project (as defined in California Labor Code sections 1720-1815) be paid not less than
the general prevailing wage rates predetermined by the Department of Industrial
Relations as effective at the date of contract award by the ADMINISTERING AGENCY.
ARTICLE II - RIGHTS -OF -WAY
1. No contract for the construction of a STATE FUNDED PROJECT shall be awarded until
all necessary rights of way have been secured. Prior to the advertising for construction
of PROJECT, ADMINISTERING AGENCY shall certify and, upon request, shall furnish
STATE with evidence that all necessary rights -of -way are available for construction
purposes or will be available by the time of award of the construction contract.
2. The furnishing of rights of way by ADMINISTERING AGENCY as provided for herein
includes, and is limited to, the following, unless the PROGRAM SUPPLEMENT provides
otherwise.
(a) Expenditures of capital and support to purchase all real property required for
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PROJECT free and clear of liens, conflicting easements, obstructions and
encumbrances, after crediting PROJECT with the fair market value of any excess
property retained and not disposed of by ADMINISTERING AGENCY.
(b) The cost of furnishing of right-of-way as provided for herein includes, in addition to
real property required for the PROJECT, title free and clear of obstructions and
encumbrances affecting PROJECT and the payment, as required by applicable law, of
damages to owners of remainder real property not actually taken but injuriously
affected by PROJECT.
(c) The cost of relocation payments and services provided to owners and occupants
pursuant to Government Code sections 7260-7277 when PROJECT displaces an
individual, family, business, farm operation or nonprofit organization.
(d) The cost of demolition and/or the sale of all improvements on the right-of-way after
credit is recorded for sale proceeds used to offset PROJECT costs.
(e) The cost of all unavoidable utility relocation, protection or removal.
(f) The cost of all necessary hazardous material and hazardous waste treatment,
encapsulation or removal and protective storage for which ADMINISTERING AGENCY
accepts responsibility and where the actual generator cannot be identified, and
recovery made.
3. ADMINISTERING AGENCY agrees to indemnify and hold STATE harmless from any
liability that may result in the event the right-of-way for a PROJECT is not clear as
certified by ADMINISTERING AGENCY, including, but not limited to, if said right-of-way
is found to contain hazardous materials requiring treatment or removal to remediate
in accordance with Federal and State laws. ADMINISTERING AGENCY shall pay, from its
own non- matching funds, any costs which arise out of delays to the construction of
PROJECT because utility facilities have not been timely removed or relocated, or
because rights -of -way were not available to ADMINISTERING AGENCY for the orderly
prosecution of PROJECT work.
ARTICLE III - MAINTENANCE AND MANAGEMENT
1. ADMINISTERING AGENCY will maintain and operate the property acquired,
developed, constructed, rehabilitated, or restored by PROJECT for its intended public
use until such time as the parties might amend this AGREEMENT to otherwise provide.
With the approval of STATE, ADMINISTERING AGENCY or its successors in interest in
the PROJECT property may transfer this obligation and responsibility to maintain and
operate PROJECT property for that intended public purpose to another public entity.
2. Upon ADMINISTERING AGENCY's acceptance of the completed construction contract
or upon contractor being relieved of the responsibility for maintaining and protecting
PROJECT, ADMINISTERING AGENCY will be responsible for the maintenance, ownership,
liability, and the expense thereof, for PROJECT in a manner satisfactory to the
authorized representatives of STATE and if PROJECT falls within the jurisdictional limits
of another Agency or Agencies, it is the duty of ADMINISTERING AGENCY to facilitate a
separate maintenance agreement(s) between itself and the other jurisdictional Agency
or Agencies providing for the operation, maintenance, ownership and liability of
PROJECT. Until those agreements are executed, ADMINISTERING AGENCY will be
responsible for all PROJECT operations, maintenance, ownership and liability in a
manner satisfactory to the authorized representatives of STATE. If, within ninety (90)
days after receipt of notice from STATE that a PROJECT, or any portion thereof, is not
Page 5 of 15
being properly operated and maintained and ADMINISTERING AGENCY has not
satisfactorily remedied the conditions complained of, the approval of future STATE
FUNDED PROJECTS of ADMINISTERING AGENCY will be withheld until the PROJECT shall
have been put in a condition of operation and maintenance satisfactory to STATE. The
provisions of this section shall not apply to a PROJECT that has been vacated through
due process of law with STATE's concurrence.
3. PROJECT and its facilities shall be maintained by an adequate and well -trained staff
of engineers and/or such other professionals and technicians as PROJECT reasonably
requires. Said operations and maintenance staff may be employees of ADMINISTERING
AGENCY, another unit of government, or a contractor under agreement with
ADMINISTERING AGENCY. All maintenance will be performed at regular intervals or as
required for efficient operation of the complete PROJECT improvements.
4. ADMINISTERING AGENCY shall comply with all applicable law, including but not
limited to, all applicable legal authority regarding construction standards.
ARTICLE IV - FISCAL PROVISIONS
1. All contractual obligations of STATE are subject to the appropriation of resources by
the Legislature and the allocation of resources by the CTC.
2. STATE'S financial commitment of STATE FUNDS will occur only upon the execution
of this AGREEMENT, the execution of each project -specific PROGRAM SUPPLEMENT
and/or STATE's approved finance letter.
3. ADMINISTERING AGENCY agrees, as a minimum, to submit invoices in arrears for
reimbursement of allowable PROJECT costs at least once every six months
commencing after the STATE FUNDS are encumbered on either the project -specific
PROGRAM SUPPLEMENT or through a project -specific finance letter approved by
STATE. STATE reserves the right to suspend future allocations and invoice payments
for any on -going or future STATE FUNDED project performed by ADMINISTERING
AGENCY if PROJECT costs have not been invoiced by ADMINISTERING AGENCY for a six-
month period
4. Invoices shall be submitted on a
accordance with Chapter 5 of the LAPM
AGENCY. For construction invoices, pay
standardized billing summary template, in
to claim reimbursement by ADMINISTERING
estimates must be included.
5. ADMINISTERING AGENCY must retain at least one copy of supporting backup
documentation for allowable costs incurred and claimed for reimbursement by
ADMINISTERING AGENCY. ADMINISTERING AGENCY agrees to submit supporting
backup documentation with invoices if requested by State. Acceptable backup
documentation includes, but is not limited to, agency's progress payment to the
contractors, copies of cancelled checks showing amounts made payable to vendors
and contractors, and/or a computerized summary of PROJECT costs.
6. Payments to ADMINISTERING AGENCY can only be released by STATE as
reimbursements of actual allowable PROJECT costs already incurred and paid for by
the ADMINISTERING AGENCY.
7. Indirect Cost Allocation Plans/Indirect Cost Rate Proposals (ICAP/ICRP), Central
Service Cost Allocation Plans and related documentation are to be prepared and
provided to the Inspector General - Independent Office of Audits and Investigations for
review and approval prior to ADMINISTERING AGENCY seeking reimbursement of
Page 6 of 15
indirect cost incurred within each fiscal year being claimed for reimbursement.
ICAPs/ICRPs must be prepared in accordance with the requirements set forth in 2 CFR,
Part 200, Chapter 5 of the LAPM, and the ICAP/ICRP approval procedures established
by STATE.
8. STATE will withhold the greater of either two (2) percent of the total of all STATE
FUNDS encumbered for each PROGRAM SUPPLEMENT or $40,000 until ADMINISTERING
AGENCY submits the Final Report of Expenditures for each completed PROGRAM
SUPPLEMENT PROJECT.
9. The estimated total cost of PROJECT, the amount of STATE FUNDS obligated, and
the required matching funds may be adjusted by mutual consent of the PARTIES with a
finance letter, and an allocation notification letter when applicable. STATE FUNDING
may be increased to cover PROJECT cost increases only if such additional funds are
available and the CTC and/or STATE concurs with that increase in the form of an
allocation and finance letter.
10. When such additional STATE FUNDS are not available, ADMINISTERING AGENCY
agrees that any increases in PROJECT costs must be defrayed with ADMINISTERING
AGENCY's own funds.
11. ADMINISTERING AGENCY shall use its own non -STATE FUNDS to finance the local
share of eligible costs and all PROJECT expenditures or contract items ruled ineligible
for financing with STATE FUNDS. STATE shall make the final determination of
ADMINISTERING AGENCY's cost eligibility for STATE FUNDED financing with respect to
claimed PROJECT costs.
12. ADMINISTERING AGENCY will reimburse STATE for STATE's share of costs for work
performed by STATE at the request of ADMINISTERING AGENCY. STATE's costs shall
include overhead assessments in accordance with section 8755.1 of the State
Administrative Manual.
13. STATE FUNDS allocated by the CTC and/or STATE are subject to the timely use of
funds provisions approved in CTC Guidelines and State procedures approved by the
CTC and STATE.
14. STATE FUNDS encumbered for PROJECT are available for liquidation only for a
limited period from the beginning of the State fiscal year when those funds were
appropriated in the State Budget. STATE FUNDS not liquidated within these periods
will be reverted unless a Cooperative Work Agreement (CWA) is submitted by
ADMINISTERING AGENCY and approved by the California Department of Finance in
accordance with Section 16304 of the Government Code. The exact date of fund
reversion will be reflected in the STATE signed PROJECT finance letter.
15. Payments to ADMINISTERING AGENCY for PROJECT -related travel and subsistence
(per diem) expenses of ADMINISTERING AGENCY forces and its contractors and
subcontractors claimed for reimbursement or as local match credit shall not exceed
rates authorized to be paid to rank and file STATE employees under current California
Department of Human Resources (CaIHR) rules unless a Cooperative Work Agreement
(CWA) is submitted by ADMINISTERING AGENCY and approved by the California
Department of Finance in accordance with Government Code section 16304. If the
rates invoiced by ADMINISTERING AGENCY are in excess of CaIHR rates,
ADMINISTERING AGENCY is responsible for the cost difference, and any overpayments
inadvertently paid by STATE shall be reimbursed to STATE by ADMINISTERING AGENCY
on demand.
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16. ADMINISTERING AGENCY agrees to comply with California Government Code 4525-
4529.14. Administering Agency shall undertake the procedures described in California
Government Code 4527(a) and 4528(a). Administering Agency shall also comply with
2 CFR Part 200 Uniform Administrative Requirements, Cost Principles and Audit
Requirement for Federal Awards, excluding 2 CFR Part 200.318-200.326.
17. ADMINISTERING AGENCY agrees and will assure that its contractors and
subcontractors will be obligated to agree that Contract Cost Principles and Procedures,
48 CFR, Federal Acquisition Regulations System, Chapter 1, Part 31, et seq., shall be
used to determine the allowability of individual PROJECT cost items. Every recipient
and sub -recipient receiving PROJECT funds under this AGREEMENT shall comply with
Federal administrative procedures in accordance with 2 CFR, Part 200, Uniform
Administrative Requirements, Cost Principles and Audit Requirement for Federal
Awards, excluding 2 CFR Part 200.318-200.326Governments. ADMINISTERING AGENCY
agrees to comply with the provisions set forth in 23 CFR Parts 140, 645 and 646 when
contracting with railroad and utility companies.
18. Every recipient and sub -recipient receiving PROJECT funds under this AGREEMENT
shall comply with 2 CFR 200 excluding 2 CFR Part 200.318-200.326, 48 CFR Chapter 1,
Part 31, LAPM, Public Contract Code (PCC) 10300- 10334 (procurement of goods), PCC
10335-10381 (non-A&E services), California Government Code 4525-4529.5 including
4527(a) and 4528(a), and other applicable STATE regulations.
19. Any PROJECT costs for which ADMINISTERING AGENCY has received payment or
credit that are determined by subsequent audit to be questioned, disallowed, or
unallowable under 2 CFR, Part 200, 48 CFR, Chapter 1, Part 31, 23 CFR Parts 140, 645
and 646, LAPM, Public Contract Code (PCC) 10300-10334 (procurement of goods), PCC
10335-10381 (non-A&E services), California Government Code 4525-4529.5 including
4527(a) and 4528(a), and other applicable STATE regulations are subject to repayment
by ADMINISTERING AGENCY to STATE and may result in STATE imposing sanctions on
ADMINISTERING AGENCY as described in Chapter 20 of the Local Assistance
Procedures Manual.
20. Should ADMINISTERING AGENCY fail to refund any moneys due upon written
demand by STATE as provided herein or should ADMINISTERING AGENCY breach this
AGREEMENT by failing to complete PROJECT without adequate justification and
approval by STATE, then, within thirty (30) days of demand, or within such other
period as may be agreed to in writing between the PARTIES hereto, STATE, acting
through the State Controller, the State Treasurer, the CTC or any other public entity or
agency, may intercept, withhold and demand the transfer of an amount equal to the
amount paid by or owed to STATE for each PROJECT, from future apportionments, or
any other funds due ADMINISTERING AGENCY from the Highway Users Tax Fund or any
other sources of funds, and/or may also withhold approval of future STATE FUNDED
projects proposed by ADMINISTERING AGENCY.
21. Should ADMINISTERING AGENCY be declared to be in breach of this AGREEMENT or
otherwise in default thereof by STATE, and if ADMINISTERING AGENCY is constituted as
a joint powers authority, special district, or any other public entity not directly
receiving funds through the State Controller, STATE is authorized to obtain
reimbursement from whatever sources of funding are available, including the
withholding or transfer of funds, from those constituent entities comprising a joint
powers authority or by bringing of an action against ADMINISTERING AGENCY or its
constituent member entities, to recover all funds provided by STATE hereunder.
Page 8 of 15
22. ADMINISTERING AGENCY acknowledges that the signatory party represents the
ADMINISTERING AGENCY and further warrants that there is nothing within a Joint
Powers Agreement, by which ADMINISTERING AGENCY was created, if any exists, that
would restrict or otherwise limit STATE's ability to recover STATE FUNDS improperly
spent by ADMINISTERING AGENCY in contravention of the terms of this AGREEMENT.
ARTICLE V
AUDITS, THIRD PARTY CONTRACTING, RECORDS RETENTION AND REPORTS
1. STATE reserves the right to conduct technical and financial audits of PROJECT work
and records and ADMINISTERING AGENCY agrees, and shall require its contractors and
subcontractors to agree, to cooperate with STATE by making all appropriate and
relevant PROJECT records available for audit and copying as required by paragraph
three (3) of Article V.
2. ADMINISTERING AGENCY, its contractors and subcontractors shall establish and
maintain a financial management system and records that properly accumulate and
segregate reasonable, allowable, and allocable incurred PROJECT costs and matching
funds by line item for the PROJECT. The financial management system of
ADMINISTERING AGENCY, its contractors and all subcontractors shall conform to
Generally Accepted Accounting Principles, enable the determination of incurred costs
at interim points of completion, and provide support for reimbursement payment
vouchers or invoices sent to or paid by STATE.
3. ADMINISTERING AGENCY, ADMINISTERING AGENCY'S contractors and
subcontractors, and STATE shall each maintain and make available for inspection and
audit by STATE, the California State Auditor, or any duly authorized representative of
STATE or the United States, all books, documents, papers, accounting records, and
other evidence pertaining to the performance of such contracts, including, but not
limited to, the costs of administering those various contracts, and ADMINISTERING
AGENCY shall furnish copies thereof if requested. All of the above -referenced parties
shall make such AGREEMENT and PROGRAM SUPPLEMENT materials available at their
respective offices at all reasonable times during the entire PROJECT period and for
three (3) years, or 35 years for Prop 1B funds, from the date of final payment to
ADMINISTERING AGENCY.
4. ADMINISTERING AGENCY shall not award a construction contract over $25,000 on
the basis of a noncompetitive negotiation for work to be performed under this
AGREEMENT without the prior written approval of STATE. All contracts awarded by
ADMINISTERING AGENCY intended or used as local match credit must meet the
requirements set forth in this AGREEMENT regarding local match funds.
5. ADMINISTERING AGENCY shall comply with Chapter 10 (commencing with Section
4525) Division 5 of Title 1 of the Government Code and shall undertake the procedures
described in California Government Code 4527(a) and 4528(a). Administering Agency
shall comply with Chapter 10 of the LAPM for AE Consultant Contracts.
6. ADMINISTERING AGENCY shall comply with Government Code Division 5 Title 1
sections 4525-4529.5 and shall undertake the procedures described in California
Government Code 4527(a) and 4528(a) for procurement of professional service
contracts. Administering Agency shall follow Public Contract Code Section 10335-
10381 for other professional service contracts.
Page 9 of 15
7. Any subcontract entered into by ADMINISTERING AGENCY as a result of this
AGREEMENT shall contain all of the provisions of Article IV, FISCAL PROVISIONS, and
this ARTICLE V, AUDITS, THIRD -PARTY CONTRACTING, RECORDS RETENTION AND
REPORTS and shall mandate that travel and per diem reimbursements and third- party
contract reimbursements to subcontractors will be allowable as PROJECT costs only
after those costs are incurred and paid for by the subcontractors.
8. To be eligible for local match credit, ADMINISTERING AGENCY must ensure that local
match funds used for a PROJECT meet the fiscal provisions requirements outlined in
ARTICLE IV in the same manner that is required of all other PROJECT expenditures.
9. Except as provided in this Article, this AGREEMENT is solely between and for the
benefit of the PARTIES and there are no third -party beneficiaries.
ARTICLE VI - MISCELLANEOUS PROVISIONS
1. ADMINISTERING AGENCY agrees to use all PROJECT funds reimbursed hereunder
only for transportation purposes that are in conformance with Article XIX of the
California State Constitution and other California laws.
2. ADMINISTERING AGENCY shall conform to all applicable State and Federal statutes
and regulations, and the Local Assistance Program Guidelines and Local Assistance
Procedures Manual as published by STATE and incorporated herein, including all
subsequent approved revisions thereto applicable to PROJECT unless otherwise
designated in the project -specific executed PROJECT SUPPLEMENT.
3. This AGREEMENT is subject to any additional restrictions, limitations, conditions, or
any statute enacted by the State Legislature or adopted by the CTC that may affect
the provisions, terms, or funding of this AGREEMENT in any manner.
4. ADMINISTERING AGENCY and the officers and employees of ADMINISTERING
AGENCY, when engaged in the performance of this AGREEMENT, shall act in an
independent capacity and not as officers, employees or agents of STATE.
5. Each project -specific PROGRAM SUPPLEMENT shall separately establish the terms
and funding limits for each described PROJECT funded under this AGREEMENT and that
PROGRAM SUPPLEMENT. No STATE FUNDS are obligated against this AGREEMENT.
6. ADMINISTERING AGENCY certifies that neither ADMINISTERING AGENCY nor its
principals are suspended or debarred at the time of the execution of this AGREEMENT,
and ADMINISTERING AGENCY agrees that it will notify STATE immediately in the event
a suspension or a debarment occurs after the execution of this AGREEMENT.
7. ADMINISTERING AGENCY certifies, by execution of this AGREEMENT, that no person
or selling agency has been employed or retained to solicit or secure this AGREEMENT
upon an agreement or understanding for a commission, percentage, brokerage, or
contingent fee, excepting bona fide employees or bona fide established commercial or
selling agencies maintained by ADMINISTERING AGENCY for the purpose of securing
business. For breach or violation of this warranty, STATE has the right to annul this
AGREEMENT without liability, pay only for the value of the PROJECT work actually
performed, or in STATE's discretion, to deduct from the price of PROGRAM
SUPPLEMENT consideration, or otherwise recover, the full amount of such commission,
percentage, brokerage, or contingent fee.
Page 10 of 15
8. In accordance with Public Contract Code section 10296, ADMINISTERING AGENCY
hereby certifies under penalty of perjury that no more than one final unappealable
finding of contempt of court by a federal court has been issued against
ADMINISTERING AGENCY within the immediate preceding two (2) year period because
of ADMINISTERING AGENCY's failure to comply with an order of a federal court that
orders ADMINISTERING AGENCY to comply with an order of the National Labor
Relations Board.
9. ADMINISTERING AGENCY shall disclose any financial, business, or other relationship
with STATE that may have an impact upon the outcome of this AGREEMENT or any
individual PROJECT encompassed within a PROGRAM SUPPLEMENT. ADMINISTERING
AGENCY shall also list current contractors who may have a financial interest in the
outcome of a PROJECT undertaken pursuant to this AGREEMENT. These disclosures
shall be delivered to STATE in a form deemed acceptable by the STATE prior to
execution of this AGREEMENT.
10. ADMINISTERING AGENCY hereby certifies that it does not have, nor shall it acquire,
any financial or business interest that would conflict with the performance of any
PROJECT initiated under this AGREEMENT.
11. ADMINISTERING AGENCY certifies that this AGREEMENT was not obtained or
secured through rebates, kickbacks or other unlawful consideration either promised or
paid to any STATE employee. For breach or violation of this warranty, STATE shall have
the right, in its sole discretion, to terminate this AGREEMENT without liability, to pay
only for PROJECT work actually performed, or to deduct from a PROGRAM SUPPLEMENT
price or otherwise recover the full amount of such rebate, kickback, or other unlawful
consideration.
12. Any dispute concerning a question of fact arising under this AGREEMENT that is
not disposed of by agreement shall be decided by the STATE's Contract Manager, who
shall be identified to ADMINISTERING AGENCY at the time of execution of this
AGREEMENT and, as applicable , any time that Contract Manager changes during the
duration of this AGREEMENT who may consider any written or verbal evidence
submitted by ADMINISTERING AGENCY. The decision of the Contract Manager, issued
in writing, shall be conclusive and binding on the PARTIES on all questions of fact
considered and determined by the Contract Manager.
13. Neither the pendency of a dispute nor its consideration by the Contract Manager
will excuse the ADMINISTERING AGENCY from full and timely performance in
accordance with the terms of this AGREEMENT and each PROGRAM SUPPLEMENT.
14. Neither STATE nor any officer or employee thereof is responsible for any injury,
damage or liability occurring by reason of anything done or omitted to be done by
ADMINISTERING AGENCY under or in connection with any work, authority or
jurisdiction of ADMINISTERING AGENCY arising under this AGREEMENT. It is understood
and agreed that ADMINISTERING AGENCY shall fully defend, indemnify and save
harmless STATE and all of its officers and employees from all claims and suits or
actions of every name, kind and description brought forth under, including but not
limited to, tortious, contractual, inverse condemnation or other theories or assertions
of liability occurring by reason of anything done or omitted to be done by
ADMINISTERING AGENCY under this AGREEMENT.
15. Neither ADMINISTERING AGENCY nor any officer or employee thereof is responsible
for any injury, damage or liability occurring by reason of anything done or omitted to
be done by STATE, under or in connection with any work, authority or
Page 11 of 15
jurisdiction arising under this AGREEMENT. It is understood and agreed that STATE
shall fully defend, indemnify and save harmless the ADMINISTERING AGENCY and all of
its officers and employees from all claims, suits or actions of every name, kind and
description brought forth under, including but not limited to, tortious, contractual,
inverse condemnation and other theories or assertions of liability occurring by reason
of anything done or omitted to be done by STATE under this AGREEMENT.
16. In the event of (a) ADMINISTERING AGENCY failing to timely proceed with effective
PROJECT work in accordance with the project -specific PROGRAM SUPPLEMENT; (b)
failing to maintain any applicable bonding requirements; and (c) otherwise materially
violating the terms and conditions of this AGREEMENT and/or any PROGRAM
SUPPLEMENT, STATE reserves the right to terminate funding for that PROJECT upon
thirty (30) days' written notice to ADMINISTERING AGENCY.
17. No termination notice shall become effective if, within thirty (30) days after receipt
of a Notice of Termination, ADMINISTERING AGENCY either cures the default involved
or, if the default is not reasonably susceptible of cure within said thirty (30) day period
the ADMINISTERING AGENCY proceeds thereafter to complete that cure in a manner
and time line acceptable to STATE.
18. Any such termination shall be accomplished by delivery to ADMINISTERING
AGENCY of a Notice of Termination, which notice shall become effective not less than
thirty (30) days after receipt, specifying the reason for the termination, the extent to
which funding of work under this AGREEMENT and the applicable PROGRAM
SUPPLEMENT is terminated and the date upon which such termination becomes
effective, if beyond thirty (30) days after receipt. During the period before the
effective termination date, ADMINISTERING AGENCY and STATE shall meet to attempt
to resolve any dispute. In the event of such termination, STATE may proceed with the
PROJECT work in a manner deemed proper by STATE. If STATE terminates funding for
PROJECT with ADMINISTERING AGENCY for the reasons stated in paragraph sixteen
(16) of ARTICLE VI, STATE shall pay ADMINISTERING AGENCY the sum due
ADMINISTERING AGENCY under the PROGRAM SUPPLEMENT and/or STATE -approved
finance letter prior to termination, provided, however, ADMINISTERING AGENCY is not
in default of the terms and conditions of this AGREEMENT or the project -specific
PROGRAM SUPPLEMENT and that the cost of any PROJECT completion to STATE shall
first be deducted from any sum due ADMINISTERING AGENCY.
19. In the case of inconsistency or conflicts with the terms of this AGREEMENT and
that of a project -specific PROGRAM SUPPLEMENT and/or Cooperative Agreement, the
terms stated in that PROGRAM SUPPLEMENT and/or Cooperative Agreement shall
prevail over those in this AGREEMENT.
20. Without the written consent of STATE, this AGREEMENT is not assignable by
ADMINISTERING AGENCY either in whole or in part.
21. No alteration or variation of the terms of this AGREEMENT shall be valid unless
made in writing and signed by the PARTIES, and no oral understanding or agreement
not incorporated herein shall be binding on any of the PARTIES.
Page 12 of 15
IN WITNESS WHEREOF, the parties have executed this AGREEMENT by their duly
authorized officer.
STATE OF CALIFORNIA City of Temecula
DEPARTMENT OF TRANSPORTATION
as
10
Aaron Adams, City Manager
Chief, Office of Project Management
Oversight Date
Division of Local Assistance
Date
ATTEST:
Randi Johl, City Clerk
APPROVED AS TO FORM:
Peter M. Thorson, City Attorney
Page 13 of 15
EXHIBIT A - FAIR EMPLOYMENT PRACTICES ADDENDUM
1. In the performance of this Agreement, ADMINISTERING AGENCY will not discriminate
against any employee for employment on account of race, religious creed, color,
national origin, ancestry, physical disability, mental disability, medical condition,
genetic information, marital status, sex, gender, gender identity, gender expression,
age, sexual orientation, or military and veteran status. ADMINISTERING AGENCY will
take affirmative action to ensure that employees are treated during employment
without regard to their race, religious creed, color, national origin, ancestry, physical
disability, mental disability, medical condition, genetic information, marital status, sex,
gender, gender identity, gender expression, age, sexual orientation, or military and
veteran status. Such action shall include, but not be limited to, the following:
employment; upgrading; demotion or transfer; recruitment or recruitment advertising;
layoff or termination; rates of pay or other forms of compensation; and selection for
training, including apprenticeship. ADMINISTERING AGENCY shall post in conspicuous
places, available to employees for employment, notices to be provided by STATE
setting forth the provisions of this Fair Employment section.
2. ADMINISTERING AGENCY, its contractor(s) and all subcontractors shall comply with
the provisions of the Fair Employment and Housing Act (Gov. Code, 12900 et seq.),
and the applicable regulations promulgated thereunder (Cal. Code Regs., Title 2,
11000, et seq.). The applicable regulations of the Fair Employment and Housing
Commission implementing Government Code section 12900(a-f), set forth in Chapter 5
of Division 4 of Title 2 of the California Code of Regulations are incorporated into
this AGREEMENT by reference and made a part hereof as if set forth in full. Each of the
ADMINISTERING AGENCY'S contractors and all subcontractors shall give written notice
of their obligations under this clause to labor organizations with which they have a
collective bargaining or other agreements, as appropriate.
3. ADMINISTERING AGENCY shall include the nondiscrimination and compliance
provisions of this clause in all contracts and subcontracts to perform work under this
AGREEMENT.
4. ADMINISTERING AGENCY will permit access to the records of employment,
employment advertisements, application forms, and other pertinent data and records
by STATE, the State Fair Employment and Housing Commission, or any other agency
of the State of California designated by STATE, for the purposes of investigation to
ascertain compliance with the Fair Employment section of this Agreement.
5. Remedies for Willful Violation:
(a) STATE may determine a willful violation of the Fair Employment provision to have
occurred upon receipt of a final judgment to that effect from a court in an action to
which ADMINISTERING AGENCY was a party, or upon receipt of a written notice from
the Fair Employment and Housing Commission that it has investigated and determined
that ADMINISTERING AGENCY has violated the Fair Employment Practices Act.
(b) For willful violation of this Fair Employment Provision, STATE shall have the right to
terminate this Agreement either in whole or in part, and any loss or damage sustained
by STATE in securing the goods or services thereunder shall be borne and paid for by
ADMINISTERING AGENCY and by the surety under the performance bond, if any, and
STATE may deduct from any moneys due or thereafter may become due to
ADMINISTERING AGENCY, the difference between the price named in the Agreement
Page 14 of 15
and the actual cost thereof to STATE to cure ADMINISTERING AGENCY'S breach of this
Agreement.
Page 15 of 15
PROGRAM SUPPLEMENT NO. OOOOOA212
to
ADMINISTERING AGENCY -STATE AGREEMENT
FOR STATE FUNDED PROJECTS NO 08-5459521
Adv. Project ID Date: July 31, 2023
0822000135 Location: 08-RIV-0-TMCA
Project Number: ATPL-5459(032)
E.A. Number:
Locode: 5459
This Program Supplement, effective 06/28/2023, hereby adopts and incorporates into the Administering Agency -State
Agreement No. 08-5459521 for State Funded Projects which was entered into between the ADMINISTERING AGENCY
and the STATE with an effective date of and is subject to all the terms and conditions thereof. This PROGRAM
SUPPLEMENT is executed in accordance with Article I of the aforementioned Master Agreement under authority of
Resolution No. approved by the ADMINISTERING AGENCY on (See copy attached).
The ADMINISTERING AGENCY further stipulates that as a condition to the payment by the State of any funds derived
from sources noted below encumbered to this project, Administering Agency accepts and will comply with the Special
Covenants and remarks set forth on the following pages.
PROJECT LOCATION: Santa Gertrudis Creek Trail Undercrossing, Lighting, Signage, and Public Outreach Campaign.
TYPE OF WORK: Bike Path
LENGTH: 0.0(MILES)
Estimated Cost
State Funds
Matching Funds
LOCAL
OTHER
STATE $1,462,000.00
$1,882,331.00
$420,331.00
$0.0c
CITY OF TEMECULA
By
Aaron Adams, City Manager
Date
Attest
Randi Johl, City Clerk
Approved
As To Form Peter M. Thorson, City Attorney
STATE OF CALIFORNIA
Department of Transportation
By
Chief, Office of Project Implementation
Division of Local Assistance
Date
I hereby certify upon my personal knowledge that budgeted funds are available for this encumbrance:
Accounting Officer Date 7/31 /2023
$1,462,000.00
Program Supplement 08--545-A212- SERIAL Page 1 of 4
08-RIV-0-TMCA
ATPL-5459(032)
SPECIAL COVENANTS OR REMARKS
1. A. This PROJECT will be administered in accordance with the applicable CTC STIP
guidelines and the Active Transportation Program guidelines as adopted or amended, the
Local Assistance Procedures Manual (LAPM), the Local Assistance Program Guidelines
(LAPG), and this PROGRAM SUPPLEMENT.
B. This PROJECT is programmed to receive State funds from the Active Transportation
Program (ATP). Funding may be provided under one or more components. A component(s)
specific fund allocation is required, in addition to other requirements, before reimbursable
work can occur for the component(s) identified. Each allocation will be assigned an effective
date and identify the amount of funds allocated per component(s).
This PROGRAM SUPPLEMENT has been prepared to allow reimbursement of eligible
PROJECT expenditures for the component(s) allocated. Unless otherwise determined, the
effective date of the component specific allocation will constitute the start of reimbursable
expenditures.
C. STATE and ADMINISTERING AGENCY agree that any additional funds made available
by future allocations will be encumbered on this PROJECT by use of a STATE -approved
Allocation Letter and STATE Finance Letter. ADMINISTERING AGENCY agrees that STATE
funds available for reimbursement will be limited to the amount allocated by the California
Transportation Commission (CTC) and/or the STATE.
D. Upon ADMINISTERING AGENCY request, the CTC and/or STATE may approve
supplementary allocations, time extensions, and fund transfers between components. Funds
transferred between allocated project components retain their original timely use of funds
deadlines, but an approved time extension will revise the timely use of funds criteria for the
component(s) and allocation(s) requested. Approved supplementary allocations, time
extensions, and fund transfers between components made after the execution of this
PROGRAM SUPPLEMENT will be documented and considered subject to the terms and
conditions thereof.
Documentation will consist of a STATE approved Allocation Letter, Fund Transfer Letter,
Time Extension Letter, and Finance Letter, as appropriate.
E. This PROJECT is subject to the timely use of funds provisions enacted by the Active
Transportation Program guidelines, as adopted or amended, and by approved CTC and State
procedures as outlined below.
Funds allocated for the environmental & permits (E&P), plan specifications & estimate
(PS&E), and right-of-way components are available for expenditure until the end of the
second fiscal year following the year in which the funds were allocated.
Program Supplement 08--545-A212- SERIAL Page 2 of 4
08-RIV-0-TMCA
ATPL-5459(032)
SPECIAL COVENANTS OR REMARKS
Funds allocated for the construction component are subject to an award deadline and contract
completion deadline. ADMINISTERING AGENCY agrees to award the contract within 6
months of the construction fund allocation and to complete and accept the construction within
36 months of award.
F. Award information shall be submitted by the ADMINISTERING AGENCY to the District
Local Assistance Engineer immediately after project contract award and prior to the submittal
of the ADMINISTERING AGENCY'S first invoice for the construction contract. Failure to do
so will cause a delay in the State processing of invoices for the construction phase.
G. The ADMINISTERING AGENCY shall invoice STATE for environmental & permits (E&P),
plans specifications & estimate (PS&E), and right-of-way costs no later than 180 days after
the end of last eligible fiscal year of expenditure. For construction costs, the
ADMINISTERING AGENCY has 180 days after project completion or contract acceptance to
make the final payment to the contractor prepare the final Report of Expenditures and final
invoice, and submit to STATE for verification and payment.
H. ADMINISTERING AGENCY agrees to submit the final report documents that collectively
constitute a "Report of Expenditures" within one hundred eighty (180) days of PROJECT
completion. Failure of ADMINISTERING AGENCY to submit a "Final Report of Expenditures"
within 180 days of PROJECT completion will result in STATE imposing sanctions upon
ADMINISTERING AGENCY in accordance with the current LAPM and the Active
Transportation Program (ATP) Guidelines.
I. ADMINISTERING AGENCY indirect costs, as defined in 2 CFR, Part 200, Uniform
Administrative Requirements, Cost Principles and Audit Requirement for Federal Awards, to
be claimed must be allocated in accordance with an Indirect Cost Allocation Plan (ICAP),
submitted, reviewed, and approved in accordance with Caltrans Audits and Investigations
requirements which may be accessed at: www.dot.ca.gov/hq/audits/.
ADMINISTERING AGENCY agrees to comply with, and require all sub -recipients and project
sponsors to comply with 2 CFR, Part 200, Uniform Administrative Requirements, Cost
Principles and Audit Requirement for Federal Awards, and all applicable Federal and State
laws and regulations.
ADMINISTERING AGENCY agrees, and will assure that its contractors and subcontractors
will be obligated to agree, that Contract Cost Principles and Procedures, 48 CFR, Federal
Acquisition Regulations System, Chapter 1, Part 31, et seq., and all applicable Federal and
State laws and regulations, shall be used to determine the allowability of individual PROJECT
cost items.
Any Fund expenditures for costs for which ADMINISTERING AGENCY has received
Program Supplement 08--545-A212- SERIAL Page 3 of 4
08-RIV-0-TMCA
ATPL-5459(032)
SPECIAL COVENANTS OR REMARKS
payment or credit that are determined by subsequent audit to be unallowable under 2 CFR,
Part 200, or 48 CFR, Chapter 1, Part 3, are subject to repayment by ADMINISTERING
AGENCY to STATE. Should ADMINISTERING AGENCY fail to reimburse Funds due STATE
within 30 days of demand, or within such other period as may be agreed in writing between
the Parties hereto, STATE is authorized to intercept and withhold future payments due
ADMINISTERING AGENCY from STATE or any third -party source, including, but not limited
to, the State Treasurer, the State Controller, and the California Transportation Commission.
J. By executing this PROGRAM SUPPLEMENT, ADMINISTERING AGENCY agrees to
comply with all reporting requirements in accordance with the Active Transportation Program
guidelines, as adopted or amended.
K. This PROJECT has received funds from Active Transportation Program (ATP). The
ADMINISTERING AGENCY agrees to administer the project in accordance with the CTC
Adopted SB1 Accountability and Transparency Guidelines.
2. The ADMINISTERING AGENCY shall construct the PROJECT in accordance with the scope
of work presented in the application and approved by the California Transportation
Commission. Any changes to the approved PROJECT scope without the prior expressed
approval of the California Transportation Commission are ineligible for reimbursement and
may result in the entire PROJECT becoming ineligible for reimbursement.
Program Supplement 08--545-A212- SERIAL Page 4 of 4
PROGRAM SUPPLEMENT NO. OOOOOA213
to
ADMINISTERING AGENCY -STATE AGREEMENT
FOR STATE FUNDED PROJECTS NO 08-5459521
Adv. Project ID Date: July 31, 2023
0822000136 Location: 08-RIV-0-TMCA
Project Number: ATPL-5459(033)
E.A. Number:
Locode: 5459
This Program Supplement, effective 06/28/2023, hereby adopts and incorporates into the Administering Agency -State
Agreement No. 08-5459521 for State Funded Projects which was entered into between the ADMINISTERING AGENCY
and the STATE with an effective date of and is subject to all the terms and conditions thereof. This PROGRAM
SUPPLEMENT is executed in accordance with Article I of the aforementioned Master Agreement under authority of
Resolution No. approved by the ADMINISTERING AGENCY on (See copy attached).
The ADMINISTERING AGENCY further stipulates that as a condition to the payment by the State of any funds derived
from sources noted below encumbered to this project, Administering Agency accepts and will comply with the Special
Covenants and remarks set forth on the following pages.
PROJECT LOCATION: Santa Gertrudis Creek Trail Undercrossing, Lighting, Signage, and Public Outreach Campaign.
TYPE OF WORK: Pedestrian Safety Program
LENGTH: 0.0(MILES)
Estimated Cost
State Funds
Matching Funds
LOCAL
OTHER
STATE $40,000.00
$40,000.00
$0.00
$0.0c
CITY OF TEMECULA
By
Date
Attest
Approved
As To Form
Aaron Adams, City Manager
Randi Johl, City Clerk
Peter M. Thorson, City Attorney
STATE OF CALIFORNIA
Department of Transportation
By
Chief, Office of Project Implementation
Division of Local Assistance
Date
I hereby certify upon my personal knowledge that budgeted funds are available for this encumbrance:
Accounting Officer Date 7/31 /2023
$40,000.00
Program Supplement 08--545-A213- SERIAL Page 1 of 4
08-RIV-0-TMCA
ATPL-5459(033)
SPECIAL COVENANTS OR REMARKS
1. A. This PROJECT will be administered in accordance with the applicable CTC STIP
guidelines and the Active Transportation Program guidelines as adopted or amended, the
Local Assistance Procedures Manual (LAPM), the Local Assistance Program Guidelines
(LAPG), and this PROGRAM SUPPLEMENT.
B. This PROJECT is programmed to receive State funds from the Active Transportation
Program (ATP). Funding may be provided under one or more components. A component(s)
specific fund allocation is required, in addition to other requirements, before reimbursable
work can occur for the component(s) identified. Each allocation will be assigned an effective
date and identify the amount of funds allocated per component(s).
This PROGRAM SUPPLEMENT has been prepared to allow reimbursement of eligible
PROJECT expenditures for the component(s) allocated. Unless otherwise determined, the
effective date of the component specific allocation will constitute the start of reimbursable
expenditures.
C. STATE and ADMINISTERING AGENCY agree that any additional funds made available
by future allocations will be encumbered on this PROJECT by use of a STATE -approved
Allocation Letter and STATE Finance Letter. ADMINISTERING AGENCY agrees that STATE
funds available for reimbursement will be limited to the amount allocated by the California
Transportation Commission (CTC) and/or the STATE.
D. Upon ADMINISTERING AGENCY request, the CTC and/or STATE may approve
supplementary allocations, time extensions, and fund transfers between components. Funds
transferred between allocated project components retain their original timely use of funds
deadlines, but an approved time extension will revise the timely use of funds criteria for the
component(s) and allocation(s) requested. Approved supplementary allocations, time
extensions, and fund transfers between components made after the execution of this
PROGRAM SUPPLEMENT will be documented and considered subject to the terms and
conditions thereof.
Documentation will consist of a STATE approved Allocation Letter, Fund Transfer Letter,
Time Extension Letter, and Finance Letter, as appropriate.
E. This PROJECT is subject to the timely use of funds provisions enacted by the Active
Transportation Program guidelines, as adopted or amended, and by approved CTC and State
procedures as outlined below.
Funds allocated for the environmental & permits (E&P), plan specifications & estimate
(PS&E), and right-of-way components are available for expenditure until the end of the
second fiscal year following the year in which the funds were allocated.
Program Supplement 08--545-A213- SERIAL Page 2 of 4
08-RIV-0-TMCA
ATPL-5459(033)
SPECIAL COVENANTS OR REMARKS
Funds allocated for the construction component are subject to an award deadline and contract
completion deadline. ADMINISTERING AGENCY agrees to award the contract within 6
months of the construction fund allocation and to complete and accept the construction within
36 months of award.
F. Award information shall be submitted by the ADMINISTERING AGENCY to the District
Local Assistance Engineer immediately after project contract award and prior to the submittal
of the ADMINISTERING AGENCY'S first invoice for the construction contract. Failure to do
so will cause a delay in the State processing of invoices for the construction phase.
G. The ADMINISTERING AGENCY shall invoice STATE for environmental & permits (E&P),
plans specifications & estimate (PS&E), and right-of-way costs no later than 180 days after
the end of last eligible fiscal year of expenditure. For construction costs, the
ADMINISTERING AGENCY has 180 days after project completion or contract acceptance to
make the final payment to the contractor prepare the final Report of Expenditures and final
invoice, and submit to STATE for verification and payment.
H. ADMINISTERING AGENCY agrees to submit the final report documents that collectively
constitute a "Report of Expenditures" within one hundred eighty (180) days of PROJECT
completion. Failure of ADMINISTERING AGENCY to submit a "Final Report of Expenditures"
within 180 days of PROJECT completion will result in STATE imposing sanctions upon
ADMINISTERING AGENCY in accordance with the current LAPM and the Active
Transportation Program (ATP) Guidelines.
I. ADMINISTERING AGENCY indirect costs, as defined in 2 CFR, Part 200, Uniform
Administrative Requirements, Cost Principles and Audit Requirement for Federal Awards, to
be claimed must be allocated in accordance with an Indirect Cost Allocation Plan (ICAP),
submitted, reviewed, and approved in accordance with Caltrans Audits and Investigations
requirements which may be accessed at: www.dot.ca.gov/hq/audits/.
ADMINISTERING AGENCY agrees to comply with, and require all sub -recipients and project
sponsors to comply with 2 CFR, Part 200, Uniform Administrative Requirements, Cost
Principles and Audit Requirement for Federal Awards, and all applicable Federal and State
laws and regulations.
ADMINISTERING AGENCY agrees, and will assure that its contractors and subcontractors
will be obligated to agree, that Contract Cost Principles and Procedures, 48 CFR, Federal
Acquisition Regulations System, Chapter 1, Part 31, et seq., and all applicable Federal and
State laws and regulations, shall be used to determine the allowability of individual PROJECT
cost items.
Any Fund expenditures for costs for which ADMINISTERING AGENCY has received
Program Supplement 08--545-A213- SERIAL Page 3 of 4
08-RIV-0-TMCA
ATPL-5459(033)
SPECIAL COVENANTS OR REMARKS
payment or credit that are determined by subsequent audit to be unallowable under 2 CFR,
Part 200, or 48 CFR, Chapter 1, Part 3, are subject to repayment by ADMINISTERING
AGENCY to STATE. Should ADMINISTERING AGENCY fail to reimburse Funds due STATE
within 30 days of demand, or within such other period as may be agreed in writing between
the Parties hereto, STATE is authorized to intercept and withhold future payments due
ADMINISTERING AGENCY from STATE or any third -party source, including, but not limited
to, the State Treasurer, the State Controller, and the California Transportation Commission.
J. By executing this PROGRAM SUPPLEMENT, ADMINISTERING AGENCY agrees to
comply with all reporting requirements in accordance with the Active Transportation Program
guidelines, as adopted or amended.
K. This PROJECT has received funds from Active Transportation Program (ATP). The
ADMINISTERING AGENCY agrees to administer the project in accordance with the CTC
Adopted SB1 Accountability and Transparency Guidelines.
1. The ADMINISTERING AGENCY shall construct the PROJECT in accordance with the scope
of work presented in the application and approved by the California Transportation
Commission. Any changes to the approved PROJECT scope without the prior expressed
approval of the California Transportation Commission are ineligible for reimbursement and
may result in the entire PROJECT becoming ineligible for reimbursement.
Program Supplement 08--545-A213- SERIAL Page 4 of 4
Item No. 9
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Approve Increase to the Professional Services Contingency Authorization for the
Margarita Recreation Center Project, PW17-21
PREPARED BY: Amer Attar, Engineering Manager
Nino Abad, Senior Civil Engineer
RECOMMENDATION: That the City Council:
1. Approve an increase to the contingency for professional services for the Margarita
Recreation Center Project, PW17-21 by $43,000; and
2. Increase the City Manager's authorized contingency by $43,000.
BACKGROUND: The Margarita Recreation Center (MRC), PW 17-21 is a Capital
Improvement Program (CIP) project to design -build a new MRC building and pool to replace the
old facility. Currently, the design phase is complete, the old MRC facility has been demolished,
and the new MRC building and pool are under construction.
The new MRC will be approximately 8,600 square feet of indoor space including a classroom,
multipurpose room with operable partition, dance/fitness room, kitchen, administrative/reception
offices, lifeguard/aquatic and first aid rooms, locker rooms, and restrooms. The new center's
outdoor facilities include multiple patio spaces and a 65'wide x 75' long pool with shallow depth
entry, transitioning to a 9' maximum depth, with a 3/4 meter height diving board. An accessory
structure for mechanical equipment related to the pool as well as additional storage is also included.
On February 26, 2019, the City Council approved an agreement for consultant services with NV5,
Inc. in the amount of $880,365 and authorized the City Manager Extra Work Authorizations not
to exceed the contingency amount of $88,036.50 for the project. The agreement generally included
the development of preliminary design and bridging documents, bid support, design -build project
management services, geotechnical inspections, special inspections, and construction management
services.
The City Council approved increases to the City Manager's authorized contingency on September
13, 2022 and on February 28, 2023 by $80,000 and $150,000 respectively. These increases were
to accommodate City requested design changes, increasing the design duration, and supply issues
related to critical electrical components increases the construction duration.
At this time staff anticipates it has funding for construction management and inspection services
through approximately September 1, 2023. It is anticipated that construction will be completed on
or before October 16, 2023 and therefore additional contingency is required to provide
construction management and inspection services through that time period.
Staff recommends an increase to the City Manager's authorized contingency in the amount of
$43,000 for a total authorized contingency of $361,036.50.
FISCAL IMPACT: The Margarita Recreation Center project is identified in the City's
Capital Improvement Program (CIP) budget for Fiscal Years 2024-28 funded with Capital
Financing, DIF (Park & Rec Improvements), and Measure S. There are sufficient funds in the
project account to the increase to the authorized contingency by $43,000.
ATTACHMENTS: Project Description
Alk
The Heart of Southern California
Wine Country
MARGARITA RECREATION CENTER
Infrastructure Project
Project Description: This project consists of the construction of a new
recreation center in Mike Naggar Community Park in place of the former
YMCA building. The project includes the demolition of the existing building
and pool, constructing a new building and pool as determined by a
Community Needs Assessment and available budget. The Information
Technology component includes camera system infrastructure, access
control, Public Wi-Fi and other identified technology needs.
Benefit: This project will provide the City a new facility to meet the
increasing demands of recreational programs.
Core Value: Healthy and Livable City
Project Status: Under construction. Construction completion and Grand
Opening anticipated in September 2023.
Department: Public Works - Account No. 210.265.999.5800.PW17-21 / 692
Level: I
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
4;. /
Project Cost:
Prior Years
Actuals
2023-24
2022-23 Adopted 2024-25 2025-26 2026-27 2027-28
Adjusted Budget Projected Projected Projected Projected
Total Project
Cost
5801-Administration
276,051
160,606
436,657
5804-Construction
1,244,331
8,701,128
9,945,459
5805-Construction Engineering
4,739
1,907
6,646
5802-Design & Environmental
531,607
666,795
1,198,402
5809-Information Technology
344,343
670,000
1,014,343
Total Expenditures
2,401,072
10,200,436
12,601,508
Source of Funds:
4481-Capital Financing
6,405,000
6,405,000
4244-DIF-Park & Rec Improvements
600,000
600,000
4256-DIF-Police Facilities
137,000
137,000
4002-Measure S
1,636,773
3,822,735
5,459,508
Total Funding
8,041,773
4,559,735
12,601,508
Future Operating & Maintenance Costs:
Total Operating Costs 1 1,383,815 1,435,233 1,488,628 1,544,079
Notes :
1. Capital Financing reflects the Temecula Public Financing Authority's 2018 Lease Financing arrangement which provides $6.4M in funding, with a term
of 15 years at an interest rate of3.42%, repaid by the General Fund.(Loan Paid off in 2022)
Do Not Remove
Supplemental Material
Item No. 10 – Approve the Funding Agreement
with the County of Riverside for the Michael
“Mike” Naggar Park Dog Park Renovation
Project, PW21-14 and Authorize the City
Manager to Execute the Agreement –
REVISED Funding Agreement
1
FUNDING AGREEMENT FOR
CITY OF TEMECULA MIKE NAGGAR COMMUNITY PARK EXPANSION PROJECT
This Funding Agreement (“Agreement”) is entered into by and between the County of Riverside,
a political subdivision of the State of California, (“County”) and the City of Temecula, (“Subrecipient”).
County and Subrecipient are sometimes individually referred to as “Party” and collectively as “Parties.”
RECITALS
WHEREAS, on March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law,
amending Section 9901 of Title VI of the Social Security Act which establishes the Coronavirus State
and Local Fiscal Recovery Funds (Fiscal Recovery Funds) to provide state, local and Tribal
governments with the resources needed to respond to the pandemic and its economic effects and to
build a stronger, more equitable economy during the recovery; and
WHEREAS, on February 8, 2022, Minute Order 3.3, the Board of Supervisors of the County of
Riverside approved allocation of ARPA funds to support eligible projects within Riverside County; and
WHEREAS, on January 6, 2022, the U.S. Department of the Treasury (U.S. Treasury) adopted
a final rule implementing the Fiscal Recovery Funds which took effect on April 1, 2022 (Final Rule);
and
WHEREAS, to respond to the negative effects of the pandemic, which in turn affect our
community as a whole, the County has dedicated a portion of the allotted ARPA funds to local agencies
for the delivery and implementation of eligible neighborhood revitalization projects; and
WHEREAS, the County desires to reimburse and the Subrecipient desires to accept ARPA
Fiscal Recovery Funds in a total amount not to exceed $200,000, for expenditures identified in
Attachment A related to the Mike Naggar Community Park Expansion Project (“Neighborhood
Revitalization Project”); and
NOW THEREFORE, in consideration of the mutual benefits, covenants, terms and conditions
contained herein, the Parties agree as follows:
AGREEMENT
1. Incorporation of Recitals. The Recitals set forth above are incorporated herein and made an
operative part of this Agreement.
2. Contract Documents. This Agreement consists of this Agreement and the following
attachments, attached hereto and by this reference incorporated herein:
2.1 Attachment A – Neighborhood Revitalization Project Scope
2.2 Attachment B – U.S. Treasury ARPA Fiscal Recovery Funds Final Rule
2.3 Attachment C – Uniform Administrative Requirements, Cost Principles, Federal
Provisions and Audit Requirements for Federal Awards -2 CFR Part 200 et seq
2.4 Attachment D – Indemnification and Insurance Requirements
2.5 Attachment E – Project Monitoring Requirements
2.6 Attachment F – Construction Requirements
2
3. Neighborhood Revitalization Project; Scope of Work. Subrecipient shall be responsible for
completion of all activities associated with design, implementation, installation and construction of the
Neighborhood Revitalization Project, as described in Attachment A, on or before December 31, 2026,
by first using funds received from the County in the amount provided in Section 4 of this Agreement.
The Subrecipient shall also furnish timely reporting and documentation assuring Subrecipient’s
compliance with the U.S. Treasury ARPA Guidelines (as stated in the Final Rule of the U.S.
Department of the Treasury published in the Federal Register on January 27, 2022), and within the
timelines and specifications provided in Attachment E. Under the provisions of the Agreement, the
County shall bear no responsibility for the Neighborhood Revitalization Project, including without
limitation any activities associated with implementation, installation and construction, or any future
operation or maintenance of the Neighborhood Revitalization Project.
3.1 Project Signage. Subrecipient shall include appropriate acknowledgement of credit to
the County for its support when promoting the Neighborhood Revitalization Project or using any data
and/or information developed under this Agreement. Signage shall be posted in a prominent location
at Neighborhood Revitalization Project site(s) and shall include the U.S. Department of Treasury’s, and
the County’s color logos, along with the following disclosure statement: “Funding for this project has
been provided in full or in part from the American Rescue Plan Act, and through an agreement with
the County of Riverside.” The Subrecipient shall also include in each of its contracts for work under
this Agreement a provision that incorporates the requirements stated within this Paragraph.
4. Funding.
4.1 County shall provide funding to Subrecipient in a total amount not to exceed $200,000
(“Award”), in quarterly payments in accordance with progress pay estimates submittals, and in
compliance with ARPA Guidelines as set forth in Attachment B, attached hereto and by this reference
incorporated herein, for the completion of the Neighborhood Revitalization Project. In the event that
there is a conflict in the terms for payment in this Agreement and the terms in Attachments B and C,
the terms in Attachments B and C shall take precedence. Subrecipient shall provide other non-federal
funding at least equal to the amounts shown in Attachment A, attached hereto and by this reference
incorporated herein, as a match to the funds provided by the County for the Neighborhood
Revitalization Project.
4.2 Except as expressly provided in Attachment A of this Agreement, Subrecipient shall
not be entitled to, nor receive from County any additional funding or other type of remuneration for
services rendered under this Agreement. The Award amounts described in this Section are specifically
for the Neighborhood Revitalization Project and make up the entire amount which the County has
approved to fund for the Neighborhood Revitalization Project. Subrecipient shall not be entitled by
virtue of this Agreement to consideration in excess of specified per-project Award amounts, and
Subrecipient shall be responsible for any and all costs incurred above any Award amount for its
implementation and completion of the Neighborhood Revitalization Project. Any subsequent
amendments to the Neighborhood Revitalization Project scope or description is not covered by this
Agreement, and the funding for any such amendment or for any Neighborhood Revitalization Project
cost overruns shall be the sole responsibility of Subrecipient, unless otherwise approved in writing by
the County.
4.3 Should it be determined at any time by the Subrecipient or the County that the
Subrecipient cannot, will not or is unable to complete the Neighborhood Revitalization Project subject
to this Agreement in accordance with the applicable State and Federal requirements and the provisions
of this Agreement on or before December 31, 2026, then the subrecipient shall return 100% of the
Award amount reimbursed to Subrecipient for the uncompleted Neighborhood Revitalization Project
as of the date of notification to the County, within thirty (30) days of notification.
3
4.4 In the event the actual cost for Neighborhood Revitalization Project is less than Award,
Subrecipient shall refund the difference to County within thirty (30) days of filing the Notice of
Completion for the Neighborhood Revitalization Project, or by June 30, 2026, whichever occurs first.
Subrecipient shall return any reimbursed Award Funds that have not been expended or are not
adequately supported by invoices and documentation to the County, within thirty (30) days of
completion of construction of the Neighborhood Revitalization Project, or upon request by the County,
whichever occurs first.
5. Invoicing and Billing
5.1 Invoices.
5.1.1 Invoices shall be submitted via e-mail to RIVCOARPA@RIVCO.ORG. The
final invoice from the Subrecipient will be submitted with enough time for the County to
reimburse the Subrecipient prior to December 31, 2026, per the final rule of ARPA.
5.1.2 Supporting documentation shall accompany each invoice: copies of paid receipts
and invoices of all Neighborhood Revitalization Project costs incurred by Subrecipient.
5.1.3 To ensure compliance with Federal and State regulations, County may require
additional supporting documentation or clarification of claimed expenses as follows:
5.1.3.1 County Executive Office staff shall notify Subrecipient to obtain
necessary additional documentation or clarification.
5.1.3.2 Subrecipient shall respond within three (3) business days with required
additional documentation or clarification to avoid disallowances/partial payment
of invoice.
5.1.3.3 All invoices containing expenses that need additional documentation or
clarification not provided to County within three (3) business days of request
shall have those expenses disallowed and only the allowed expenses shall be
paid.
5.1.3.4 Subrecipient may resubmit disallowed expenses as a supplemental
invoice only and must be accompanied by required documentation.
5.2 Payments
5.2.1 If the conditions set forth in this Agreement are met, County shall pay, on/or
before the thirtieth (30th) day after receipt of a complete and accurate invoice, the sum
of money claimed by the approved invoice, (less any credit due County for adjustments
of prior invoices). If the conditions are not met, County shall pay when the necessary
processing is completed and/or proper backup documentation is provided.
5.2.2 County shall not pay for unauthorized costs incurred by Subrecipient or for the
claimed work which County monitoring shows have not been provided as authorized.
5.2.3 County retains the right to withhold payment on disputed claims.
6. Term. The Term of this Agreement shall be from the date of approval of this Agreement until
filing of notice of completion for the Neighborhood Revitalization Project, or on December 31, 2026,
whichever is sooner, unless sooner terminated as provided herein.
4
7. Subrecipient Compliance Obligations. The Subrecipient agrees to comply with the terms and
conditions of this Agreement. The Subrecipient also agrees to apply the terms and conditions of this
Agreement to all of its subcontractors (if applicable) and to require their strict compliance therewith.
If it is determined that the Subrecipient is noncompliant, County may temporarily withhold or disallow
reimbursement of costs, under 2 C.F.R. Part 200, as supplemented by 2 C.F.R. Part 910.
7.1 Federal Provisions. Subrecipient and all of its subcontractors shall comply with the
Uniform Administrative Requirements, Cost Principles, Federal Provisions and Audit Requirements
for Federal Awards Provisions contained in Attachment C
8. Contract Representatives.
8.1 County Representative. The County Executive Officer, or designee, shall be the
designated representative who shall administer this Agreement on behalf of the County.
8.2 Subrecipient Representative. The City Manager, or designee, shall be the designated
representative who shall administer this Agreement on behalf of the Subrecipient.
8.3 The Contract Representatives may be contacted as described in Section 11, below.
9. Records and Audit.
9.1 Subrecipient shall store and maintain all writings, documents and records prepared or
compiled in connection with the performance of this Agreement for a minimum of five (5) years from
the termination or completion of this Agreement. This includes any handwriting, typewriting, printing,
photostatic, photographing and every other means of recording upon any tangible thing, any form of
communication or representation including letters, words, pictures, sounds or symbols or any
combination thereof. Any authorized representative of County shall have access to any writings as
defined above for the purposes of making a report, audit, evaluation, or examination Further, County has
the right at all reasonable times to audit, inspect or otherwise evaluate the work performed or being
performed under this Agreement.
9.2 If it is determined pursuant to an audit that any funds provided pursuant to this Agreement
have been improperly expended, Subrecipient shall, at the direction of the agency performing the audit,
reimburse the County within thirty (30) days the full amount of such improperly expended funds. The
funds shall be reimbursed in accordance with the recommendations in the audit.
10. Monitoring of Contract Compliance and Infrastructure Progress Reports.
10.1 Contract Compliance. The Subrecipient shall comply with the monitoring arrangements
set forth in Project Monitoring Requirements, and Construction Requirements, attached as
Attachments E and F, respectively.
10.2 Neighborhood Revitalization Project Progress Reports and Progress Pay Estimates.
Subrecipient shall, as specified herein, provide quarterly reports detailing Neighborhood Revitalization
Project’s progress, including a financial status report and milestone progress report as described in
Attachment E.
11. Notices. As used in this Agreement, notice includes but is not limited to the communications
of any notice, request, demand, approval, statement, report, acceptance, consent, waiver, and
appointment. All notices must be in writing. All such notices from one party to another may be
delivered in person, sent via reputable overnight courier, or served by first-class mail, certified or
registered, postage prepaid, to each and all of the addresses set forth below.
5
If to County: If to Subrecipient:
Riverside County Executive Office City of Temecula
Attention: Rania Odenbaugh and Scott Bruckner Attention: Aaron Adams
4080 Lemon Street, 4th Floor, 41000 Main Street
Riverside, CA. 92501 Temecula, CA 92590
12. Conflicts of Interest. Subrecipient covenants that it presently has no interest, including but
not limited to, other projects or independent contracts, and shall not acquire any such interest, direct or
indirect, which would conflict in any manner or degree with the performance of services required
under this Agreement. Subrecipient further covenants that in the performance of this Agreement, no
person having any such interest shall be employed or retained by it under this Agreement. In the event
federal funds are used, in whole or in part, for this Neighborhood Revitalization Project, Subrecipient
understands and agrees it must maintain a conflict of interest policy consistent with 2. C.F.R. section
200.318 (c) and that such conflict of interest policy is applicable to each activity funded under this
award. Subrecipient must disclose in writing to the U.S. Treasury or through County, as appropriate,
any potential conflict of interest affecting the awarded funds in accordance with 2. C.F.R. section
200.12.
13. Nondiscrimination. During any period in which Subrecipient is in receipt of funds from County,
Subrecipient and its Board, officers, employees, agents, representatives or subcontractors shall not
unlawfully discriminate in violation of any Federal, State or local law, rule or regulation against any
employee, applicant for employment or person receiving services under this Agreement because of race,
religious creed, color, national origin, ancestry, physical or mental disability including perception of
disability, medical condition, genetic information, pregnancy related condition, marital status,
gender/sex, sexual orientation, gender identity, gender expression, age (over 40), political affiliation or
belief, or military and veteran status. Subrecipient and its officers, employees, agents, representatives or
subcontractors shall comply with all applicable Federal, State and local laws and regulations related to
non- discrimination and equal opportunity, including without limitation the County’s non-
discrimination policy; Title VI of the Civil Rights Act of 1964 (42 US.C. sections 2000d et seq.) and
U.S. Treasury’s implementing regulations at 31 C.F.R. Part 22, which prohibit discrimination on the
basis of race, color, or national origin under programs or activities receiving federal financial assistance;
The Fair Housing Act, Title VIII of the Civil Rights Act of 1968 (42 U.S.C. sections 3601 et seq.), which
prohibits discrimination in housing on the basis of race, color, religion, national origin, sex, familial
status, or disability; Section 504 of the Rehabilitation Act of 1973, as amended (42 U.S.C. sections 6101
et seq.), and the U.S. Treasury’s implementing regulations at 31 C.F.R. part 23, which prohibit
discrimination on the basis of age in programs or activities receiving federal financial assistance; and
Title II of the Americans with Disabilities Act of 1990, as amended (42 U.S.C. sections 12101 et
seq.)which prohibits discrimination on the basis of disability under programs, activities, and services
provided or made available by state and local governments or instrumentalities or agencies thereto; The
Fair Employment and Housing Act (Government Code sections 12900 et seq.); California Labor Code
sections 1101, and 1102; the Federal Civil Rights Act of 1964 (P.L. 88-352), as amended; and all
applicable regulations promulgated in the California Code of Regulations or the Code of Federal
Regulations, and Riverside County’s non-discrimination policy.
Subrecipient shall include the non-discrimination and compliance provisions of this Section in all
subcontracts to perform work under or as a derivative of this Agreement.
6
14. Indemnification. The Subrecipient shall be bound by the indemnification, hold harmless and
defend provisions contained in Attachment D.
15. Insurance. Subrecipient shall obtain, and maintain, or caused to be obtained and maintained, at
all times during the Term of this Agreement, insurance coverage in the amounts and coverage specified
in Attachment D.
16. Termination. The County may terminate this agreement upon a determination that Subrecipient
is not complying with ARPA terms and conditions. The County may withhold additional planned
distributions of funding to Subrecipient pending receipt of requisite reporting requirements by
Subrecipient to the County as described herein.
17. Compliance with Laws. The Subrecipient is required to comply with all applicable federal, state
and local laws and regulations for all work performed or funded by and through this Agreement. The
Subrecipient is required to obtain all necessary federal, state and local permits, authorizations and
approvals for all work performed under this Agreement.
18. Disputes. The parties shall attempt to resolve any disputes amicably at the working level. If that
is not successful, the dispute shall be referred to the senior management of the parties. The Subrecipient
shall proceed diligently with the Neighborhood Revitalization Project described in this Agreement
pending the resolution of a dispute. The Parties reserve the right to pursue any remedies at law or in
equity should any dispute relating to this Agreement not by resolved by the Parties. Notwithstanding
the foregoing, prior to the filing of any legal action related to this Agreement, the Parties shall be
obligated to attend a mediation session in Riverside County before a neutral third party mediator. A
second mediation session shall be required if the first session is not successful. The parties shall share
the cost of the mediations.
19. Status of Subrecipient. The Subrecipient is, for purposes relating to this Agreement, an
independent contractor and shall not be deemed an employee of the County. It is expressly understood
and agreed that the Subrecipient (including its employees, agents, and subcontractors) shall in no event
be entitled to any benefits to which County employees are entitled, including but not limited to overtime,
any retirement benefits, worker's compensation benefits, and injury leave or other leave benefits. There
shall be no employer-employee relationship between the parties nor is there a joint venture; and
Subrecipient shall indemnify and hold County harmless from any and all claims that may be made against
County based upon any contention by a third party that an employer-employee relationship exists by
reason of this Agreement.
19.1 All acts of Subrecipient and its officers, employees, agents, representatives,
subcontractors, and all others acting on behalf of Subrecipient relating to the performance of this
Agreement, shall be performed as independent contractors and not as agents, officers, or employees of
County. Subrecipient, by virtue of this Agreement, has no authority to bind or incur any obligation on
behalf of County. No agent, officer or employee of the County is to be considered an employee of
Subrecipient. At all times during the term of this Agreement, the Subrecipient and its officers,
employees, agents, representatives, or subcontractors are, and shall represent and conduct themselves as,
independent contractors and not employees of County.
19.2 Subrecipient shall determine the method, details, and means of performing the work and
services to be provided by Subrecipient under this Agreement. Subrecipient shall be responsible to
County only for the requirements and results specified in this Agreement and, except as expressly
7
provided in this Agreement, shall not be subjected to County's control with respect to the physical action
or activities of Subrecipient in fulfillment of this Agreement. Subrecipient has control over the manner
and means for completion of the Neighborhood Revitalization Project described in this Agreement. If
necessary, Subrecipient has the responsibility for employing or engaging other persons or firms to assist
Subrecipient in fulfilling the terms and obligations under this Agreement.
19.3 If in the performance of this Agreement any third persons are employed by Subrecipient,
such persons shall be entirely and exclusively under the direction, supervision, and control of
Subrecipient. All terms of employment including hours, wages, working conditions, discipline, hiring
and discharging or any other term of employment or requirements of law shall be determined by the
Subrecipient. It is further understood and agreed that Subrecipient must issue W-2 forms or other forms
as required by law for income and employment tax purposes for all Subrecipient’s assigned personnel
under the terms and conditions of this Agreement.
20. Entire Agreement. This Agreement is the result of negotiations between the Parties. This
Agreement is intended by the Parties as a full and final expression of their understanding with respect to
the matters contained in this Agreement and shall not be modified in any manner except by an instrument
in writing executed by the Parties or their respective successors in interest.
21. Amendment; Modification. No supplement, modification, or amendment of this Agreement shall
be binding unless executed in writing and signed by both Parties.
22. Governing Law and Venue. The interpretation and performance of this Agreement shall be
governed by the laws of the State of California. Venue shall be in Riverside County, California.
23. Construction/Interpretation. Headings or captions to the provisions of this Agreement are solely
for the convenience of the Parties, are not part of this Agreement, and shall not be used to interpret or
determine the validity of this Agreement. Any ambiguity in this Agreement shall not be construed against
the drafter, but rather the terms and provisions hereof shall be given a reasonable interpretation as if both
parties had in fact drafted this Agreement.
24. No Waiver. Failure of the Parties to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor
shall any waiver or relinquishment of any rights or powers hereunder at any one time or more times be
deemed a waiver or relinquishment of such other right or power at any other time or times.
25. No Third-Party Beneficiaries. There are no intended third-party beneficiaries of any right or
obligation assumed by the Parties.
26. Severability. It is intended that each paragraph of this Agreement shall be treated as separate and
divisible, and in the event that any paragraphs are deemed unenforceable, the remainder shall continue
to be in full force and effect so long as the primary purpose of this Agreement is unaffected.
27. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the same instrument.
28. Use of Electronic (Digital) Signatures. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will constitute one instrument.
Each party of this Agreement agrees to the use of electronic signatures, such as digital signatures that
8
meet the requirements of the California Uniform Electronic Transactions Act ((“CUETA”) Cal. Civ.
Code §§ 1633.1 to 1633.17), for executing this Agreement. The parties further agree that the electronic
signatures of the parties included in this Agreement are intended to authenticate this writing and to have
the same force and effect as manual signatures. Electronic signature means an electronic sound, symbol,
or process attached to or logically associated with an electronic record and executed or adopted by a
person with the intent to sign the electronic record pursuant to the CUETA as amended from time to
time. The CUETA authorizes use of an electronic signature for transactions and contracts among parties
in California, including a government agency. Digital signature means an electronic identifier, created
by computer, intended by the party using it to have the same force and effect as the use of a manual
signature, and shall be reasonably relied upon by the parties. For purposes of this section, a digital
signature is a type of "electronic signature" as defined in subdivision (i) of Section 1633.2 of the Civil
Code
[Signature Provisions on Following Page]
9
28.Authority to Enter Agreement. Each Party to this Agreement warrants to the other that it is duly
organized and existing and that it and the respective signatories have full right and authority to enter into
and consummate this Agreement and all related documents and bind the parties thereto.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date as indicated
beside each Party's signature.
COUNTY:
COUNTY OF RIVERSIDE, a political subdivision
of the State of California
By: ______________________________
SUBRECIPIENT:
CITY OF TEMECULA
By: _______________________________
Chair, Board of Supervisors Aaron Adams, City Manager
ATTEST:
Clerk of the Board
Kimberly Rector
By: _____________________________
Deputy
(Seal)
APPROVED AS TO FORM
County Counsel
By: ________________________
Kristine Bell-Valdez
Deputy County Counsel
ATTEST:
___________________________
Randi Johl, City Clerk
APPROVED AS TO FORM:
___________________________
Peter M. Thorson, City Attorney
10
Attachment A – Neighborhood Revitalization Project Scope
Dog Park Renovation at Michael “Mike” Naggar Park
Scope of Work
The Subrecipient will complete all planning, design, and procurement necessary to construct the
Project. The Subrecipient will construct a dog park at Michael “Mike” Naggar Community Park
that includes a pen for small breed dogs and a pen for large breed dogs. In addition, there will be
new water fountains, benches, trash receptacles, dog bag dispensers, trees and other landscape
improvements, and shade structures.
Project Budget
ITEM DESCRIPTION
COUNTY OF
RIVERSIDE
ARPA
PROJECT
FUNDING
AMOUNT
(Not to Exceed)
SUBRECIPIENT
NON-FEDERAL
FUNDING
AMOUNT
ESTIMATED
PROJECT COST
1 Facility Planning $0 $0 $0
2 Preliminary Design $0 $0 $0
3 Final Design $0 $71,516 $71,516
4 Spec Review,
Bid/Award
$0 $100,000 $100,000
5 Construction $200,000 $593,484 $793,484
6 Admin Closeout $0 $75,000 $75,000
TOTAL: $200,000 $840,000 $1,040,000
Schedule
ITEM DESCRIPTION OF SUBMITTAL ESTIMATED DUE
DATE
1 Feasibility Report N/A
2 Preliminary Design Report N/A
3 Final Design August 30, 2023
4 Spec Review, Bid/Award August 30, 2023
5 Construction and Implementation January 31, 2024
6 Admin Closeout April 30, 2024
11
Attachment B – U.S. Treasury ARPA Fiscal Recovery Funds Final Rule
4338 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
1 Public Law 117–2. https://www.congress.gov/
117/plaws/publ2/PLAW-117publ2.pdf.
2 Throughout this Supplementary Information,
Treasury uses ‘‘state, local, and Tribal
governments’’ or ‘‘recipients’’ to refer generally to
governments receiving SLFRF funds; this includes
states, territories, Tribal governments, counties,
metropolitan cities, and nonentitlement units of
local government.
3 86 FR 26786 (May 17, 2021).
4 Centers for Disease Control and Prevention,
COVID Data Tracker: COVID–19 Vaccinations in the
United States, https://covid.cdc.gov/covid-data-
tracker/#vaccinations (last visited December 31,
2021).
5 Centers for Disease Control and Prevention,
COVID Data Tracker, http://www.covid.cdc.gov/
covid-data-tracker/#datatracker-home (last visited
December 7, 2021).
6 U.S. Bureau of Labor Statistics, Unemployment
Rate [UNRATE], retrieved from FRED, Federal
Reserve Bank of St. Louis; https://fred.
stlouisfed.org/series/UNRATE (last visited
December 7, 2021).
7 Id.
8 U.S. Bureau of Economic Analysis, Real Gross
Domestic Product [GDPC1], retrieved from FRED,
Federal Reserve Bank of St. Louis, https://fred.
stlouisfed.org/series/GDPC1 (last visited December
7, 2021).
9 U.S. Bureau of Labor Statistics, supra note 6.
10 U.S. Bureau of Labor Statistics, All Employees,
State Government [CES9092000001] and All
Employees, Local Government [CES9093000001],
retrieved from FRED, Federal Reserve Bank of St.
Louis, https://fred.stlouisfed.org/series/
CES9092000001 and https://fred.stlouisfed.org/
series/CES9093000001 (last visited December 7,
2021).
11 The ARPA adds section 602 of the Social
Security Act, which creates the State Fiscal
Recovery Fund, and section 603 of the Social
Security Act, which creates the Local Fiscal
Recovery Fund (together, SLFRF). Sections 602 and
603 contain substantially similar eligible uses; the
primary difference between the two sections is that
section 602 establishes a fund for states, territories,
and Tribal governments and section 603 establishes
a fund for metropolitan cities, nonentitlement units
of local government, and counties.
DEPARTMENT OF THE TREASURY
31 CFR Part 35
RIN 1505–AC77
Coronavirus State and Local Fiscal
Recovery Funds
AGENCY: Department of the Treasury.
ACTION: Final rule.
SUMMARY: The Secretary of the Treasury
(Treasury) is adopting as final the
interim final rule published on May 17,
2021, with amendments. This rule
implements the Coronavirus State Fiscal
Recovery Fund and the Coronavirus
Local Fiscal Recovery Fund established
under the American Rescue Plan Act.
DATES: The provisions in this final rule
are effective April 1, 2022.
FOR FURTHER INFORMATION CONTACT:
Katharine Richards, Director,
Coronavirus State and Local Fiscal
Recovery Funds, Office of Recovery
Programs, Department of the Treasury,
(844) 529–9527.
SUPPLEMENTARY INFORMATION:
I. Introduction
Overview
Since the first case of coronavirus
disease 2019 (COVID–19) was
discovered in the United States in
January 2020, the pandemic has caused
severe, intertwined public health and
economic crises. In March 2021, as
these crises continued, the American
Rescue Plan Act of 2021 (ARPA)1
established the Coronavirus State and
Local Fiscal Recovery Funds (SLFRF) to
provide state, local, and Tribal
governments 2 with the resources
needed to respond to the pandemic and
its economic effects and to build a
stronger, more equitable economy
during the recovery. The U.S.
Department of the Treasury (Treasury)
issued an interim final rule
implementing the SLFRF program on
May 10, 2021 3 and has since disbursed
over $240 billion to state, local, and
Tribal governments and received over
1,500 public comments on the interim
final rule. Treasury is now issuing this
final rule which responds to public
comments, implements the ARPA
statutory provisions on eligible and
ineligible uses of SLFRF funds, and
makes several changes to the provisions
of the interim final rule, summarized
below in the section Executive
Summary of Major Changes.
Since Treasury issued the interim
final rule in May 2021, both the public
health and economic situations facing
the country have evolved. On the public
health front, the United States has made
tremendous progress in the fight against
COVID–19, including a historic
vaccination campaign that has reached
over 80 percent of adults with at least
one dose and is reaching millions of
children as well.4 However, the disease
continues to present an imminent threat
to public health, especially among
unvaccinated individuals. As the Delta
variant spread across the country this
summer and fall, the United States faced
another severe wave of cases, deaths,
and strain on the healthcare system,
with the risk of hospitalization and
mortality exponentially greater to
unvaccinated Americans. COVID–19 has
now infected over 50 million and killed
over 800,000 Americans since January
2020; tens of thousands of Americans
continue to be infected each day.5 Even
as the nation recovers, new and
emerging COVID–19 variants may
continue to pose threats to both public
health and the economy. Moving
forward, state, local, and Tribal
governments will continue to play a
major role in responding through
vaccination campaigns, testing, and
other services.
The economic recovery similarly has
made tremendous progress but faces
continued risks from the disease and the
disruptions it has caused. In the early
months of the pandemic, the United
States experienced the sharpest
economic downturn on record, with
unemployment spiking to 14.8 percent
in April 2020.6 The economy has
gradually added back jobs, with growth
accelerating in the first half of 2021.7
However, as the Delta variant spread,
the intensified health risks and renewed
disruptions slowed growth,
demonstrating the continued risks from
the virus. By fall 2021, the economy had
exceeded its pre-pandemic size 8 and
unemployment had fallen below 5
percent,9 but despite this progress, too
many Americans remain unemployed,
out of the labor force, or unable to pay
their bills, with this pain particularly
acute among lower-income Americans
and communities of color. Again,
moving forward, state, local, and Tribal
governments will remain on the
frontlines of the economic response and
rebuilding a stronger economy in the
aftermath of the pandemic.
However, as state, local, and Tribal
governments continue to face
substantial needs to respond to public
health and economic conditions, they
have also experienced severe impacts
from the pandemic and resulting
recession. State, local, and Tribal
governments cut over 1.5 million jobs in
the early months of the pandemic amid
sharp declines in revenue and remain
over 950,000 jobs below their pre-
pandemic levels.10 As the Great
Recession demonstrated, austerity
among state, local, and Tribal
governments can hamper overall
economic growth and severely curtail
the ability of governments to serve their
constituents.
Recognizing these imperatives, the
SLFRF program provides vital resources
for state, local, and Tribal governments
to respond to the pandemic and its
economic effects and to replace revenue
lost due to the public health emergency,
preventing cuts to government services.
Specifically, the ARPA provides that
SLFRF funds 11 may be used:
(a) To respond to the public health
emergency or its negative economic
impacts, including assistance to
households, small businesses, and
nonprofits, or aid to impacted industries
such as tourism, travel, and hospitality;
(b) To respond to workers performing
essential work during the COVID–19
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public health emergency by providing
premium pay to eligible workers;
(c) For the provision of government
services to the extent of the reduction in
revenue due to the COVID–19 public
health emergency relative to revenues
collected in the most recent full fiscal
year prior to the emergency; and
(d) To make necessary investments in
water, sewer, or broadband
infrastructure.
In addition, Congress specified two
types of ineligible uses of funds: funds
may not be used for deposit into any
pension fund or, for states and
territories only, to directly or indirectly
offset a reduction in net tax revenue
resulting from a change in law,
regulation, or administrative
interpretation.
Issued May 10, 2021, Treasury’s
interim final rule provided further detail
on eligible uses of funds within the four
statutory categories, ineligible uses of
funds, and administration of the
program. The interim final rule
provided state, local, and Tribal
governments substantial flexibility to
determine how best to use payments
from the SLFRF program to meet the
needs of their communities. The interim
final rule aimed to facilitate swift and
effective implementation by establishing
a framework for determining the types
of programs and services that are
eligible under the ARPA along with
examples of eligible uses of funds that
state, local, and Tribal governments may
consider.
State, local, and Tribal governments
are already deploying SLFRF funds to
make an impact in their communities.
The SLFRF program ensures that state,
local, and Tribal governments have the
resources needed to fight the pandemic,
sustain and strengthen the economic
recovery, maintain vital public services,
and make investments that support
long-term growth, opportunity, and
equity. Treasury looks forward to
supporting and engaging with state,
local, and Tribal governments as they
use these funds to make transformative
investments in their communities.
Finally, with so many pressing and
effective ways to use SLFRF funds, there
is no excuse for waste, fraud, or abuse
of these funds.
Treasury received over 1,500
comments spanning nearly all aspects of
the interim final rule. The final rule
considers and responds to comments,
provides clarification to many aspects of
the interim final rule, and makes several
changes to eligible uses under the
program, summarized immediately
below.
Executive Summary of Major Changes
and Clarifications
The final rule provides broader
flexibility and greater simplicity in the
program, in response to public
comments. Among other clarifications
and changes, the final rule provides for
the following:
•Public Health and Negative
Economic Impacts: In addition to
programs and services, the final rule
clarifies that recipients may use funds
for capital expenditures that support an
eligible COVID–19 public health or
economic response. For example,
recipients may build certain affordable
housing, childcare facilities, schools,
hospitals, and other projects consistent
with the requirements in this final rule
and the Supplementary Information.
In addition, the final rule presumes
that an expanded set of households and
communities are ‘‘impacted’’ or
‘‘disproportionately impacted’’ by the
pandemic, thereby allowing recipients
to provide responses to a broad set of
households and entities without
requiring additional analysis. Further,
the final rule provides a broader set of
enumerated eligible uses available for
these communities as part of COVID–19
public health and economic response,
including making affordable housing,
childcare, and early learning services
eligible in all impacted communities
and making certain community
development and neighborhood
revitalization activities eligible for
disproportionately impacted
communities.
Further, the final rule allows for a
broader set of uses to restore and
support government employment,
including hiring above a recipient’s pre-
pandemic baseline, providing funds to
employees that experienced pay cuts or
furloughs, avoiding layoffs, and
providing retention incentives.
•Premium Pay: The final rule offers
more streamlined options to provide
premium pay, by broadening the share
of essential workers who can receive
premium pay without a written
justification while maintaining a focus
on lower-income and frontline essential
workers.
•Revenue Loss: The final rule offers
a standard allowance for revenue loss of
up to $10 million, not to exceed a
recipient’s SLFRF award amount,
allowing recipients to select between a
standard amount of revenue loss or
complete a full revenue loss calculation.
Recipients that select the standard
allowance may use that amount for
government services.
•Water, Sewer, and Broadband
Infrastructure: The final rule
significantly broadens eligible
broadband infrastructure investments to
address challenges with broadband
access, affordability, and reliability, and
adds additional eligible water and sewer
infrastructure investments, including a
broad range of lead remediation and
stormwater management projects.
Structure of the Supplementary
Information
In addition to this Introduction, this
Supplementary Information is organized
into four sections: (1) Eligible Uses, (2)
Restrictions on Use, (3) Program
Administration Provisions, and (4)
Regulatory Analyses.
The Eligible Uses section describes
the standards to determine eligible uses
of funds in each of the four eligible use
categories:
(1) Responding to the public health
and negative economic impacts of the
pandemic (which includes several sub-
categories)
(2) Providing premium pay to
essential workers
(3) Providing government services to
the extent of revenue loss due to the
pandemic, and
(4) Making necessary investments in
water, sewer, and broadband
infrastructure.
Each eligible use category has
separate and distinct standards for
assessing whether a use of funds is
eligible. Standards, restrictions, or other
provisions in one eligible use category
do not apply to the others. Therefore,
recipients should first determine which
eligible use category a potential use of
funds fits within, then assess whether
the potential use of funds meets the
eligibility standard or criteria for that
category. In the case of uses to respond
to the public health and negative
economic impacts of the pandemic,
recipients should also determine which
sub-category the eligible use fits within
(i.e., public health, assistance to
households, assistance to small
businesses, assistance to nonprofits, aid
to impacted industries, or public sector
capacity and workforce), then assess
whether the potential use of funds
meets the eligibility standard for that
sub-category. Treasury does not pre-
approve uses of funds; recipients are
advised to review the final rule and may
pursue eligible projects under it.
In some sections of the rule, Treasury
identifies specific uses of funds that are
eligible, called ‘‘enumerated eligible
uses’’; for example, Treasury provides
many enumerated eligible uses of funds
to respond to the public health and
negative economic impacts of the
pandemic. Uses of funds that are not
specifically named as eligible in this
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12 Centers for Disease Control and Prevention,
COVID Data Tracker, http://www.covid.cdc.gov/
covid-data-tracker/#datatracker-home (last visited
December 31, 2021).
13 U.S. Bureau of Labor Statistics, All Employees,
Total Nonfarm [PAYEMS] https://fred.
stlouisfed.org/series/PAYEMS (last visited
December 7, 2021).
final rule may still be eligible in two
ways. First, under the revenue loss
eligible use category, recipients have
broad latitude to use funds for
government services up to their amount
of revenue loss due to the pandemic. A
potential use of funds that does not fit
within the other three eligible use
categories may be permissible as a
government service, which recipients
can fund up to their amount of revenue
loss. For example, transportation
infrastructure projects are generally
ineligible as a response to the public
health and negative economic impacts
of the pandemic; however, a recipient
could fund these projects as a
government service up to its amount of
revenue loss, provided that other
restrictions on use do not apply. See
sections Revenue Loss and Restrictions
on Use for further information. Second,
the eligible use category for responding
to the public health and negative
economic impacts of the pandemic
provides a non-exhaustive list of
enumerated eligible uses, which means
that the listed eligible uses include
some, but not all, of the uses of funds
that could be eligible. The Eligible Uses
section provides a standard for
determining if other uses of funds,
beyond those specifically enumerated,
are eligible. If a recipient would like to
pursue a use of funds that is not
specifically enumerated, the recipient
should use the standard and other
guidance provided in the section Public
Health and Negative Economic Impacts
to assess whether the use of funds is
eligible.
Next, the Restrictions on Use section
describes limitations on how funds may
be used. Treasury has divided the
Restriction on Use section into (A)
statutory restrictions under the ARPA,
which include (1) offsetting a reduction
in net tax revenue, and (2) deposits into
pension funds, and (B) other restrictions
on use, which include (1) debt service
and replenishing reserves, (2)
settlements and judgments, and (3)
general restrictions. These restrictions
apply to all eligible use categories;
however, some restrictions apply only
to certain types of recipient
governments, and recipients are advised
to review the final rule to determine
which restrictions apply to their type of
government (e.g., state, territory, Tribal
government, county, metropolitan city,
or nonentitlement unit of government).
To reiterate, for recipient governments
covered by a specific restriction, that
restriction applies to all eligible use
categories and any use of funds under
the SLFRF program. Specifically:
•For states and territories only, funds
may not be used to offset directly or
indirectly a reduction in net tax revenue
resulting from a change in state or
territory law.
•For all recipients except Tribal
governments, funds may not be used for
deposits into a pension fund.
•For all recipients, funds may not be
used for debt service or replenishing
financial reserves.
•All recipients must also comply
with three general restrictions. First, a
recipient may not use SLFRF funds for
a program, service, or capital
expenditure that conflicts with or
contravenes the statutory purpose of
ARPA, including a program, service, or
capital expenditure that includes a term
or condition that undermines efforts to
stop the spread of COVID–19. Second,
recipients may not use SLFRF funds in
violation of the conflict-of-interest
requirements contained in the Award
Terms and Conditions, including any
self-dealing or violation of ethics rules.
Lastly, recipients should be aware that
federal, state, and local laws and
regulations, outside of SLFRF program
requirements, also apply, including for
example, environmental laws and
federal civil rights and
nondiscrimination requirements, which
include prohibitions on discrimination
on the basis of race, color, national
origin, sex (including sexual orientation
and gender identity), religion, disability,
age, or familial status (having children
under the age of 18).
The Program Administration
Provisions section describes the
processes and requirements for
administering the program on an
ongoing basis, specifically as relates to
the following: Distribution of funds,
timeline for using funds, transfer of
funds from a recipient to different
organizations, use of funds for program
administration, reporting on use of
funds, and remediation and recoupment
of funds used for ineligible purposes. Of
note, SLFRF funds may only be used for
costs incurred within a specific time
period, beginning March 3, 2021, with
all funds obligated by December 31,
2024 and all funds spent by December
31, 2026. Recipients are advised to also
consult Treasury’s Reporting and
Compliance Guidance for additional
information on program administration
processes and requirements, including
applicability of the Uniform Guidance.
Finally, the section Regulatory
Analyses provides Treasury’s analysis of
the impacts of this rulemaking, as
required by several laws, regulations,
and Executive Orders.
Throughout this Supplementary
Information, statements using the terms
‘‘should’’ or ‘‘must’’ refer to
requirements, except when used in
summarizing opinions expressed in
public comments. Statements using the
term ‘‘encourage’’ refer to
recommendations, not requirements.
II. Eligible Uses
A. Public Health and Negative
Economic Impacts
Background
Since the first case of COVID–19 was
discovered in the United States in
January 2020, the disease has infected
over 50 million and killed over 800,000
Americans.12 The disease—and
necessary measures to respond—have
had an immense public health and
economic impact on millions of
Americans across many areas of life, as
detailed below in the respective sections
on Public Health and Negative
Economic Impacts. Since the release of
the interim final rule in May 2021, the
country has made major progress in
fighting the disease and rebuilding the
economy but faces continued risks, as
illustrated by the spread of the Delta
variant and the resulting slowdown in
the economic recovery. The SLFRF
program, and Treasury’s interim final
rule, provide substantial flexibility to
recipients to respond to pandemic
impacts in their local community; this
flexibility is designed to help state,
local, and Tribal governments adapt to
the evolving public health emergency
and tailor their response as needs evolve
and to the particular local needs of their
communities.
Indeed, state, local, and Tribal
governments face continued needs to
respond at scale to the public health
emergency. This includes continued
public health efforts to slow the spread
of the disease, to increase vaccination
rates and provide vaccinations to new
populations as they become eligible, to
protect individuals living in congregate
facilities, and to address the broader
impacts of the pandemic on public
health. Similarly, while a strong
economic recovery is underway, the
economy remains 3.9 million jobs below
its pre-pandemic level, pointing to the
continued need for response efforts,
with low-income workers and
communities of color facing elevated
rates of unemployment and economic
hardship.13 Long-standing disparities in
health and economic outcomes in
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14 Treasury uses ‘‘underserved’’ to refer to
populations sharing a particular characteristic, as
well as geographic communities, that have been
systematically denied a full opportunity to
participate in aspects of economic, social, and civic
life. In the interim final rule, Treasury generally
used the term ‘‘disadvantaged’’ to refer to these
same populations and communities.
15 U.S. Bureau of Labor Statistics, All Employees,
State Government [CES9092000001] and All
Employees, Local Government [CES9093000001],
retrieved from FRED, Federal Reserve Bank of St.
Louis, https://fred.stlouisfed.org/series/
CES9092000001 and https://fred.stlouisfed.org/
series/CES9093000001 (last visited December 7,
2021).
16 Tracy Gordon, State and Local Budgets and the
Great Recession, Brookings Institution (Dec. 31,
2012), http://www.brookings.edu/articles/state-and-
local-budgets-and-the-great-recession.
17 In some cases, a use may be permissible under
another eligible use category even if it falls outside
the scope of section (c)(1)(A) of section 602 and 603
of the Social Security Act.
underserved 14 communities, that
amplified and exacerbated the impacts
of the pandemic, also present continued
barriers to full and equitable recovery.
As state, local, and Tribal
governments work to meet the public
health and economic needs of their
communities, these governments are
also confronting the need to rebuild
their own capacity. Facing severe
budget challenges during the pandemic,
many state, local, and Tribal
governments have been forced to make
cuts to services or their workforces,
including cutting over 1.5 million jobs
from February to May 2020, or delay
critical investments. As of fall 2021,
state, local, and Tribal government
employment remained over 950,000 jobs
below pre-pandemic levels.15 In the
recovery from the Great Recession, cuts
to state, local, and Tribal governments
became a meaningful drag on economic
growth for several years, and the SLFRF
program provides the resources needed
to re-invest in vital public services and
workers to avoid this outcome.16
1. General Provisions: Structure and
Standards
Background: Sections 602(c)(1)(A)
and 603(c)(1)(A) of the Social Security
Act establish that recipients may use
funds ‘‘to respond to the public health
emergency with respect to COVID–19 or
its negative economic impacts,
including assistance to households,
small businesses, and nonprofits, or aid
to impacted industries such as tourism,
travel, and hospitality.’’ The interim
final rule established three categories
within this eligible use: (1) Public
health responses for those impacted by
the pandemic, including the general
public; (2) responses to the negative
economic impacts that were
experienced by those impacted as a
result of the pandemic; and (3)
additional services, either as a public
health response or a response to the
negative economic impacts of the
pandemic, for disproportionately
impacted communities.
The interim final rule established the
method to determine which specific
programs or services may be eligible to
respond to the public health emergency
or to respond to the negative economic
impacts of the public health emergency
within this framework. The interim final
rule included multiple enumerated uses
that are eligible within each of these
categories when provided to eligible
populations, including populations that
the interim final rule presumed to have
been impacted (in the case of public
health responses and responses to
negative economic impacts) or
disproportionately impacted (in the case
of disproportionately impacted
communities). Finally, the interim final
rule also allowed recipients to designate
additional individuals or classes as
impacted or disproportionately
impacted. The standards for each of
these criteria under the interim final
rule are discussed below.
To assess whether a program or
service would be eligible to respond to
the public health emergency or its
negative economic impacts, the interim
final rule stated that, ‘‘the recipient [is
required] to, first, identify a need or
negative impact of the COVID–19 public
health emergency and, second, identify
how the program, service, or other
intervention addresses the identified
need or impact [. . . .] [E]ligible uses
under this category must be in response
to the disease itself or the harmful
consequences of the economic
disruptions resulting from or
exacerbated by the COVID–19 public
health emergency.’’ The enumerated
eligible uses were presumed to meet this
criterion.
With respect to uses not specifically
enumerated in the interim final rule as
eligible public health responses, the
interim final rule stated that, ‘‘[t]o assess
whether additional uses would be
eligible under this category, recipients
should identify an effect of COVID–19
on public health, including either or
both of immediate effects or effects that
may manifest over months or years, and
assess how the use would respond to or
address the identified need.’’
With respect to uses not specifically
enumerated in the interim final rule as
eligible responses to a negative
economic impact of the public health
emergency, the interim final rule stated
that ‘‘[e]ligible uses that respond to the
negative economic impacts of the public
health emergency must be designed to
address an economic harm resulting
from or exacerbated by the public health
emergency. In considering whether a
program or service would be eligible
under this category, the recipient should
assess whether, and the extent to which,
there has been an economic harm, such
as loss of earnings or revenue, that
resulted from the COVID–19 public
health emergency and whether, and the
extent to which, the use would respond
to or address this harm.17 A recipient
should first consider whether an
economic harm exists and whether this
harm was caused or made worse by the
COVID–19 public health emergency.’’
The interim final rule went on to say
that: ‘‘In addition, the eligible use must
‘respond to’ the identified negative
economic impact. Responses must be
related and reasonably proportional to
the extent and type of harm
experienced; uses that bear no relation
or are grossly disproportionate to the
type or extent of harm experienced
would not be eligible uses.’’
Throughout this final rule, Treasury
refers to households, communities,
small businesses, nonprofits, and
industries that experienced public
health or negative economic impacts of
the pandemic as ‘‘impacted.’’ The first
section in the interim final rule under
this eligible use category included
public health responses for these
impacted classes. The second category
in the interim final rule under this
eligible use category included responses
to the negative economic impacts that
were experienced by these impacted
classes as a result of the pandemic.
The interim final rule further
recognized that certain populations
have experienced disproportionate
health or negative economic impacts
during the pandemic, as pre-existing
disparities in these communities
amplified the impacts of the pandemic.
For example, the interim final rule
recognized that the negative economic
effects of the pandemic were
particularly pronounced among lower-
income families, who were more likely
to experience income loss and more
likely to have a job that required in-
person work. The interim final rule
recognized the role of pre-existing social
vulnerabilities and disparities in driving
the disparate health and economic
outcomes and presumed that programs
designed to address these health or
economic disparities are responsive to
the public health or negative economic
impacts of the COVID–19 public health
emergency, when provided in
disproportionately impacted
communities. In addition to identifying
certain populations and communities
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18 Note that small businesses, nonprofits, and
industries may also function as subrecipients. For
additional information on these distinctions see
section Distinguishing Subrecipients versus
Beneficiaries.
presumed to be disproportionately
impacted, it also empowered recipients
to identify other disproportionately
impacted households, populations,
communities, or small businesses. The
interim final rule provided that, in
identifying these disproportionately
impacted communities, recipients
should be able to support their
determination that the pandemic
resulted in disproportionate public
health or economic outcomes to the
specific populations, households, or
geographic areas to be served.
Throughout this final rule, Treasury
refers to those households,
communities, small businesses, and
nonprofits that experienced
disproportionate public health or
negative economic impacts of the
pandemic as ‘‘disproportionately
impacted.’’ The third category in the
interim final rule under this eligible use
included public health responses and
responses to the negative economic
impacts for these disproportionately
impacted classes.
The interim final rule provided
significant flexibility for recipients to
determine which households,
populations, communities, or small
businesses have been impacted and/or
disproportionately impacted by the
pandemic and to identify appropriate
responses. The interim final rule
included several provisions to provide
simple methods for recipients to
identify impacts and design programs to
address those impacts. First, the interim
final rule allowed recipients to
demonstrate a negative economic
impact on a population or class and
provide assistance to households or
small businesses that fall within that
population or class. In such cases, the
recipient need only demonstrate that an
individual household or business is
within the class that experienced a
negative economic impact, rather than
requiring a recipient to demonstrate that
each individual household or small
business experienced a negative
economic impact, because the impact
was already identified for the class.
Second, in the interim final rule,
Treasury presumed that certain
populations have been impacted or
disproportionately impacted and are
thus eligible for services that respond to
these impacts or disproportionate
impacts. Specifically, the interim final
rule permitted recipients to presume
that households that experienced
unemployment, increased food or
housing insecurity, or are low- or
moderate-income experienced a
negative economic impact from the
pandemic. The interim final rule also
permitted recipients to presume that
certain services provided in Qualified
Census Tracts (QCTs), to individuals
living in QCTs, or by Tribal
governments are responsive to
disproportionate impacts of the
pandemic. In addition to the
populations presumed to be impacted or
disproportionately impacted, under the
interim final rule, recipients could
identify other impacted households or
classes, as described above, as well as
other populations, households, or
geographic areas that are
disproportionately impacted by the
pandemic.
Third, as mentioned previously, the
interim final rule included a non-
exhaustive list of uses of funds that
Treasury identified as responsive to the
impacts or disproportionate impacts of
the pandemic. Treasury refers to these
as ‘‘enumerated eligible uses.’’
To summarize, the interim final rule
identified certain populations that are
presumed to be impacted by the
pandemic (and specific enumerated
uses of funds that are responsive to that
impact) and populations that are
presumed to be disproportionately
impacted by the pandemic (and specific
enumerated uses of funds that are
responsive to those disproportionate
impacts). In addition, the interim final
rule provided standards for recipients to
assess whether additional uses of funds,
beyond the enumerated eligible uses,
are eligible for impacted and
disproportionately impacted
populations and permitted recipients to
identify other households or classes that
experienced impacts of the pandemic or
disproportionate impacts of the
pandemic.
Rule Structure
Public Comment: Many commenters
expressed concern regarding the
structure of the eligible uses, indicating
they found the structure of the public
health and negative economic impacts
section of the interim final rule to be
confusing or difficult to navigate. Other
commenters indicated that they
understood the enumerated uses to be
the only eligible uses and/or the
presumed eligible populations to be the
only eligible populations. Several
commenters expressed frustration about
the number of eligible uses specifically
enumerated in the interim final rule,
which they considered too few, and
commenters proposed a wide range of
additional enumerated eligible uses (for
further discussion, see the section
Public Health and section Negative
Economic Impacts). Commenters
expressed concern with pursuing uses
of funds not explicitly enumerated in
the eligible use section or uncertainty
regarding the broad flexibility provided
under the interim final rule to pursue
additional programs that respond to the
public health or negative economic
impacts of the pandemic or the process
for doing so.
Treasury Response: Treasury
recognizes that many commenters felt
the structure of the interim final rule
could be clarified. These comments are
consistent with many of the questions
that Treasury has received from
recipients, which requested clarification
regarding the category their desired
response fits into. Treasury observes
that these comments and questions
generally fall into four categories: (1)
How to identify the correct public
health or negative economic impact
category for a particular response, (2)
how to identify whether a particular use
is eligible, (3) how to identify an
impacted or disproportionately
impacted class, and (4) whether an
enumerated use can be provided to a
class other than those presumed
impacted or disproportionately
impacted. In response to comments,
Treasury is adjusting the structure of the
public health and negative economic
impacts eligible use section of the final
rule to improve clarity and make it
easier for recipients to interpret and
apply the final rule.
Specifically, Treasury is restructuring
the rule to aid recipients in determining
whether a particular response is eligible
and how the particular response might
be eligible under a particular category.
This restructuring reinforces the
fundamental criteria that a use of funds
is eligible based on its responsiveness to
a public health or negative economic
impact experienced by individuals,
households, small businesses,
nonprofits, or impacted industries
(together ‘‘beneficiaries’’).18 This
restructuring is intended to make the
rule easier to navigate and to
implement, including any criteria or
conditions on particular uses of funds.
The reorganization of the public
health and negative economic impacts
section of the final rule is also intended
to clarify the enumerated eligible uses
described in the interim final rule. The
reorganization itself is not intended to
change the scope of the enumerated
uses that were included in the interim
final rule or that were allowable under
the interim final rule. In some cases,
specific enumerated uses are being
altered, and those changes are discussed
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19 In designing an intervention to mitigate
COVID–19, the recipient should consider guidance
from public health authorities, particularly the
Centers for Disease Control and Prevention (CDC),
in assessing appropriate COVID–19 mitigation and
prevention strategies (see Centers for Disease
Control and Prevention, COVID–19, https://
www.cdc.gov/coronavirus/2019-ncov/index.html).
A program or service that imposes conditions on
participation in or acceptance of the service that
would undermine efforts to stop the spread of
COVID–19 or discourage compliance with practices
in line with CDC guidance for stopping the spread
of COVID–19 is not a permissible use of funds.
as changes within the section on that
enumerated use.
The final rule streamlines and aligns
services and standards that are generally
applicable or are provided for public
health purposes. Under this approach,
eligible uses to respond to the public
health emergency are organized based
on the type of public health problem: (1)
COVID–19 mitigation and prevention,
(2) medical expenses, (3) behavioral
health care, and (4) preventing and
responding to violence. Under this
approach, eligible uses to respond to the
negative economic impacts of the public
health emergency are organized based
on the type of beneficiary: (1) Assistance
to households, (2) assistance to small
businesses, and (3) assistance to
nonprofits, alongside a fourth
standalone eligibility category for aid to
travel, tourism, hospitality, and other
impacted industries. The first three
categories, assistance to households,
small businesses, and nonprofits,
include enumerated eligible uses for
impacted and disproportionately
impacted beneficiaries. This change in
structure is intended to provide a
framework that clearly identifies the
intended beneficiaries of uses of funds
and provides clarity about what types of
assistance are ‘‘responsive to the
pandemic or its negative economic
impacts’’ for these beneficiaries.
a. Standards for Identifying a Public
Health or Negative Economic Impact
Standards: Designating a Public Health
Impact
Public Comment: Many commenters
expressed uncertainty about how to
determine whether a use of funds,
beyond those specifically enumerated as
eligible, might be an eligible public
health response. For example, many
commenters submitted questions asking
whether specific uses of funds would be
eligible. Others described what they
considered to be impacts of the
pandemic and argued that uses of funds
to respond to these issues should be
eligible. Some commenters requested
that Treasury provide additional detail
to guide their assessments of eligible
uses of funds. For example, a
commenter requested more clarification
around exactly what and whose medical
expenses can be covered. These
comments ranged in their specificity
and covered the full range of the
enumerated eligible uses.
Treasury Response: Treasury is
clarifying that when assessing whether
a program or service is an eligible use
to respond to the public health impacts
of the COVID–19 public health
emergency, the Department will
consider the two eligibility
requirements discussed below. These
standards apply to all proposed public
health uses.
First, there must be a negative public
health impact or harm experienced by
an individual or a class. For ease of
administration, the interim final rule
allowed, and the final rule maintains
the ability for, recipients to identify a
public health impact on a population or
group of individuals, referred to as a
‘‘class,’’ and to provide assistance to
that class. In determining whether an
individual is eligible for a program
designed to address a harm experienced
by a class, the recipient need only
document that the individual is within
the class that experienced a public
health impact, see section Standards:
Designating Other Impacted Classes. In
the case of some impacts, for example
impacts of COVID–19 itself that are
addressed by providing prevention and
mitigation services, such a class could
reasonably include the general public.
Second, the program, service, or other
intervention must address or respond to
the identified impact or harm. The final
rule maintains the interim final rule
requirement that eligible uses under this
category must be in response to the
disease itself or other public health
harms that it caused.19
Responses must be reasonably
designed to benefit the individual or
class that experienced the public health
impact or harm. Uses of funds should be
assessed based on their responsiveness
to their intended beneficiaries and the
ability of the response to address the
impact or harm experienced by those
beneficiaries.
Responses must also be related and
reasonably proportional to the extent
and type of public health impact or
harm experienced. Uses that bear no
relation or are grossly disproportionate
to the type or extent of harm
experienced would not be eligible uses.
Reasonably proportional refers to the
scale of the response compared to the
scale of the harm. It also refers to the
targeting of the response to beneficiaries
compared to the amount of harm they
experienced. In evaluating whether a
use is reasonably proportional,
recipients should consider relevant
factors about the harm identified and
the response. For example, recipients
may consider the size of the population
impacted and the severity, type, and
duration of the impact. Recipients may
also consider the efficacy, cost, cost-
effectiveness, and time to delivery of the
response.
If a recipient intends to fund capital
expenditures in response to the public
health impacts of the pandemic,
recipients should refer to the section
Capital Expenditures for details about
the eligibility of capital expenditures.
Standards: Designating a Negative
Economic Impact
Public Comment: Many commenters
expressed uncertainty about how to
determine whether uses of funds,
beyond those specifically enumerated as
eligible, might be eligible responses to
negative economic impacts. For
example, many commenters submitted
questions asking whether specific uses
of funds would be eligible. Others
described what they considered to be
impacts of the pandemic and argued
that uses of funds to respond to these
issues should be eligible. Some
commenters requested that Treasury
provide additional detail to guide their
assessments of eligible uses of funds.
These comments ranged in their
specificity and covered the full range of
eligible uses to respond to negative
economic impacts. Several commenters
asked for clarification about what types
of food assistance would be considered
eligible. Another commenter requested
that the establishment of outdoor dining
be eligible. Many commenters inquired
about homeless shelters as an eligible
use of SLFRF funds.
Commenters also expressed
uncertainty about the ability to establish
classes, including geographic areas, that
experienced a negative economic impact
or disagreed with the requirement that
an individual entity be impacted by the
pandemic in order to receive assistance.
For example, a commenter argued that
interventions should not be limited to
individuals or businesses that
experienced an economic impact and
should instead be used broadly to
support economic growth. These
commenters argued that an expenditure
that supports a more robust economy
may help combat the pandemic’s
negative economic impacts, and it can
do so even if funding is provided to
individuals or entities that did not
themselves experience a negative
economic impact during the pandemic.
Treasury Response: The final rule
maintains the standard articulated in
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20 For example, expenses such as excessive
compensation to employees or expenses which
have already been reimbursed through another
federal program, are not reasonably designed to
address a negative economic impact to a
beneficiary.
21 For example, a program or service that imposes
conditions on participation in or acceptance of the
service that would undermine efforts to stop the
spread of COVID–19 or discourage compliance with
practices in line with CDC guidance for stopping
the spread of COVID–19 is not a permissible use of
funds.
the interim final rule. For clarity, the
final rule re-articulates that when
assessing whether a program or service
is an eligible use to respond to the
negative economic impacts of the
COVID–19 public health emergency,
Treasury will consider the two
eligibility requirements discussed
below.
First, there must be a negative
economic impact, or an economic harm,
experienced by an individual or a class.
The recipient should assess whether,
and the extent to which, there has been
an economic harm, such as loss of
earnings or revenue, that resulted from
the COVID–19 public health emergency.
A recipient should first consider
whether an economic harm exists and
then whether this harm was caused or
made worse by the COVID–19 public
health emergency. This approach is
consistent with the text of the statute,
which provides that funds in this
category must be used to ‘‘respond to
the public health emergency with
respect to . . . its negative economic
impacts.’’
While economic impacts may either
be immediate or delayed, individuals or
classes that did not experience a
negative economic impact from the
public health emergency would not be
eligible beneficiaries under this
category. As noted above, the interim
final rule permitted recipients to
presume that households that
experienced unemployment, increased
food or housing insecurity, or are low-
or moderate-income experienced a
negative economic impact from the
pandemic. For discussion of the final
rule’s approach to this presumption, see
section Populations Presumed Eligible.
The final rule also maintains several
provisions included in the interim final
rule and subsequent guidance that are
intended to ease administration of
identifying that the beneficiary
experienced a negative economic impact
or harm. For example, the interim final
rule allowed, and the final rule
maintains the ability for, recipients to
demonstrate a negative economic
impact on a population or group,
referred to as a ‘‘class,’’ and to provide
assistance to households, small
businesses, or nonprofits that fall within
that class. In such cases, the recipient
need only demonstrate that the
household, small business, or nonprofit
is within the class that experienced a
negative economic impact, see section
Standards: Designating Other Impacted
Classes. This would allow, for example,
an internet access assistance program
for all households with children to
support those households’ ability to
participate in healthcare, work, and
educational activities like extending
learning opportunities, among other
critical activities. In that case, the
recipient would only need to identify a
negative economic impact to the class of
‘‘households with children’’ and would
not need to document or otherwise
demonstrate that each individual
household served experienced a
negative economic impact.
Second, the response must be
designed to address the identified
economic harm or impact resulting from
or exacerbated by the public health
emergency. In selecting responses, the
recipient must assess whether, and the
extent to which, the use would respond
to or address this harm or impact. This
approach is consistent with the text of
the statute, which provides that funds
may be used to ‘‘respond to’’ the
‘‘negative economic impacts’’ of the
public health emergency ‘‘including
assistance to households, small
businesses, and nonprofits, or aid to
impacted industries such as tourism,
travel, and hospitality.’’ The list of
potential responses (‘‘assistance’’ or
‘‘aid’’) suggests that responses should
address the ‘‘negative economic
impacts’’ of particular types of
beneficiaries (e.g., households or small
businesses).
Responses must be reasonably
designed to benefit the individual or
class that experienced the negative
economic impact or harm. Uses of funds
should be assessed based on their
responsiveness to their intended
beneficiary and the ability of the
response to address the impact or harm
experienced by that beneficiary.20
Responses must also be related and
reasonably proportional to the extent
and type of harm experienced; uses that
bear no relation or are grossly
disproportionate to the type or extent of
harm experienced would not be eligible
uses.21 Reasonably proportional refers
to the scale of the response compared to
the scale of the harm. It also refers to the
targeting of the response to beneficiaries
compared to the amount of harm they
experienced; for example, it may not be
reasonably proportional for a cash
assistance program to provide assistance
in a very small amount to a group that
experienced severe harm and in a much
larger amount to a group that
experienced relatively little harm. In
evaluating whether a use is reasonably
proportional, recipients should consider
relevant factors about the harm
identified and the response. For
example, recipients may consider the
size of the population impacted and the
severity, type, and duration of the
impact. Recipients may also consider
the efficacy, cost, cost-effectiveness, and
time to delivery of the response.
Finally, recipients should be aware of
the distinction between beneficiaries of
funds and subrecipients; a recipient
may provide services to beneficiaries
through subrecipients that did not
experience a negative economic impact,
see section Distinguishing Subrecipients
versus Beneficiaries. That is, a recipient
may award SLFRF funds to an entity
that did not experience a negative
economic impact in order to implement
a program or provide a service to
beneficiaries on its behalf. Such
transfers, when implementing a public
health or negative economic impact
response, should be responsive to and
designed to benefit individuals,
households, small businesses,
nonprofits, or impacted industries that
did experience a public health or
negative economic impact.
Determining the Appropriate Eligible
Use Category
Public Comment: Some commenters
expressed uncertainty about how to
analyze negative economic impacts to
different entities (e.g., households, small
businesses, nonprofits). For example,
commenters asked whether a nonprofit,
which did not experience a negative
economic impact itself, could be granted
funds to provide services to individuals
experiencing homelessness, who did
experience negative economic impacts.
Other commenters proposed providing
assistance to support the expansion of
small businesses, under the theory that
this would create more job
opportunities for unemployed workers
who experienced negative economic
impacts.
Treasury Response: In the final rule,
Treasury is clarifying that recipients
should assess a potential use of funds
based on which beneficiary experienced
the negative economic impact, in other
words, the households, small
businesses, nonprofits, or impacted
industries that experienced the negative
economic impact.
Treasury notes that recipients may
award SLFRF funds to many different
types of organizations to carry out
eligible uses of funds and serve
beneficiaries on behalf of a recipient.
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4345 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
22 AMI is also often referred to as median family
income for the area. Since AMI is synonymous with
this term and used more generally, the final rule
refers to AMI.
23 For the six New England states of Connecticut,
Maine, Massachusetts, New Hampshire, Rhode
Island, and Vermont, HUD provides AMI for towns
rather than counties. Recipients in these states
should use the AMI corresponding to their town
when determining thresholds for both low and
moderate income.
When a recipient provides funds to
another entity to carry out eligible uses
of funds and serve beneficiaries the
entity becomes a subrecipient (see
section Distinguishing a Subrecipient
versus a Beneficiary). For example, a
recipient may grant funds to a nonprofit
organization to provide food assistance
(an eligible use) to low-income
households (the beneficiaries).
Recipients only need to assess whether
the beneficiaries experienced a negative
economic impact and whether the
eligible use responds to that impact,
consistent with the two-part framework
described above; the organization
carrying out the eligible use does not
need to have experienced a negative
economic impact if it is serving as the
vehicle for reaching the beneficiaries.
When making determinations about
how to implement a program, recipients
should consider whether that method of
program implementation is an effective
and efficient method to implement the
program and do so in accordance with
the Uniform Guidance provisions that
govern procurements and sub-granting
of federal funds, as applicable.
As noted above, recipients should
analyze eligible uses based on the
beneficiary of the assistance or the
entity that experienced a negative
economic impact. Assistance to a small
business or to an impacted industry
must respond to a negative economic
impact experienced by that small
business or industry. Recipients may
not provide assistance to small
businesses or impacted industries that
did not experience a negative economic
impact, although recipients can identify
negative economic impacts for classes,
rather than individual businesses, and
may also presume that small businesses
in certain areas experienced impacts;
see section General Provisions:
Structure and Standards and section
Assistance to Small Businesses for
details.
Several examples illustrate the
application of these concepts. For
example, a recipient could provide
assistance to households via a contract
with a business to create subsidized jobs
for the long-term unemployed; in this
case the business is a subrecipient and
need not have experienced a negative
economic impact, but the recipient
would need to identify a specific
connection between the assistance
provided and addressing the negative
economic impact experienced by the
unemployed households. The recipient
could, for instance, document the
subsidized jobs created under the
contract and their reservation for long-
term unemployed individuals.
Similarly, a recipient might provide
assistance to a small business that
experienced a pandemic-related loss of
revenue. This small business is a
beneficiary and may use those funds in
many ways, potentially including hiring
or retaining staff. However, general
assistance to a business that did not
experience a negative economic impact
under the theory that this assistance
generally grows the economy and
therefore enhances opportunities for
unemployed workers would not be an
eligible use, because such assistance is
not reasonably designed to impact the
individuals or classes that experienced
a negative economic impact. In other
words, there is not a reasonable
connection between the assistance
provided and an impact on the
beneficiaries. Such an activity would be
attenuated from and thus not reasonably
designed to benefit the households that
experienced the negative economic
impact.
b. Populations Presumed Eligible
Presumed Eligibility: Impacted and
Disproportionately Impacted
Households and Communities
Background: As noted above, the
interim final rule allowed recipients to
presume that certain households were
impacted or disproportionately
impacted by the pandemic and thus
eligible for responsive programs or
services. Specifically, under the interim
final rule, recipients could presume that
a household or population that
experienced unemployment,
experienced increased food or housing
insecurity, or is low- or moderate-
income experienced negative economic
impacts resulting from the pandemic,
and recipients may provide services that
respond to these impacts.
The interim final rule also recognized
that pre-existing health, economic, and
social disparities contributed to
disproportionate pandemic impacts in
certain communities and allowed for a
broader list of enumerated eligible uses
to respond to the pandemic in
disproportionately impacted
communities. Under the interim final
rule, recipients were allowed to
presume that families residing in QCTs
or receiving services provided by Tribal
governments were disproportionately
impacted by the pandemic.
Definition of Low- and Moderate-
Income
Public Comment: As noted earlier,
many commenters sought a definition
for ‘‘low- and moderate-income’’ to
provide recipients greater clarity on
which specific households could be
presumed to be impacted by the
pandemic.
Treasury Response: The final rule
maintains the presumptions identified
in the interim final rule and defines
low- and moderate-income for the
purposes of determining which
households and populations recipients
may presume to have been impacted. To
simplify the administration of this
presumption, the final rule adopts a
definition of low- and moderate-income
based on thresholds established and
used in other federal programs.
Definitions. The final rule defines a
household as low income if it has (i)
income at or below 185 percent of the
Federal Poverty Guidelines (FPG) for the
size of its household based on the most
recently published poverty guidelines
by the Department of Health and Human
Services (HHS) or (ii) income at or
below 40 percent of the Area Median
Income (AMI) for its county and size of
household based on the most recently
published data by the Department of
Housing and Urban Development
(HUD).22
The final rule defines a household as
moderate income if it has (i) income at
or below 300 percent of the FPG for the
size of its household based on the most
recently published poverty guidelines
by HHS or (ii) income at or below 65
percent of the AMI for its county and
size of household based on the most
recently published data by HUD.23
Recipients may determine whether to
measure income levels for specific
households or for a geographic area
based on the type of service to be
provided. For example, recipients
developing a program that serves
specific households (e.g., a subsidy for
internet access, a childcare program)
may measure income at the household
level. Recipients providing a service
that reaches a general geographic area
(e.g., a park) may measure median
income of that area.
Further, recipients should generally
use the income threshold for the size of
the household to be served (e.g., when
providing childcare to a household of
five, recipients should reference the
income threshold for a household of
five); however, recipients may use the
income threshold for a default
household size of three if providing
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24 U.S. Department of Health and Human Service,
HHS Poverty Guidelines for 2021, available at
https://aspe.hhs.gov/topics/poverty-economic-
mobility/poverty-guidelines.
25 U.S. Department of Housing and Urban
Development, FY 2021 Section 8 Income Limits,
available at https://www.huduser.gov/portal/
datasets/il/il21/Section8-FY21.xlsx. Recipients may
refer to the list of counties (and New England
towns) identified by state and metropolitan area for
identifying the appropriate area. U.S. Department of
Housing and Urban Development, FY 2021 List of
Counties (and New England Towns) Identified by
State and Metropolitan Area, available at https://
www.huduser.gov/portal/datasets/il/il21/area-
definitions-FY21.pdf.
26 The U.S. Census Bureau provides an interactive
map: U.S. Census Bureau, Median Household
Income State Selection Map, available at https://
data.census.gov/cedsci/map?q=Median
%20Household%20Income&g=0100000US
%2404000%24001&tid=ACSST5Y2019.S1901&cid=
S1901_C01_012E&vintage=2019. The U.S. Census
Bureau also provides an interactive table: U.S.
Census Bureau, Median Household Income In The
Past 12 Months (In 2019 Inflation-Adjusted Dollars),
available at https://data.census.gov/cedsci/table?q=
b19013&tid=ACSDT5Y2019.B19013&hidePreview=
true.
27 See U.S. Bureau of Labor Statistics,
Occupational Employment and Wage Estimates,
https://www.bls.gov/oes/current/oes_nat.htm (last
visited December 7, 2021).
28 U.S. Census Bureau, Poverty Status by State,
https://www.census.gov/data/tables/time-series/
demo/income-poverty/cps-pov/pov-46.html (last
visited December 7, 2021).
services that reach a general geographic
area or if doing so would simplify
administration of the program to be
provided (e.g., when developing a park,
recipients should use the income
threshold for a household size of three
and compare it to median income of the
geographic area to be served).
Note that recipients can also identify
and serve other classes of households
that experienced negative economic
impacts or disproportionate impacts
from the pandemic; recipients can
identify these classes based on their
income levels, including above the
levels defined as low- and moderate-
income in the final rule. For example,
a recipient may identify that households
in their community with incomes above
the final rule threshold for low-income
nevertheless experienced
disproportionate impacts from the
pandemic and provide responsive
services. See section General Provisions:
Standards for Identifying Other Eligible
Populations for details on applicable
standards.
Applicable levels. For reference, the
FPG is commonly referred to as the
federal poverty level (FPL) and is
related to—although distinct from—the
U.S. Census Bureau’s poverty threshold.
The final rule uses the FPG when
referring specifically to the HHS
guidelines, as these are the quantitative
metrics used for determining low- and
moderate-income households.
The FPG by household size for 2021
is included in the table below.
Recipients should refer to HHS Poverty
Guidelines for this information, which
is updated annually and available on
the HHS website.24 For calculating the
thresholds of 40 percent and 65 percent
of AMI, recipients should refer to the
annual HUD Section 8 50 percent
income limits by county and household
size published by HUD and available on
the HUD website; in particular,
recipients should calculate the 40
percent threshold as 0.8 times the 50
percent income limit, and recipients
should calculate the 65 percent
threshold as 1.3 times the 50 percent
income limit.25 Finally, for median
income of Census Tracts and other
geographic areas, recipients should refer
to the most recent American
Community Survey 5-year estimates
available through the Census website.26
2021 FEDERAL POVERTY GUIDELINES
Household size
48 contiguous
states and the
District of
Columbia
Alaska Hawaii
1 ................................................................................................................................................... $12,880 $16,090 $14,820
2 ................................................................................................................................................... 17,420 21,770 20,040
3 ................................................................................................................................................... 21,960 27,450 25,260
4 ................................................................................................................................................... 26,500 33,130 30,480
5 ................................................................................................................................................... 31,040 38,810 35,700
6 ................................................................................................................................................... 35,580 44,490 40.920
7 ................................................................................................................................................... 40,120 50,170 46,140
8 ................................................................................................................................................... 44,660 55,850 51,360
For families/households with more than 8 persons, add the following amounts for each additional person:
48 Contiguous States and the District of Columbia: $4,540.
Alaska: $5,680.
Hawaii: $5,220.
Source: ‘‘HHS Poverty Guidelines for 2021,’’ available at https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines.
Rationale. In defining low income, the
final rule uses both the FPG and AMI to
account for national trends and regional
differences. The metric of 185 percent of
FPG aligns with some other programs;
for instance, under the National School
Lunch Program, students with
household incomes under 185 percent
of FPG qualify for free or reduced-price
lunch, and schools often use eligibility
for free or reduced-price lunch as an
indicator of low-income status under
Title 1–A of the Elementary and
Secondary Education Act. Eligibility for
other programs, such as the Federal
Communications Commission’s e-Rate
program and the Special Supplemental
Nutrition Program for Women, Infants
and Children employ this metric as
well. In addition, 185 percent of the
FPG for a family of four is $49,025,
which is approximately the wage
earnings for a two-earner household in
which both earners receive the median
wage in occupations, such as waiters
and waitresses and hotel clerks, that
were heavily impacted by COVID–19.27
This measure is targeted toward those at
the bottom of the income distribution
and thus helps to promote use of SLFRF
funds towards populations with the
greatest needs. At the same time, with
approximately one-quarter of Americans
below 185 percent of the poverty
threshold, this approach is broad
enough to facilitate use of SLFRF funds
across many jurisdictions.28 Because
regions have different cost and income
levels, this definition also allows for
upward adjustment based on AMI for
those regions where 40 percent of AMI
exceeds 185 percent of FPG. The metric
of 40 percent of AMI is based on the
midpoint of values often used to
designate certain categories of low-
income households; specifically, it is
the midpoint of the 30 percent income
limit and the 50 percent income limit
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29 For instance, Melissa Kearney et al. (2013) cap
the ‘‘struggling lower middle-income class’’ at 250
percent of the federal poverty level, while Isabel
Sawhill and Edward Rodrigue (2015) define the
‘‘middle class’’ as those with incomes of at least 300
percent of the poverty line. Melissa Kearney et al.,
‘‘A Dozen Facts about America’s Struggling Lower-
Middle Class,’’ The Hamilton Project (December
2013), https://www.hamiltonproject.org/assets/
legacy/files/downloads_and_links/THP_12Low
IncomeFacts_Final.pdf; Isabel Sawhill and Edward
Rodrigue, ‘‘An Agenda for Reducing Poverty and
Improving Opportunity,’’ Brookings Institution,
https://www.brookings.edu/wp-content/uploads/
2016/07/Sawhill_FINAL.pdf.
30 Data on median annual wages from: U.S.
Bureau of Labor and Statistics, Occupational
Employment and Wage Statistics, available at
https://www.bls.gov/oes/current/oes_nat.htm (last
visited December 7, 2021).
31 For instance, households earning between 200
and 300 percent of the FPG have significantly
higher rates of food and housing insecurity than
those earning above 300 percent of the FPG. Table
1, Kyle J. Caswell and Stephen Zuckerman, Food
Insecurity, Housing Hardship, and Medical Care
Utilization, Urban Institute (June 2018), https://
www.urban.org/sites/default/files/publication/
98701/2001896_foodinsecurity_housinghardship_
medicalcareutilization_finalized.pdf.
used in programs such as the
Community Development Block Grant
(CDBG) Program.
In defining moderate income, the final
rule uses both the FPG and AMI to
account for national trends and regional
differences. While there are different
definitions of moderate income, 300
percent of FPG falls within the range
commonly used by researchers.29
Analysis of median wages among a
sample of occupations likely impacted
by the pandemic also suggests that an
income cutoff of 300 percent of FPG
would include many households with
workers in such occupations.30
Moreover, the metric of 300 percent of
FPG covers households that, while
above the poverty line, often lack
economic security.31 Treasury
determined the AMI threshold for
moderate income by maintaining the
same ratio of FPG multiplier to AMI
multiplier as in the definition of low
income. This anchors the threshold to
the existing definitions of moderate
income from the literature while taking
into account geographical variation in
income and expenses in the same
manner as the definition of low income.
Eligibility Presumptions
Public Comment: Many commenters
believed that a broader range of groups
should be considered presumptively
impacted and disproportionately
impacted, arguing that many
households had been affected by the
pandemic and that broader presumed
eligibility would help recipients provide
assistance quickly and effectively.
Treasury also received many
comments on the presumption that
families living in QCTs or receiving
services from Tribal governments were
disproportionately impacted by the
pandemic. While many commenters
supported the interim final rule’s
recognition of disproportionate impacts
of the pandemic on low-income
communities, many commenters
disagreed with treating QCTs as the only
presumed eligible group of
disproportionately impacted
households, apart from households
served by Tribal governments. While
acknowledging a potential increase in
administrative burden, commenters
recommended that Treasury presume
other households or geographic areas, in
addition to QCTs, were
disproportionately impacted;
suggestions included all low- and
moderate-income households,
geographic areas designated as
Opportunity Zones, Difficult
Development Areas (DDAs), areas with
a certain amount of Real Estate
Advantage Program (REAP) recipients,
or use of eligibility criteria from the
Community Reinvestment Act. One
commenter generally recommended that
a clearer definition of
‘‘disproportionately impacted’’ should
be provided and that any definition
should include communities of color
and people of limited means. Another
recommended specific eligibility for
people that had recently interacted with
the criminal justice system. Many
commenters representing Tribal
governments and groups recommended
a presumption of eligibility for all Tribal
uses of funds, clarification that off
reservation members remained eligible,
and broad flexibility on use of funds.
Additionally, commenters noted that
some areas are technically eligible to be
QCTs but fall short because of the
aggregate population of eligible tracts.
One commenter noted that these areas
should be considered the same as QCTs
for the purpose of SLFRF funds. Some
commenters argued that rural counties
typically have few QCTs despite high
levels of poverty and disruption caused
by the COVID–19 pandemic. Other rural
commenters recommended that the
designation be by county rather than at
a more granular level, arguing that the
QCT designation is biased towards
urban areas and understates the harm
done to rural America. Many
commenters representing Tribal
governments supported the
presumption that services provided by
Tribal governments respond to
disproportionate impacts.
Treasury Response
Summary: While households residing
in QCTs or served by Tribal
governments were presumed to be
disproportionately impacted, Treasury
emphasizes that under the interim final
rule recipients could also identify other
households, populations, or geographic
areas that were disproportionately
impacted by the pandemic and provide
services to respond.
The final rule maintains the
presumptions identified in the interim
final rule, as well as recipients’ ability
to identify other impacted or
disproportionately impacted classes.
The final rule also allows recipients to
presume that low-income households
were disproportionately impacted, and
as discussed above, defines low- and
moderate-income. Finally, under the
final rule recipients may also presume
that households residing in the U.S.
territories or receiving services from
territorial governments were
disproportionately impacted.
Households presumed to be impacted:
Impacted households are those that
experienced a public health or negative
economic impact from the pandemic.
With regard to public health impacts,
recipients may presume that the general
public experienced public health
impacts from the pandemic for the
purposes of providing services for
COVID–19 mitigation and behavioral
health. In other words, recipients may
provide a wide range of enumerated
eligible uses in these categories to the
general public without further analysis.
As discussed in the introduction,
COVID–19 as a disease has directly
affected the health of tens of millions of
Americans, and efforts to prevent and
mitigate the spread of the disease are
needed and in use across the country.
Further, the stress of the pandemic and
resulting recession have affected nearly
all Americans. Accordingly, the final
rule presumes that the general public
are impacted by and eligible for services
to respond to COVID–19 mitigation and
prevention needs, as well as behavioral
health needs.
With regard to negative economic
impacts, as with the interim final rule,
under the final rule recipients may
presume that a household or population
that experienced unemployment,
experienced increased food or housing
insecurity, or is low- or moderate-
income experienced negative economic
impacts resulting from the pandemic.
The final rule’s definition of low- and
moderate-income, by providing
standard metrics based on widely
available data, is intended to simplify
administration for recipients.
Households presumed to be
disproportionately impacted:
Disproportionately impacted
households are those that experienced a
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32 For instance, the American Community Survey
does not include all territories. U.S. Census Bureau,
Areas Published, https://www.census.gov/
programs-surveys/acs/geography-acs/areas-
published.html (last visited November 9, 2021).
33 U.S. Department of Health and Human
Services, supra note 24.
34 For instance, data from the American
Community Survey is based on geographical
location rather than Tribal membership. U.S.
Census Bureau, My Tribal Area, https://
www.census.gov/Tribal/Tribal_glossary.php.
35 Lina Stoylar et. al., Challenges in the U.S.
Territories: COVID–19 and the Medicaid Financing
Cliff, Kaiser Family Foundation (May 18, 2021),
https://www.kff.org/coronavirus-covid-19/issue-
brief/challenges-in-the-u-s-territories-covid-19-and-
the-medicaid-financing-cliff/.
disproportionate, or meaningfully more
severe, impact from the pandemic. As
discussed in the interim final rule, pre-
existing disparities in health and
economic outcomes magnified the
impact of the COVID–19 public health
emergency on certain households and
communities. As with the interim final
rule, under the final rule recipients may
presume that households residing in
QCTs or receiving services provided by
Tribal governments were
disproportionately impacted by the
pandemic. In addition, under the final
rule recipients may presume that low-
income households were
disproportionately impacted by the
pandemic. Finally, under the final rule
recipients may also presume that
households residing in the U.S.
territories or receiving services from
territorial governments were
disproportionately impacted.
Treasury notes that households
presumed to be disproportionately
impacted would also be presumptively
impacted, as these households have not
only experienced pandemic impacts but
have experienced disproportionate
pandemic impacts; as a result, these
households are presumptively eligible
for responsive services for both
impacted and disproportionately
impacted households.
Many different geographic, income-
based, or poverty-based presumptions
could be used to designate
disproportionately impacted
populations. The combination of
permitting recipients to use QCTs, low-
income households, and services
provided by Tribal or territorial
governments as presumptions balances
these varying methods. Specifically,
QCTs are a commonly used designation
of geographic areas based on low
incomes or high poverty rates of
households in the community; for
recipients providing geographically
targeted services, QCTs may provide a
simple metric with readily available
maps for use. However, Treasury
recognizes that QCTs do not capture all
underserved populations, including for
reasons noted by commenters. By
allowing recipients to also presume that
low-income households were
disproportionately impacted, the final
rule provides greater flexibility to serve
underserved households or
communities. Data on household
incomes is also readily available at
varying levels of geographic granularity
(e.g., Census Tracts, counties), again
permitting flexibility to adapt to local
circumstances and needs. Finally,
Treasury notes that, as discussed further
below, recipients may also identify
other households, populations, and
communities disproportionately
impacted by the pandemic, in addition
to those presumed to be
disproportionately impacted.
Additionally, Tribal and territorial
governments may face both
disproportionate impacts of the
pandemic and administrability
challenges with operationalizing the
income-based standard; therefore,
Treasury has presumed that services
provided by these governments respond
to disproportionate pandemic impacts.
Given a lack of regularly published data
on household incomes in most
territories,32 as well as a lack of poverty
guidelines developed for these
jurisdictions,33 it may be highly
challenging to assess disproportionate
impact in these communities according
to an income- or poverty-based
standard. Similarly, data on incomes in
Tribal communities are not readily
available.34 Finally, as described in the
sections on Public Health and Negative
Economic Impacts, Tribal communities
have faced particularly severe health
and economic impacts of the pandemic.
Similarly, available research suggests
that preexisting health and economic
disparities in the territories amplified
the impact of the pandemic on these
communities.35
Categorical Eligibility
Public Comment: Several commenters
suggested that the final rule permit
recipients to rely on a beneficiary’s
eligibility for other federal benefits
programs as an easily administrable
proxy for identifying a group or
population that experienced a negative
economic impact as a result of the
COVID–19 public health emergency
(i.e., categorical eligibility). In other
words, a recipient would determine that
individuals or households are eligible
for an SLFRF-funded program based on
the individual or household’s eligibility
in another program, typically another
federal benefit program. Commenters
noted that categorical eligibility is a
common policy in program
administration that can significantly
ease administrative burden on both
program administrators and
beneficiaries.
Treasury Response: Treasury agrees
that allowing recipients to identify
impacted and disproportionately
impacted beneficiaries based on their
eligibility for other programs with
similar income tests would ease
administrative burden. To the extent
that the other program’s eligibility
criteria align with a population or class
that experienced a negative economic
impact of the pandemic, this approach
is also consistent with the process
allowed under the final rule for
recipients to determine that a class has
experienced a negative economic
impact, and then document that an
individual receiving services is a
member of the class. For these reasons,
the final rule recognizes categorical
eligibility for the following programs
and populations:
•Impacted households. Treasury will
recognize a household as impacted if it
otherwise qualifies for any of the
following programs:
Æ Children’s Health Insurance
Program (CHIP)
Æ Childcare Subsidies through the
Child Care and Development Fund
(CCDF) Program
Æ Medicaid
Æ National Housing Trust Fund
(HTF), for affordable housing programs
only
Æ Home Investment Partnerships
Program (HOME), for affordable housing
programs only
•Disproportionately impacted
households. Treasury will recognize a
household as disproportionately
impacted if it otherwise qualifies for any
of the following programs:
Æ Temporary Assistance for Needy
Families (TANF)
Æ Supplemental Nutrition Assistance
Program (SNAP)
Æ Free and Reduced-Price Lunch
(NSLP) and/or School Breakfast (SBP)
programs
Æ Medicare Part D Low-income
Subsidies
Æ Supplemental Security Income
(SSI)
Æ Head Start and/or Early Head Start
Æ Special Supplemental Nutrition
Program for Women, Infants, and
Children (WIC)
Æ Section 8 Vouchers
Æ Low-Income Home Energy
Assistance Program (LIHEAP)
Æ Pell Grants
Æ For services to address educational
disparities, Treasury will recognize Title
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4349 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
36 Title I eligible schools means schools eligible to
receive services under section 1113 of Title I, Part
A of the Elementary and Secondary Education Act
of 1965, as amended (20 U.S.C. 6313), including
schools served under section 1113(b)(1)(C) of that
Act.
I eligible schools 36 as
disproportionately impacted and
responsive services that support the
school generally or support the whole
school as eligible
c. Standards for Identifying Other
Eligible Populations
Standards: Designating Other Impacted
Classes
Public Comment: Treasury received
multiple comments requesting
additional clarification about how
classes of impacted individuals may be
designated, as well as questions asking
whether recipients must demonstrate a
specific public health or negative
economic impact to each entity served
(e.g., each household receiving
assistance under a program). There were
several comments requesting that
specific geographic designations, like a
county or Impact Zone, be eligible to
use as a determining boundary.
Treasury Response: The interim final
rule allowed, and the final rule
maintains, the ability for recipients to
demonstrate a public health or negative
economic impact on a class and to
provide assistance to beneficiaries that
fall within that class. Consistent with
the scope of beneficiaries included in
sections 602(c)(1)(A) and 603(c)(1)(A) of
the Social Security Act, Treasury is
clarifying that a recipient may identify
such impacts for a class of households,
small businesses, or nonprofits. In such
cases, the recipient need only
demonstrate that the household, small
business, or nonprofit is within the
relevant class. For example, a recipient
could determine that restaurants in the
downtown area had generally
experienced a negative economic impact
and provide assistance to those small
businesses to respond. When providing
this assistance, the recipient would only
need to demonstrate that the small
businesses receiving assistance were
restaurants in the downtown area. The
recipient would not need to
demonstrate that each restaurant served
experienced its own negative economic
impact.
In identifying an impacted class and
responsive program, service, or capital
expenditure, recipients should consider
the relationship between the definition
of the class and proposed response.
Larger and less-specific classes are less
likely to have experienced similar
harms and thus the responses are less
likely to be responsive to the harms
identified. That is, as the group of
entities being served by a program has
a wider set of fact patterns, or the type
of entities, their circumstances, or their
pandemic experiences differ more
substantially, it may be more difficult to
determine that the class has actually
experienced the same or similar
negative economic impact and that the
response is appropriately tailored to
address that impact.
Standard: Designating Other
Disproportionately Impacted Classes
Summary of Interim Final Rule: As
noted above, the interim final rule
provided a broad set of enumerated
eligible uses of funds in
disproportionately impacted
communities, including to address pre-
existing disparities that contributed to
more severe pandemic impacts in these
communities. The interim final rule
presumed that these services are eligible
uses when provided in a QCT, to
families and individuals living in QCTs,
or when these services are provided by
Tribal governments. Recipients may also
provide these services to ‘‘other
populations, households, or geographic
areas disproportionately impacted by
the pandemic’’ and, in identifying these
disproportionately impacted
communities, should be able to support
their determination that the pandemic
resulted in disproportionate public
health or economic outcomes to the
group identified.
Public Comment: A significant
number of commenters expressed
uncertainty regarding the process for
determining eligibility for
disproportionately impacted
communities beyond QCTs. A
commenter noted that a clearer
definition of ‘‘disproportionately
impacted’’ should be delineated and
that any definition should include
communities of color and people of
limited means. Some commenters
suggested a template or checklist to see
if an area meets the standard for
disproportionately impacted
communities outside of QCTs. Some
commenters stated that QCT and non-
QCT beneficiaries should be treated the
same.
Treasury Response: Under the interim
final rule, presuming eligibility for
services in QCTs, for populations living
in QCTs, and for Tribal governments
was intended to ease administrative
burden, providing a simple path for
recipients to offer services in
underserved communities, and is not an
exhaustive list of disproportionately
impacted communities. To further
clarify, the final rule codifies the
interpretive framework discussed above,
including presumptions of groups
disproportionately impacted, as well as
the ability to identify other
disproportionately impacted
populations, households, or geographies
(referred to here as disproportionately
impacted classes).
As discussed in the interim final rule,
in identifying other disproportionately
impacted classes, recipients should be
able to support their determination that
the pandemic resulted in
disproportionate public health or
economic outcomes to the specific
populations, households, or geographic
areas to be served. For example, the
interim final rule considered data
regarding the rate of COVID–19
infections and deaths in low-income
and socially vulnerable communities,
noting that these communities have
experienced the most severe health
impacts, compared to national averages.
Similarly, the interim final rule
considered the high concentration of
low-income workers performing
essential work, the reduced ability to
socially distance, and other pre-existing
public health challenges, all of which
correlate with more severe COVID–19
outcomes. The interim final rule also
considered the disproportionate
economic impacts of the pandemic,
citing, for example, the rate of job losses
among low-income persons as compared
to the general population. The interim
final rule then identified QCTs, a
common, readily accessible, and
geographically granular method of
identifying communities with a large
proportion of low-income residents, as
presumed to be disproportionately
impacted by the pandemic.
In other words, the interim final rule
identified disproportionately impacted
populations by assessing the impacts of
the pandemic and finding that some
populations experienced meaningfully
more severe impacts than the general
public. Similarly, to identify
disproportionately impacted classes,
recipients should compare the impacts
experienced by that class to the typical
or average impacts of the pandemic in
their local area, state, or nationally.
Recipients may identify classes of
households, communities, small
businesses, nonprofits, or populations
that have experienced a
disproportionate impact based on
academic research or government
research publications, through analysis
of their own data, or through analysis of
other existing data sources. To augment
their analysis, or when quantitative data
is not readily available, recipients may
also consider qualitative research and
sources like resident interviews or
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37 Press Release, Centers for Disease Control and
Prevention, First Travel-related Case of 2019 Novel
Coronavirus Detected in United States (Jan. 21,
2020), https://www.cdc.gov/media/releases/2020/
p0121-novel-coronavirus-travel-case.html.
38 Centers for Disease Control and Prevention,
COVID Data Tracker: Trends in Number of COVID–
19 Cases and Deaths in the US Reported to CDC,
by State/Territory, https://covid.cdc.gov/covid-data-
tracker/#trends_dailytrendscases (last visited
December 7, 2021).
39 Id.
40 Centers for Disease Control and Prevention,
COVID Data Tracker, http://www.covid.cdc.gov/
covid-data-tracker/#datatracker-home (last visited
December 31, 2021).
41 Centers for Disease Control and Prevention,
COVID Data Tracker: COVID–19 Vaccinations in the
United States, https://covid.cdc.gov/covid-data-
tracker/#vaccinations (last visited December 7,
2021).
42 Id.
43 Columbus, Ohio Recovery Plan, https://
www.columbus.gov/recovery/.
44 Luzerne County, Pennsylvania Recovery Plan,
https://www.luzernecounty.org/DocumentCenter/
View/26304/Final-Interim-Recovery-Plan-
Performance-Report-83121.
45 This includes implementing mitigation
strategies consistent with the Centers for Disease
Control and Prevention’s (CDC) Guidance for
COVID–19 Prevention in K–12 Schools (November
5, 2021), available at https://www.cdc.gov/
coronavirus/2019-ncov/community/schools-
childcare/k-12-guidance.html.
feedback from relevant state and local
agencies, such as public health
departments or social services
departments. In both cases, recipients
should consider the quality of the
research, data, and applicability of
analysis to their determination.
In designing a program or service that
responds to a disproportionately
impacted class, a recipient must first
identify the impact and then identify an
appropriate response. To assess
disproportionate impact, recipients
should rely on data or research that
measures the public health or negative
economic impact. An assessment of the
effects of a response (e.g., survey data on
levels of resident support for various
potential responses) is not a substitute
for an assessment of the impact
experienced by a particular class. Data
about the appropriateness or desirability
of a response may be used to assess the
reasonableness of a response, once an
impact or disproportionate impact has
been identified but should not be the
basis for assessing impact.
2. Public Health
Background
On January 21, 2020, the Centers for
Disease Control and Prevention (CDC)
identified the first case of novel
coronavirus in the United States.37
Since that time, and through present
day, the United States has faced
numerous waves of the virus that have
brought acute strain on health care and
public health systems. At various points
in the pandemic, hospitals and
emergency medical services have seen
significant influxes of patients; response
personnel have faced shortages of
personal protective equipment; testing
for the virus has been scarce; and
congregate living facilities like nursing
homes have seen rapid spread.
Since the initial wave of the COVID–
19 pandemic, the United States has
faced several additional major waves
that continued to impact communities
and stretch public health services. The
summer 2020 wave impacted
communities in the south and
southwest. As the weather turned colder
and people spent more time indoors, a
wave throughout fall and winter 2020
impacted communities in almost every
region of the country as the virus
reached a point of uncontrolled spread
and over 3,000 people died per day due
to COVID–19.38
In December 2020, the Food and Drug
Administration (FDA) authorized
COVID–19 vaccines for emergency use,
and soon thereafter, mass vaccination in
the United States began. At the time of
the interim final rule publication in May
2021, the number of daily new
infections was steeply declining as
rapid vaccination campaigns progressed
across the country. By summer 2021,
COVID–19 cases had fallen to their
lowest level since early months of the
pandemic, when testing was scarce.
However, throughout late summer and
early fall, the Delta variant, a more
infectious and transmittable variant of
the SARS–CoV–2 virus, sparked yet
another surge. From June to early
September, the seven-day moving
average of reported cases rose from
12,000 to 165,000.39
As of December 2021, COVID–19 in
total has infected over 50 million and
killed over 800,000 Americans.40
Preventing and mitigating the spread of
COVID–19 continues to require a major
public health response from federal,
state, local, and Tribal governments.
First, state, local, and Tribal
governments across the country have
mobilized to support the national
vaccination campaign. As of December
2021, more than 80 percent of adults
have received at least one dose, with
more than 470 million total doses
administered.41 Additionally, more than
15 million children over the age of 12
have received at least one dose of the
vaccine and over 47 million people have
received a booster dose.42 Vaccines for
younger children, ages 5 through 11,
have been approved and are reaching
communities and families across the
country. As new variants continue to
emerge globally, the national effort to
administer vaccinations and other
COVID–19 mitigation strategies will be
a critical component of the public
health response.
In early reporting on uses of SLFRF
funds, recipients have indicated that
they plan to put funds to immediate use
to support continued vaccination
campaigns. For example, one recipient
has indicated that it plans to use SLFRF
funds to support a vaccine incentive
program, providing $100 gift cards to
residents at community vaccination
clinics. The program aimed to target
communities with high public health
needs.43 Another recipient reported that
it is partnering with multiple agencies,
organizations, and providers to
distribute COVID–19 vaccinations to
homebound residents in assisted living
facilities.44
State, local, and Tribal governments
have also continued to execute other
aspects of a wide-ranging public health
response, including increasing access to
COVID–19 testing and rapid at-home
tests, contact tracing, support for
individuals in isolation or quarantine,
enforcement of public health orders,
new public communication efforts,
public health surveillance (e.g.,
monitoring case trends and genomic
sequencing for variants), enhancement
to health care capacity through
alternative care facilities, and
enhancement of public health data
systems to meet new demands or scaling
needs.
State, local, and Tribal governments
have also supported major efforts to
prevent COVID–19 spread through
safety measures at key settings like
nursing homes, schools, congregate
living settings, dense worksites,
incarceration settings, and in other
public facilities. This has included, for
example, implementing infection
prevention measures or making
ventilation improvements.
In particular, state, local, and Tribal
governments have mounted significant
efforts to safely reopen schools. A key
factor in school reopening is the ability
to implement COVID–19 mitigation
strategies such as providing masks and
other hygiene resources, improving air-
quality and ventilation, increasing
outdoor learning and eating spaces,
testing and contact tracing protocols,
and a number of other measures.45 For
example, one recipient described plans
to use SLFRF funds to further invest in
school health resources that were
critical components of school reopening
and reducing the spread of COVID–19 in
schools. Those investments include the
increasing school nurses and social
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4351 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
46 Nirmita Panchal et al., The Implications of
COVID–19 for Mental Health and Substance Abuse
(Feb. 10, 2021), https://www.kff.org/coronavirus
covid-19/issue-brief/the-implications-of-covid-19-
for-mental-health-and-substance-use/#:∼:text=
Older%20adults%20are%20also%20 more,
prior%20to%20the%20current%20crisis; Mark E´.
Czeisler et al., Mental Health, Substance Abuse, and
Suicidal Ideation During COVID–19 Pandemic—
United States, June 24–30 2020, Morb. Mortal.
Wkly. Rep. 69(32):1049–57 (Aug. 14, 2020), https://
www.cdc.gov/mmwr/volumes/69/wr/
mm6932a1.htm.
47 Id.
48 Rebecca T. Leeb et al., Mental Health-Related
Emergency Department Visits Among Children
Aged <18 Years During the COVID Pandemic—
United States, January 1–October 17, 2020, Morb.
Mortal. Wkly. Rep. 69(45):1675–80 (Nov. 13, 2020),
https://www.cdc.gov/mmwr/volumes/69/wr/
mm6945a3.htm.
49 Centers for Disease Prevention and Control,
National Center for Health Statistics, Provisional
Drug Overdose Death Counts, https://www.cdc.gov/
nchs/nvss/vsrr/drug-overdose-data.htm (last visited
May 8 December 6, 2021).
50 Panchal, supra note 46; Mark E´. Czeisler et al.,
supra note 46.
51 The White House, FACT SHEET: More Details
on the Biden-Harris Administration’s Investments
in Community Violence Interventions (April 7,
2021), https://www.whitehouse.gov/briefing-room/
statements-releases/2021/04/07/fact-sheet-more-
details-on-the-biden-harris-administrations-
investments-in-community-violence-interventions/.
52 Federal Bureau of Investigation, FBI Releases
2020 Crime Statistics (September 27, 2021) https://
www.fbi.gov/news/pressrel/press-releases/fbi-
releases-2020-crime-statistics.
53 Id.
54 Id.
55 The Educational Fund to Stop Gun Violence,
Community Gun Violence, https://efsgv.org/learn/
type-of-gun-violence/community-gun-violence/ (last
visited November 9, 2021).
56 Giffords Law Center, Healing Communities in
Crisis: Lifesaving Solutions to the Urban Gun
Violence Epidemic (March 2016), https://giffords.
org/wp-content/uploads/2019/01/Healing-
Communities-in-Crisis.pdf.
57 St. Louis, MO Recovery Plan, https://
www.stlouis-mo.gov/government/recovery/covid-19/
arpa/plan/.
58 Los Angeles County, CA Recovery Plan, http://
file.lacounty.gov/SDSInter/bos/supdocs/
160391.pdf.
59 Office of the White House, National Strategy for
the COVID–19 Response and Pandemic
Preparedness (Jan. 21, 2021), https://
www.whitehouse.gov/wp-content/uploads/2021/01/
National-Strategy-for-the-COVID-19-Response-and-
Pandemic-Preparedness.pdf.
60 In a study of 13 states from October to
December 2020, the CDC found that Hispanic or
Latino and Native American or Alaska Native
individuals were 1.7 times more likely to visit an
emergency room for COVID–19 than White
individuals, and Black individuals were 1.4 times
more likely to do so than White individuals. See
Sebastian D. Romano et al., Trends in Racial and
Ethnic Disparities in COVID–19 Hospitalizations,
by Region—United States, March–December 2020,
MMWR Morb Mortal Wkly Rep 2021, 70:560–565
(Apr. 16, 2021), https://www.cdc.gov/mmwr/
volumes/70/wr/mm7015e2.htm?s_cid=mm7015e2_
w.
61 Centers for Disease Control and Prevention,
COVID Data Tracker: Trends in COVID–19 Cases
and Deaths in the United States, by County-level
Population Factors, https://covid.cdc.gov/covid-
data-tracker/#pop-factors_totaldeaths (last visited
December 7, 2021).
62 The CDC’s Social Vulnerability Index includes
fifteen variables measuring social vulnerability,
including unemployment, poverty, education
levels, single-parent households, disability status,
non-English speaking households, crowded
housing, and transportation access.
Centers for Disease Control and Prevention,
COVID Data Tracker: Trends in COVID–19 Cases
and Deaths in the United States, by Social
Continued
workers, improved ventilation systems,
and other health and safety measures.
The need for public health measures
to respond to COVID–19 will continue
moving forward. This includes the
continuation of vaccination campaigns
for the general public, booster doses,
and children. This also includes
monitoring the spread of COVID–19
variants, understanding the impact of
these variants, developing approaches to
respond, and monitoring global COVID–
19 trends. Finally, the long-term health
impacts of COVID–19 will continue to
require a public health response,
including medical services for
individuals with ‘‘long COVID,’’ and
research to understand how COVID–19
impacts future health needs and raises
risks for the tens of millions of
Americans who have been infected.
The COVID–19 pandemic also
negatively impacted other areas of
public health, particularly mental health
and substance use. In January 2021, over
40 percent of American adults reported
symptoms of depression or anxiety, up
from 11 percent in the first half of
2019.46 The mental health impacts of
the pandemic have been particularly
acute for adults ages 18 to 24, racial and
ethnic minorities, caregivers for adults,
and essential workers, with all reporting
significantly higher rates of considering
suicide.47 The proportion of children’s
emergency department visits related to
mental health has also risen
noticeably.48 Similarly, rates of
substance use and overdose deaths have
spiked: Preliminary data from the CDC
show a nearly 30 percent increase in
drug overdose mortality from April 2020
to April 2021, bringing the estimated
overdose death toll for a 12-month
period over 100,000 for the first time
ever.49 The CDC also found that 13
percent of adults started or increased
substance use to cope with stress related
to COVID–19 and 26 percent reported
having symptoms of trauma- and
stressor-related disorder (TRSD) related
to the pandemic.50
Another public health challenge
exacerbated by the pandemic was
violent crime and gun violence, which
increased during the pandemic and has
disproportionately impacted low-
income communities.51 According to
the Federal Bureau of Investigation
(FBI), although the property crime rate
fell 8 percent in 2020, the violent crime
rate increased 6 percent in 2020
compared to 2019 data.52 In particular,
the estimated number of aggravated
assault offenses rose 12 percent, while
murder and manslaughter increased 30
percent from 2019 to 2020.53 The
proportion of homicides committed
with firearms rose from 73 percent in
2019 to 76 percent in 2020.54 Exposure
to violence can create serious short-term
and long-term harmful effects to health
and development, and repeated
exposure to violence may be connected
to negative health outcomes.55
Addressing community violence as a
public health issue may help prevent
and even reduce additional harm to
individuals, households, and
communities.56
Many communities are using SLFRF
funds to invest in holistic approaches in
violence prevention that are rooted in
targeted outreach and addressing root
causes. For example, the City of St.
Louis is planning to invest in expanding
a ‘‘community responder’’ model
designed to provide clinical help and to
divert non-violent calls away from the
police department. Additionally, the
city will expand access to mental health
services, allowing residents to seek
support at city recreation centers,
libraries, and other public spaces.57
Similarly, Los Angeles County will
further invest in its ‘‘Care First, Jails
Last’’ program which seeks to replace
‘‘arrest and incarceration’’ responses
with health interventions.58
While the pandemic affected
communities across the country, it
disproportionately impacted some
demographic groups and exacerbated
health inequities along racial, ethnic,
and socioeconomic lines.59 The CDC
has found that racial and ethnic
minorities are at increased risk for
infection, hospitalization, and death
from COVID–19, with Hispanic or
Latino and Native American or Alaska
Native patients at highest risk.60
Similarly, low-income and socially
vulnerable communities have seen the
most severe health impacts. For
example, counties with high poverty
rates also have the highest rates of
infections and deaths, with 308 deaths
per 100,000 compared to the U.S.
average of 238 deaths per 100,000, as of
December 2021.61 Counties with high
social vulnerability, as measured by
factors such as poverty and educational
attainment, have also fared more poorly
than the national average, with 325
deaths per 100,000 as of December
2021.62 Over the course of the
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Vulnerability Index, https://covid.cdc.gov/covid-
data-tracker/#pop-factors_totaldeaths (last visited
December 7, 2021).
63 Centers for Disease Control and Prevention,
Risk for COVID–19 Infection, Hospitalization, and
Death By Race/Ethnicity, https://www.cdc.gov/
coronavirus/2019-ncov/covid-data/investigations-
discovery/hospitalization-death-by-race-
ethnicity.html (last visited December 7, 2021).
64 See, e.g., Centers for Disease Control and
Prevention, Risk of Severe Illness or Death from
COVID–19 (Dec. 10, 2020), https://www.cdc.gov/
coronavirus/2019-ncov/community/health-equity/
racial-ethnic-disparities/disparities-illness.html
(last visited December 7, 2021).
65 Milena Almagro et al., Racial Disparities in
Frontline Workers and Housing Crowding During
COVID–19: Evidence from Geolocation Data (Sept.
22, 2020), NYU Stern School of Business
(forthcoming), available at https://papers.ssrn.com/
sol3/papers.cfm?abstract_id=3695249; Grace
McCormack et al., Economic Vulnerability of
Households with Essential Workers, JAMA
324(4):388–90 (2020), available at https://jamanet
work.com/journals/jama/fullarticle/2767630.
66 See, e.g., Joseph G. Courtney et al., Decreases
in Young Children Who Received Blood Lead Level
Testing During COVID–19—34 Jurisdictions,
January–May 2020, Morb. Mort. Wkly. Rep.
70(5):155–61 (Feb. 5, 2021), https://www.cdc.gov/
mmwr/volumes/70/wr/mm7005a2.htm; Emily A.
Benfer & Lindsay F. Wiley, Health Justice Strategies
to Combat COVID–19: Protecting Vulnerable
Communities During a Pandemic, Health Affairs
Blog (Mar. 19, 2020), https://www.healthaffairs.org/
do/10.1377/hblog20200319.757883/full/.
67 See, e.g., Centers for Disease Control and
Prevention, supra note 62; Benfer & Wiley, supra
note 66; Nathaniel M. Lewis et al., Disparities in
COVID–19 Incidence, Hospitalizations, and Testing,
by Area-Level Deprivation—Utah, March 3–July 9,
2020, Morb. Mortal. Wkly. Rep. 69(38):1369–73
(Sept. 25, 2020), https://www.cdc.gov/mmwr/
volumes/69/wr/mm6938a4.htm.
68 Generally, funding uses eligible under CRF as
a response to the direct public health impacts of
COVID–19 will continue to be eligible under the
ARPA, including those not explicitly listed in the
final rule, with the following two exceptions: (1)
The standard for eligibility of public health and
safety payrolls has been updated (see section Public
Sector Capacity and Workforce in General
Provisions: Other) and (2) expenses related to the
issuance of tax-anticipation notes are no longer an
eligible funding use (see section Restrictions on
Use: Debt Service).
pandemic, Native Americans have
experienced more than one and a half
times the rate of COVID–19 infections,
more than triple the rate of
hospitalizations, and more than double
the death rate compared to White
Americans.63 Low-income and minority
communities also exhibit higher rates of
pre-existing conditions that may
contribute to an increased risk of
COVID–19 mortality.64 In addition,
individuals living in low-income
communities may have had more
limited ability to socially distance or to
self-isolate when ill, resulting in faster
spread of the virus, and were over-
represented among essential workers,
who face greater risk of exposure.65
Social distancing measures in
response to the pandemic may have also
exacerbated pre-existing public health
challenges. For example, for children
living in homes with lead paint,
spending substantially more time at
home raises the risk of developing
elevated blood lead levels, while
screenings for elevated blood lead levels
declined during the pandemic.66 The
combination of these underlying social
and health vulnerabilities may have
contributed to more severe public health
outcomes of the pandemic within these
communities, resulting in an
exacerbation of pre-existing disparities
in health outcomes.67
Summary of the Interim Final Rule
Approach to Public Health
Summary: As discussed above, the
interim final rule provided flexibility for
recipients to pursue a wide range of
eligible uses to ‘‘respond to’’ the
COVID–19 public health emergency.
Uses of funds to ‘‘respond to’’ the public
health emergency address the SARS-
CoV–2 virus itself, support efforts to
prevent or decrease spread of the virus,
and address other impacts of the
pandemic on public health. The interim
final rule implemented these provisions
by identifying a non-exhaustive list of
programs or services that may be funded
as responding to COVID–19
(‘‘enumerated eligible uses’’), along with
considerations for evaluating other
potential uses of funds not explicitly
listed. Enumerated eligible uses are
discussed below. For guidance on how
to determine whether a particular use is
allowable, beyond those enumerated,
see section Standards: Identifying a
Public Health Impact.
Enumerated eligible uses under this
section built and expanded upon
permissible expenditures under the
Coronavirus Relief Fund; for clarity, the
interim final rule expressly listed as
eligible uses the uses permissible under
the Coronavirus Relief Fund, with
minor exceptions.68 The interim final
rule also recognized that the nature of
the COVID–19 public health emergency,
and responsive policy measures,
programs, and services, had changed
over time and is expected to continue
evolving.
The interim final rule categorized
enumerated eligible uses to respond to
the public health emergency into several
categories: (1) COVID–19 mitigation and
prevention, (2) medical expenses, (3)
behavioral health care, (4) public health
and safety staff, (5) expenses to improve
the design and execution of health and
public health programs, and (6) eligible
uses to address disparities in public
health outcomes. For each category in
turn, this section describes public
comments received and Treasury’s
responses, as well as comments received
proposing additional enumerated
eligible uses.
Reorganizations and Cross-
References: In some cases, enumerated
eligible uses included in the interim
final rule under responding to the
public health emergency have been re-
categorized in the organization of the
final rule to enhance clarity. For
discussion of eligible uses for public
health and safety staff and to improve
the design and execution of public
health programs, please see section
Public Sector Capacity and Workforce in
General Provisions: Other. For
discussion of eligible uses to address
disparities in public health outcomes,
please see section Assistance to
Households in Negative Economic
Impacts.
Conversely, discussion of eligible
assistance to small businesses and
nonprofits to respond to public health
impacts has been moved from
Assistance to Small Businesses and
Assistance to Nonprofits in Negative
Economic Impacts to this section. This
change is consistent with the interim
final rule, which provides that
appropriate responses to address the
public health impacts of COVID–19 may
be provided to any type of entity.
a. COVID–19 Mitigation and Prevention
COVID–19 public health response and
mitigation tactics. Recognizing the
broad range of services and
programming needed to contain
COVID–19, the interim final rule
provided an extensive list of
enumerated eligible uses to prevent and
mitigate COVID–19 and made clear that
the public health response to the virus
is expected to continue to evolve over
time, necessitating different uses of
funds.
Enumerated eligible uses of funds in
this category included: Vaccination
programs; medical care; testing; contact
tracing; support for isolation or
quarantine; supports for vulnerable
populations to access medical or public
health services; public health
surveillance (e.g., monitoring case
trends, genomic sequencing for
variants); enforcement of public health
orders; public communication efforts;
enhancement to health care capacity,
including through alternative care
facilities; purchases of personal
protective equipment; support for
prevention, mitigation, or other services
in congregate living facilities (e.g.,
nursing homes, incarceration settings,
homeless shelters, group living
facilities) and other key settings like
schools; ventilation improvements in
congregate settings, health care settings,
or other key locations; enhancement of
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4353 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
69 See Centers for Disease Control and Prevention,
COVID Data Tracker, https://covid.cdc.gov/covid-
data-tracker/#trends_dailycases (last visited
December 7, 2021).
70 See Centers for Disease Control and Prevention,
COVID–19, https://www.cdc.gov/coronavirus/2019-
ncov/index.html (last visited November 8, 2021).
71 See §35.6(b); Coronavirus State and Local
Fiscal Recovery Funds, 86 FR at 26786.
72 Centers for Disease Control and Prevention,
COVID Data Tracker: COVID–19 Vaccinations in the
United States, https://covid.cdc.gov/covid-data-
tracker/#vaccinations (last visited October 18,
2021).
73 U.S. Food and Drug Administration,
Coronavirus (COVID–19) Update: FDA Takes
Additional Actions on the Use of a Booster Dose for
COVID–19 Vaccines, https://www.fda.gov/news-
events/press-announcements/fda-authorizes-pfizer-
biontech-covid-19-vaccine-emergency-use-children-
5-through-11-years-age (last visited November 8,
2021).
74 U.S. Food and Drug Administration, FDA
Authorizes Pfizer-BioNTech COVID–19 Vaccine for
Emergency Use in Children 5 through 11 Years of
Age, https://www.fda.gov/news-events/press-
announcements/fda-authorizes-pfizer-biontech-
covid-19-vaccine-emergency-use-children-5-
through-11-years-age (last visited November 8,
2021).
public health data systems; other public
health responses; and capital
investments in public facilities to meet
pandemic operational needs, such as
physical plant improvements to public
hospitals and health clinics or
adaptations to public buildings to
implement COVID–19 mitigation tactics.
These enumerated uses are consistent
with guidance from public health
authorities, including the CDC.
Public Comment: Many commenters
were supportive of expansive
enumerated eligible uses for mitigating
and preventing COVID–19, noting the
wide range of activities that
governments may undertake and the
continued changing landscape of
pandemic response. Some commenters
requested that Treasury engage in
ongoing consideration of and
consultation on evolving public health
needs and resulting eligible expenses.
Some commenters noted that their
jurisdiction does not have an official
public health program, for example
smaller jurisdictions or those that do not
have a health department, and requested
clarification on whether their public
health expenses would still be eligible
in compliance with program rules.
Treasury Response: In the final rule,
Treasury is maintaining an expansive
list of enumerated eligible uses to
mitigate and prevent COVID–19, given
the wide-ranging activities that
governments may take to further these
goals, including ‘‘other public health
responses.’’ Note that the final rule
discusses several of these enumerated
uses in more detail below.
Treasury is further clarifying that
when providing COVID–19 prevention
and mitigation services, recipients can
identify the impacted population as the
general public. Treasury presumes that
all enumerated eligible uses for
programs and services, including
COVID–19 mitigation and prevention
programs and services, are reasonably
proportional responses to the harm
identified unless a response is grossly
disproportionate to the type or extent of
harm experienced. Note that capital
expenditures are not considered
‘‘programs and services’’ and are not
presumed to be reasonably proportional
responses to an identified harm except
as provided in section Capital
Expenditures in General Provisions:
Other. In other words, recipients can
provide any COVID–19 prevention or
mitigation service to members of the
general public without any further
analysis of impacts of the pandemic on
those individuals and whether the
service is responsive.
This approach gives recipient
governments an extensive set of eligible
uses that can adapt to local needs, as
well as evolving response needs and
developments in understanding of
transmission of COVID–19. Treasury
emphasizes how the enumerated
eligible uses can adapt to changing
circumstances. For example, when the
interim final rule was released, national
daily COVID–19 cases were at relatively
low levels and declining;69 as the Delta
variant spread and cases peaked in
many areas of the country, particularly
those with low vaccination rates,
government response needs and tactics
evolved, and the SLFRF funds provided
the ability to quickly and nimbly adapt
to new public health needs. Treasury
also notes that funds may be used to
support compliance with and
implementation of COVID–19 safety
requirements, including vaccination
requirements, testing programs, or other
required practices.
Recipient governments do not need to
have an official health or public health
program in order to utilize these eligible
uses; any recipient can pursue these
eligible uses, though Treasury
recommends consulting with health and
public health professionals to support
effective implementation.
The CDC has provided
recommendations and guidelines to
help mitigate and prevent COVID–19.
The interim final rule and final rule
help support recipients in stopping the
spread of COVID–19 through these
recommendations and guidelines.70 The
final rule reflects changing
circumstances of COVID–19 and
provides a broad range of permissible
uses for mitigating and preventing the
spread of the disease, in a manner
consistent with CDC guidelines and
recommendations.
The purpose of the SLFRF funds is to
mitigate the fiscal effects stemming from
the COVID–19 public health emergency,
including by supporting efforts to stop
the spread of the virus. The interim final
rule and final rule implement this
objective by, in part, providing that
recipients may use SLFRF funds for
COVID–19 mitigation and prevention.71
A program or service that imposes
conditions on participation in or
acceptance of the service that would
undermine efforts to stop the spread of
COVID–19 or discourage compliance
with recommendations and guidelines
in CDC guidance for stopping the spread
of COVID–19 is not a permissible use of
funds. In other words, recipients may
not use funds for a program that
undermines practices included in the
CDC’s guidelines and recommendations
for stopping the spread of COVID–19.
This includes programs that impose a
condition to discourage compliance
with practices in line with CDC
guidance (e.g., paying off fines to
businesses incurred for violation of
COVID–19 vaccination or safety
requirements), as well as programs that
require households, businesses,
nonprofits, or other entities not to use
practices in line with CDC guidance as
a condition of receiving funds (e.g.,
requiring that businesses abstain from
requiring mask use or employee
vaccination as a condition of receiving
SLFRF funds).
Vaccination programs and vaccine
incentives. At the time of the interim
final rule release, many vaccination
programs were using mass vaccination
tactics to rapidly reach Americans en
masse for first vaccine doses.72 Since
that time, the FDA has authorized
booster vaccine doses for certain groups
and certain vaccines and has also
authorized vaccines for youths 73 74 The
inclusion of ‘‘vaccination programs’’ as
an eligible use allows for adaptation as
the needs of programs change or new
groups become eligible for different
types of vaccinations.
Public Comment: Since the release of
the interim final rule, many recipient
governments have also requested
clarification on whether vaccine
incentives are a permissible use of
funds.
Treasury Response: Treasury issued
guidance clarifying that ‘‘[vaccine]
programs that provide incentives
reasonably expected to increase the
number of people who choose to get
vaccinated, or that motivate people to
get vaccinated sooner than they
otherwise would have, are an allowable
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75 Coronavirus State and Local Fiscal Recovery
Funds, Frequently Asked Questions, as of July 19,
2021; https://home.treasury.gov/system/files/136/
SLFRPFAQ.pdf. Note that programs may provide
incentives to individuals who have already received
a vaccination if the incentive is reasonably expected
to increase the number of people who choose to get
vaccinated or motivate people to get vaccinated
sooner and the costs are reasonably proportional to
the expected public health benefit.
use of funds so long as such costs are
reasonably proportional to the expected
public health benefit.’’75 This use of
funds remains permissible under the
final rule.
Capital Expenditures
Public Comment: Many commenters
requested clarification around the types
and scope of permissible capital
investments in public facilities to meet
pandemic operational needs; ventilation
improvements in congregate settings,
health care settings, or other key
locations; and whether support for
prevention and mitigation in congregate
facilities could include facilities
renovations, improvements, or
construction of new facilities, or if the
facilities must solely be used for
COVID–19 response.
Treasury Response: For clarity,
Treasury has addressed the eligibility
standard for capital expenditures, or
investments in property, facilities, or
equipment, in one section of this
Supplementary Information; see section
Capital Expenditures in General
Provisions: Other. In recognition of the
importance of capital expenditures in
the COVID–19 public health response,
Treasury enumerates that the following
projects are examples of eligible capital
expenditures, as long as they meet the
standards for capital expenditures in
section Capital Expenditures in General
Provisions: Other:
•Improvements or construction of
COVID–19 testing sites and laboratories,
and acquisition of related equipment;
•Improvements or construction of
COVID–19 vaccination sites;
•Improvements or construction of
medical facilities generally dedicated to
COVID–19 treatment and mitigation
(e.g., emergency rooms, intensive care
units, telemedicine capabilities for
COVID–19 related treatment);
•Expenses of establishing temporary
medical facilities and other measures to
increase COVID–19 treatment capacity,
including related construction costs;
•Acquisition of equipment for
COVID–19 prevention and treatment,
including ventilators, ambulances, and
other medical or emergency services
equipment;
•Improvements to or construction of
emergency operations centers and
acquisition of emergency response
equipment (e.g., emergency response
radio systems);
•Installation and improvements of
ventilation systems;
•Costs of establishing public health
data systems, including technology
infrastructure;
•Adaptations to congregate living
facilities, including skilled nursing
facilities, other long-term care facilities,
incarceration settings, homeless
shelters, residential foster care facilities,
residential behavioral health treatment,
and other group living facilities, as well
as public facilities and schools
(excluding construction of new facilities
for the purpose of mitigating spread of
COVID–19 in the facility); and
•Mitigation measures in small
businesses, nonprofits, and impacted
industries (e.g., developing outdoor
spaces).
Other clarifications on COVID–19
mitigation: Medical care, supports for
vulnerable populations, data systems,
carceral settings. Based on public
comments and questions received from
recipients following the interim final
rule, Treasury is making several further
clarifications on enumerated eligible
uses in this category.
Public Comment: Several commenters
requested clarification on eligible uses
of funds for medical care; Treasury
addresses those comments in the section
Medical Expenses below.
Public Comment: Recipients posed
questions on the type and scope of
activities eligible as ‘‘supports for
vulnerable populations to access
medical or public health services.’’
Treasury Response: Enumerated
eligible uses should be considered in
the context of the eligible use category
or section where they appear; in this
case, ‘‘supports for vulnerable
populations to access medical or public
health services’’ appears in the section
COVID–19 Mitigation and Prevention.
As such, these eligible uses should help
vulnerable or high-risk populations
access services that mitigate COVID–19,
for example, transportation assistance to
reach vaccination sites, mobile
vaccination or testing programs, or on-
site vaccination or testing services for
homebound individuals, those in group
homes, or similar settings.
Public Comment: Some commenters
asked whether ‘‘enhancement of public
health data systems’’ could include
investments in software, databases, and
other information technology resources
that support responses to the COVID–19
public health emergency but also
provide benefits for other use cases and
long-term capacity of public health
departments and systems.
Treasury Response: These are
permissible uses of funds under the
interim final rule and remain eligible
under the final rule.
Assistance to Businesses and Nonprofits
To Implement COVID–19 Mitigation
Strategies
Background: As detailed above,
Treasury received many public
comments describing uncertainty about
which eligible use category should be
used to assess different potential uses of
funds. As a result, Treasury has re-
categorized some uses of funds in the
final rule to provide greater clarity,
consistent with the principle that uses
of funds should be assessed based on
their intended beneficiary. For example,
COVID–19 mitigation and prevention
serves the general public or specific
populations within the public.
However, in the interim final rule,
assistance to small businesses,
nonprofits, and impacted industries to
implement COVID–19 mitigation and
prevention strategies was categorized in
the respective sections within Negative
Economic Impacts. The final rule
consolidates all COVID–19 mitigation
and prevention within Public Health.
Public Comment: Treasury has
received multiple comments and
questions about which eligible use
permits the recipient to provide
assistance to businesses and nonprofits
to address the public health impacts of
COVID–19.
Treasury Response: In the final rule,
these services have been re-categorized
under COVID–19 mitigation and
prevention to reflect the fact that this
assistance responds to public health
impacts of the pandemic rather than the
negative economic impacts to a small
business, nonprofit, or impacted
industry. When providing COVID–19
mitigation and prevention services,
recipients can identify the impacted
entity as small businesses, nonprofits, or
businesses in impacted industries in
general. As with all enumerated eligible
uses, recipients may presume that all
COVID–19 mitigation and prevention
programs and services are reasonably
proportional responses to the harm
identified unless a response is grossly
disproportionate to the type or extent of
harm experienced. Note that capital
expenditures are not considered
‘‘programs and services’’ and are not
presumed to be reasonably proportional
responses to an identified harm except
as provided in section Capital
Expenditures in General Provisions:
Other. In other words, recipients can
provide any COVID–19 prevention or
mitigation service to small businesses,
nonprofits, and businesses in impacted
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76 See Centers for Disease Control and Prevention,
Participate in Outdoor and Indoor Activities,
https://www.cdc.gov/coronavirus/2019-ncov/daily-
life-coping/outdoor-activities.html (last visited
November 8, 2021).
77 Hotlines or warmlines, crisis intervention,
overdose prevention, infectious disease prevention,
and services or outreach to promote access to
physical or behavioral health primary care and
preventative medicine.
industries without any further analysis
of impacts of the pandemic on those
entities and whether the service is
responsive.
In some cases, this means that an
entity not otherwise eligible to receive
assistance to respond to negative
economic impacts of the pandemic, for
example an entity that did not
experience a negative economic impact,
may still be eligible to receive assistance
under this category for COVID–19
mitigation and prevention services.
Uses of funds can include loans,
grants, or in-kind assistance to small
businesses, nonprofits, or other entities
to implement COVID–19 prevention or
mitigation tactics, such as vaccination;
testing; contact tracing programs;
physical plant changes to enable greater
use of outdoor spaces or ventilation
improvements; enhanced cleaning
efforts; and barriers or partitions. For
example, this would include assistance
to a restaurant to establish an outdoor
patio, given evidence showing much
lower risk of COVID–19 transmission
outdoors.76 Uses of funds can also
include aid to travel, tourism,
hospitality, and other impacted
industries to implement COVID–19
mitigation and prevention measures to
enable safe reopening, for example,
vaccination or testing programs,
improvements to ventilation, physical
barriers or partitions, signage to
facilitate social distancing, provision of
masks or personal protective equipment,
or consultation with infection
prevention professionals to develop safe
reopening plans.
Recipients providing assistance to
small businesses, nonprofits, or
impacted industries that includes
capital expenditures (i.e., expenditures
on property, facilities, or equipment)
should also review the section Capital
Expenditures in General Provisions:
Other, which describes eligibility
standards for these expenditures.
Recipients providing assistances in the
form of loans should review the section
Treatment of Loans Made with SLFRF
Funds in General Provisions: Other.
Recipients should also be aware of the
difference between beneficiaries of
assistance and subrecipients when
working with small businesses,
nonprofits, or impacted industries. As
noted above, Treasury presumes that the
general public, as well as small
businesses, nonprofits, and impacted
industries in general, has been impacted
by the COVID–19 disease itself and is
eligible for services that mitigate or
prevent COVID–19 spread. As such, a
small business, nonprofit, or impacted
industry receiving assistance to
implement COVID–19 mitigation
measures is a beneficiary of assistance
(e.g., granting funds to a small business
to develop an outdoor patio to reduce
transmission). In contrast, if a recipient
contracts with, or grants funds to, a
small business, nonprofit, or impacted
industry to carry out an eligible use for
COVID–19 mitigation on behalf of the
recipient, the entity is a subrecipient
(e.g., contracting with a small business
to operate COVID–19 vaccination sites).
For further information on
distinguishing between beneficiaries
and subrecipients, as well as the
impacts of the distinction on reporting
and other requirements, see section
Distinguishing Subrecipients versus
Beneficiaries.
b. Medical Expenses
Background: The interim final rule
also included as an enumerated eligible
use medical expenses, including
medical care and services to address the
near-term and potential longer-term
impacts of the disease on individuals
infected.
Public Comment: Some commenters
sought clarification on the types of
medical expenses eligible and for
whom, including whether funds could
be used under this category for
expanding health insurance coverage
(e.g., subsidies for premiums, expanding
a group health plan), improvements to
healthcare facilities or establishment of
new medical facilities, direct costs of
medical services, and costs to a self-
funded health insurance plan (e.g., a
county government health plan) for
COVID–19 medical care.
Treasury Response: In the final rule,
Treasury is maintaining this enumerated
eligible use category and clarifying that
it covers costs related to medical care
provided directly to an individual due
to COVID–19 infection (e.g., treatment)
or a potential infection (e.g., testing).
This can include medical costs to
uninsured individuals; deductibles, co-
pays, or other costs not covered by
insurance; costs for uncompensated care
at a health provider; emergency medical
response costs; and, for recipients with
a self-funded health insurance plan,
excess health insurance costs due to
COVID–19 medical care. These are
medical expenses due to COVID–19 and
distinguish this category of eligible uses
from other related eligible uses, like
COVID–19 mitigation and prevention
and health insurance expenses to
households, to provide greater clarity
for recipients in determining which
category of eligible uses they should
review to assess a potential use of funds.
For discussion of eligibility for
programs to expand health insurance
coverage, see section Assistance to
Households.
c. Behavioral Health Care
Background: Recognizing that the
public health emergency, necessary
mitigation measures like social
distancing, and the economic downturn
have exacerbated mental health and
substance use challenges for many
Americans, the interim final rule
included an enumerated eligible use for
mental health treatment, substance use
treatment, and other behavioral health
services, including a non-exhaustive list
of specific services that would be
eligible under this category.
Public Comment: Many commenters
expressed support for the interim final
rule’s recognition of behavioral health
impacts of the pandemic and eligible
uses under this category. Several
commenters requested clarification on
the types of eligible services under this
category, specifically whether both
acute and chronic care are included as
well as services that often do not
directly accept insurance payments, like
peer support groups. Some commenters
highlighted the importance of cultural
competence in providing effective
behavioral health services. Some
commenters suggested that funding
should be available broadly and quickly
for this purpose, recommending that
funding available for behavioral health
not be tied to the amount of revenue
loss experienced by the recipient.
Treasury Response: In the final rule,
Treasury is maintaining this enumerated
eligible use category and clarifying that
it covers an expansive array of services
for prevention, treatment, recovery, and
harm reduction for mental health,
substance use, and other behavioral
health challenges caused or exacerbated
by the public health emergency. The
specific services listed in the interim
final rule also remain eligible.77
Treasury is further clarifying that
when providing behavioral health
services, recipients can identify the
impacted population as the general
public and, as with all enumerated
eligible uses, presume that all programs
and services are reasonably proportional
responses to the harm identified unless
a response is grossly disproportionate to
the type or extent of harm experienced.
In contrast, capital expenditures are not
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78 However, SLFRF funds may not be used to
reimburse a service that was also billed to
insurance.
79 In line with the Department of Health and
Human Services, Overdose Prevention Strategy,
https://www.hhs.gov/overdose-prevention/, and the
Office of National Drug Control Policy,
Administration’s Statement on Drug Policy
Priorities for Year One (April 1, 2021), https://
www.whitehouse.gov/wp-content/uploads/2021/03/
BidenHarris-Statement-of-Drug-Policy-Priorities-
April-1.pdf.
considered ‘‘programs and services’’ and
are not presumed to be reasonably
proportional responses to an identified
harm except as provided in section
Capital Expenditures in General
Provisions: Other.
In other words, recipients can provide
behavioral health services to members
of the general public without any
further analysis of impacts of the
pandemic on those individuals and
whether the service is responsive.
Recipients may also use this eligible use
category to respond to increased rates of
behavioral health challenges at a
population level or, at an individual
level, new behavioral health challenges
or exacerbation of pre-existing
challenges, including new barriers to
accessing treatment.
Services that respond to these impacts
of the public health emergency may
include services across the continuum
of care, including both acute and
chronic care, such as prevention,
outpatient treatment, inpatient
treatment, crisis care, diversion
programs (e.g., from emergency
departments or criminal justice system
involvement), outreach to individuals
not yet engaged in treatment, harm
reduction, and supports for long-term
recovery (e.g., peer support or recovery
coaching, housing, transportation,
employment services).
Recipients may also provide services
for special populations, for example,
enhanced services in schools to address
increased rates of behavioral health
challenges for youths, mental health
first responder or law enforcement-
mental health co-responder programs to
divert individuals experiencing mental
illness from the criminal justice system,
or services for pregnant women with
substance use disorders or infants born
with neonatal abstinence syndrome.
Finally, recipients may use funds for
programs or services to support
equitable access to services and reduce
racial, ethnic, or socioeconomic
disparities in access to high-quality
treatment.
Eligible uses of funds may include
services typically billable to
insurance 78 or services not typically
billable to insurance, such as peer
support groups, costs for residence in
supportive housing or recovery housing,
and the 988 National Suicide Prevention
Lifeline or other hotline services.
Recipients may also use funds in
conjunction with other federal grants or
programs (see section Program
Administration Provisions), though
eligible services under SLFRF are not
limited to those eligible under existing
federal programs.
Given the public health emergency’s
exacerbation of the ongoing opioid and
overdose crisis, Treasury highlights
several ways that funds may be used to
respond to opioid use disorder and
prevent overdose mortality.79
Specifically, eligible uses of funds
include programs to expand access to
evidence-based treatment like
medications to treat opioid use disorder
(e.g., direct costs or incentives for
emergency departments, prisons, jails,
and outpatient providers to offer
medications and low-barrier treatment),
naloxone distribution, syringe service
programs, outreach to individuals in
active use, post-overdose follow up
programs, programs for diversion from
the criminal justice system, and
contingency management interventions.
Finally, for clarity, Treasury has
addressed the eligibility standard for
capital expenditures, or investments in
property, facilities, or equipment, in one
section of this Supplementary
Information; see section Capital
Expenditures in General Provisions:
Other. Examples of capital expenditures
related to behavioral health that
Treasury recognizes as eligible include
behavioral health facilities and
equipment (e.g., inpatient or outpatient
mental health or substance use
treatment facilities, crisis centers,
diversion centers), as long as they
adhere to the standards detailed in the
Capital Expenditures section.
d. Preventing and Responding to
Violence
Background: The interim final rule
highlighted that some types of violence
had increased during the pandemic and
that the ability of victims to access
services had decreased, noting as an
example the challenges that individuals
affected by domestic violence face in
accessing services. Accordingly, the
interim final rule enumerated as an
eligible use, in disproportionately
impacted communities, evidence-based
community violence intervention
programs. Following the release of the
interim final rule, Treasury received
several recipient questions regarding
whether and how funds may be used to
respond to an increase in crime,
violence, or gun violence in some
communities during the pandemic.
Treasury released further guidance
identifying how enumerated eligible
uses and eligible use categories under
the interim final rule could support
violence reduction efforts, including
rehiring public sector staff, behavioral
health services, and services to address
negative economic impacts of the
pandemic that may aid victims of crime.
The guidance also identified an
expanded set of enumerated eligible
uses to address increased gun violence.
Public Comment: Several commenters
expressed support for this use of funds.
Treasury Response: In the final rule,
Treasury is maintaining enumerated
eligible uses in this area and clarifying
how to apply eligibility standards.
Throughout the final rule, enumerated
eligible uses should respond to an
identified impact of the COVID–19
public health emergency in a reasonably
proportional manner to the extent and
type of harm experienced. Many of the
enumerated eligible uses—like
behavioral health services, services to
improve employment opportunities, and
services to address educational
disparities in disproportionately
impacted communities—that respond to
the public health and negative economic
impacts of the pandemic may also have
benefits for reducing crime or aiding
victims of crime. For example, the
pandemic exacerbated the impact of
domestic violence, sexual assault, and
human trafficking; enumerated eligible
uses like emergency housing assistance,
cash assistance, or assistance with food,
childcare, and other needs could be
used to support survivors of domestic
violence, sexual assault, or human
trafficking who experienced public
health or economic impacts due to the
pandemic.
Public Comment: Several commenters
expressed support for community
violence intervention programs or
argued that traditional public safety
approaches had negatively impacted the
social determinants of health in their
communities. Several commenters
recommended inclusion of approaches
like mental health or substance use
diversion programs.
Treasury Response: Treasury
recognizes the importance of
comprehensive approaches to
challenges like violence. The final rule
includes an enumerated eligible use for
community violence intervention
programs in all communities, not just
the disproportionately impacted
communities eligible under the interim
final rule. Given the increased rate of
violence during the pandemic, Treasury
has determined that this enumerated
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80 U.S. Bureau of Labor Statistics, All Employees,
Total Nonfarm [PAYEMS], retrieved from FRED,
Federal Reserve Bank of St. Louis; https://
fred.stlouisfed.org/series/PAYEMS (last visited
December 7, 2021).
81 Id.
82 U.S. Bureau of Labor Statistics, Unemployment
Rate [UNRATE], retrieved from FRED, Federal
Reserve Bank of St. Louis; https://fred.
stlouisfed.org/series/UNRATE (last visited
December 7, 2021).
83 U.S. Bureau of Labor Statistics, supra note 80.
84 U.S. Bureau of Labor Statistics, supra note 82.
85 U.S. Bureau of Economic Analysis, Real Gross
Domestic Product [GDPC1], retrieved from FRED,
Federal Reserve Bank of St. Louis, https://fred.
stlouisfed.org/series/GDPC1 (last visited December
7, 2021).
86 U.S. Department of the Treasury, Economy
Statement by Catherine Wolfram, Acting Assistant
Secretary for Economy Policy, for the Treasury
Borrowing Advisory Committee (November 1,
2021), available at https://home.treasury.gov/news/
press-releases/jy0453.
87 Yuka Hayashi, IMF Cuts Global Growth
Forecast Amid Supply-Chain Disruptions,
Pandemic Pressures, Wall Street Journal (October
12, 2021), available at https://www.wsj.com/
articles/imf-cuts-global-growth-forecast-amid-
supply-chain-disruptions-warns-of-inflation-risks-
11634043601.
88 U.S. Bureau of Labor Statistics, supra note 80.
89 U.S. Bureau of Labor Statistics, Civilian Labor
Force Level [CLF16OV], retrieved from FRED,
Federal Reserve Bank of St. Louis, https://fred.
stlouisfed.org/series/CLF16OV (last visited
December 7, 2021).
90 U.S. Bureau of Labor Statistics, Labor Force
Statistics from the Current Population Survey:
Employment status of the civilian population by sex
and age (December 6, 2021), https://www.bls.gov/
news.release/empsit.t01.htm (last visited December
7, 2021); U.S. Bureau of Labor Statistics, Labor
Force Statistics from the Current Population
Survey: Employment status of the civilian
noninstitutional population by race, Hispanic or
Latino ethnicity, sex, and age (December 6, 2021),
https://www.bls.gov/web/empsit/cpseea04.htm (last
visited December 7, 2021); U.S. Bureau of Labor
Statistics, Labor Force Statistics from the Current
Population Survey: Employment status of the
civilian noninstitutional population 25 years and
over by educational attainment (December 6, 2021),
https://www.bls.gov/web/empsit/cpseea05.htm (last
visited December 7, 2021).
91 Elise Gould & Jori Kandra, Wages grew in 2020
because the bottom fell out of the low-wage labor
market, Economic Policy Institute (Feb. 24, 2021),
https://files.epi.org/pdf/219418.pdf. See also,
Michael Dalton et al., The K-Shaped Recovery:
Examining the Diverging Fortunes of Workers in the
Recovery from the COVID–19 Pandemic using
Business and Household Survey Microdata, U.S.
Bureau of Labor Statistics Working Paper Series
(July 2021), https://www.bls.gov/osmr/research-
papers/2021/pdf/ec210020.pdf.
92 Center on Budget and Policy Priorities,
Tracking the COVID–19 Recession’s Effects on
Food, Housing, and Employment Hardships,
https://www.cbpp.org/research/poverty-and-
inequality/tracking-the-covid-19-economys-effects-
on-food-housing-and (last visited December 17,
2021).
eligible use is responsive to the impacts
of the pandemic in all communities.
The final rule incorporates guidance
issued after the interim final rule on
specifically types of services eligible,
including:
•Evidence-based practices like
focused deterrence, street outreach,
violence interrupters, and hospital-
based violence intervention models,
complete with wraparound services
such as behavioral therapy, trauma
recovery, job training, education,
housing and relocation services, and
financial assistance; and
•Capacity-building efforts at
community violence intervention
programs like funding more
intervention workers, increasing their
pay, providing training and professional
development for intervention workers,
and hiring and training workers to
administer the programs.
Public Comment: Some commenters
sought further clarification on whether
some of the enumerated eligible uses are
considered responsive to all crime,
violent crime, or gun violence.
Treasury Response: Enumerated
eligible uses that respond to an increase
in gun violence may be pursued in
communities experiencing an increase
in gun violence associated with the
pandemic, specifically: (1) Hiring law
enforcement officials—even above pre-
pandemic levels—or paying overtime
where the funds are directly focused on
advancing community policing
strategies for gun violence, (2)
additional enforcement efforts to reduce
gun violence exacerbated by the
pandemic, including prosecuting gun
traffickers, dealers, and other parties
contributing to the supply of crime
guns, as well as collaborative federal,
state, and local efforts to identify and
address gun trafficking channels, and (3)
investing in technology and equipment
to allow law enforcement to more
efficiently and effectively respond to the
rise in gun violence resulting from the
pandemic, for example technology to
assist in the identification of guns
whose serial numbers have been
damaged.
3. Negative Economic Impacts
a. Assistance to Households
Background
While the U.S. economy is now on the
path to a strong recovery, the public
health emergency, including the
necessary measures taken to protect
public health, resulted in significant
economic and financial hardship for
many Americans. As businesses closed,
consumers stayed home, schools shifted
to remote education, and travel declined
precipitously, over 22 million jobs were
lost in March and April 2020.80 One
year later, in April 2021, the economy
still remained over 8 million jobs below
its pre-pandemic peak,81 and the
unemployment rate hovered around 6
percent.82
In the months since Treasury issued
the interim final rule in May 2021, the
economy has made large strides in its
recovery. The economy gained over 4
million jobs in the seven months from
May to November 2021;83 the
unemployment rate fell more than 1.5
percentage points to 4.2 percent, which
is the lowest rate since February 2020;84
and the size of the nation’s economy
surpassed the pre-pandemic peak in the
second quarter of 2021.85
While the economy has made
immense progress in its recovery since
May 2021, the economy has also faced
setbacks that illustrate the continued
risks to the recovery. As the Delta
variant spread across the country this
summer and fall, the United States faced
another severe wave of cases, deaths,
and strain on the healthcare system,
which contributed to a slowdown in the
pace of recovery in the third quarter.86
Supply chain disruptions have also
demonstrated the difficulties of
restarting a global economy.87
Moreover, although many Americans
have returned to work as of November
2021, the economy remains 3.9 million
jobs below its pre-pandemic peak,88 and
2.4 million workers have dropped out of
the labor market altogether relative to
February 2020.89 Thus, despite much
progress, there is a continued need to
respond to the pandemic’s economic
effects to ensure a full, broad-based, and
equitable recovery.
Indeed, the pandemic’s economic
impacts continue to affect some
demographic groups more than others.
Rates of unemployment remain
particularly severe among workers of
color and workers with lower levels of
educational attainment; for example, the
overall unemployment rate in the
United States was 4.2 percent in
November 2021, but certain groups saw
much higher rates: 6.7 percent for Black
workers, 5.2 percent for Hispanic or
Latino workers, and 5.7 percent for
workers without a high school
diploma.90 Job losses have also been
particularly steep among low-wage
workers, with these workers remaining
furthest from recovery as of the end of
2020.91 A severe recession, and its
concentrated impact among low-income
workers, has amplified food and
housing insecurity, with an estimated
nearly 20 million adults living in
households where there is sometimes or
often not enough food to eat and an
estimated 12 million adults living in
households that were not current on
rent.92
While economic effects have been
seen across many communities, there
are additional disparities by race and
income. For example, approximately
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4358 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
93 Michael Karpman, Dulce Gonzalez, Genevieve
M. Kenney, Parents Are Struggling to Provide for
Their Families during the Pandemic, Urban
Institute (May 2020), https://www.urban.org/
research/publication/parents-are-struggling-
provide-their-families-during-pandemic?utm_
source=urban_researcher&utm_
medium=email&utm_campaign=covid_
parents&utm_term=lhp.
94 Women have carried a larger share of childcare
responsibilities than men during the COVID–19
crisis. See, e.g., Gema Zamarro & Marı´a J. Prados,
Gender differences in couples’ division of
childcare, work and mental health during COVID–
19, Rev. Econ. Household 19:11–40 (2021),
available at https://link.springer.com/article/
10.1007/s11150-020-09534-7; Titan Alon et al., The
Impact of COVID–19 on Gender Equality, National
Bureau of Economic Research Working Paper 26947
(April 2020), available at https://www.nber.org/
papers/w26947.
95 U.S. Bureau of Labor Statistics, Labor Force
Participation Rate—20 Yrs. & Over, Black or African
American Women [LNS11300032], retrieved from
FRED, Federal Reserve Bank of St. Louis; https://
fred.stlouisfed.org/series/LNS11300032 (last visited
December 7, 2021).
96 U.S. Bureau of Labor Statistics, Labor Force
Participation Rate—20 Yrs. & Over, Black or African
American Men [LNS11300031], retrieved from
FRED, Federal Reserve Bank of St. Louis; https://
fred.stlouisfed.org/series/LNS11300031 (last visited
December 7, 2021).
97 U.S. Bureau of Labor Statistics, Labor Force
Participation Rate—20 Yrs. & Over, White Women
[LNS11300029], retrieved from FRED, Federal
Reserve Bank of St. Louis; https://fred.stlouis
fed.org/series/LNS11300029 (last visited December
7, 2021).
98 See, e.g., Michael Greenstone & Adam Looney,
Unemployment and Earnings Losses: A Look at
Long-Term Impacts of the Great Recession on
American Workers, Brookings Institution (Nov. 4,
2011), https://www.brookings.edu/blog/jobs/2011/
11/04/unemployment-and-earnings-losses-a-look-
at-long-term-impacts-of-the-great-recession-on-
american-workers/.
99 Chi Chi Wu, Solving the Credit Conundrum:
Helping Consumers’ Credit Records Impaired by the
Foreclosure Crisis and Great Recession, National
Consumer Law Center (Dec. 2013), https://
www.nclc.org/images/pdf/credit_reports/report-
credit-conundrum-2013.pdf.
100 Irwin Garfinkel, Sara McLanahan, Christopher
Wimer, eds., Children of the Great Recession,
Russell Sage Foundation (Aug. 2016), available at
https://www.russellsage.org/publications/children-
great-recession.
101 Kyle J. Casewell and Stephen Zuckerman,
Food Insecurity, Housing Hardship, and Medical
Care Utilization, Urban Institute (June 2018),
available at https://www.urban.org/sites/default/
files/publication/98701/2001896_foodinsecurity_
housinghardship_medicalcareutilization_
finalized.pdf.
102 Housing insecurity is defined as not paying
the full amount of rent or mortgage and/or utility
bills (gas, oil, or electricity) sometime in the
previous 12 months.
103 Housing quality hardship is defined as an
affirmative response to one or more questions
related to problems with a respondent’s physical
dwelling: Pests and/or insects; leaking roof or
ceiling; windows that are broken or cannot shut;
exposed electrical wires; broken plumbing (toilet,
hot water, other); holes in walls, ceiling, or floor;
no appliances (refrigerator or stove); and no phone
(of any kind).
104 Id.
105 Elise Gould and Melat Kassa. Low-wage, low-
hours workers were hit hardest in the COVID–19
recession: The State of Working America 2020
employment report, Economic Policy Institute (May
2021), available at https://www.epi.org/publication/
swa-2020-employment-report/.
106 Id.
107 Id.
108 Id.
109 R. Chetty, J. Friedman, N. Hendren, M.
Stepner, & Team, T. O. I., The Economic Impacts
of COVID–19: Evidence from a New Public Database
Built Using Private Sector Data (No. w27431; p.
w27431) (2020), National Bureau of Economic
Research. https://doi.org/10.3386/w27431.
110 M. Despard, Michal Grinstein-Weiss, Yung
Chun, and Stephen Roll, COVID–19 job and income
loss leading to more hunger and financial hardship,
Brookings Institute (July 13, 2020), https://
www.brookings.edu/blog/upfront/2020/07/13/
covid-19-job-and-income-loss-leading-to-more-
hunger-and-financial-hardship/.
111 N. Panchal, R. Kamal, C. Mun˜ana, & P.
Chidambaram, The Implications of COVID–19 for
Mental Health and Substance Use, Kaiser Family
Foundation (February 10, 2021), https://
half of low-income, Black, and Hispanic
parents reported difficulty covering
costs related to food, housing, utility, or
medical care.93 Over the course of the
pandemic, inequities also manifested
along gender lines, as schools closed to
in-person activities, leaving many
working families without childcare
during the day.94 Women of color have
been hit especially hard: The labor force
participation rate for Black women has
fallen by 3.6 percentage points 95 during
the pandemic as compared to 1.3
percentage points for Black men 96 and
1.7 percentage points for White
women.97
As the economy recovers, the effects
of the pandemic-related recession may
continue to impact households,
including a risk of longer-term effects on
earnings and economic potential. For
example, unemployed workers,
especially those who have experienced
longer periods of unemployment, earn
lower wages over the long term once
rehired.98 In addition to the labor
market consequences for unemployed
workers, recessions can also cause
longer-term economic challenges
through, among other factors, damaged
consumer credit scores 99 and reduced
familial and childhood wellbeing.100
These potential long-term economic
consequences underscore the continued
need for robust policy support.
Low- and moderate-income
households, those with income levels at
or below 300 percent of the federal
poverty level (FPL), face particular
hardships and challenges. These
households report much higher rates of
food insecurity and housing hardships
than households with higher incomes.
For example, households with incomes
at or below 300 percent FPL are several
times more likely to have reported
struggling with food insecurity
compared to households with income
above 300 percent FPL.101 Similarly,
low- and moderate-income households
reported being housing insecure 102 at
rates more than twice as high as higher-
income households, and low- and
moderate-income households reported
housing quality hardship 103 at rates
statistically significantly greater than
the rate for higher-income
households.104 The economic crisis
caused by the pandemic worsened
economic outcomes for workers in many
low- and moderate-income households.
Industries that employed low-wage
workers experienced a disproportionate
level of job loss. For example, from
February 2020 to February 2021, the
hospitality and leisure industry lost
nearly 3.5 million jobs.105 While the
entire industry was impacted, 72
percent of the job losses occurred in the
lowest wage service occupations
compared to only a 6 percent rate of job
loss in the highest wage management
and finance jobs.106 Similar trends exist
in other heavily impacted industries. In
public education, the lowest wage
occupations, service and transportation
jobs, saw a job loss rate of 20 and 26
percent, respectively.107 During that
same time period, the highest wage
occupations in public education,
management, actually saw jobs increase
by 7 percent.108
While many households suffered
negative economic outcomes as a result
of the COVID–19 pandemic and
economic recession, households with
low incomes were impacted in
disproportionate and exceptional ways.
From January 2020 to March 2021, low-
wage workers experienced job loss at a
rate five times higher than middle-wage
workers, and high-wage workers
actually experienced an increase in job
opportunities.109 Because workers in
low-income households were more
likely to lose their job or experience
reductions in pay, those same
households were also more likely to
experience economic hardships like
trouble paying utility bills, affording
rent or mortgage payments, purchasing
food, and paying for medical
expenses.110 The disproportionate
negative impacts the pandemic has had
on low-income families extend beyond
financial insecurity. For example, low-
income families have reported higher
levels of social isolation, stress, and
other negative mental health outcomes
during the pandemic. While over half of
all U.S. adults report that their mental
health was negatively affected by the
pandemic, adults with low incomes
reported major negative mental health
impacts at a rate nearly twice that of
adults with high incomes.111
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implications-of-covid-19-for-mental-health-and-
substance-use/.
112 For which recipients may presume that any
student who did not have access to in-person
instruction for a significant period of time was
impacted by the pandemic.
Summary of Interim Final Rule and
Final Rule Structure
Summary: The interim final rule
provided a non-exhaustive list of
enumerated eligible uses to respond to
the negative economic impacts of the
pandemic through assistance to
households, as well as a standard for
assessing whether uses of funds beyond
those enumerated are eligible.
The interim final rule described
enumerated eligible uses for assistance
to households in several categories: (1)
Assistance to unemployed workers, (2)
state Unemployment Insurance Trust
Funds, (3) assistance to households, and
(4) expenses to improve the efficacy of
economic relief. Note that the interim
final rule posed several questions to the
public on enumerated eligible uses for
assistance to households; comments on
these questions are addressed in the
relevant subject matter section below.
In addition, in recognition that pre-
existing health, economic, and social
disparities contributed to
disproportionate pandemic impacts in
certain communities, the interim final
rule also provided a broader list of
enumerated eligible uses to respond to
the pandemic in disproportionately
impacted communities, specifically: (1)
Building stronger communities through
investments in housing and
neighborhoods, (2) addressing
educational disparities, and (3)
promoting healthy childhood
environments. In the interim final rule,
under the Public Health section,
recipients could also provide services to
address health disparities and increase
access to health and social services;
these eligible uses have been re-
organized into the Assistance to
Households section to consolidate
responses in disproportionately
impacted communities and enhance
clarity.
This section addresses enumerated
eligible uses in the final rule to respond
to negative economic impacts to
households. As a reminder, recipients
may presume that a household or
population that experienced
unemployment, experienced increased
food or housing insecurity, or is low or
moderate income experienced negative
economic impacts resulting from the
pandemic, and recipients may provide
services to them that respond to these
impacts, including these enumerated
eligible uses.
For guidance on how to determine
whether a particular use, beyond those
enumerated, is eligible; further detail on
which households and communities are
presumed eligible for services; and how
to identify eligible households and
communities beyond those presumed
eligible, see section General Provisions:
Structure and Standards.
Reorganizations and Cross-
References: The final rule reorganizes
all enumerated eligible uses for
impacted and disproportionately
impacted households into the section
Assistance to Households, with the
exception that expenses to improve the
efficacy of economic relief has been re-
categorized into a different section of
the final rule for increased clarity; for
discussion of that use category, see
section General Provisions: Other.
Note that in conducting this
reorganization, and based on further
analysis and in response to comments,
Treasury has determined that several
enumerated uses included in the
interim final rule for disproportionately
impacted communities are directly
responsive to negative economic
impacts experienced by impacted
households. In the final rule, these uses
have been moved from
‘‘disproportionately impacted’’ to
‘‘impacted’’ households accordingly,
making these services available to both
disproportionately impacted and
impacted households. These uses
include assistance applying for public
benefits or services; programs or
services that address or mitigate the
impacts of the COVID–19 public health
emergency on childhood health or
welfare, including childcare, early
learning services, programs to provide
home visits, and services for families
involved in the child welfare system
and foster youth; programs to address
the impacts of lost instructional time for
students;112 and programs or services
that address housing insecurity, lack of
affordable housing, or homelessness.
The following activities remain
enumerated eligible uses for
disproportionately impacted
households: Remediation of lead paint
or other lead hazards; housing vouchers
and assistance relocating to
neighborhoods with higher levels of
economic opportunity; and programs or
services that address educational
disparities, including assistance to high-
poverty school districts to advance
equitable funding across districts and
geographies and evidence-based
services to address the academic, social,
emotional, and mental health needs of
students.
Enumerated Eligible Uses for Impacted
Households
The interim final rule included
several enumerated eligible uses to
provide assistance to households or
populations facing negative economic
impacts due to COVID–19. Enumerated
eligible uses included: Food assistance;
rent, mortgage, or utility assistance;
counseling and legal aid to prevent
eviction or homelessness; emergency
assistance for burials, home repairs,
weatherization, or other needs; internet
access or digital literacy assistance; cash
assistance; or job training to address
negative economic or public health
impacts experienced due to a worker’s
occupation or level of training. It also
posed a question as to what other types
of services or costs Treasury should
consider as eligible uses to respond to
the negative economic impacts of
COVID–19.
This section addresses each of these
enumerated eligible uses in turn, with
the exception of job training, which has
been re-categorized for increased clarity
to the eligible use for ‘‘assistance to
unemployed and underemployed
workers.’’ In general, commenters
supported inclusion of these
enumerated eligible uses to address key
economic needs among households due
to the pandemic, and Treasury is
maintaining these eligible uses in the
final rule, in line with commenters’
recommendations.
1. Food assistance. The interim final
rule included an enumerated eligible
use for food assistance. Some
commenters expressed support for this
eligible use and emphasized the
importance of aid to address food
insecurity. Some commenters raised
questions as to whether food assistance
funds could be used to augment services
provided through organizations like
food banks, churches, and other food
delivery services, or generally be sub-
awarded to these organizations.
Treasury Response: Treasury is
maintaining this enumerated eligible
use without change. Recipients may, as
was the case under the interim final
rule, administer programs through a
wide range of entities, including
nonprofit and for-profit entities, to carry
out eligible uses on behalf of the
recipient government (see section
Distinguishing Subrecipients versus
Beneficiaries). Further, Treasury is
clarifying that capital expenditures
related to food banks and other facilities
primarily dedicated to addressing food
insecurity are eligible; recipients
seeking to use funds for capital
expenditures should refer to the section
Capital Expenditures in General
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113 See FAQ 2.21. Coronavirus State and Local
Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
114 Jung Hyun Choi, Laurie Goodman, and Daniel
Pang, The Pandemic Is Making It Difficult for Mom-
and-Pop Landlords to Maintain Their Properties,
Urban Institute (July 23, 2021), https://
www.urban.org/urban-wire/pandemic-making-it-
difficult-mom-and-pop-landlords-maintain-their-
properties.
115 U.S. Energy Information Administration,
Residential Energy Consumption Survey (2017),
Retrieved from https://www.eia.gov/consumption/
residential/data/2015/hc/php/hc11.1.php.
D. Herna´ndez, Understanding ‘energy insecurity’
and why it matters to health, Social Science &
Medicine, 167, 1–10 (2016), https://doi.org/
10.1016/j.socscimed.2016.08.029.
116 Herna´ndez, D. (2016). Understanding ‘energy
insecurity’ and why it matters to health. Social
Science & Medicine, 167, 1–10. https://doi.org/
10.1016/j.socscimed.2016.08.029.
117 U.S. Energy Information Administration,
Residential Energy Consumption Survey (RECS)
https://www.eia.gov/consumption/residential/data/
2015/hc/php/hc11.1.php. (last visited November 9,
2021)
Provisions: Other for additional
eligibility standards that apply to uses
of funds for capital expenditures.
2. Emergency housing assistance. The
interim final rule included an
enumerated eligible use for rent,
mortgage, or utility assistance and
counseling and legal aid to prevent
eviction or homelessness.
Public Comment: Several commenters
supported the inclusion of eviction
prevention activities as an eligible use
given the high number of households
behind on rent and potentially at risk of
eviction. Following release of the
interim final rule, Treasury had also
received requests for elaboration on the
types of eligible services in this
category. Some commenters also
recommended including assistance to
households for delinquent property
taxes, for example to prevent tax
foreclosures on homes, as an
enumerated eligible use.
Treasury Response: In response to
requests for elaboration on the types of
eligible services for eviction prevention,
Treasury has provided further guidance
that these services include ‘‘housing
stability services that enable eligible
households to maintain or obtain
housing, such as housing counseling,
fair housing counseling, case
management related to housing stability,
outreach to households at risk of
eviction or promotion of housing
support programs, housing related
services for survivors of domestic abuse
or human trafficking, and specialized
services for individuals with disabilities
or seniors that support their ability to
access or maintain housing,’’ as well as
‘‘legal aid such as legal services or
attorney’s fees related to eviction
proceedings and maintaining housing
stability, court-based eviction
prevention or eviction diversion
programs, and other legal services that
help households maintain or obtain
housing.’’113 Treasury also emphasized
that recipients may work with court
systems, nonprofits, and a wide range of
other organizations to implement
strategies to support housing stability
and prevent evictions.
In the final rule, Treasury is
maintaining these enumerated eligible
uses, including those described in the
interim final rule and later guidance, in
line with commenters’
recommendations. To enhance clarity,
Treasury is also elaborating on some
types of services included under this
eligible use category; this remains a
non-exhaustive list of eligible services.
For example, eligible services under this
use category include: Rent, rental
arrears, utility costs or arrears (e.g.,
electricity, gas, water and sewer, trash
removal, and energy costs, such as fuel
oil), reasonable accrued late fees (if not
included in rental or utility arrears),
mortgage payment assistance, financial
assistance to allow a homeowner to
reinstate a mortgage or to pay other
housing-related costs related to a period
of forbearance, delinquency, or default,
mortgage principal reduction,
facilitating mortgage interest rate
reductions, counseling to prevent
foreclosure or displacement, relocation
expenses following eviction or
foreclosure (e.g., rental security
deposits, application or screening fees).
Treasury is clarifying that assistance to
households for delinquent property
taxes, for example to prevent tax
foreclosures on homes, was permissible
under the interim final rule and
continues to be so under the final rule.
In addition, Treasury is also clarifying
that recipients may administer utility
assistance or address arrears on behalf
of households through direct or bulk
payments to utility providers to
facilitate utility assistance to multiple
consumers at once, so long as the
payments offset customer balances and
therefore provide assistance to
households.
This eligible use category also
includes emergency assistance for
individuals experiencing homelessness,
either individual-level assistance (e.g.,
rapid rehousing services) or assistance
for groups of individuals (e.g., master
leases of hotels, motels, or similar
facilities to expand available shelter).
Further, Treasury is clarifying that
transitional shelters (e.g., temporary
residences for people experiencing
homelessness) are eligible capital
expenditures. Recipients seeking to use
funds for capital expenditures should
refer to the section Capital Expenditures
in General Provisions: Other for
additional eligibility standards that
apply to uses of funds for capital
expenditures.
Note that this enumerated eligible use
describes ‘‘emergency housing
assistance,’’ or assistance for responses
to the immediate or near-term negative
economic impacts of the pandemic. The
final rule also clarifies and expands the
ability of recipients to use SLFRF funds
to address the general lack of affordable
housing and housing challenges
underscored by the pandemic. For
discussion of affordable housing eligible
uses, including services that primarily
increase access to affordable, high-
quality housing and support stable
housing and homeownership over the
long term, see the eligible use for
‘‘promoting long-term housing security:
Affordable housing and homelessness.’’
3. Emergency assistance for pressing
needs: Burials, home repairs,
weatherization, or other needs. The
interim final rule included an
enumerated eligible use for emergency
assistance for burials, home repairs,
weatherization, and other needs; these
types of programs may provide
emergency assistance for pressing and
unavoidable household needs. Treasury
did not receive comments on this
eligible use and is maintaining it in the
final rule.
Background on Home Repairs and
Weatherization: The economic
downturn has meant fewer households
had the resources needed to make
necessary home repairs and
improvements. In May 2021, 28 percent
of landlords reported deferring
maintenance and 27 percent of tenants
reported maintenance requests going
unanswered.114 While small and
cosmetic repairs can often wait,
deferring major repairs, such as
plumbing needs, can result in unsafe
and unhealthy living environments and,
eventually, the need for more expensive
repairs and fixes.
In addition to repairs, many homes
are in need of weatherization.
Weatherization assistance helps low-
and moderate-income Americans save
energy, reduce their utility bills, and
keeps them and their homes safe. One
in three households is energy
insecure,115 meaning they do not have
the ability to meet their energy needs.116
Weatherization efforts are particularly
important for low- and moderate-
income households. Households of
color, renters, and households with low
or moderate incomes are all more likely
to report energy insecurity.117 These
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118 A. Drehobl, & L. Ross, Lifting the high energy
burden in America’s largest cities: How energy
efficiency can improve low income and
underserved communities, American Council for an
Energy Efficient Economy (2016), https://
www.aceee.org/sites/default/files/publications/
researchreports/u1602.pdf.
119 See, e.g., Nation Telecommunications and
Information Administration, More than Half of
American Households Used the Internet for Health-
Related Activities in 2019, NTIA Data Show
(December 7, 2020), https://www.ntia.gov/blog/
2020/more-half-american-households-used-
internet-health-related-activities-2019-ntia-data-
show; Nation Telecommunications and Information
Administration, Nearly a Third of American
Employees Worked Remotely in 2019, NTIA Data
Show (September 3, 2020) https://www.ntia.gov/
blog/2020/nearly-third-american-employees-
worked-remotely-2019-ntia-data-show; and
generally, Nation Telecommunications and
Information Administration, Digital Nation Data
Explorer (June 10, 2020), https://www.ntia.gov/
data/digital-nation-data-explorer.
120 BroadbandSearch Blog Post, How Do U.S.
Internet Costs Compare To The Rest Of The World?,
available at https://www.broadbandsearch.net/blog/
internet-costs-compared-worldwide.
121 Pew Research Center, Mobile Technology and
Home Broadband 2021 (June 3, 2021), https://
www.pewresearch.org/internet/2021/06/03/mobile-
technology-and-home-broadband-2021/.
122 Pew Research Center, 53% of Americans Say
the internet Has Been Essential During the COVID–
19 Outbreak (April 30, 2020), https://www.pew
research.org/internet/2020/04/30/53-of-americans-
say-the-internet-has-been-essential-during-the-
covid-19-outbreak/.
123 Id.
disparities are partially a result of
economic hardship but are also caused
by inequitable access to housing with
proper insulation, up to date heating,
cooling, and ventilation systems, and
functioning and up to date lighting and
appliances.118 While programs that
address the effects of energy hardships,
like the Low-Income Home Energy
Assistance Program (LIHEAP), are
critical, weatherization attempts to
address root causes by addressing issues
that lead to energy insecurities.
4. Internet access or digital literacy
assistance. The interim final rule
included an enumerated eligible use for
assistance to households for internet
access or digital literacy assistance. This
enumerated eligible use, which
responds to the negative economic
impacts of the pandemic on a household
by providing assistance that helps them
secure internet access or increase their
ability to use computers and the
internet, is separate from the eligible use
category for investments in broadband
infrastructure, under Sections
602(c)(1)(D) and 603(c)(1)(D), which is
used to build new broadband networks
through infrastructure construction or
modernization. For discussion of
broadband infrastructure investment in
the final rule, see section Broadband
Infrastructure in Infrastructure.
Background: The COVID–19 public
health emergency has underscored the
importance of universally available,
high-speed, reliable, and affordable
broadband coverage as millions of
Americans rely on the internet to
participate in, among other critical
activities, school, healthcare, and work.
Recognizing the need for such
connectivity, SLFRF funds can be used
to make necessary investments in
broadband infrastructure that increase
access over the long term, as well as the
necessary supports to purchase internet
access or gain digital literacy skills
needed to complete activities of daily
living during the pandemic.
The National Telecommunications
and Information Administration (NTIA)
highlighted the growing necessity of
broadband in daily lives through its
analysis of NTIA internet Use Survey
data, noting that Americans turn to
broadband internet service for every
facet of daily life including work, study,
and healthcare.119 With increased use of
technology for daily activities and the
movement by many businesses and
schools to operating remotely during the
pandemic, broadband has become even
more critical for people across the
country to carry out their daily lives.
However, even in areas where
broadband infrastructure exists,
broadband access may be out of reach
for millions of Americans because it is
unaffordable, as the United States has
some of the highest broadband prices in
the Organisation for Economic Co-
operation and Development (OECD).120
According to a 2021 Pew Research
Center study, 20 percent of non-
broadband users say that the monthly
cost of home broadband is the primary
reason they do not have broadband at
home, and 40 percent say that cost is
one reason for their lack of home
broadband.121 Further, according to
another survey, 22 percent of parents
with homebound schoolchildren during
the COVID–19 pandemic say that it is
very or somewhat likely that their
children will have to rely on public wi-
fi to finish their schoolwork because
there is no reliable internet connection
at home; this percentage nearly doubles
for lower-income parents, 40 percent of
whom noted that their children will
have to rely on public wi-fi.122 The
same survey showed that 36 percent of
lower-income parents with homebound
children say their child will not be able
to complete their schoolwork because
they do not have access to a computer
at home.123
Public Comment: Many commenters
highlighted the importance of
broadband access during the pandemic,
including for remote work and
education, and argued that affordability
presents a major barrier to broadband
adoption by households; in other words,
many households live in areas that have
broadband infrastructure and service
available but are unable to purchase
service for their household due to the
high cost. These commenters argued
that broadband must be affordable to be
accessible.
Commenters proposed several
potential responses to affordability
concerns. Some commenters
recommended that building ‘‘gap
networks,’’ or broadband networks built
at low cost to provide affordable service
in areas where it is lacking, be eligible
as assistance to households to respond
to the negative economic impacts of the
pandemic, even if they do not meet the
technical standards for eligibility under
the eligible use category of broadband
infrastructure investment, especially the
required speed standards for new
service. These commenters argued that
the networks have shown promise as a
timely means to expand access to
affordable broadband internet during
the pandemic, even if they may not
provide service speeds needed for more
intensive internet uses. Another
commenter requested eligible uses
include funding cellular towers to
decrease costs. One commenter
recommended that affordability should
be addressed through other programs
but not SLFRF given that affordability
and availability may require nuanced
solutions that would be complex to
combine.
Treasury Response: The interpretive
framework and enumerated eligible uses
allow recipients flexibility to address
identified pandemic impacts, including
through solutions that take into account
the particularized issues in their
community. Given extensive commenter
feedback on the importance of
affordability to achieving broadband
access, and the centrality of broadband
to participating in work, education,
healthcare, and other activities during
the pandemic, affordability programs
are an appropriate eligible use to
respond to the negative economic
impacts of the pandemic and Treasury
is maintaining the enumerated eligible
use for assistance to households for
internet access and digital literacy
programs in the final rule.
Building or constructing new
broadband networks is an infrastructure
investment and is governed by a
separate clause in the statute. Treasury
has addressed comments on ‘‘gap
networks’’ that require infrastructure
build-out in the section Broadband
Infrastructure in Infrastructure.
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124 Amy Finkelstein & Matthew J Notowidigdo,
Take-Up and Targeting: Experimental Evidence
from SNAP, The Quarterly Journal of Economics,
vol 134(3), pages 1505–1556 (2019), https://
www.nber.org/papers/w24652.
Public Comment: Some commenters
also use the term ‘‘gap networks’’ to
refer to equipment installed as part of
wi-fi systems, such as routers, repeaters,
and access points; this equipment
provides consumer access to an existing
broadband network and does not require
new network build-out or construction.
These commenters recommended that
Treasury permit, as assistance to
households for internet access,
investments in public wi-fi networks,
free wi-fi in public housing
communities, and other equipment that
offers internet access to end users by
utilizing existing broadband networks.
Other commenters recommended that
eligible uses in this category include
providing devices and equipment
necessary to access the internet, like
computers and routers, directly to low-
income households.
Treasury Response: Treasury has
determined that these services, which
expand internet access without
constructing new networks, are an
appropriate enumerated eligible use as
assistance to households to respond to
a negative economic impact, and they
are permitted under the final rule.
Treasury is clarifying that eligible uses
under this category can also include a
wide range of programs and services to
expand internet access and digital
literacy, such as subsidies for the cost of
internet service, other programs that
support adoption of internet service
where available, digital literacy
programs, or programs that provide
devices and equipment to access the
internet (e.g., programs that provide
equipment like tablets, computers, or
routers) to households. Recipients
seeking to use funds for equipment
should refer to the section Capital
Expenditures in General Provisions:
Other for additional eligibility standards
that apply to uses of funds for capital
expenditures (e.g., equipment, property,
and facilities).
5. Cash assistance. The interim final
rule included as an enumerated eligible
use cash assistance and provided that
cash transfers must be ‘‘reasonably
proportional’’ to the negative economic
impact they address and may not be
‘‘grossly in excess of the amount needed
to address’’ the impact. In assessing
whether a transfer is reasonably
proportional, recipients may ‘‘consider
and take guidance from the per person
amounts previously provided by the
Federal Government in response to the
COVID–19 crisis,’’ and transfers
‘‘grossly in excess of such amounts’’ are
not eligible.
Public Comment: Several commenters
expressed support for this eligible use,
noting that this is a common policy tool
for some governments to support the
well-being of households and
individuals in their communities. Some
commenters requested that Treasury set
a specific dollar amount for permissible
cash transfers, and Treasury has also
received recipient questions on whether
specific types of transfers, such as those
to a substantial share of the population
in the jurisdiction, would be a
permissible use of funds.
Treasury Response: Treasury is
maintaining this enumerated eligible
use in the final rule, in line with
commenters’ recommendations. Because
the final rule is intended to provide
flexibility to recipients to respond to the
particularized pandemic impacts in
their communities, which may vary in
type and intensity, setting a specific
dollar threshold for eligible cash
transfers would fail to recognize the
particularized needs of communities
and limit recipients’ flexibility to tailor
their response to those needs.
To provide greater clarity, Treasury is
elaborating on the analysis that
recipients may undertake to assess the
eligibility of specific cash assistance
programs or transfers. Cash transfers,
like all eligible uses in this category,
must respond to the negative economic
impacts of the pandemic on a household
or class of households. For the reasons
discussed above, recipients may
presume that low- and moderate-income
households (as defined in the final rule),
as well as households that experienced
unemployment, food insecurity, or
housing insecurity, experienced a
negative economic impact due to the
pandemic.
Recipients may also identify other
households or classes of households
that experienced a negative economic
impact of the pandemic and provide
cash assistance that is reasonably
proportional to, and not grossly in
excess of, the amount needed to address
the negative economic impact. For
example, in the ARPA, Congress
authorized Economic Impact Payments
to households at certain income levels,
identifying and responding to a negative
economic impact of the pandemic on
these households.
Finally, Treasury has reiterated in the
final rule that responses to negative
economic impacts should be reasonably
proportional to the impact that they are
intended to address. Uses that bear no
relation or are grossly disproportionate
to the type or extent of harm
experienced would not be eligible uses.
Reasonably proportional refers to the
scale of the response compared to the
scale of the harm. It also refers to the
targeting of the response to beneficiaries
compared to the amount of harm they
experienced; for example, it may not be
reasonably proportional for a cash
assistance program to provide assistance
in a very small amount to a group that
experienced severe harm and in a much
larger amount to a group that
experienced relatively little harm.
6. Survivor’s benefits. The interim
final rule included an enumerated
eligible use for survivor’s benefits to
surviving family members of
individuals who have died from
COVID–19, including cash assistance to
widows, widowers, or dependents.
Public Comment: Treasury did not
receive any comments on the inclusion
of survivor’s benefits as an enumerated
use for impacted households in the
interim final rule.
Treasury Response: This use of funds
remains eligible under the final rule.
Consistent with the general
reorganization noted above, the final
rule organizes survivor’s benefits under
assistance to households to clarify that
households are the intended
beneficiaries of survivor’s benefits.
7. Assistance accessing or applying
for public benefits or services.
Recognizing that eligible households
often face barriers to accessing public
benefits or services that improve health
and economic outcomes, the interim
final rule included as an enumerated
eligible use in disproportionately
impacted communities, public benefits
navigators to assist community members
with navigating and applying for
available federal, state, and local public
benefits or services. Treasury also
clarified in subsequent guidance after
the interim final rule that this eligible
use category would include outreach
efforts to increase uptake of the Child
Tax Credit.
Background: The under-enrollment of
eligible households in social assistance
programs is a well-recognized and
persistent challenge. There are many
reasons why a household may not be
receiving a particular benefit even
though they are eligible. For many
federal programs, enrollment processes
vary from state-to-state. Sometimes,
households are simply unaware that
they are eligible for a particular
benefit.124 For example, despite having
one of the highest rates of participation
of any benefits program, nearly 20
percent of eligible individuals do not
participate in the Supplementary
Nutritional Assistance Program
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125 United States Department of Agriculture,
Trends in Supplemental Nutrition Assistance
Program Participation Rates: Fiscal Year 2016 to
Fiscal Year 2018 (May 2021), https://fns-prod.
azureedge.net/sites/default/files/resource-files/
Trends2016-2018.pdf.
126 Jeremy Barofsky et al., Spreading Fear: The
Announcement Of The Public Charge Rule Reduced
Enrollment In Child Safety-Net Programs, Health
Affairs (October 2020), https://www.health
affairs.org/doi/full/10.1377/hlthaff.2020.00763.
127 See, e.g., U.S. Department of the Treasury, By
ZIP Code: Number of Children under Age 18 with
a Social Security Number Who Are Not Found on
a Tax Year 2019 or 2020 Tax Return but who
Appear on a Tax Year 2019 Form 1095 and
Associated Number of Policy Holders (June 2021),
https://home.treasury.gov/system/files/131/
Estimated-Counts-of-Children-Unclaimed-for-CTC-
by-ZIP-Code-2019.pdf.
128 Women have carried a larger share of
childcare responsibilities than men during the
COVID–19 crisis. See, e.g., Gema Zamarro & Mar(´a
J. Prados, Gender differences in couples’ division of
childcare, work and mental health during COVID–
19, Rev. Econ. Household 19:11–40 (2021),
available at https://link.springer.com/article/
10.1007/s11150-020-09534-7; Titan Alon et al., The
Impact of COVID–19 on Gender Equality, National
Bureau of Economic Research Working Paper 26947
(April 2020), available at https://www.nber.org/
papers/w26947.
129 See, e.g., Center For The Study Of Child Care
Employment (CSCCE), Child Care Sector Jobs: BLS
Analysis (November 8, 2021), https://cscce.
berkeley.edu/child-care-sector-jobs-bls-analysis/;
Emma K. Lee, and Zachary Parolin. The Care
Burden during COVID–19: A National Database of
Child Care Closures in the United States, Socius
(January 2021), doi:10.1177/23780231211032028.
130 Jason Furman, Melissa Schettini Kearney, and
Wilson Powell, The Role of Childcare Challenges in
the US Jobs Market Recovery During the COVID–
19 Pandemic, NBER Working Paper No. 28934 (June
2021), https://www.nber.org/papers/w28934.
131 U.S. Census Bureau, Phase 3.2 Household
Pulse Survey: Table 2. Childcare Arrangements in
the Last 4 Weeks for Children Under 5 Years Old,
by Selected Characteristics, (Washington: 2021),
available at https://www.census.gov/programs-
surveys/household-pulse-survey/data.html.
132 Id.
133 N. Kalluri, C. Kelly, & A. Garg, Child Care
During the COVID–19 Pandemic: A Bad Situation
Made Worse. Pediatrics (2021), https://doi.org/
10.1542/peds.2020-041525.
134 National Association for the Education of
Young Children, Am I Next? Sacrificing to Stay
Open, Child Care Providers Face a Bleak Future
Without Relief (December 2020), https://
www.naeyc.org/sites/default/files/globally-shared/
downloads/PDF.
135 G. G. Weisenfeld, Impacts of Covid-19 on
Preschool Enrollment and Spending, New
Brunswick, NJ: National Institute for Early
Education Research (2021), https://nieer.org/wp-
content/uploads/2021/03/NIEER_Policy_Brief_
Impacts-of-Covid-19on_Preschool_Enrollment_and_
Spending_3_16_21.pdf.
136 Heather Long, ‘The pay is absolute crap’:
Child-care workers are quitting rapidly, a red flag
for the economy, Washington Post (September 19,
2021), https://www.washingtonpost.com/business/
2021/09/19/childcare-workers-quit/.
137 Monash University, The emotional toll of
COVID–19 among early childhood educators
(August 5, 2020) https://lens.monash.edu/@
education/2020/08/05/1381001/the-emotional-toll-
of-covid-19-among-early-childhood-educators.
138 Daphna Bassok and Anna Shapiro,
Understanding COVID–19-era enrollment drops
Continued
(SNAP).125 In other cases, policies like
public charge and asset testing can
discourage otherwise eligible
households.126 While the gap between
households that need assistance and the
number of households participating in
public benefit programs has always
existed, narrowing that gap and
ensuring households receive the support
they need is critical in mitigating the
negative economic impacts of the
pandemic.
Public Comment: Treasury has also
received feedback from recipients and
stakeholders noting the need to increase
awareness and uptake of assistance
programs, including gaps that remain in
enrollment of eligible households in
programs to address the negative
economic impacts of the pandemic.127
Treasury Response: Treasury has
determined that this impact of the
pandemic is widely experienced across
many jurisdictions and programs or
services to increase awareness and
uptake of assistance programs would
respond to the pandemic’s negative
economic impact in all communities. As
such, in the final rule, this use is eligible
for any impacted household or class of
households, not only in
disproportionately impacted
communities.
8. Promoting healthy childhood
environments. The interim final rule
included programs and services that
promote healthy childhood
environments as an enumerated eligible
use for disproportionately impacted
households. The interim final rule listed
three programs or services included
under this use: Childcare; programs to
provide home visits by health
professionals, parent educators, and
social service professionals to
individuals with young children to
provide education and assistance for
economic support, health needs, or
child development; and services for
child welfare-involved families and
foster youth to provide support and
education on child development,
positive parenting, coping skills, or
recovery for mental health and
substance use. The interim final rule
also included an enumerated eligible
use for early learning services in
disproportionately impacted
communities, to address disparities in
education.
Public Comment: Childcare and Early
Learning: Treasury received multiple
comments that were supportive of the
provision of childcare. Treasury has also
received multiple comments and
questions indicating that recipients have
identified a need for childcare for a
broader range of households and
communities, for example those that
may need childcare in order to return to
work, in addition to households and
communities disproportionately
impacted by the pandemic. Several
commenters expressed uncertainty
about how childcare facilities should
interact with the boundaries of a QCT.
Finally, one commenter recommended
that pre-K or early learning services
encompass care for infants and toddlers,
arguing that these types of care are often
more expensive or challenging to access
for families.
Background: Childcare and Early
Learning: As daycares and schools
closed in-person activities during the
pandemic, many working families were
left without childcare during the day.128
Although daycare centers and schools
have since reopened in many
communities, there remains a persistent
childcare shortage as childcare
employment levels have not fully
rebounded since the sharp decline in
childcare employment at the beginning
of the pandemic.129 As a result, working
parents in communities across the
country, and more specifically women,
may face challenges entering or
reentering the labor force.130
Low-income households are also more
likely to lose access to quality
childcare.131 The widespread closure of
childcare centers combined with a lack
of access to paid family leave means
parents in low-income households are
more likely to experience a reduction of
income or leave their jobs due to a lack
of childcare options.132
Additionally, childcare providers
serving primarily low-income families
were less likely to remain open during
the pandemic because of tighter profit
margins and general community
financial insecurity, compared to
childcare providers serving primarily
high-income families.133 134
In addition to disruptions to
childcare, early learning services were
also significantly impacted by the
pandemic, and the disruption of these
services had widespread ramifications
for learning loss, parental support, and
equity. Early learning centers have seen
declined enrollment across the board,
though there was a larger dip in
enrollment for low-income
households.135 This lower enrollment
coincides with a diminishing workforce,
as similarly to childcare, early
childhood educators have been leaving
the profession due to long hours, low
pay,136 and health and safety
concerns.137 As a result, children’s
school readiness has suffered, leading to
potential long-term impacts on life
outcomes.138 The impact also extended
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4364 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
among early-grade public school students,
Brookings Institution (February 22, 2021), https://
www.brookings.edu/blog/brown-center-chalkboard/
2021/02/22/understanding-covid-19-era-
enrollment-drops-among-early-grade-public-school-
students/.
139 Centers for Disease Control and Prevention,
Pregnant and Recently Pregnant People, https://
www.cdc.gov/coronavirus/2019-ncov/need-extra-
precautions/pregnant-people.html (last visited
November 9, 2021).
140 Id.
141 Sarah Javaid, Sarah Barringer, Sarah D
Compton, Elizabeth Kaselitz, Maria Muzik, Cheryl
A. Moyer, The impact of COVID–19 on prenatal
care in the United States: Qualitative analysis from
a survey of 2519 pregnant women, Midwifery,
Volume 98, 2021, 102991, ISSN 0266–6138, https://
doi.org/10.1016/j.midw.2021.102991.
142 A Basu, HH Kim, R Basaldua, KW Choi, L
Charron, et al., A cross-national study of factors
associated with women’s perinatal mental health
and wellbeing during the COVID–19 pandemic,
PLOS ONE 16(4): e0249780, (2021), https://doi.org/
10.1371/journal.pone.0249780.
143 Amanda Taub, A New Covid-19 Crisis:
Domestic Abuse Rises Worldwide, New York Times
(April 6, 2020), https://www.nytimes.com/2020/04/
06/world/coronavirus-domestic-violence.html.
144 Xenia Shih Bion, Efforts to Reduce Black
Maternal Mortality Complicated by COVID–19,
California Health Care Foundation (April 20, 2020),
https://www.chcf.org/blog/efforts-reduce-black-
maternal-mortality-complicated-covid-19/.
145 U.S. Department of Health and Human
Services, Home Visiting Evidence of Effectiveness,
https://homvee.acf.hhs.gov/outcomes/maternal%20
health/In%20Brief.
146 National Conference of State Legislatures,
Criminal Justice System Responses to COVID–19
(November 16, 2020), https://www.ncsl.org/
research/civil-and-criminal-justice/criminal-justice-
and-covid-19.aspx.
147 John Burton Advocates for Youth, The
Cumulative Impact of the Pandemic on Youth Who
Have Been in Foster Care or Homeless (May 2020)
https://jbay.org/wp-content/uploads/2021/04/JBAY-
COVID-19-Impact.pdf.
148 John Kelly, Next Week, Thousands of Foster
Youth Will Age Out on the Same Day (September
21, 2021), https://imprintnews.org/subscriber-
content/thousands-of-foster-youth-will-age-out-on-
the-same-day/59006.
149 Conrad-Hiebner, Aislinn, and Elizabeth
Byram, The Temporal Impact of Economic
Insecurity on Child Maltreatment: A Systematic
Review. Trauma, Violence, & Abuse, vol. 21, no. 1,
Jan. 2020, pp. 157–178, doi:10.1177/
1524838018756122.
to parents. Parents, especially mothers,
may face challenges reentering or
remaining in the workforce if early
learning services are unavailable.
Treasury Response: Childcare and
Early Learning Services: Treasury agrees
with commenters’ analysis that
challenges accessing or affording
childcare have been widespread during
the pandemic, affecting many
jurisdictions and populations across the
country. Disruptions to early care and
learning services similarly have had
broad impact and likely result in
negative impacts for young children and
their parents. As such, these
enumerated eligible uses are generally
responsive to the negative economic
impacts of the pandemic in all
communities, not just in
disproportionately impacted
communities. Under the final rule,
childcare and early learning services are
available to impacted households or
classes of households, not just those
disproportionately impacted. These
eligible uses can include new or
expanded services, increasing access to
services, efforts to bolster, support, or
preserve existing providers and services,
and similar activities.
Further, Treasury is clarifying that
improvements to or new construction of
childcare, daycare, and early learning
facilities are eligible capital
expenditures. Recipients seeking to use
funds for capital expenditures should
refer to the section Capital Expenditures
in General Provisions: Other for
additional eligibility standards that
apply to uses of funds for capital
expenditures.
Public Comment: Home Visiting:
Treasury has also received questions
about whether the provision of home
visiting services would be responsive to
the health and mental health needs of
impacted new mothers, citing the
positive mental health impacts shown
on the mother as well as improved
outcomes for children.
Background: Home Visiting: Pregnant
and recently pregnant individuals are at
an increased risk for serious illness from
COVID–19.139 Furthermore, pregnant
individuals with COVID–19 are more
likely to experience preterm birth
(delivering the baby earlier than 37
weeks).140 In addition to heightened
health risks from COVID–19, pregnant
individuals may have experienced
significant changes to their prenatal care
during the pandemic 141 or may also
have experienced increased mental
health challenges, including high levels
of depression, anxiety, loneliness, and
post-traumatic stress during the
pandemic.142
Home visiting services provided to
families, particularly new mothers and
newborns, feature regular home visits
from trained nurses, social workers,
and/or counselors who provide health
care, mental health resources, positive
parenting support, support in making
personal health decisions, and
awareness of other potentially helpful
services. These functions have become
even more essential at mitigating
negative factors associated with the
pandemic. Home visits give
professionals a chance to flag potential
domestic violence, which has risen
worldwide over the course of the
pandemic.143 Racial health disparities
can also be driven down by home visits.
For example, Black women are more
likely to avoid hospitals during the
pandemic, and home visitors can help
either assuage concerns around
hospitals or give effective advice for
alternative methods of childbirth.144
Given the disproportionate effect of the
pandemic on people of color, home
visits are an essential equity tool that
tackle major negative effects of the
pandemic. These are just a few
selections from the evidence that
suggests many home visiting models can
have a positive effect on maternal
physical and mental health.145
Treasury Response: Home Visiting:
Given the widespread impact of
COVID–19 on pregnant and recently
pregnant individuals, Treasury is re-
categorizing home visiting services as an
eligible use for impacted communities,
not just disproportionately impacted
communities. Under the final rule, these
eligible uses are available to impacted
households or classes of households.
Public Comment: Child Welfare:
While the interim final rule noted that
certain types of assistance, particularly
around child development and
parenting, were eligible for child
welfare-involved families, Treasury has
received some recipient questions
asking whether financial, educational,
housing, or other supports and services
are eligible uses for foster youth,
including those aging out of the system,
and child welfare-involved families.
Other commenters asked about whether
funding for kinship care would be
eligible.
Background: Child Welfare: The
COVID–19 pandemic placed meaningful
strain on the child welfare and foster
care system. Court hearings were
delayed,146 essential mental health care
was shifted to a virtual environment,
and attendance and performance in
school among foster children dropped
sharply.147 Additionally, there was a
nationwide rise of new children
entering the foster care system and
many states placed temporary moratoria
on children aging out of the foster care
system.148 As these temporary moratoria
expire, additional support will be
needed to assist children exiting the
system.
Additionally, financial and material
hardship are causal factors in the
increase of new children entering the
foster care system, whether through loss
of a caregiver, domestic violence,149 or
other associated costs of the pandemic.
Therefore, support to decrease these
hardships will support families and
increase positive outcomes for youth
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150 Verlenden JV, Pampati S, Rasberry CN, et al.
Association of Children’s Mode of School
Instruction with Child and Parent Experiences and
Well-Being During the COVID–19 Pandemic—
COVID Experiences Survey, United States, October
8–November 13, 2020. MMWR Morb Mortal Wkly
Rep 2021;70:369–376. DOI: http://dx.doi.org/
10.15585/mmwr.mm7011a1external icon.
151 U.S. Department of Education, Strategies for
Using American Rescue Plan Funding to Address
the Impact of Lost Instructional Time, August 2021.
Retrieved from https://www2.ed.gov/documents/
coronavirus/lost-instructional-time.pdf.
152 Consumer Financial Protection Bureau,
Housing insecurity and the COVID–19 pandemic
Continued
and families that may otherwise become
involved in the child welfare system.
Treasury Response: In the final rule,
Treasury is clarifying that services to
foster youth, including those aging out
of the system, and child welfare-
involved families may encompass a
wide array of financial, educational,
child development, or health supports,
or other supports necessary, including
supports for kinship care.
9. Addressing the impacts of lost
instructional time.
Public Comment: The interim final
rule included an enumerated eligible
use to address educational disparities in
disproportionately impacted
communities, recognizing that
underserved students have been more
severely impacted by the pandemic and
including responsive services for early
learning, enhance funding to high-
poverty districts, and providing
evidence-based services to address the
academic, social, emotional, and mental
health needs of students. Some
commenters expressed concerns that
learning loss or the negative impacts of
lost instructional time due to school
closures or remote education during the
pandemic had affected a significant
share of students in grades kindergarten
through twelve (K–12), including
students who may not fall within a
disproportionally impacted group.
Background: The COVID–19
pandemic resulted in the widespread
closure of schools across the nation.
While many schools and districts
reopened to in-person instruction or
implemented remote learning, the shift
was not immediate or without
consequence. Children who received
virtual only or combined remote and in-
person instruction were more likely to
report experiencing negative mental-
and physical health outcomes than
children who received in-person
instruction.150
Treasury Response: Under the final
rule, addressing the impact of lost
instructional time and/or learning loss
is an enumerated eligible use for
impacted households. When providing
services to address lost instructional
time, recipients may presume that any
K–12 student who lost access to in-
person instruction for a significant
period of time has been impacted by the
pandemic and is thus eligible for
responsive services.
Interventions or services that address
the impact of lost instructional time
may include offering high-quality
tutoring and other extended learning
opportunities, providing differentiated
instruction, implementing activities to
meet the comprehensive needs of
students, expanding and improving
language access for parents and families,
providing information and assistance to
parents and families on how they can
effectively support students, including
in a distance learning environment,
improving student engagement in
distance education, and administering
and using high-quality assessments to
assess students’ academic progress,
among others. In designing services
under this eligible use, recipients may
wish to reference guidance from the
Department of Education on strategies
for addressing lost instructional time.151
The final rule also maintains a
separate enumerated eligible use for
addressing educational disparities in
disproportionately impacted
communities. This eligible use includes
services to address disparities in
educational outcomes that predate the
pandemic and amplified its impact on
underserved students; these include, for
example, enhanced funding to high-
poverty districts and providing
evidence-based services to address the
academic, social, emotional, and mental
health needs of students.
Finally, as described in the section
Public Health, recipients can provide a
broad range of behavioral health
services, including services for children
and youth in schools, to respond to the
impacts of the pandemic on mental
health and other behavioral health
issues. When providing behavioral
health services, recipients may presume
that the general public was impacted by
the pandemic and provide behavioral
health services to members of the
general public, including children and
youth in schools, without any further
analysis of impacts of the pandemic on
those individuals and whether the
service is responsive.
10. Promoting long-term housing
security: affordable housing and
homelessness. Under the interim final
rule, recipients may use SLFRF funds to
provide a set of housing services to
communities that have been
disproportionately impacted by the
pandemic. Specifically, the interim final
rule provided that programs or services
that address housing insecurity, lack of
affordable housing, or homelessness,
were responsive to the negative
economic impacts of the pandemic
when provided to disproportionately
impacted households and communities.
The enumerated uses included
supportive housing or other programs or
services to improve access to stable,
affordable housing among individuals
who are homeless and development of
affordable housing to increase supply of
affordable and high-quality living units.
Many recipients have already
announced plans to use SLFRF funds
for affordable housing interventions in
all of these categories. Treasury received
many comments asking for additional
clarity or flexibility in these uses.
As detailed below, based on multiple
public comments and questions and
Treasury’s subsequent analysis,
Treasury has determined that
supportive housing or other programs or
services to improve access to stable,
affordable housing among individuals
who are homeless, and the development
of affordable housing to increase supply
of affordable and high-quality living
units are responsive to the needs of
impacted populations, not only
disproportionately impacted
populations. This final rule reflects this
clarification and builds on the
objectives stated in the interim final rule
to improve access to stable, affordable
housing, including through
interventions that increase the supply of
affordable and high-quality living units,
improve housing security, and support
durable and sustainable
homeownership.
Finally, note that ‘‘emergency housing
assistance,’’ or assistance for responses
to the immediate negative economic
impacts of the pandemic through
services like financial assistance for
rental arrears or mortgage payments, is
also an eligible use category for
assistance to households under the final
rule; see the eligible use for ‘‘emergency
housing assistance’’ above. The
provision of housing vouchers and
assistance relocating to neighborhoods
with higher levels of economic
opportunity remains an eligible use
under assistance to disproportionately
impacted households; for discussion,
see the eligible use for ‘‘housing
vouchers and assistance relocating’’
below.
Background: Affordable Housing: It is
clear that the ongoing pandemic and
resulting economic crisis are having a
profound, long-term negative effect on
the pre-existing affordable housing
crisis facing low-income households.152
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(March 2020), https://files.consumerfinance.gov/f/
documents/cfpb_Housing_insecurity_and_the_
COVID-19_pandemic.pdf.
153 Joint Center For Housing Studies Of Harvard
University, The State of the Nation’s Housing (June
2021), https://www.jchs.harvard.edu/sites/default/
files/reports/files/Harvard_JCHS_State_Nations_
Housing_2021.pdf.
154 Davin Reed and Eileen Divringi, Household
Rental Debt During COVID–19: Update for 2021,
Federal Reserve Bank of Philadelphia (2020),
available at: https://www.philadelphiafed.org/
community-development/housing-and-
neighborhoods/household-rental-debt-during-covid-
19-update-for-2021. Further, some research suggests
that liquidity may be a more important predictor of
default than other factors, including income or
equity. See Trading Equity for Liquidity (June
2019), available at https://www.jpmorganchase.
com/content/dam/jpmc/jpmorgan-chase-and-co/
institute/pdf/institute-trading-equity-for-
liquidity.pdf.
The combination of a large number of
higher-income households who have
weathered the pandemic without
significant income losses, low interest
rates, and housing supply constraints
exacerbated by the pandemic, have
driven a sharp increase in the sale price
of homes.153 Meanwhile, many low-
income renters and homeowners are
struggling with lost employment and
income and are behind on their housing
payments.154
Public Comment: Affordable Housing
Outside of Low-Income Geographies: A
major theme in comments was that
affordable housing interventions,
especially development of affordable
housing, should be allowed outside of
QCTs, as concentrating the supply of
affordable housing in low-income
geographies can have the effect of
increasing both concentrated poverty
and racial and economic segregation,
while locking lower-income households
in need of housing support out of high-
opportunity neighborhoods with access
to employment and amenities.
Treasury Response: Affordable
Housing Outside Low-Income
Geographies: As previously stated,
affordable housing is not confined to
low-income geographies under the
interim final rule. As discussed
elsewhere, the interim final rule
presumed that QCTs, as well as
communities served by Tribal
governments, were disproportionately
impacted for administrative
convenience, but recipients may
identify other populations, households,
or geographic areas with disparate
impacts of COVID–19 and provide
affordable housing services to them. For
example, under the interim final rule, a
city could determine that its low-
income residents faced disproportionate
impacts of COVID–19 and develop
affordable housing targeted to these
households. Such a scenario could
include, for example, affordable projects
in higher-income neighborhoods that
would allow residents to live closer to
jobs and well-resourced schools.
Additionally, as noted above,
Treasury is finalizing the rule with some
changes to the treatment of affordable
housing development designed to
clarify that permanent supportive
housing or other programs or services to
improve access to stable, affordable
housing among individuals who are
homeless, and the development of
affordable housing to increase supply of
affordable and high-quality living units,
are responsive to individuals and
households that were impacted by the
pandemic in addition to those that were
disproportionately impacted. This shift
is in line with commenters’
recommendations and consistent with
the facts described above, which
demonstrate that lack of supply of
affordable housing units contributed to
the pandemic’s impact on housing
insecurity and unsustainable housing
cost burdens and that these impacts
were experienced broadly across the
country.
Public Comment: Eligible Activities:
Many commenters asked for clarity on
what types of activities (e.g., land
acquisition, construction, pre-
construction costs, operating costs, etc.)
are eligible uses of SLFRF, and what
affordability criteria must be applied to
affordable housing development.
Commenters encouraged Treasury to
allow the full array of affordable
housing activities, including particular
requests for broad flexibility for Tribal
communities, and to specify that
‘‘development’’ should include
construction, preservation,
rehabilitation, and operation. Other
commenters requested clarification
about permissible program
administration approaches for
affordable housing, such as contracting
methods and distribution of funds.
Some commenters asked that
Treasury require SLFRF funds to be
focused on the lowest-income
households, who suffer the most severe
rent burdens and risks of housing
instability, and whose housing situation
has left them particularly vulnerable to
COVID–19. For example, one
commenter argued that SLFRF funds
should only be used to support
affordable housing for households
making 50 percent of AMI or less and
that recipients should be required to set
aside significant portions of any
developments for renters making 30
percent of AMI or less and persons with
physical and sensory disabilities. Other
commenters requested a more flexible
approach to affordable housing
definitions.
Treasury Response: Eligible Activities:
The final rule clarifies eligibility of
affordable housing development for
recipients; these uses were eligible
under the interim final rule, but
Treasury is providing further guidance
to enhance clarity and respond to
recipient and commenter questions.
As with all interventions to address
the negative economic impacts of the
pandemic, affordable housing projects
must be responsive and proportional to
the harm identified. This test may be
met by affordable housing development
projects—which may involve large
expenditures and capital investments—
if the developments increase the supply
of long-term affordable housing for low-
income households. While there may be
less costly (or non-capital) alternatives
to affordable housing development, a
comprehensive response to the
widespread housing challenges
underscored by the pandemic will
require the production of additional
affordable homes, and targeted
affordable housing development is a
cost-effective and proportional response
to this need.
For purposes of this test, Treasury
will presume that any projects that
would be eligible for funding under
either the National Housing Trust Fund
(HTF) or the Home Investment
Partnerships Program (HOME) are
eligible uses of SLFRF funds. Note that
these programs use different income
limits than the definition of low- and
moderate-income adopted by Treasury.
Given the severity of the affordable
housing shortage, and the ways in
which the pandemic has exacerbated
the need for affordable, high-quality
dwelling units, Treasury has determined
that the households served by these
federal housing programs have been
impacted by the pandemic and its
negative economic impacts and that
development of affordable housing
consistent with these programs is a
related and reasonably proportional
response to those impacts. Additionally,
affordable housing projects provided by
a Tribal government are eligible uses of
SLFRF if they would be eligible for
funding under the Indian Housing Block
Grant program, the Indian Community
Development Block Grant program, or
the Bureau of Indian Affairs Housing
Improvement Program. Alignment with
these programs, which define
‘‘affordable housing’’ in a manner
consistent with a proportionate
response to the affordable housing
challenges faced by low- and moderate-
income households as a result of the
negative economic impacts of the
pandemic, is intended to give recipients
comfort and clarity as they design a
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4367 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
155 Stefan Pichler, Katherine Wen, and Nicolas R.
Ziebarth, COVID–19 Emergency Sick Leave Has
Helped Flatten The Curve In The United States:
Study examines the impact of emergency sick leave
on the spread of COVID–19, Health Affairs 39, no.
12 (2020): 2197–2204, https://www.health
affairs.org/doi/10.1377/hlthaff.2020.00863.
156 Scott Brown et al., Employee and Worksite
Perspectives of the Family and Medical Leave Act:
Results from the 2018 Surveys, Abt Associates (July
2020), https://www.dol.gov/sites/dolgov/files/
OASP/evaluation/pdf/WHD_FMLA2018Survey
Results_FinalReport_Aug2020.pdf.
157 Id.
158 Ann P. Bartel et al., Racial and ethnic
disparities in access to and use of paid family and
medical leave: evidence from four nationally
representative datasets, U.S. Bureau of Labor
Statistics (BLS) (January 2019), https://www.bls.gov/
opub/mlr/2019/article/racial-and-ethnic-
disparities-in-access-to-and-use-of-paid-family-
andmedical-leave.htm.
Continued
wide variety of affordable housing
interventions, including production,
rehabilitation, and preservation of
affordable rental housing and, in some
cases, affordable homeownership units.
These programs allow the financing of
a wide range of affordable housing
activities and set clear eligibility criteria
that many recipients are already familiar
with.
Finally, to further support sustainable
and durable homeownership, recipients
may consider offering down payment
assistance, such as through
contributions to a homeowner’s equity
at origination or that establish a post-
closing, mortgage reserve account on
behalf of the borrower that may be
utilized to make a missed or partial
mortgage payment at any point during
the life of the loan (e.g., if the borrower
faces financial stress). Homeownership
assistance that would be eligible under
the Community Development Block
Grant (at 24 CFR 507.201(n)) is also an
eligible use of SLFRF funds.
Public Comment: Permanent
Supportive Housing: Treasury has
received comments encouraging the use
of SLFRF funds for permanent
supportive housing. This is an eligible
use under the interim final rule: Both
the development of affordable housing
(including operating subsidies) and
wraparound services such as behavioral
health services, employment services,
and other supportive services, are
eligible responses to the public health
crisis or its negative economic impacts.
Treasury Response: The final rule
maintains the eligibility of permanent
supportive housing as an enumerated
use. Treasury is also clarifying that
other affordable housing developments
targeted to specialized populations are
also eligible, for example recovery
housing for individuals in recovery from
substance use.
Public Comment: Operating Expenses:
Commenters specifically asked that
Treasury allow the use of SLFRF funds
for operating expenses of affordable
housing units, as operating subsidies are
typically required to reach extremely
low-income households, whose
affordable rents may be lower than the
ongoing cost of operating their unit.
Treasury Response: Operating
expenses for eligible affordable housing
were an eligible use of funds under the
interim final rule and the final rule
maintains this treatment. This may
include capitalized operating reserves.
Rehabilitation and repair of public
housing will also be considered an
eligible use of SLFRF funds.
Public Comment: Affordable Housing
Loans and Revolving Loan Funds: Some
commenters requested that loans with
maturities beyond the period of
performance or revolving loan funds
that revolve beyond the period of
performance be eligible uses of SLFRF
funds if used for affordable housing.
Some commenters pointed out that for-
profit developers of low-income housing
through the Low-Income Housing Tax
Credit (LIHTC) may be deterred from
accepting grants to bridge funding gaps
in current LIHTC deals by the treatment
of grants to for-profit entities in the
calculation of eligible basis for the
LIHTC.
Treasury Response: The final rule
does not change the treatment of loans
from the interim final rule. For more
details see section Treatment of Loans
in Program Administration Provisions.
Similarly, the final rule does not change
the treatment of grants to support
affordable housing development,
including developments supported by
the LIHTC: such grants are an eligible
use of funds.
Additional enumerated eligible uses
for assistance to impacted households.
As noted above, the interim final rule
posed a question on what other types of
services or costs Treasury should
consider as eligible uses to respond to
the negative economic impacts of
COVID–19. In response, commenters
proposed a wide variety of additional
recommended enumerated eligible uses
to assist households, ranging from
general categories of services (e.g., legal
and social services) to services that
respond to needs widely experienced
across the country (e.g., access to and
affordability of health insurance) to
services that are most applicable to the
particularized needs of certain
populations or geographic areas of the
United States (e.g., senior citizens,
SNAP recipients, immigrants, formerly-
incarcerated individuals, responding to
environmental issues in certain
geographic regions). Other commenters
generally requested a high degree of
flexibility to respond to the particular
needs of their communities.
Treasury Response: Given the large
number and diversity of SLFRF
recipients, Treasury’s approach to
assistance to households in the final
rule aims to clarify additional
enumerated eligible uses that respond to
negative economic impacts of the
pandemic experienced widely in many
jurisdictions across the country, making
it clear and simple for recipients to
pursue these enumerated eligible uses
under the final rule. In the final rule,
Treasury is clarifying several additional
uses, which generally respond to
pandemic impacts experienced broadly
across jurisdictions and populations, are
eligible under the interim final rule as
assistance to households and continue
to be so under the final rule, as outlined
below.
11. Paid sick, medical, or family
leave.
Public Comment: Some commenters
argued that the pandemic increased the
need for paid sick or medical leave, as
staying home when ill is recommended
by the CDC to prevent spread of the
virus but lack of access to paid sick
leave often prevents workers from
staying home. Other commenters
recommended paid family leave as an
eligible use, arguing that shortages in
access to childcare or home health
assistance, as well as school closures,
may increase the need for family
members to serve as caretakers.
Background: The COVID–19
pandemic highlighted the importance of
paid leave as well as the number of
workers who do not have access to paid
sick and/or family leave. When workers
have access to paid leave, they are less
likely to report to work sick, and
therefore less likely to spread illnesses
in the workplace: One study
demonstrates that the emergency sick
leave provision of the Families First
Coronavirus Response Act (FFCRA)
reduced the spread of COVID–19.155
The lack of paid leave exacerbates
financial hardships experienced as a
result of the public health emergency. A
2018 survey by the Department of Labor
found that two-thirds of employees that
took unpaid or partial-paid leave
experienced financial hardship.156
Furthermore, because the Family and
Medical Leave Act (FMLA) excludes
small employers, part-time workers, and
workers who have been with their
employer for less than a year, 44 percent
of workers do not have access to even
unpaid leave.157 Workers of color and
workers with lower incomes are less
likely to have access to paid leave.158 159
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4368 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
159 U.S. Bureau of Labor Statistics, Employee
Benefits in the United States (March 2019), https://
www.bls.gov/ncs/ebs/benefits/2019/ownership/
civilian/table31a.pdf.
160 Maya Rossin-Slater et al., Local exposure to
school shootings and youth antidepressant use,
Proceedings of the National Academy of Sciences,
vol 117(38), pages 23484–23489 (2020), https://
www.pnas.org/content/117/38/23484; Ariel Marek
Pihl and Gaetano Basso, Did California Paid Family
Leave Impact Infant Health?, Journal of Policy
Analysis and Management, https://onlinelibrary.
wiley.com/doi/abs/10.1002/pam.2210.
161 J.C. Jacobs, A. Laporte, C.H. Van Houtven, P.C.
Coyte, Caregiving intensity and retirement status in
Canada. Social Science & Medicine, 102, 74–82
(2014), https://www.sciencedirect.com/science/
article/abs/pii/S0277953613006631.
162 E. Lightfoot, R.P. Moone, Caregiving in times
of uncertainty: Helping adult children of aging
parents find support during the COVID–19
outbreak, Journal of Gerontological Social Work,
63(6–7), 542–552 (2020), https://www.tandfon
line.com/doi/abs/10.1080/01634372.2020.1769793.
163 Note: ‘‘Caregiving intensity’’ is defined as the
amount and type of care provided by informal
caregivers; ‘‘Caregiving burden’’ is defined as the
impacts on physical and mental health, and health-
related quality of life of informal caregivers.
164 SA Cohen, ZJ Kunicki, MM Drohan, ML
Greaney, Exploring Changes in Caregiver Burden
and Caregiving Intensity due to COVID–19,
Gerontology and Geriatric Medicine (January 2021),
doi:10.1177/2333721421999279.
165 Id.
166 Jennifer Tolbert et al., Key Facts about the
Uninsured Population, Kaiser Family Foundation
(November 6, 2020), https://www.kff.org/uninsured/
issue-brief/key-facts-about-the-uninsured-
population/.
167 Joshua Aarons et. al., As the COVID–19
Recession Extended into the Summer of 2020, More
Than 3 Million Adults Lost Employer-Sponsored
Health Insurance Coverage and 2 Million Became
Uninsured, Urban Institute (September 18, 2020),
https://www.urban.org/research/publication/covid-
19-recession-extended-summer-2020-more-3-
million-adults-lost-employer-sponsored-health-
insurance-coverage-and-2-million-became-
uninsured.
168 Centers for Medicare and Medicaid Services,
Medicaid and CHIP Enrollment Trends Snapshot
through September 2020 (Washington: 2021),
available at https://www.medicaid.gov/sites/
default/files/2021-01/september-medicaid-chip-
enrollment-trend-snapshot.pdf.
169 Centers for Medicare and Medicaid Services,
2021 Federal Health Insurance Exchange Weekly
Enrollment Snapshot: Final Snapshot (January 12,
2021) available at https://www.cms.gov/newsroom/
fact-sheets/2021-federal-health-insurance-
exchange-weekly-enrollment-snapshot-final-
snapshot.
170 Sara R. Collins, Munira Z. Gunja, and
Gabriella N. Aboulafia, U.S. Health Insurance
Coverage in 2020: A Looming Crisis in Affordability
(New York: Commonwealth Fund, 2020), available
at https://www.commonwealthfund.org/
publications/issue-briefs/2020/aug/looming-crisis-
health-coverage-2020-biennial.
171 Id.
172 Federal Deposit Insurance Corporation, FDIC
National Survey of Unbanked and Underbanked
Households (2015), https://www.fdic.gov/household
survey/2015/2015execsumm.pdf.
173 Federal Deposit Insurance Corporation, How
America Banks: Household Use of Banking and
Financial Services 2019 FDIC Survey, https://
www.fdic.gov/analysis/household-survey/
2019report.pdf.
For workers that are also caregivers
for children, seniors, or other family
members, there may be a similar need
for—and benefits of—paid family leave.
For example, some workers may have
struggled during the pandemic to
balance caring for children, as schools
and daycares closed, and working. For
new parents, paid parental leave results
in fewer infant hospitalizations,
lowering parental stress, increasing
parental involvement, and improving
the overall health of parent and child.160
COVID–19 has also increased the levels
of ‘‘caregiving intensity’’161 and
‘‘caregiving burden’’162 for those
providing care to seniors or older family
members.163 164 When surveyed, more
than half of caregivers reported that
COVID–19 increased both the amount of
caregiving responsibilities they had as
well as the negative physical and mental
impacts their caregiving responsibilities
had on themselves.165
Treasury Response: Treasury agrees
that these constitute impacts of the
pandemic, and accordingly, under the
final rule, creating, expanding, or
financially supporting paid sick,
medical, or family leave programs is an
enumerated eligible use of funds to
respond to the negative economic
impacts of the pandemic.
12. Health insurance.
Public Comment: Several commenters
recommended that uses of funds to
expand access to health insurance be
enumerated eligible uses; commenters
believed that the heightened risk of
illness or hospitalization due to COVID–
19 had increased the negative economic
impacts of lacking health insurance.
Background: In 2019, prior to the
pandemic, it was estimated that 11
percent of nonelderly adults lacked
health insurance.166 By mid-2020, job
loss had resulted in an estimated 3.3
million people losing their employer
sponsored insurance, resulting in an
additional 2 million uninsured
adults.167 Participation in Medicaid, the
Children’s Health Insurance Program
(CHIP), and the Affordable Care Act
(ACA) marketplace played an important
role in minimizing the number of
people who completely lost health
insurance during the early phases of the
pandemic; Medicaid and CHIP
enrollment increased by 9 percent from
February to September 2020 168 and 8.3
million people enrolled in insurance
through the ACA marketplace.169
Although the ACA, CHIP, and
Medicaid have significantly reduced the
number of uninsured Americans
through the pandemic and the economic
downturn, adequate coverage and
affordability still remains an issue for
many. In 2020, 21 percent of working-
age adults were inadequately insured,
meaning even if they had insurance,
they incurred a significant amount of
out-of-pocket costs.170 Additionally, 37
percent of adults reported struggling
with medical bills or medical debt and
71 percent of adults who did not
purchase insurance cited affordability as
the main factor.171
Treasury Response: Treasury agrees
that loss of health insurance, increased
financial risk from lacking health
insurance, or excessive out-of-pocket
healthcare costs constitute negative
economic impacts of the pandemic.
Under the final rule, programs or
services to expand access to health
insurance coverage are an enumerated
eligible use as assistance to households,
for example, subsidies for health
insurance premiums or expansion of a
recipient’s health insurance plan to
cover additional employees who
currently lack coverage.
13. Services for the unbanked and
underbanked.
Public Comment: One commenter
expressed support for the inclusion of
services to increase banking access as an
allowable expense under SLFRF. The
commenter recommended that states be
encouraged to offer opportunities for
consumers to open safe and affordable
accounts capable of receiving direct
payments. The commenter emphasized
that allowing unbanked and
underbanked households to receive
funds securely through no-fee, direct
deposit will help connect or reconnect
consumers to the mainstream financial
system.
Background: Banking inequities can
make it difficult for unbanked or
underbanked households to access
housing, jobs, and other important
economic opportunities. Being
unbanked or underbanked can also
make it challenging for households to
apply for and receive financial
assistance, including services like
pandemic emergency housing
assistance.
Safe, affordable, and accessible
financial services play a critical role in
assisting households in the United
States in managing income volatility
and cash flow shortages.172 Currently,
over 5 percent of families, or 7 million
households are ‘‘unbanked,’’ meaning
they do not have a bank account.173
Low-income households, non-white
households, and households with
individuals with disabilities were even
more likely to be unbanked. In 2019, 16
percent of Native American households,
14 percent of Black households, and 12
percent of Hispanic households were
unbanked, compared to 2.5 percent of
white households. Additionally,
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174 Board of the Governors of the Federal Reserve
System, Report on the Economic Well-Being of U.S.
Households in 2018–May 2019, https://www.federal
reserve.gov/publications/2019-economic-well-being-
of-us-households-in-2018-banking-and-credit.htm.
175 Zaheer Allam, The Forceful Reevaluation of
Cash-Based Transactions by COVID–19 and Its
Opportunities to Transition to Cashless Systems in
Digital Urban Networks. Surveying the Covid-19
Pandemic and its Implications (2020): 107–117.
doi:10.1016/B978–0–12–824313–8.00008–5.
176 Bureau of Labor Statistics, Labor Force
Statistics from the Current Population Survey:
Concepts and Definitions, https://www.bls.gov/cps/
definitions.htm (last visited November 9, 2021).
177 Id.
underbanked households—those that
have a bank account but rely on
alternative financial services, such as
money orders, payday loans, and check
cashing services— account for 16
percent of all households in the United
States.174 As a result of the COVID–19
pandemic, new social distancing
protocols have, in some instances, made
it more difficult to perform financial
transactions with paper instruments,
like banknotes, coinage, paper checks,
or money orders. Households
constrained to these payment methods
may face challenges receiving
government assistance. Additionally,
businesses have transitioned to cashless
payments systems to promote
contactless payments.175 As a result,
unbanked individuals may face
additional challenges conducting
financial transactions.
Treasury Response: Recognizing these
challenges, Treasury is clarifying that
recipients may use SLFRF funds to
provide financial services that facilitate
the delivery of federal, state, or local
benefits (e.g., Child Tax Credit, Earned
Income Tax Credit, tax refunds, or
emergency housing or food assistance
funds). The following includes a non-
exhaustive list of uses to provide
financial services to unbanked and
underbanked households:
•Provide low or no cost financial
services, including in conjunction with
administration of benefits, such as pre-
paid debit cards, e.g., via Economic
Impact Payment or General Purpose
Reloadable pre-paid cards or for the
development of public banking
infrastructure that can support benefit
delivery.
•Provide transitional services to
facilitate long-term access to banking
and financial services.
•Provide financial literacy programs
and conduct community outreach and
deploy engagement resources to
increase awareness about low-cost, no-
overdraft fee accounts, pilot new
strategies and approaches that help
overcome barriers to banking access and
support the gathering and sharing of
information in ways that improve
equity, such as community meetings,
partnerships with community-based
organizations, online surveys, focus
groups, human-centered design
activities, and other community
engagement activities.
Assistance to Unemployed and
Underemployed Workers
The interim final rule included
assistance to unemployed workers as an
enumerated eligible use, including
‘‘services like job training to accelerate
rehiring of unemployed workers.’’
Treasury provided further guidance,
based on recipient questions after the
interim final rule, that eligible uses
under this section also include ‘‘other
efforts to accelerate rehiring and thus
reduce unemployment, such as
childcare assistance, assistance with
transportation to and from a jobsite or
interview, and incentives for newly
employed workers[,]’’ as well as
assistance to unemployed workers
seeking to start small businesses.
Finally, further guidance also provided
that ‘‘public jobs programs, subsidized
employment, combined education and
on-the-job training programs, or job
training to accelerate rehiring or address
negative economic or public health
impacts experienced due to a worker’s
occupation or level of training’’ are all
enumerated eligible uses as assistance to
unemployed or underemployed
workers.
The interim final rule defined eligible
beneficiaries of assistance as
‘‘individuals who want and are
available for work, including those who
have looked for work sometime in the
past 12 months or who are employed
part time but who want and are
available for full-time work.’’ This
definition is based on definitions used
by the Bureau of Labor Statistics to
define individuals currently
unemployed, as well as persons
marginally attached to the labor force
and working part-time for economic
reasons.176 The latter two classifications
are types of labor underutilization, or
‘‘underemployed’’ workers.177 Finally,
the interim final rule specified that
assistance to unemployed workers
included both workers who lost their
job during the pandemic and resulting
recession and workers unemployed
when the pandemic began who saw
further deterioration of their economic
prospects due to the pandemic.
Public Comment: Commenters
generally supported the inclusion of this
enumerated eligible use. One
commenter recommended including
assistance for underemployed workers
who took jobs due to the pandemic that
did not fully utilize their skillset or did
not provide the hours, wages, or job
quality desired. Treasury has also
received recipient questions on whether
job fairs or grants to businesses to hire
underserved workers are eligible uses
under this category. Another commenter
recommended flexibility in eligible
workforce development programs,
arguing that rural areas may face
particular challenges.
Treasury Response: Treasury is
maintaining this eligible use in the final
rule, including the enumerated eligible
services in the interim final rule and
subsequent guidance. Treasury is also
confirming that job fairs or grants to
businesses to hire underserved workers
are eligible uses under this section.
Treasury is also enumerating that job
and workforce training centers are
eligible capital expenditures, so long as
they adhere to the standards and
presumptions detailed in the section
Capital Expenditures in General
Provisions: Other.
The final rule maintains the definition
of eligible beneficiaries, which is
aligned with the Bureau of Labor
Statistics’ definitions of unemployed
workers and other labor
underutilization, using a common,
widely known definition that
incorporates a broad group of
individuals both unemployed or whose
skills are otherwise underutilized in the
labor market.
In addition, recognizing that the
pandemic has generated broad
workforce disruption, in the final rule,
Treasury is making clear that recipients
may provide job training or other
enumerated types of assistance to
individuals that are currently employed
but are seeking to move to a job that
provides better opportunities for
economic advancement, such as higher
wages or more opportunities for career
advancement.
Recipient Unemployment Insurance
Trust Funds and Related Expenses
Under the interim final rule, a
recipient may use funds to make
deposits into its account of the
Unemployment Trust Fund established
under section 904 of the Social Security
Act (42 U.S.C. 1104) up to the level
needed to restore the pre-pandemic
balance of such account as of January
27, 2020 or to pay back advances
received under Title XII of the Social
Security Act (42 U.S.C. 1321) for the
payment of benefits between January 27,
2020 and May 17, 2021. These costs
support the solvency of the
unemployment insurance system and,
ultimately, unemployment insurance
benefits provided to unemployed
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178 Note that, while the economic harm being
addressed accrued before March 3, 2021, the cost
incurred to address the harm occurs after March 3,
2021 and provides assistance to unemployed
workers, an eligible use of SLFRF funds.
179 See, e.g., U.S. Department of the Treasury,
More Information on the Conclusion of the Public
Comment Period and the Interim Final Rule on the
Coronavirus State and Local Fiscal Recovery Funds,
https://home.treasury.gov/system/files/136/IFR-
Explainer.pdf.
workers during the pandemic.178 The
interim final rule also posed the
question of what, if any, conditions
should be considered to ensure that
funds used under this eligible use
category repair economic impacts of the
pandemic and strengthen
unemployment insurance systems.
Public Comment: Inclusion as an
Eligible Use and Conditions:
Commenters expressed mixed
perspectives on this eligible use
category. Some commenters supported
its inclusion, arguing that
unemployment insurance systems have
faced significant costs to support
unemployed workers during the
pandemic and that this constitutes a
negative economic impact that SLFRF
funds should be able to address. Other
commenters opposed this eligible use
category, arguing that funds used under
this category may not ultimately support
unemployed workers. Some
commenters noted that unemployment
insurance taxes on businesses
automatically increase when trust fund
balances are low and suggested that
permitting the deposit of funds into
unemployment insurance trust funds
prevents a tax increase on businesses,
some of which may not have faced
negative economic impacts from the
pandemic, rather than providing
assistance to unemployed workers.
Other comments suggested that deposits
are better thought of as savings for
future needs than assistance to
unemployed workers in the near term.
Responding to the interim final rule’s
question, several commenters suggested
that, if Treasury maintains this eligible
use, the final rule should require
detailed reporting on funds used under
this category or place conditions on this
category to increase the likelihood that
funds ultimately support unemployed
workers. For example, some
commenters suggested that recipients
that deposit SLFRF funds into their trust
fund should be barred from cutting
unemployment insurance benefits for
workers during the period of
performance or from erecting new
barriers to accessing benefits (e.g.,
through the application process and
ongoing requirements to receive
benefits). One commenter, noting that
unemployment insurance benefits often
provide low rates of wage replacement
and do not cover some types of
unemployed workers, argued that
recipients should not be permitted to
deposit funds into the trust fund unless
the recipient concurrently expands
benefits. Finally, one commenter
suggested a cap on the amount of funds
that can be used for this purpose.
Treasury Response: Inclusion as an
Eligible Use and Conditions: In the final
rule, Treasury is maintaining the
inclusion of this eligible use category.
Because unemployment insurance trust
funds directly fund benefits to
unemployed workers, maintaining the
solvency of the trust fund is critical to
the continued provision of assistance to
unemployed workers. Further, funds
deposited into the trust fund must be
used as assistance to unemployed
workers, an eligible use of SLFRF funds.
Finally, while, in the absence of the
SLFRF, trust fund deposits would likely
be funded through increases on
employer payroll taxes, the eligibility of
uses of SLFRF funds does not depend
on how obligations would otherwise be
satisfied if the SLFRF were not available
for this use.
While deposits to unemployment
insurance trust funds generally serve as
assistance to unemployed workers,
recipients that make deposits but also
cut unemployment insurance benefits to
workers substantially decrease the
likelihood that the deposited funds will
assist unemployed workers. In other
words, SLFRF funds deposited into an
unemployment insurance trust fund
generally serve as assistance to
unemployed workers, unless recipients
take policy actions that substantially
decrease the extent to which SLFRF
funds would flow to unemployed
workers. As such, through December 31,
2024, recipients that deposit SLFRF
funds into an unemployment insurance
trust fund or use SLFRF funds to repay
principal on Title XII advances, may not
take action to reduce benefits available
to unemployed workers by changing the
computation method governing regular
unemployment compensation in a way
that results in a reduction of average
weekly benefit amounts or the number
of weeks of benefits payable (i.e., the
maximum benefit entitlement).
Finally, until the final rule becomes
effective on April 1, 2022, the interim
final rule remains binding and
effective.179 These requirements were
not in effect under the interim final rule
and do not apply to funds used (i.e.,
obligated or expended) under the
interim final rule while it is in effect. In
addition, recognizing that some
recipients have taken significant steps
toward making a trust fund deposit or
repaying principal on Title XII advances
under the interim final rule, such as the
legislative appropriation of funds for
this purpose, even if a formal obligation
has not occurred, Treasury will exercise
enforcement discretion to not pursue
violations of this final rule provision
(i.e., the requirement not to reduce
benefits) for recipients that have
appropriated funds for this purpose
prior to the date of adoption of the final
rule consistent with the laws and
procedures in their jurisdiction.
Recipients should refer to Treasury’s
Statement Regarding Compliance with
the Coronavirus State and Local Fiscal
Recovery Funds Interim Final Rule and
Final Rule, which provides additional
detail on these issues.
Public Comment and Treasury
Response: Technical Corrections and
Amendments: Following the interim
final rule, Treasury received recipient
questions on whether paying interest on
advances received under Title XII of the
Social Security Act (42 U.S.C. 1321) is
an eligible use of SLFRF funds; Treasury
is clarifying that such use is
permissible, consistent with Treasury’s
treatment of the eligibility of interest on
Title XII advances under the
Coronavirus Relief Fund.
Treasury is further clarifying that
recipients may only use SLFRF funds
for contributions to unemployment
insurance trust funds and repayment of
the principal amount due on advances
received under Title XII of the Social
Security Act up to an amount equal to
(i) the difference between the balance in
the recipient’s unemployment insurance
trust fund as of January 27, 2020 and the
balance of such account as of May 17,
2021, plus (ii) the principal amount
outstanding as of May 17, 2021 on any
advances received under Title XII of the
Social Security Act between January 27,
2020 and May 17, 2021. Further,
recipients may use SLFRF funds for the
payment of any interest due on such
Title XII advances. In other words,
excluding interest due on Title XII
advances, the magnitude of the decrease
of the balance in the unemployment
insurance trust fund plus the principal
outstanding on any Title XII borrowings
made from the beginning of the public
health emergency to the date of
publication of the SLFRF interim final
rule sets a cap on the amount of SLFRF
funds a recipient may use for trust fund
contributions and repayment of
principal on Title XII advances. Further,
a recipient that deposits SLFRF funds
into its unemployment insurance trust
fund to fully restore the pre-pandemic
balance may not draw down that
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4371 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
180 U.S. Department of Health and Human
Services, COVID–19 and Economic Opportunity:
Inequities in the Employment Crisis, April 2021.
Retrieved from https://aspe.hhs.gov/sites/default/
files/migrated_legacy_files//199901/covid-
economic-equity-brief.pdf.
181 Adelle Simmons et al., Health disparities by
race and ethnicity during the COVID–19 pandemic:
Current evidence and policy approaches. U.S.
Department of Health and Human Services https://
aspe.hhs.gov/sites/default/files/migrated_legacy_
files//199516/covid-equity-issue-brief.pdf.
182 Perry, Brea L., Brian Aronson, and Bernice A.
Pescosolido, Pandemic precarity: COVID–19 is
exposing and exacerbating inequalities in the
American heartland, National Academy of Sciences
(Febuary 2021), https://www.pnas.org/content/118/
8/e2020685118.
183 Id.
184 Jesse Bennet & Rakesh Kochhar, Two
Recessions, Two Recoveries, Pew Research Center
(December 13, 2019), https://www.pewresearch.org/
social-trends/2019/12/13/two-recessions-two-
recoveries-2/.
185 Darrick Hamilton et al., Building an Equitable
Recovery: The role of Race, Labor Markets, and
Education, The New School’s Institute on Race and
Political Economy (February 2021).
186 Adhikari S, Pantaleo NP, Feldman JM,
Ogedegbe O, Thorpe L, Troxel AB. Assessment of
Community-Level Disparities in Coronavirus
Disease 2019 (COVID–19) Infections and Deaths in
Large US Metropolitan Areas. JAMA Netw Open.
2020;3(7):e2016938. doi:10.1001/
jamanetworkopen.2020.16938.
balance and deposit more SLFRF funds,
back up to the pre-pandemic balance.
Enumerated Eligible Uses for
Disproportionately Impacted
Households
Background
The COVID–19 pandemic has had
disproportionally negative impacts on
many households and communities that
were already experiencing inequality
related to race, gender, age, or income
before the pandemic. People of color,
low-income workers, and women
disproportionately lost their jobs during
the COVID–19 pandemic and
experienced disproportionate rates of
negative health outcomes.180 181
These disproportionate negative
impacts experienced by systemically
underserved communities are not novel
to the COVID–19 pandemic and the
economic downturn. Research shows
that historically underserved
communities that are experiencing
economic and social disparities
typically experience disproportionate
impacts of economic downturns and
natural disasters.182 This pattern held
true for the effects of COVID–19 and the
economic downturn: Historically
undeserved groups experienced
amplified negative impacts, further
widening inequality.183
Many communities facing systemic
barriers had not yet recovered from the
impact of the Great Recession before
experiencing the impacts of COVID–19
and the economic downturn. For
example, in 2009, at the end of the Great
Recession, households without a high
school diploma had an average annual
income of $32,300 (measured in 2018
dollars). By 2018, nine years into the
economic recovery, those same
households saw their average income
increase by $600. During that same time
period, households with a bachelor’s
degree saw an increase in their average
household income of $6,100 (measured
in 2018 dollars).184
The impact pre-existing inequalities
have on a household or community’s
ability to recover is intersectional.
Research shows that pre-existing racial
and gender disparities exacerbated the
disproportionate economic and health
impact COVID–19 and the economic
downturn had on workers of color, and
specifically, women of color.185 Another
study found that during the first six
months of the pandemic counties that
were both high-poverty and majority
non-white experienced COVID–19
infection rates eight times higher than
high-poverty, majority white
counties.186 Many residents in these
communities are still coping with the
negative health and economic impacts.
Summary of the Interim Final Rule and
Final Rule Structure
As described previously, the interim
final rule provided a broader list of
enumerated eligible uses to respond to
the pandemic in disproportionately
impacted communities, in recognition
that pre-existing health, economic, and
social disparities contributed to
disproportionate pandemic impacts in
certain communities and that
addressing the root causes of those
disparities constitutes responding to the
public health and negative economic
impacts of the pandemic. The interim
final rule described eligible uses in
disproportionately impacted
communities in four categories, spread
across public health and negative
economic impacts: (1) Addressing
disparities in public health outcomes,
(2) building stronger communities
through investments in housing and
neighborhoods, (3) addressing
educational disparities, and (4)
promoting healthy childhood
environments. As described above,
Treasury has moved eligible uses related
to community violence intervention,
assistance accessing or applying to
public benefits and services, affordable
housing development, healthy
childhood environments, and
addressing lost instructional time in K–
12 schools into the category ‘‘assistance
to impacted households,’’ recognizing
that these pandemic impacts were
widely shared across the country.
This section discusses enumerated
eligible uses to address health
disparities, to build stronger
communities through investments in
neighborhoods, to address educational
disparities, to provide rental assistance
vouchers or assistance relocating to
areas of greater economic opportunity,
and additional eligible uses to respond
to negative economic impacts in
disproportionately impacted
communities. While many of these
services impact both health and
economic outcomes, Treasury has
consolidated them into a single section
for simplicity and clarity and to reflect
the intertwined nature of these issues.
As a reminder, recipients can
presume these uses are eligible when
provided in a QCT, to families and
individuals living in QCTs, by Tribal or
territorial governments, or to low-
income households or communities. As
provided in section Standards:
Designating Other Disproportionately
Impacted Classes, recipients can also
provide these services to other
populations, households, or geographic
areas disproportionately impacted by
the pandemic. Recipients may also
identify additional disproportionate
impacts of the pandemic and design an
appropriate response to address that
harm. For details on eligibility
standards and presumed eligible
populations, see section General
Provisions: Structure and Standards.
Enumerated Eligible Uses for
Disproportionately Impacted
Households
1. Addressing health disparities.
Public Comment: General: In general,
commenters supported eligible uses to
address health disparities and support
health equity; several commenters
highlighted the disparities faced by
communities of color and low-income
populations, as well as the importance
of community engagement in
developing effective programs to serve
disproportionately impacted
communities. Many commenters
recommended additional enumerated
eligible uses to address health
disparities; these are discussed further
below in this section.
Treasury Response: In line with
commenters’ recommendations, the
final rule maintains several enumerated
eligible uses to address health
disparities, specifically:
a. Community health workers.
Treasury received few comments on
community health workers, though one
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4372 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
187 See, e.g., Centers for Disease Control and
Prevention, Community Health Worker (CHW)
Toolkit, https://www.cdc.gov/dhdsp/pubs/toolkits/
chw-toolkit.htm (last visited November 9, 2021).
188 Environmental Protection Agency, 40 CFR
141.80(c)(1), https://www.ecfr.gov/current/title-40/
chapter-I/subchapter-D/part-141/subpart-I/section-
141.80.
189 See, e.g., Opportunity Insights, Creating Moves
To Opportunity (August 2019), https://
opportunityinsights.org/policy/cmto/.
190 U.S. Department of Health and Human
Services, Neighborhood and Built Environment,
https://health.gov/healthypeople/objectives-and-
data/browse-objectives/neighborhood-and-built-
environment#cit1 (last visited November 9, 2021).
191 Social determinants of health are ‘‘the
conditions in the places where people live, learn,
work, and play that affect a wide range of health
risks and outcomes.’’ Centers for Disease Control
and Prevention, About Social Determinants of
Health (SDOH), https://www.cdc.gov/social
determinants/about.html (last visited November 9,
2021).
192 In public health, this is referred to as ‘‘built
environment,’’ or the man-made physical aspects of
a community (e.g., homes, buildings, streets, open
spaces, and infrastructure).
requested further clarification on their
role.187 Treasury is maintaining this
eligible use in the final rule.
b. Remediation of lead paint or other
lead hazards. The interim final rule
included remediation of lead paint or
other lead hazards as an enumerated
eligible use to address health
disparities.
Public Comment: Treasury received
several comments asking for
clarification on the eligibility of a
particular use that would indirectly
address lead pollution. For example, a
commenter requested the ability to fund
remedial actions, such as filtration and
plumbing procedures to help address
lead pollution. One commenter
requested that private wells be eligible
for funding to address contamination
with substances such as lead. Other
commenters requested that Treasury
allow replacement of lead pipes as an
eligible use of funds.
Treasury Response: Recipients may
make a broad range of water
infrastructure investments under section
602(c)(1)(d) and 603(c)(1)(d), which can
include lead service line replacement
and other activities to identify and
remediate lead in water. These uses are
discussed in greater detail in section
Water and Sewer Infrastructure of this
Supplemental Information.
Treasury has further determined that
several of the services identified by
commenters are appropriate responses
to address health disparities in
disproportionately impacted
households. These services were eligible
under the interim final rule and
continue to be so under the final rule.
These services include remediation to
address lead-based public health risk
factors, outside of lead in water,
including evaluation and remediation of
lead paint, dust, or soil hazards; testing
for blood lead levels; public outreach
and education; and emergency
protection measures, like bottled water
and water filters, in areas with an action
level exceedance for lead in water in
accordance with the Environmental
Protection Agency’s Lead and Copper
Rule.188
Further, Treasury had determined that
certain capital expenditures, including
improvements to existing facilities to
remediate lead contaminants (e.g.,
removal of lead paint), are eligible
responses, although this does not
include construction of new facilities
for the purpose of lead remediation.
Recipients should make sure that all
capital expenditures adhere to the
standards and presumptions detailed in
section Capital Expenditures in General
Provisions: Other.
c. Medical facilities. Treasury
received a few comments from
recipients seeking to use SLFRF funds
to build new medical facilities, such as
hospitals or public health clinics, to
serve disproportionately impacted
communities. Given the central role of
access to high-quality medical care in
reducing health disparities and
addressing the root causes that led to
disproportionate impact COVID–19
health impacts in certain communities,
the final rule recognizes that medical
equipment and facilities designed to
address disparities in public health
outcomes are eligible capital
expenditures. This includes primary
care clinics, hospitals, or integrations of
health services into other settings.
Recipients should make sure that all
capital expenditures adhere to the
standards and presumptions detailed in
section Capital Expenditures in General
Provisions: Other.
2. Housing vouchers and assistance
relocating. In addition to other housing
services, the interim final rule permitted
a variety of rental assistance approaches
to support low-income households in
securing stable, long-term housing,
including housing vouchers, residential
counseling, or housing navigation
assistance to facilitate household moves
to neighborhoods with high levels of
economic opportunity and mobility for
low-income residents. Examples could
include SLFRF-funded analogues to
Section 8 Housing Choice vouchers;
other kinds of rent subsidies, including
shallow subsidies; and programs to help
residents move to areas with higher
levels of economic mobility.189 Treasury
did not receive public comments on
these enumerated eligible uses.
Treasury Response: Treasury
maintains the eligibility of vouchers and
relocation assistance in the final rule.
3. Building strong, healthy
communities through investments in
neighborhoods. While the interim final
rule included a category of enumerated
eligible uses for ‘‘building stronger
communities through investments in
housing and neighborhoods,’’ the
examples of services provided generally
focused on housing uses. In response to
questions following release of the
interim final rule, Treasury issued
further guidance clarifying that
‘‘investments in parks, public plazas,
and other public outdoor recreation
spaces may be responsive to the needs
of disproportionately impacted
communities by promoting healthier
living environments.’’
Public Comment: General: A
significant theme across many public
comments was the importance of
neighborhood environment to health
and economic outcomes and the
potential connections between
residence in an underserved
neighborhood and disproportionate
impacts from the pandemic. Many
commenters highlighted the connection
between neighborhoods and health
outcomes, including citing public health
research linking neighborhood traits to
health outcomes. For example, the CDC
states that ‘‘neighborhoods people live
in have a major impact on their health
and well-being.’’190 As such, CDC
identifies ‘‘neighborhoods and built
environment’’ as one of five key social
determinants of health 191 and includes
‘‘creat[ing] neighborhoods and
environments that promote health and
safety’’ as one of the agency’s goals for
social determinants of health outcomes.
a. Neighborhood features that
promote improved health and safety
outcomes.
Public Comment: Commenters argued
that neighborhoods impact physical
health outcomes in several ways. First,
some commenters reasoned that the
physical environment and amenities in
a community 192 influence a person’s
level of physical activity, with features
like parks, recreation facilities, and safe
sidewalks promoting increased physical
activity that improves health outcomes.
Conversely, commenters argued that a
lack of these features in a neighborhood
could dampen physical activity and
contribute to health conditions like
obesity that are risk factors for more
severe COVID–19 health outcomes.
Second, some commenters also
suggested that access to healthy food in
a neighborhood impacts health
outcomes. These commenters reasoned
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4373 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
193 J Beaulac, E Kristjansson, S Cummins, A
systematic review of food deserts, 1966–2007, Prev
Chronic Dis 2009;6(3):A105, http://www.cdc.gov/
pcd/issues/2009/jul/08_0163.htm.
194 See, e.g., Yijun Zhang et al. The Association
between Green Space and Adolescents’ Mental
Well-Being: A Systematic Review. International
journal of environmental research and public health
vol. 17,18 6640 (Sep. 11 2020), doi:10.3390/
ijerph17186640; EC South, BC Hohl, MC Kondo, JM
MacDonald, CC Branas, Effect of Greening Vacant
Land on Mental Health of Community-Dwelling
Adults: A Cluster Randomized Trial, JAMA Netw
Open. 2018;1(3):e180298 (2018), available at:
doi:10.1001/jamanetworkopen.2018.0298.
195 See, e.g., Yanqing Xu, Cong Fu, Eugene
Kennedy, Shanhe Jiang, Samuel Owusu-Agyemang,
The impact of street lights on spatial-temporal
patterns of crime in Detroit, Michigan, Cities,
Volume 79, Pages 45–52, ISSN 0264–2751 (2018),
https://doi.org/10.1016/j.cities.2018.02.021.
196 A. Chalfin, B. Hansen, J. Lerner et al.,
Reducing Crime Through Environmental Design:
Evidence from a Randomized Experiment of Street
Lighting in New York City, Journal of Quantitative
Criminology (2021), https://doi.org/10.1007/s10940-
020-09490-6.
197 See, e.g., American Public Health Association,
Improving Health and Wellness through Access to
Nature (November 5, 2013), https://www.apha.org/
policies-and-advocacy/public-health-policy-
statements/policy-database/2014/07/08/09/18/
improving-health-and-wellness-through-access-to-
nature.
198 LR Larson et al., Urban Park Use During the
COVID–19 Pandemic: Are Socially Vulnerable
Communities Disproportionately Impacted?, Front.
Sustain. Cities 3:710243 (2021), https://doi.org/
10.3389/frsc.2021.710243.
199 JP Despre´s, Severe COVID–19 outcomes—the
role of physical activity. Nat Rev Endocrinol 17,
451–452 (2021). https://doi.org/10.1038/s41574-
021-00521-1.
200 Caroline George and Adie Tomer, Beyond
‘food deserts’: America needs a new approach to
mapping food, Brookings Institution (August 17,
2021), https://www.brookings.edu/research/beyond-
food-deserts-america-needs-a-new-approach-to-
mapping-food-insecurity/.
201 However, Treasury cautions recipients that
general infrastructure development, including street
or road construction, remains a generally ineligible
use of funds under the final rule. Sidewalks and
pedestrian safety should be the predominant
component of uses of funds in this category. While
projects may include ancillary construction needed
to execute the predominant component, a project
that predominantly involves street construction or
repair to benefit vehicular traffic would be
ineligible.
that lacking adequate access to
affordable, healthy food or living in a
‘‘food desert’’ may contribute to
disparities in diet that influence health
outcomes, including contributing to pre-
existing conditions that increased risk
for severe COVID–19 outcomes. These
commenters cited public health research
finding ‘‘clear evidence for disparities in
food access in the United States by
income and race.’’193
Some commenters also suggested that
neighborhood environment is connected
to other public health outcomes, like
mental health and public safety. For
example, some research suggests that
living in neighborhoods with green
space and tree cover correlates with
improved mental health outcomes.194
Finally, some commenters argued that
activities like installing streetlights,
greening or cleanup of public spaces or
land, and other efforts to revitalize
public spaces would support improved
public safety.195 196
These commenters recommended that
Treasury include as an enumerated
eligible use in disproportionately
impacted communities projects to
develop neighborhood features that
promote improved health and safety
outcomes, such as parks, green spaces,
recreational facilities, sidewalks,
pedestrian safety features like
crosswalks, projects that increase access
to healthy foods, streetlights,
neighborhood cleanup, and other
projects to revitalize public spaces.
Background: Investments in
neighborhood features, including parks,
recreation facilities, sidewalks, and
healthy food access, can work to
improve physical and mental health
outcomes. Allowing people access to
nature, including parks, has been
connected to decreased levels of
mortality and illness and increased
well-being.197 Urban park use during
the COVID–19 pandemic may have
declined among lower-income
individuals.198 Encouraging physical
activity can also play a role in health
outcomes, as a sedentary lifestyle is a
risk factor for chronic diseases and more
severe COVID–19 outcomes.199 Parks,
recreation facilities, and sidewalks can
promote healthier living environments
by allowing for safe and socially
distanced recreation during the COVID–
19 pandemic.
Additionally, food insecurity rates,
which are higher among lower-income
households and households of color,
doubled among all households and
tripled among households with children
during the onset of COVID–19 from
February 2020 to May 2020.200
Improving healthy food access supports
public health, particularly among lower-
income households and households of
color that face disproportionate
outcomes.
Treasury Response: Treasury
recognizes the connection between
neighborhood built environment and
physical health outcomes as discussed
in the research and analysis provided by
commenters, including risk factors that
may have contributed to
disproportionate COVID–19 health
impacts in low-income communities.
The final rule also recognizes that the
public health impacts of the pandemic
are broader than just the COVID–19
disease itself and include substantial
impacts on mental health and public
safety challenges like rates of violent
crime, which are correlated with a
neighborhood’s built environment and
features. As such, neighborhood features
that promote improved health and
safety outcomes respond to the pre-
existing disparities that contributed to
COVID–19’s disproportionate impacts
on low-income communities.
The final rule includes enumerated
eligible uses in disproportionately
impacted communities for developing
neighborhood features that promote
improved health and safety outcomes,
such as parks, green spaces, recreational
facilities, sidewalks, pedestrian safety
features like crosswalks,201 projects that
increase access to healthy foods,
streetlights, neighborhood cleanup, and
other projects to revitalize public
spaces. Recipients seeking to use funds
for capital expenditures should refer to
the section Capital Expenditures in
General Provisions: Other, which
describes additional eligibility
standards that apply to uses of funds for
capital expenditures.
b. Vacant or abandoned properties.
As discussed above, the interim final
rule included enumerated eligible uses
for building stronger communities
through investments in housing and
neighborhoods in disproportionately
impacted communities. The interim
final rule also posed a question of
whether other potential uses in this
category, specifically ‘‘rehabilitation of
blighted properties or demolition of
abandoned or vacant properties,’’
address the public health or economic
impacts of the pandemic.
Public Comment: Several commenters
argued that programs or services to
address vacant or abandoned property
would respond to the public health and
negative economic impacts of the
pandemic in disproportionately
impacted communities. Some
commenters cited research suggesting
that living near such property is
correlated with worse physical health
and mental health outcomes, noted that
such properties pose an environmental
hazard, or argued that such properties
present a barrier to economic recovery.
These commenters suggested that
renovation or demolition of vacant or
abandoned property could benefit
community health and raise property
values. Other commenters
recommended that Treasury include an
enumerated eligible use for the
operation of land banks that redevelop
or renew vacant properties and land.
Treasury Response: As noted
throughout the final rule, the pandemic
underscored the importance of safe,
affordable housing and healthy
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202 A state or locality may use its existing
classifications of what is considered vacant or
abandoned property under state law and local
ordinances, as well as any corresponding processes
for demolition, for these eligible uses. A recipient
without a definition of vacant or abandoned
property may refer to definitions used in the
Department of Housing and Urban Development’s
Neighborhood Stabilization Program (available at
the citations below); however, recipients should be
aware that other federal, state, or local requirements
may apply such as compliance with the Uniform
Relocation Act (see U.S. Department of Housing and
Urban Development, Real Estate Acquisition and
Relocation Overview in HUD Programs, https://
www.hudexchange.info/programs/relocation/
overview/#overview-of-the-ura (last visited
November 9, 2021) and other state and local
requirements like condemnation and code
enforcement. U.S. Department of Housing and
Urban Development, What is the definition of
vacant properties as referenced in NSP Eligible Use
E—Redevelop Demolished or Vacant Properties?
(October 2012), https://www.hudexchange.info/
faqs/programs/neighborhood-stabilization-program-
nsp/redevelopment/what-is-the-definition-of-
vacant-properties-as-referenced-in-nsp-eligible/.
U.S. Department of Housing and Urban
Development, What are the definitions of
abandoned and foreclosed? (October 2012), https://
www.hudexchange.info/faqs/programs/
neighborhood-stabilization-program-nsp/program-
requirements/eligible-activitiesuses/what-are-the-
definitions-of-abandoned-and-foreclosed/.
203 For analysis of vacancy rates considered low
or high, see, e.g., page 12 of Alan Mallach, The
Empty House Next Door, Lincoln Institute (May
2018), https://www.lincolninst.edu/publications/
policy-focus-reports/empty-house-next-door#
:∼:text=%E2%80%9CAlan%20Mallach%20is%20
the%20sage,through%20data%20and%20
model%20 practices. Recipients may determine the
appropriate geographic unit for which to analyze
vacancy rates (e.g., county, census tract) based on
their circumstances. As needed, recipients may
refer to the Current Population Survey/Housing
Vacancy Survey data series on Housing Vacancies
and Homeownership as one data source to assess
vacancy rates. See https://www.census.gov/housing/
hvs/index.html. Other data sources include the
American Community Survey five-year estimates,
for smaller geographic areas, or tabulations by the
Department of Housing and Urban Development
based on United States Postal Service Vacancy Data.
See, respectively, https://data.census.gov/cedsci/
table?q=DP04&tid=ACSDP5Y2019.DP04&
hidePreview=true or https://www.huduser.gov/
portal/datasets/usps.html.
204 See U.S. Environmental Protection Agency,
Large-Scale Residential Demolition, https://
www.epa.gov/large-scale-residential-demolition
(last visited November 9, 2021) for a primer on
requirements that may apply.
neighborhood environments to public
health and economic outcomes.
Treasury agrees with commenters that
high rates of vacant or abandoned
properties in a neighborhood may
exacerbate public health disparities, for
example through environmental
contaminants that contribute to poor
health outcomes or by contributing to
higher rates of crime. As such, certain
services for vacant or abandoned
properties are eligible to address the
public health and negative economic
impacts of the pandemic on
disproportionately impacted households
or communities. Eligible activities
include:
•Rehabilitation, renovation,
maintenance, or costs to secure vacant
or abandoned properties to reduce their
negative impact
•Costs associated with acquiring and
securing legal title of vacant or
abandoned properties and other costs to
position the property for current or
future productive use
•Removal and remediation of
environmental contaminants or hazards
from vacant or abandoned properties,
when conducted in compliance with
applicable environmental laws or
regulations
•Demolition or deconstruction of
vacant or abandoned buildings
(including residential, commercial, or
industrial buildings) paired with
greening or other lot improvement as
part of a strategy for neighborhood
revitalization
•Greening or cleanup of vacant lots,
as well as other efforts to make vacant
lots safer for the surrounding
community
•Conversion of vacant or abandoned
properties to affordable housing
•Inspection fees and other
administrative costs incurred to ensure
compliance with applicable
environmental laws and regulations for
demolition, greening, or other
remediation activities
Vacant or abandoned properties are
generally those that have been
unoccupied for an extended period of
time or have no active owner.202 Such
properties may be in significant
disrepair (e.g., major structural defects;
lack of weather tight conditions; or lack
of useable plumbing, kitchen facilities,
electricity, or heating infrastructure (not
to include utilities currently out of
service or disconnected but able to be
reconnected and used)), or may be
declared unfit for inhabitants by a
government authority.
As noted above, demolition and
greening (or other structure or lot
remediation) of vacant or abandoned
properties, including residential,
commercial, or industrial buildings, is
an eligible use of funds. Treasury
encourages recipients to undertake these
activities as part of a strategy for
neighborhood revitalization and to
consider how the cleared property will
be used to benefit the disproportionately
impacted community. Activities under
this eligible use should benefit current
residents and businesses, who
experienced the pandemic’s impact on
the community.
Treasury encourages recipients to be
aware of potential impacts of demolition
of vacant or abandoned residential
properties. Demolition activities that
exacerbate the pandemic’s impact on
housing insecurity or lack of affordable
housing are not eligible uses of funds.
This risk is generally more acute in
jurisdictions with low or reasonable
vacancy rates and less acute in
jurisdictions with high or hyper-
vacancy.203
Treasury presumes that demolition of
vacant or abandoned residential
properties that results in a net reduction
in occupiable housing units for low- and
moderate-income individuals in an area
where the availability of such housing is
lower than the need for such housing
would exacerbate the impacts of the
pandemic on disproportionately
impacted communities and that use of
SLFRF funds for such activities would
therefore be ineligible. This includes
activities that convert occupiable
housing units for low- and moderate-
income individuals into housing units
unaffordable to current residents in the
community. Recipients may assess
whether units are ‘‘occupiable’’ and
what the housing need is for a given
area taking into account vacancy rates
(as described above), local housing
market conditions (including conditions
for different types of housing like multi-
family or single-family), and applicable
law and housing codes as to what units
are occupiable. Recipients should also
take all reasonable steps to minimize the
displacement of persons due to
activities under this eligible use
category, especially the displacement of
low-income households or longtime
residents.
Recipients engaging in these activities
and other construction activities with
SLFRF funds should be mindful of the
provisions of the Uniform Relocation
Assistance and Real Property
Acquisition Policies Act of 1970, as
amended, 42 U.S.C. 4601, and the
Department of Transportation’s
implementing regulations, 49 CFR part
24, that apply to projects funded with
federal financial assistance, such as
SLFRF funds. Recipients should also be
aware of federal, state, and local laws
and regulations, outside of SLFRF
program requirements, that apply to this
activity. Recipients must comply with
the applicable requirements of the
Uniform Guidance regarding
procurement, contracting, and conflicts
of interest and must follow the
applicable laws and regulations in their
jurisdictions. Recipients must also
comply with all federal, state, and local
public health and environmental laws
or regulations that apply to activities
under this eligible use category,204 for
example, requirements around the
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handling and disposal of asbestos-
containing materials, lead paint, and
other harmful materials may apply, as
well as environmental standards for any
backfill materials used at demolition
sites. Treasury encourages recipients to
consult and apply best practices from
the Environmental Protection Agency as
well.
Recipients must evaluate each
subrecipient’s risk of noncompliance
with federal statutes, regulations, and
the terms and conditions of the
subaward related to safely and properly
conducting activities under this eligible
use. This may include checking for any
past violations recorded by state or local
environmental, workplace safety,
licensing, and procurement agencies, as
well as regular reviews for suspensions,
debarments, or stop work orders.
Recipients must establish rigorous
oversight and internal controls
processes to monitor compliance with
any applicable requirements, including
compliance by subrecipients.
4. Addressing educational disparities.
The interim final rule included an
enumerated eligible use for addressing
educational disparities in
disproportionately impacted
communities and outlined some
enumerated eligible services under this
use. These enumerated uses included
early learning services, assistance to
high-poverty school districts to advance
equitable funding across districts and
geographies, and educational and
evidence-based services to address the
academic, social, emotional, and mental
health needs of students. Addressing the
many dimensions of resource equity—
including equitable and adequate school
funding; access to a well-rounded
education; well-prepared, effective, and
diverse educators and staff; and
integrated support services—can also
begin to mitigate the impact of COVID–
19 on schools and students and can
close long-standing gaps in educational
opportunity. As discussed above, in the
final rule, early learning services and
addressing the impacts of lost
instructional time for K–12 students are
enumerated eligible uses for impacted
communities, not just
disproportionately impacted
communities.
Public Comment: Treasury received
some comments in this category.
Generally, commenters expressed
agreement with the elements of the
interim final rule regarding use of funds
for addressing educational disparities.
Some commenters had questions about
whether a few specific uses of funds
qualified under this category. For
example, commenters inquired about
whether the funds could be used for
behavioral health in a school setting or
cultural language classes.
Treasury Response: Treasury is
maintaining these enumerated eligible
uses in the final rule, which are now
organized under the heading of
‘‘services to address educational
disparities.’’ Treasury reiterates that
these uses include addressing
educational disparities exacerbated by
COVID–19, including but not limited to:
increasing resources for high-poverty
school districts, educational services
like tutoring or afterschool programs,
summer education and enrichment
programs, and supports for students’
social, emotional, and mental health
needs. This also includes responses
aimed at addressing the many
dimensions of resource equity—
including equitable and adequate school
funding; access to a well-rounded
education; well-prepared, effective, and
diverse educators and staff; and
integrated support services—in order to
close long-standing gaps in educational
opportunity.
Further, Treasury is clarifying that
improvements or new construction of
schools and other educational facilities
or equipment are eligible capital
expenditures for disproportionately
impacted communities. Recipients
seeking to use funds for capital
expenditures should refer to the section
Capital Expenditures in General
Provisions: Other for additional
eligibility standards that apply to uses
of funds for capital expenditures.
Treasury notes that services to
promote healthy childhood
environments, including childcare,
early learning services, and home
visiting programs that serve infants and
toddlers, is a separate category of
enumerated eligible uses for households
impacted by the pandemic (see eligible
uses for ‘‘promoting healthy childhood
environments’’). Similarly, education
services to address the impact of lost
instructional time during the pandemic
are a separate eligible use category for
households impacted by the pandemic;
when providing these services,
recipients may presume that any K–12
student who lost access to in-person
instruction for a significant period of
time has been impacted by the
pandemic and is thus eligible for
responsive services (see eligible uses for
‘‘addressing the impact of lost
instructional time’’).
Proposed Additional Enumerated
Eligible Uses Not Incorporated
The interim final rule posed a
question on what other types of services
or costs Treasury should consider as
eligible uses to respond to the
disproportionate public health or
negative economic impacts of COVID–
19 on low-income populations and
communities.
In response, commenters proposed a
wide variety of additional
recommended enumerated eligible uses
to assist disproportionately impacted
households, ranging from general
categories of services (e.g., long-term
investments to remediate long-term
disparities) to highly specific examples
of services (e.g., a specific type of
healthcare equipment). As discussed
above, Treasury is including several
additional categories of enumerated
eligible uses in the final rule in response
to public comments.
Given the large number and diversity
of SLFRF recipients, Treasury’s
approach to assistance to households in
disproportionately impacted
communities in the final rule aims to
provide enumerated eligible uses that
respond to disproportionate impacts of
the pandemic experienced widely in
many jurisdictions across the country
and are intended to simplify and clarify
these enumerated eligible uses. At the
same time, Treasury recognizes that the
impacts of the pandemic vary over time,
by jurisdiction, and by population; as
such, the final rule provides flexibility
for recipients to identify additional
disproportionate impacts to additional
households or classes of households and
pursue programs and services that
respond to those disproportionate
impacts.
In the final rule, Treasury has not
chosen to include as enumerated uses
all uses proposed by commenters; given
the significant range, and in some cases
highly specific nature, of the proposed
uses Treasury was not able to assess that
the proposed uses would respond to
disproportionate impacts experienced in
many jurisdictions across the country,
supporting an enumerated eligible use
available to all recipients
presumptively. However, the final rule
continues to provide a framework to
allow recipients to identify and respond
to additional disproportionate impacts
(for details, see section General
Provisions: Structure and Standards).
Some types of proposed additional
enumerated eligible uses for assistance
to households in disproportionately
impacted communities were
recommended by several commenters:
•Capital expenditures. Many
commenters recommended that capital
expenditures on many different types of
public and private facilities be
enumerated eligible uses. For clarity,
Treasury has addressed all comments on
the eligibility of capital expenditures on
property, facilities, or equipment in one
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4376 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
205 Board of Governors of the Federal Reserve
System, Monetary Policy Report (June 12, 2020),
https://www.federalreserve.gov/monetarypolicy/
2020-06-mpr-summary.htm.
206 U.S. Small Business Administration, Office of
Advocacy, Small Businesses Generate 44 Percent of
U.S. Economic Activity (Jan. 30, 2019), https://
advocacy.sba.gov/2019/01/30/small-businesses-
generate-44-percent-of-u-s-economic-activity/.
207 Joseph R. Biden, Remarks by President Biden
on Helping Small Businesses (Feb. 22, 2021),
https://www.whitehouse.gov/briefing-room/
speechesremarks/2021/02/22/remarks-by-president-
bidenon-helping-small-businesses/.
208 Daniel Wilmoth, U.S. Small Business
Administration Office of Advocacy, The Effects of
the COVID–19 Pandemic on Small Businesses, Issue
Brief No. 16 (Mar. 2021), available at https://
cdn.advocacy.sba.gov/wp-content/uploads/2021/
03/02112318/COVID-19-Impact-On-Small-
Business.pdf.
209 U.S. Census Bureau, Small Business Pulse
Survey, https://portal.census.gov/pulse/data/ (last
visited December 7, 2021).
210 Olivia S. Kim et al., Revenue Collapses and
the Consumption of Small Business Owners in the
Early Stages of the COVID–19 Pandemic (Nov.
2020), https://www.nber.org/papers/w28151.
211 See, e.g., Board of Governors of the Federal
Reserve System, Report to Congress on the
Availability of Credit to Small Businesses (Sept.
2017), available at https://www.federalreserve.gov/
publications/2017-september-availability-of-credit-
to-small-businesses.htm.
212 Alexander W. Bartik et al., The Impact of
COVID–19 on small business outcomes and
expectations, PNAS 117(30): 17656–66 (July 28,
2020), available at https://www.pnas.org/content/
117/30/17656.
213 Robert Fairlie, The impact of COVID–19 on
small business owners: Evidence from the first
3months after widespread social-distancing
restrictions, Journal of economics & management
strategy (August 27, 2020), https://doi.org/10.1111/
jems.12400.
214 U.S. Small Business Administration, The
Effects of the COVID–19 Pandemic on Small
Businesses (March 2021), https://cdn.advocacy.
sba.gov/wp-content/uploads/2021/03/02112318/
COVID-19-Impact-On-Small-Business.pdf.
215 Robert Fairlie, supra note 213.
216 Federal Reserve Bank of Atlanta. 2019. Small
Business Credit Survey 2019 Report on Minority-
Owned Firms. December. fedsmallbusiness.org/
survey/2019/report-on-minority-owned-firms.
217 Ding, Lei, and Alvaro Sanchez. 2020. What
Small Businesses Will Be Impacted by COVID–19?
Federal Reserve Bank of Philadelphia.
philadelphiafed.org/covid-19/covid-19-equity-in-
recovery/what-small-businesses-will-be-impacted.
218 Lucas Misera, An Uphill Battle: COVID–19’s
Outsized Toll on Minority-Owned Firms, Federal
Reserve Bank of Cleveland (October 8, 2020),
https://www.clevelandfed.org/newsroom-and-
events/publications/community-development-
briefs/db-20201008-misera-report.aspx.
219 Robert Fairlie, A. Robb, D. Robinson, Black
and White: Access to Capital among Minority-
Owned Startups, NBER Working Paper 28154
(November 2020), https://www.nber.org/papers/
w28154.
section (see section Capital
Expenditures in General Provisions:
Other).
•Equity funds. Several commenters
recommended that Treasury permit
SLFRF funds to be deposited into an
equity fund to support long-term racial
and economic equity investments. The
eligibility of such use would depend on
the specific structure and uses of funds.
Under the statute, SLFRF funds can
only support costs incurred until
December 31, 2024; see section
Timeline for Use of SLFRF Funds in
Program Administration Provisions.
Further, recipients may calculate the
cost incurred with respect to
investments in revolving loan funds
based on the methodology described in
section Treatment of Loans in Program
Administration Provisions. Projects
funded by a revolving loan fund using
SLFRF funds would also need to be
eligible uses of SLFRF funds.
•Environmental quality and climate
resilience. Several commenters
recommended eligible uses to enhance
environmental quality, remediate
pollution, promote recycling or
composting, or increase energy
efficiency or electrical grid resilience.
Whether these projects respond to the
disproportionate impacts of the
pandemic on certain communities
would depend on the specific issue they
address and its nexus to the public
health and economic impacts of the
pandemic.
b. Assistance to Small Businesses
Background
The pandemic has severely impacted
many businesses, with small businesses
hit especially hard. Small businesses
make up nearly half of U.S. private-
sector employment 205 and play a key
role in supporting the overall economic
recovery as they are responsible for two-
thirds of net new jobs.206 Since the
beginning of the pandemic, however,
400,000 small businesses have closed,
with many more at risk.207 Sectors with
a large share of small business
employment have been among those
with the most drastic drops in
employment.208 The negative outlook
for small businesses has continued: As
of November 2021, approximately 66
percent of small businesses reported
that the pandemic has had a moderate
or large negative effect on their
business, and over a third expect that it
will take over 6 months for their
business to return to their normal level
of operations.209
This negative outlook is likely the
result of many small businesses having
faced periods of closure and having seen
declining revenues as customers stayed
home.210 In general, small businesses
can face greater hurdles in accessing
credit,211 and many small businesses
were already financially fragile at the
outset of the pandemic.212
While businesses everywhere faced
significant challenges during the
pandemic, minority-owned and very
small businesses have faced additional
obstacles. Between February and April
2020, the number of actively self-
employed Black business owners
decreased by 41 percent.213 During that
same time period, Asian and Latino
business owners decreased by 26 and 32
percent, respectively, compared to a 17
percent decrease in white business
owners.214 Female business owners also
saw significant impacts, with businesses
owned by women falling by 25
percent.215
Many of the disparities in how
minority business owners experienced
the pandemic are rooted in systemic
issues present even before the
pandemic. For example, before the
economic downturn, only 12 percent of
Black-owned businesses and 19 percent
of Hispanic-owned businesses had
annual earnings of over $1 million
compared to 31 percent of white-owned
businesses.216 Minority-owned
businesses were also overrepresented in
industries hit hardest by the economic
downturn (e.g., services, transportation
and warehousing, healthcare and social
assistance, administrative and support
and waste management, and
accommodation and food services).217
Approximately 22 percent of all
minority-owned business fell into the
hardest hit industries compared to 13
percent of nonminority-owned
businesses.218
Although disparities in annual
revenue are not a direct indication of a
business’s ability to weather an
economic downturn, they do highlight
other disparities that make it more
challenging for these businesses to
survive the effects of the pandemic.
Black-owned startups, for example, face
larger challenges in raising capital,
including securing business loans.219
Summary of the Interim Final Rule and
Final Rule Structure
Summary of Interim Final Rule: As
discussed above, small businesses faced
significant challenges in covering
payroll, mortgages or rent, and other
operating costs as a result of the public
health emergency and measures taken to
contain the spread of the virus. Under
Sections 602(c)(1)(A) and 603(c)(1)(A),
recipients may ‘‘respond to the public
health emergency or its negative
economic impacts,’’ by, among other
things, providing ‘‘assistance to . . .
small businesses.’’ Accordingly, the
interim final rule allowed recipients to
provide assistance to small businesses
to address the negative economic
impacts faced by those businesses. A
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4377 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
‘‘small business’’ is defined as a
business concern or other organization
that:
(1) Has no more than 500 employees
or, if applicable, the size standard in
number of employees established by the
Administrator of the Small Business
Administration for the industry in
which the business concern or
organization operates; and
(2) Is a small business concern as
defined in section 3 of the Small
Business Act (15 U.S.C. 632).
Specifically, the interim final rule
provided that recipients may provide
assistance to small businesses to adopt
safer operating procedures, weather
periods of closure, or mitigate financial
hardship resulting from the COVID–19
public health emergency, including:
•Loans or grants to mitigate financial
hardship such as declines in revenues
or impacts of periods of business
closure;
•Loans, grants, or in-kind assistance
to implement COVID–19 prevention or
mitigation tactics; and
•Technical assistance, counseling, or
other services to assist with business
planning needs.
The interim final rule further
provided that recipients may consider
additional criteria to target assistance to
businesses in need, including small
businesses. Such criteria may include
businesses facing financial insecurity,
substantial declines in gross receipts
(e.g., comparable to measures used to
assess eligibility for the Paycheck
Protection Program), or other economic
harm due to the pandemic, as well as
businesses with less capacity to weather
financial hardship, such as the smallest
businesses, those with less access to
credit, or those serving underserved
communities. The interim final rule also
indicated that recipients should
consider local economic conditions and
business data when establishing such
criteria. Finally, the interim final rule
posed a question on whether there are
other services or costs that Treasury
should consider as eligible uses to
respond to the disproportionate impacts
of COVID–19 on low-income
populations and communities.
Final Rule Structure: Consistent with
the interim final rule approach, the final
rule provides a non-exhaustive list of
enumerated eligible uses for assistance
to small businesses that are impacted or
disproportionately impacted by the
pandemic. Further, within Assistance to
Small Business, a recipient may also
identify a negative economic impact
experienced by small businesses and
design and implement a response to that
negative economic impact, beyond the
uses specifically enumerated in the final
rule, according to the standard
described in the section Standards:
Identifying a Negative Economic Impact.
A recipient may also identify small
businesses that have been
disproportionately impacted by the
public health emergency and design and
implement a program that responds to
the source of that disproportionate
impact.
Consistent with other eligible use
categories to respond to the public
health and economic impacts of the
pandemic, recipients may identify and
serve small businesses that experienced
a negative economic impact or
disproportionate impact due to the
pandemic, as described in the section
Standards for Identifying Other Eligible
Populations. For example, to identify
impacted small businesses, a recipient
may consider whether the small
businesses faced challenges in covering
payroll, mortgage or rent, or other
operating costs as a result of the public
health emergency and measures taken to
contain the spread of the virus. In order
to ease administrative burden, the final
rule presumes that small businesses
operating in QCTs, small businesses
operated by Tribal governments or on
Tribal Lands, and small businesses
operating in the U.S. territories were
disproportionately impacted by the
pandemic.
Reorganizations and Cross-
References: As detailed above, Treasury
has re-categorized some uses of funds in
the final rule to provide greater clarity.
For discussion of assistance to small
businesses and impacted industries to
implement COVID–19 mitigation and
prevention strategies, see section
COVID–19 Mitigation and Prevention in
Public Health.
Small Businesses Eligible for Assistance
Public Comment: Treasury received
many comments about the general
benefits or drawbacks of use of SLFRF
funds to provide assistance to small
businesses. Some commenters suggested
that SLFRF funds should be available to
assist all small businesses, rather than
only businesses that experienced direct
negative economic impacts due to the
public health emergency. Other
commenters argued that aid to small
businesses should be narrowed in the
final rule, asserting that SLFRF funds
should instead focus on assistance to
households or building public sector
capacity.
Treasury also received comments
requesting clarification of the types of
small businesses eligible for assistance.
For example, some commenters
requested clarification about whether
microbusinesses were included in the
definition of small business. Comments
also suggested that self-employed
individuals and Tribal enterprises be
classified as small businesses,
respectively. Commenters argued that
these types of small businesses are more
common among low-income and
minority businessowners and serve as
important institutions in underserved
communities.
Finally, some commenters suggested
that Treasury permit broader
enumerated eligible uses to assist small
businesses in disproportionately
impacted communities and generally
strengthen economic growth in these
communities. These commenters
recommended that Treasury presume
small businesses operating in QCTs are
disproportionately impacted and
eligible for broader enumerated uses.
Treasury Response: As discussed in
the section Designating a Negative
Economic Impact, in the final rule,
recipients must identify an economic
harm caused or exacerbated by the
pandemic on a small business or class
of small businesses to provide services
that respond.
As discussed above, programs or
services in this category must respond
to a harm experienced by a small
business or class of small businesses as
a result of the public health emergency.
To identify impacted small businesses
and necessary response measures,
recipients may consider impacts such as
lost revenue or increased costs,
challenges covering payroll, rent or
mortgage, or other operating costs, the
capacity of a small business to weather
financial hardships, and general
financial insecurity resulting from the
public health emergency.
Recognizing the difficulties faced by
small businesses in certain
communities, the final rule presumes
that small businesses operating in QCTs,
small businesses operated by Tribal
governments or on Tribal Lands, and
small businesses operating in the U.S.
territories were disproportionately
impacted by the pandemic. This
presumption parallels the final rule’s
approach to assistance to households,
reflecting the more severe pandemic
impacts in underserved communities
and creating a parallel structure across
different categories of eligible uses to
make the structure simpler for
recipients to understand and navigate.
Treasury notes that recipients may
also designate a class of small
businesses that experienced a negative
economic impact or disproportionate
negative economic impact (e.g.,
microbusinesses, small businesses in
certain economic sectors), design an
intervention to fit the impact, and
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220 In regard to counting employees, businesses
owned and controlled by a Tribal government are
not considered affiliates of the Tribal government
and are not considered affiliates of other businesses
owned by the Tribal government because of their
common ownership by the Tribal government or
common management, as described in 13 CFR
121.103(b)(2). This definition is consistent with the
Small Business Administration (SBA) HUBZone
definition of a ‘‘small business concern’’ relating to
Tribal governments as well as how Tribal
enterprises are defined for the State Small Business
Credit Initiative (SSBCI).
document that the individual entity is a
member of the class. Additional
information about this framework is
included in the section General
Provisions: Structure and Standards.
Further, Treasury is maintaining the
interim final rule definition of ‘‘small
business,’’ which used the Small
Business Administration’s (SBA)
definition of fewer than 500 employees,
or per the standard for that industry, as
defined by SBA. This definition
includes businesses with very few
employees, self-employed individuals,
and Tribally owned businesses.220
Finally, Treasury notes that recipients
may award SLFRF funds to many
different types of organizations,
including small businesses, to function
as a subrecipient in carrying out eligible
uses of funds on behalf of a recipient
government. In this case, a small
business need not have experienced a
negative economic impact in order to
serve as a subrecipient. See section
Distinguishing Subrecipients versus
Beneficiaries for more detailed
discussion of interactions with
subrecipients, in contrast to
beneficiaries of assistance.
Enumerated Eligible Uses for Assistance
to Small Businesses
Public Comment: Treasury received
comments requesting clarification of the
types of assistance available to small
businesses. For example, one
commenter suggested that outdoor
dining be an eligible use for SLFRF
funds as assistance to small businesses.
Other commenters asked for
clarification about how SLFRF funds
could be used to support new
businesses and start-ups.
Several commenters requested
clarification of whether and how
recipients may provide services to
business districts or downtown areas,
particularly those that exist in whole or
in part within a QCT, and requested
reduced documentation of the specific
negative economic impact for the
businesses operating within those areas.
These commenters argued in favor of
allowing redevelopment or other
support, including capital investments,
in business districts that were
negatively impacted by COVID–19.
Several commenters also argued that
funds should be available to support
and grow microbusinesses, or
businesses with five or fewer
employees, which are more likely to be
owned by women and people of color.
Treasury Response: In the final rule,
Treasury is maintaining and clarifying
the enumerated eligible uses of funds
for assistance to small businesses that
are impacted or disproportionately
impacted by the pandemic.
Impacted small businesses.
Specifically, Treasury is maintaining
enumerated eligible uses from the
interim final rule for assistance to
impacted small businesses. These
include but are not limited to:
•Loans or grants to mitigate financial
hardship such as declines in revenues
or impacts of periods of business
closure, for example by supporting
payroll and benefits costs, costs to retain
employees, mortgage, rent, or utilities
costs, and other operating costs;
•Loans, grants, or in-kind assistance
to implement COVID–19 prevention or
mitigation tactics (see section Public
Health for details on these eligible uses);
and
•Technical assistance, counseling, or
other services to assist with business
planning needs.
Treasury acknowledges a range of
potential circumstances in which
assisting small businesses could be
responsive to the negative economic
impacts of COVID–19, including for
small businesses startups and
microbusinesses and individuals
seeking to start small or
microbusinesses. For example:
•As noted above, a recipient could
assist small business startups or
microbusinesses with additional costs
associated with COVID–19 mitigation
tactics; see section Public Health for
details on these eligible uses.
•A recipient could identify and
respond to a negative economic impact
of COVID–19 on new small business
startups or microbusinesses; for
example, if small business startups or
microbusinesses in a locality faced
greater difficulty accessing credit than
prior to the pandemic or faced increased
costs to starting the business due to the
pandemic or if particular small
businesses or microbusinesses had lost
expected startup capital due to the
pandemic.
•The interim final rule also
discussed, and the final rule maintains,
eligible uses that provide support for
individuals who have experienced a
negative economic impact from the
COVID–19 public health emergency,
including uses that provide job training
for unemployed individuals. These
initiatives also may support small
business start-ups, microbusinesses, and
individuals seeking to start small or
microbusinesses.
Disproportionately impacted small
businesses. Additionally, Treasury
agrees with commenters that
disproportionately impacted small
businesses may benefit from additional
assistance to address the sources of that
disparate impact.
As such, the final rule provides a
broader set of enumerated eligible uses
for disproportionately impacted small
businesses and/or small businesses in
disproportionately impacted business
districts. Recipients may use SLFRF
funds to assist these businesses with
certain capital investments, such as
rehabilitation of commercial properties,
storefront improvements, and fac¸ade
improvements. Recipients may also
provide disproportionately impacted
microbusinesses additional support to
operate the business, including
financial, childcare, and transportation
supports.
Recipients could also provide
technical assistance, business
incubators, and grants for start-ups or
expansion costs for disproportionately
impacted small businesses. Note that
some of these types of assistance are
similar to those eligible to respond to
small businesses that experienced a
negative economic impact (‘‘impacted’’
small businesses). However, because the
final rule presumes that some small
businesses were disproportionately
impacted, these enumerated eligible
uses can be provided to those
businesses without any specific
assessment of whether they individually
experienced negative economic impacts
or disproportionate impacts due to the
pandemic.
Cross-References: Recipients
providing assistance to small businesses
for capital expenditures (i.e.,
expenditures on property, facilities, or
equipment) should also review the
section Capital Expenditures in General
Provisions: Other, which describes
eligibility standards that apply to capital
expenditures. Recipients should also
note that services to address vacant or
abandoned commercial or industrial
properties are addressed in section
Vacant or Abandoned Properties in
Assistance to Households.
Loans to Small Businesses
Public Comment: Treasury received
many comments requesting clarification
on using SLFRF funds to establish funds
that provide loans to small businesses.
For example, commenters sought
clarification of how eligible use
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221 See, e.g., Federal Reserve Bank of San
Francisco, Impacts of COVID–19 on Nonprofits in
the Western United States (May 2020), https://
www.frbsf.org/community-development/files/
impact-of-covid.
222 Philanthropy and COVID–19: Measuring one
year of giving, Candid and the Center for Disaster
Philanthropy. (2021), https://www.issuelab.org/
resources/38039/38039.pdf.
223 Id.
224 Elizabeth T. Boris et al., Nonprofit Trends and
Impacts 2021, Urban Institute (October 7, 2021),
https://www.urban.org/research/publication/
nonprofit-trends-and-impacts-2021/view/full_
report.
225 Id.
226 Chelsea Newhouse, COVID–19 JOBS UPDATE,
NOVEMBER 2021: Nonprofits add just 5,000 jobs in
November, Center for Civil Society Studies at Johns
Hopkins University (December 10, 2021), http://
ccss.jhu.edu/november-2021-jobs/.
227 Elizabeth T. Boris et al. supra note 224 at p.
38.
228 §35.3 Definitions.
229 The ARPA also states under ‘‘Transfer
Authority’’ that a Recipient may transfer funds to
a private nonprofit organization such as those
defined in paragraph (17) of section 401 of the
McKinney-Vento Homeless Assistance Act (42
U.S.C. 11360(17). See 602 & 603(c)(3) of the Social
Security Act. See section Transfers of Funds for
additional information on other types of entities,
including other forms of nonprofits, that may
receive transfers.
230 While not stated specifically in the interim
final rule, the Department does not require or have
a preference as to the payment structure for
recipients that transfer funds to subrecipients (e.g.,
advance payments, reimbursement basis, etc.).
Ultimately, recipients must comply with the
eligible use requirements and any other applicable
laws or requirements and are responsible for the
actions of their subrecipients or beneficiaries.
requirements and applicable dates for
SLFRF funds would apply to third party
organizations (like economic
development organizations) who receive
SLFRF funds in order to establish a loan
fund. In addition, commenters
requested clarification on what
requirements apply to loan programs
with available funds remaining after
December 31, 2024.
Treasury Response: SLFRF funds may
be used to make loans, including to
small businesses, provided that the loan
is an eligible use, and the cost of the
loan is tracked and reported in
accordance with Treasury’s Compliance
and Reporting Guidance. Funds that are
unobligated after December 31, 2024
must be returned to Treasury. See
section Treatment of Loans for more
information about using SLFRF funds
for loan programs.
c. Assistance to Nonprofits
Background: Nonprofits have faced
significant challenges because of the
pandemic, including increased demand
for services and changing operational
needs.221 Prior to the pandemic, the
median U.S. nonprofit reported that it
had six months of cash on hand.222 This
varied by sector, however, with some
sectors like disaster relief organizations
reporting a median of 17 months cash
on hand, and others, like mental health
and crisis intervention organizations
reporting only three months.223
Evidence suggests that the pandemic
has damaged the financial health of
nonprofits, with small nonprofits,
which tend to rely more heavily on
donations than large nonprofits,
reporting relatively larger declines in
donations — 42 percent versus 29
percent, respectively.224 Among
nonprofits that collect fees for services,
the median revenue amount collected
from such fees fell by 30 percent from
2019 to 2020, with arts organization
experiencing a 50 percent decline.225
Nonprofits also experienced significant
job losses. While employment in the
nonprofit sector has recovered from its
low point in 2020, as of November 2021,
the sector remained 485,000 jobs below
its pre-pandemic level.226 In addition,
some nonprofits may have experienced
declines in volunteer staffing during the
pandemic.227
At the same time, nonprofits provide
a host of services for their communities,
including helping Americans weather
the multitude of challenges presented
by the pandemic. The ARPA and the
interim final rule recognized this
dichotomy—nonprofits as entities that
have themselves been negatively
impacted by the pandemic and as
entities that provide services that
respond to the public health and
negative economic impacts of the
pandemic on households and others
—by creating two roles for nonprofits.
First, under Sections 602(c)(1)(A) and
603(c)(1)(A), recipients may ‘‘respond to
the public health emergency or its
negative economic impacts,’’ by, among
other activities, providing ‘‘assistance to
. . . nonprofits.’’ The interim final rule
defined assistance to nonprofits to
include ‘‘loans, grants, in-kind
assistance, technical assistance or other
services, that responds to the negative
economic impacts of the COVID–19
public health emergency,’’ and
‘‘nonprofit’’ to mean a tax-exempt
organization under Section 501(c)(3) of
the U.S. Internal Revenue Code.228
Second, as discussed above, ARPA
and the interim final rule provided that
nonprofit organizations may also receive
funds as subrecipients of a recipient
government (i.e., a government that
received SLFRF funds); subrecipients
carry out an eligible use of SLFRF funds
on behalf of a recipient government
(e.g., a recipient government that would
like to provide food assistance to
impacted households may grant funds
to a nonprofit organization to carry out
that eligible use). Recipients generally
have wide latitude to award funds to
many types of organizations, including
nonprofit or for-profit organizations, as
subrecipients to carry out eligible uses
of funds on their behalf. For further
information on distinguishing between
beneficiaries and subrecipients, as well
as the impacts of the distinction on
reporting and other requirements, see
section Transfers of Funds and section
Distinguishing Subrecipients versus
Beneficiaries under the Public Health
and Negative Economic Impacts eligible
use category.229
Reorganization and Cross-References:
Under the interim final rule, assistance
to disproportionately impacted
communities was a separate, stand-
alone category. The final rule
reorganizes the disproportionate impact
analysis within the sections Assistance
to Households, Assistance to Small
Business, and Assistance to Nonprofits
to better articulate how recipients can
serve disproportionately impacted
beneficiaries in each of those categories.
As detailed above in the Public Health
subsection, in response to public
comments describing uncertainty on
which eligible use category should be
used to assess different potential uses of
funds, Treasury has re-categorized some
uses of funds in the final rule to provide
greater clarity. For discussion of
assistance to nonprofits to implement
COVID–19 mitigation and prevention
strategies, see section COVID–19
Mitigation and Prevention in Public
Health.
Recipients providing assistance via
nonprofits involving capital
expenditures (i.e., expenditures on
property, facilities, or equipment)
should also review the section Capital
Expenditures in General Provisions:
Other, which describes eligibility
standards for these expenditures.
Recipients providing assistances in the
form of loans should review the section
Treatment of Loans.
Public Comment: Eligible Assistance
to Impacted and Disproportionately
Impacted Nonprofits: A few
commenters asked Treasury to be more
explicit in the final rule that recipients
may use funds to provide relief directly
to nonprofit organizations and to
explain how nonprofits might qualify
themselves for assistance and what
expenses SLFRF funds may be used to
cover.230 Commenters requested that
Treasury note that the pandemic is
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231 Note, this response is meant to clarify the
difference between nonprofits as beneficiaries and
nonprofits as subrecipients. It is not meant to limit
the types of relationships that a recipient may enter
into with a nonprofit as permitted under the
Uniform Guidance.
232 See sections 602(c)(3) and 603(c)(3) of the
Social Security Act. See also Section 401 of the
McKinney-Vento Homeless Assistance Act (42
U.S.C. 11360(17), which defines a ‘‘private
nonprofit organization.’’
leading to a changing financial
landscape for nonprofits.
Treasury Response: Eligible
Assistance to Impacted and
Disproportionately Impacted
Nonprofits: The interim final rule
provided for, and the final rule
maintains, the ability for recipients to
provide direct assistance to nonprofits
that experienced public health or
negative economic impacts of the
pandemic. Specifically, recipients may
provide direct assistance to nonprofits if
the nonprofit has experienced a public
health or negative economic impact as
a result of the pandemic. For example,
if a nonprofit organization experienced
impacts like decreased revenues or
increased costs (e.g., through reduced
contributions or uncompensated
increases in service need), and a
recipient provides funds to address that
impact, then it is providing direct
assistance to the nonprofit as a
beneficiary under Subsection (c)(1) of
Sections 602 and 603. Direct assistance
may take the form of loans, grants, in-
kind assistance, technical assistance, or
other services that respond to the
negative economic impacts of the
COVID–19 public health emergency.
A recipient may identify a negative
economic impact experienced by a
nonprofit, or class of nonprofits, and
design and implement a response to that
negative economic impact, see section
Standards: Designating a Negative
Economic Impact. The final rule
provides a non-exhaustive list of
enumerated eligible uses for assistance
to nonprofits that are impacted or
disproportionately impacted by the
pandemic.
A recipient may also identify a class
of nonprofits that have been
disproportionately impacted by the
public health emergency and design and
implement a program that responds to
the source of that disproportionate
impact. For example, a recipient may
determine that nonprofits offering after-
school programs within its jurisdiction
were disproportionately impacted by
the pandemic due to the previous in-
person, indoors nature of the work and
the nonprofits’ reliance on fees received
for services (e.g., attendance fees). The
recipient might then design an
intervention to assist those nonprofits in
adapting their programming (e.g., to
outdoor or online venues), their revenue
structure (e.g., adapting the fee for
service structure or developing expertise
in digital donation campaigns), or both.
Additional information about this
framework is included in General
Provisions: Structure and Standards. In
order to ease administrative burden, the
final rule presumes that nonprofits
operating in QCTs, operated by Tribal
governments or on Tribal Lands, or
operating in the U.S. territories were
disproportionately impacted by the
pandemic.
To summarize, a recipient may
determine that certain nonprofits were
impacted by the pandemic or were
disproportionately impacted by the
pandemic and provide responsive
services.
Public Comment: Beneficiaries and
Subrecipients: As noted elsewhere in
this final rule, Treasury received
multiple comments expressing
uncertainty on how to categorize a
particular activity in the eligible use
categories. For instance, some
commenters requested that recipients be
able to use SLFRF funds for certain
expenses incurred by nonprofits (e.g.,
unemployment charges) as a response to
a public health or negative economic
impact to that nonprofit; others asked if
nonprofits providing certain services
(e.g., social services) made them eligible
for direct assistance. Commenters also
requested that Treasury acknowledge
that engagement directly with nonprofit
organizations in low-income
communities and communities of color
may allow the recipient to better assess
economic harms in these areas.
Treasury Response: Beneficiaries and
Subrecipients: Treasury recognizes that
many nonprofits play important roles in
their communities, and some may have
experienced public health or negative
economic impacts during the pandemic.
As such, under the interim final rule
and the final rule, nonprofits may be
impacted by the pandemic and receive
assistance as a beneficiary, as described
above, and/or be a subrecipient
providing services on behalf of a
recipient.231
Specifically, the interim final rule
also allowed for, and the final rule
maintains, the ability for the recipient to
transfer, e.g., via grant or contract, funds
to nonprofit entities to carry out an
eligible use on behalf of the recipient.
Treasury notes that recipients may
award SLFRF funds to many different
types of organizations to carry out
eligible uses of funds and serve
beneficiaries on behalf of a recipient
government (e.g., assisting in a
vaccination campaign, operating a job
training program, developing affordable
housing). When a recipient provides
funds to an organization to carry out
eligible uses of funds and serve
beneficiaries, the organization becomes
a subrecipient. In this case, a nonprofit
need not have experienced a negative
economic impact in order to serve as a
subrecipient.
In the context of SLFRF, nonprofits of
all types may be subrecipients. Treasury
is not restricting the types of nonprofits
that can operate as subrecipients, rather
allowing recipients to decide what form
best meets the needs of their
community. Therefore, a ‘‘nonprofit’’
that is acting as subrecipient could
include, but is not limited to, a
nonprofit as that term is defined in
paragraph (17) of section 401 of the
McKinney-Vento Homeless
Assistance.232 See section
Distinguishing Subrecipients versus
Beneficiaries for further information.
Additional guidance on determining
subrecipient status may be found in the
Uniform Guidance.233
Recipients may transfer funds to
subrecipients in several ways, including
advance payments and on a
reimbursement basis. Ultimately,
recipients must comply with the eligible
use requirements and any other
applicable laws or requirements and are
responsible for the actions of their
subrecipients or beneficiaries.
As part of accepting the Award Terms
and Conditions for SLFRF, each
recipient agreed to maintain a conflict-
of-interest policy consistent with 2 CFR
200.318(c) that is applicable to all
activities funded with the SLFRF award.
Pursuant to this requirement, decisions
concerning SLFRF funds must be free of
undisclosed personal or organizational
conflicts of interest, both in fact and in
appearance. Recipients may avoid
conflicts of interest in providing
assistance to nonprofits or making
subrecipient awards by, inter alia,
making aid available to nonprofits on
generally applicable terms or utilizing a
competitive grant process, respectively.
A recipient may not use control over
SLFRF funds for their own private gain.
Furthermore, no employee, officer, or
agent may participate in the selection,
award, or administration of a contract
supported by a federal award if he or
she has a real or apparent conflict of
interest.
Public Comment: Definition of
Nonprofit: Treasury also received
several requests to expand the definition
of nonprofits so that other tax-exempt
entities (e.g., 501(c)(7)s, 501(c)(9)s,
501(c)(19)s, nonprofits with ‘‘historical
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234 §35.3 Definitions.
235 Treasury considered expanding the definition
of nonprofit to include 501(c)(6) organizations, as
Congress later did in the Coronavirus Response and
Consolidated Appropriations Act of 2021, but
ultimately decided to retain the original CARES Act
definition. To the extent impacted by the pandemic,
501(c)(6) organizations may be eligible to receive
funds to support eligible uses that align with their
overall purpose (e.g., tourism promotion in aid of
an impacted industry).
236 Coronavirus State and Local Fiscal Recovery
Funds, 86 FR at 26795.
237 For a definition of ‘‘Tribal development
districts,’’ please see FAQ 2.9 at the following:
Coronavirus State and Local Fiscal Recovery Funds,
Frequently Asked Questions, as of July 19, 2021;
https://home.treasury.gov/system/files/136/
SLFRPFAQ.pdf.
significance’’) could be eligible for
direct assistance as beneficiaries.
Treasury Response: Definition of
Nonprofit: The final rule expands the
definition of nonprofits to mean
501(c)(3) organizations and 501(c)(19)
organizations.234 The 501(c)(3)
classification includes a wide range of
organizations with varying charitable or
public service-oriented goals (e.g.,
housing, food assistance, job training).
As discussed above, these nonprofit
organizations often experienced
hardship due to increased needs for
services combined with decreased
donations and other sources of funding.
In response to comments, Treasury has
expanded the definition of nonprofit to
include 501(c)(19) organizations, which
includes veterans’ organizations, to
provide recipients more flexibility and
in alignment with the definition of
nonprofit adopted by the CARES Act,
wherein 501(c)(3)s and 501(c)(19)s were
eligible for assistance.235
Public Comment: Reporting
Requirements: One commenter asked
Treasury to clarify if nonprofits that
receive direct assistance as beneficiaries
are required to comply with guidelines
and reporting requirements.
Treasury Response: Reporting
Requirements: Nonprofits that receive
direct assistance as beneficiaries are not
subrecipients under SLFRF and are
therefore not required to comply with
SLFRF reporting requirements.
However, the recipient must comply
with SLFRF reporting requirements,
which would require reporting
obligations and expenditures for
assistance to nonprofits. The recipient
may also choose to establish other forms
of reporting or accountability as a part
of the recipient’s direct assistance
program.
A nonprofit entity that receives a
transfer from a recipient is a
subrecipient. Per the Uniform Guidance,
subrecipients must adhere to the same
requirements as recipients. Therefore, a
nonprofit subrecipient may only receive
funds to carry out an eligible use of
SLFRF funds and must comply with any
reporting and compliance requirements.
Note that recipients are ultimately
responsible for reporting information to
Treasury and must collect any necessary
information from their subrecipients to
complete required reporting.
d. Aid to Impacted Industries
The interim final rule allowed for
‘‘aid to tourism, travel, and hospitality,
and other impacted industries’’ that
responds to the negative economic
impacts of the COVID–19 public health
emergency. In designating other
impacted industries, Treasury specified
that recipients should consider the
‘‘extent of the economic impact as
compared to tourism, travel, and
hospitality’’ and ‘‘whether impacts were
due to the COVID–19 pandemic, as
opposed to longer-term economic or
industrial trends unrelated to the
pandemic.’’236 Treasury identified
declines in employment and revenue as
possible metrics to compare the
economic impact on a particular
industry relative to the tourism, travel,
and hospitality industries.
Treasury further provided that aid
should be limited to businesses,
attractions, business districts, and Tribal
development districts 237 that were
operating prior to the pandemic and
affected by required closures and other
efforts to contain the pandemic.
Examples of eligible aid include
assistance to implement COVID–19
mitigation and infection prevention
measures, aid to support safe reopening
of businesses in these industries, as well
as aid for a planned expansion or
upgrade of tourism, travel, and
hospitality facilities delayed due to the
pandemic. The interim final rule and
Treasury’s subsequent Compliance and
Reporting Guidance also required
governments to publicly report
assistance provided to private-sector
businesses under this eligible use and
maintain records of their assessments to
facilitate transparency and
accountability.
Reorganization and Cross-References:
As detailed above, Treasury has re-
categorized some uses of funds in the
final rule to provide greater clarity. In
the interim final rule, aid to impacted
industries to implement COVID–19
mitigation and prevention strategies was
categorized under Aid to Impacted
Industries; the final rule addresses these
items under the section COVID–19
Mitigation and Prevention in Public
Health. Recipients should also be aware
of the difference between beneficiaries
of assistance and subrecipients when
working with impacted industries; for
further information, see section
Distinguishing Subrecipients versus
Beneficiaries.
Designating an Impacted Industry
Public Comment: Many commenters
requested greater clarity on how to
designate ‘‘other impacted industries’’
within their jurisdiction. Commenters
requested greater specificity as to the
metrics used to measure impact, with
some suggesting metrics such as the
change in the size of an industry’s
workforce due to the pandemic, as well
as consideration of whether and why
employees are choosing to return to
work at slower rates in certain
industries. One commenter asked if this
meant nearly every industry was
‘‘disproportionately impacted.’’ Some
commenters encouraged Treasury to
focus on industries most negatively
impacted by the pandemic, including
disallowing across-the-board business
subsidies to businesses that were not
negatively impacted by the pandemic
and saw revenue or profit growth. Other
commenters asked for flexibility for
recipients to determine impacted
industries based on their local
knowledge of the economic landscape.
Treasury Response: The final rule
maintains the interim final rule’s
approach of allowing recipients to
designate impacted industries outside
the travel, tourism, and hospitality
industries, and, in response to
comments, provides greater clarity as to
how recipients may designate such
impacted industries.
Sections 602(c)(1)(A) and 603(c)(1)(A)
recognize that the tourism, travel, and
hospitality industries are severely
negatively impacted by the pandemic.
Under the final rule, recipients may
provide eligible aid (described in further
detail herein) to the tourism, travel, and
hospitality industries. Treasury
considers Tribal development districts,
which are commercial centers for Tribal
hospitality, gaming, tourism, and
entertainment and can include Tribal
enterprises, as part of the tourism,
travel, and hospitality industries that
have been severely hit by the pandemic.
Therefore, Treasury reaffirms that Tribal
development districts are considered
impacted industries and recipients may
provide eligible aid to them.
To identify other industries
comparably impacted to the tourism,
travel, and hospitality industries,
recipients should undertake a two-step
process: Identifying an industry and
determining whether that industry is
comparably impacted.
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238 Once an industry is designated as impacted,
aid should be generally broadly available to
businesses in the industry that qualify. Recipients
should document how they defined the scope of
their industry and how they determined that the
industry was impacted. For states and territories,
this includes documenting their justification for
defining a constituent industry with greater
geographic precision than state or territory-wide.
239 National Leisure & Hospitality supersector
employment data can be found on the U.S. Bureau
of Labor Statistics website: U.S. Bureau of Labor
Statistics, Leisure and Hospitality, https://
www.bls.gov/iag/tgs/iag70.htm (last visited
December 7, 2021).
First, recipients should identify an
industry to be assessed. In identifying
this industry, the final rule provides
recipients the flexibility to define its
substantive or geographic scope.238
Recipients may identify a broad sector
that encompasses a number of sub-
industries, or they may identify a
specific sub-industry to be assessed. For
example, a recipient may identify
‘‘personal care services’’ as an industry,
or they may identify a more specific
category within the ‘‘personal care
services’’ industry (e.g., barber shops) as
an industry. In defining the industry,
Treasury encourages recipients to define
narrow and discrete industries eligible
for aid. Recipients are not required to
follow, but may consider following,
industry classifications under the North
American Industry Classification
System (NAICS). Treasury notes that the
larger and more diverse the sector, the
more difficult it may be to demonstrate
that the larger and less specific sector is
negatively impacted in the same way
given the scale and diversity of
businesses within it.
State or territory recipients may also
define a constituent industry with
greater geographic precision than state
or territory-wide. For example, a state
may identify a particular industry in a
certain region of the state that was
negatively impacted by the pandemic,
even if the same industry in the rest of
the state did not see a meaningful
negative economic impact from the
pandemic. State recipients oversee large
and diverse industries, sometimes with
differences in economic activity
between geographic regions. Allowing
greater geographic precision allows
recipients to target aid to those that
need it most, ensuring that state
averages do not conceal hard-hit areas
in their state.
Second, to determine whether the
industry is ‘‘impacted,’’ recipients
should compare the negative economic
impacts of the public health emergency
on the identified industry to the impacts
observed on the travel, tourism, and
hospitality industries.
1. Simplified test. An industry is
presumed to be impacted if the industry
experienced employment loss of at least
8 percent.
Specifically, a recipient should
compare the percent change in the
number of employees of the recipient’s
identified industry and the national
Leisure & Hospitality sector in the three
months before the pandemic’s most
severe impacts began (a straight three-
month average of seasonally-adjusted
employment data from December 2019,
January 2020, and February 2020) with
the latest data as of the final rule release
(a straight three-month average of
seasonally-adjusted employment data
from September 2021, October 2021,
and November 2021).239 The national
Leisure & Hospitality sector largely
represents the national travel, tourism,
and hospitality industries enumerated
in the statute. According to the Bureau
of Labor Statistics, employment has
fallen by approximately 8 percent for
the national Leisure & Hospitality sector
when comparing the most recent three-
month period available as of the date of
adoption of the final rule to the three-
month period immediately before the
public health emergency. Therefore, if
the identified industry has suffered an
employment loss of at least 8 percent,
the final rule presumes the industry to
be an ‘‘impacted industry.’’
For parity and simplicity, smaller
recipients without employment data
that measure industries in their specific
jurisdiction may use data available for a
broader unit of government for this
calculation (e.g., a county may use data
from the state in which it is located; a
city may use data for the county, if
available, or state in which it is located)
solely for purposes of determining
whether a particular industry is an
impacted industry.
2. If simplified test is not met. If an
industry does not satisfy the test above
or data are unavailable, the recipient
may still designate the industry as
impacted by demonstrating the
following:
a. The recipient can show that the
totality of relevant major economic
indicators demonstrate that the industry
is experiencing comparable or worse
economic impacts as the national
tourism, travel, and hospitality
industries at the time of the publication
of the final rule, and that the impacts
were generally due to the COVID–19
public health emergency. Example
economic indicators include gross
output, GDP, net profits, employment
levels, and projected time to restore
employment back to pre-pandemic
levels. Recipients may rely on available
economic data, government research
publications, research from academic
sources, and other quantitative sources
for this determination.
If quantitative data is unavailable, the
recipient can rely on qualitative data to
show that the industry is experiencing
comparable or worse economic impacts
as the national tourism, travel, and
hospitality industries, and the impacts
were generally due to the COVID–19
public health emergency. Recipients
may rely on sources like community
interviews, surveys, and research from
relevant state and local government
agencies.
As the public health emergency and
economic recovery evolves, recipients
should assess how industry impacts
shift over time. Impacted industries may
recover in a short period of time and no
longer face a negative economic impact;
in those circumstances, the recipient
should ensure that the extent and length
of aid is reasonably proportional to the
negative economic impact that is
experienced, as detailed further below
and in section General Provisions:
Structure and Standards. Recipients
may add to their list of impacted
industries by showing that the negative
economic impacts to the industry at the
time of the designation are comparable
to the negative economic impacts to the
national tourism, travel, and hospitality
sectors as of the date of the final rule
adoption, as detailed herein.
Eligible Aid
Public Comment: Commenters asked
for further clarification as to the
definition of eligible aid to an impacted
industry, with many requesting that a
broad range of aid be eligible. Examples
of aid that recipients asked to be
considered eligible include aid to
businesses to cover COVID–19
mitigation costs and planned
renovations or improvements to
tourism, travel, and hospitality
facilities, as well as marketing and in-
kind incentives to attract visitors.
Commenters also asked about the
eligibility of aid to broadly cover losses
incurred by facilities such as convention
centers and hotels due to the
pandemic’s economic impact.
Commenters also asked for further
clarification about the requirements
related to private-sector reporting.
Further, some commenters asked for
clarification about eligible aid to
impacted industries owned and
operated by Tribal governments,
including for Tribal construction
projects that have been delayed due to
the pandemic’s economic impacts, and
for deference to Tribal determinations of
negative economic impacts.
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240 As part of accepting the Award Terms and
Conditions for SLFRF, each recipient agreed to
maintain a conflict-of-interest policy consistent
with 2 CFR 200.318(c) that is applicable to all
activities funded with the SLFRF award. Pursuant
to this policy, decisions concerning SLFRF must be
free of undisclosed personal or organizational
conflicts of interest, both in fact and in appearance.
Recipients may avoid conflicts of interest in
awarding aid to impacted industries by, inter alia,
making aid available to businesses in the industry
on generally applicable terms or utilizing a
competitive grant process. A recipient may not use
control over SLFRF for their own private gain.
Furthermore, no employee, officer, or agent may
participate in the selection, award, or
administration of a contract supported by a federal
award if he or she has a real or apparent conflict
of interest.
Treasury Response: In response to
commenters’ requests for clarification
on eligible aid, the final rule requires
that aid to impacted industries,
including to Tribal development
districts, be designed to address the
harm experienced by the impacted
industry.
First, recipients should identify a
negative economic impact, i.e., an
economic harm, that is experienced by
businesses in the impacted industry.
Second, recipients should select a
response that is designed to address the
identified economic harm resulting from
or exacerbated by the public health
emergency. Responses must also be
related and reasonably proportional to
the extent and type of harm
experienced; uses that bear no relation
or are grossly disproportionate to the
type or extent of harm experienced
would not be eligible uses. Recipients
should consider the further discussion
of this standard provided in the sections
Standards: Designating a Public Health
Impact and Standards: Designating a
Negative Economic Impact.
These responses may take the form of
direct spending by recipients to promote
an industry or support for businesses
within an ‘‘impacted’’ industry that
experienced a negative economic impact
(e.g., through a grant program).
Examples of eligible responses include:
•Aid to mitigate financial hardship
due to declines in revenue or profits by
supporting payroll costs and
compensation of returning employees
for lost pay and benefits during the
COVID–19 pandemic, as well as support
of operations and maintenance of
existing equipment and facilities, such
as rent, leases, and utilities;
•Aid for technical assistance,
counseling, and other services to assist
with business planning needs; and
•Aid to implement COVID–19
mitigation and infection prevention
measures, such as vaccination or testing
programs, is broadly eligible for many
types of entities, including travel,
tourism, hospitality, and other impacted
industries. Recipients providing aid to
impacted industries for COVID–19
public health measures should review
the section Assistance to Businesses to
Implement COVID–19 Strategies in
Public Health, which describes types of
eligible uses of funds in this category.
To address the identified harms,
responses (e.g., aid through a grant
program) should be generally broadly
available to all businesses within the
impacted industry to avoid the risk of
self-dealing, preferential treatment, and
conflicts of interest.240 Treasury
encourages recipients to design aid
programs such that funds are first used
for operational expenses that are
generally recognized as ordinary and
necessary for the recipient’s operation,
such as payroll, before being used on
other types of costs. As noted in the
section General Standards: Structure
and Standards, uses of funds that do not
respond to the negative economic
impacts of the pandemic, such as
excessive compensation to employees,
is ineligible.
The final rule maintains the interim
final rule’s requirement that aid may
only be considered responsive to the
negative economic impacts of the
pandemic if it supports businesses,
attractions, and Tribal development
districts operating prior to the pandemic
and affected by required closures and
other efforts to contain the pandemic.
Further, to facilitate transparency and
accountability, the final rule maintains
the interim final rule’s requirement that
recipients publicly report assistance
provided to private-sector businesses
under this eligible use, including
tourism, travel, hospitality, and other
impacted industries, and its connection
to negative economic impacts of the
public health emergency. Recipients
also should maintain records to support
their assessment of how businesses
receiving assistance were affected by the
negative economic impacts of the public
health emergency and how the aid
provided responds to these impacts.
Recipients providing aid to impacted
industries for capital expenditures (i.e.,
expenditures on property, facilities, or
equipment), including Tribal
governments providing aid to Tribal
development districts, should also
review the section Capital Expenditures
in General Provisions: Other, which
describes eligibility standards that are
applicable to these expenditures,
depending on the type of aid. Recipients
providing assistance in the form of loans
should review the section Treatment of
Loans in Program Administration
Provisions.
4. General Provisions: Other
As noted above, the final rule
consolidates into a General Provisions
section several types of uses of funds; in
the interim final rule, the eligibility of
these uses of funds was discussed
within specific categories of eligible
uses for public health and negative
economic impacts. Treasury anticipates
that this re-organization will enhance
recipient clarity in assessing eligible
uses of funds. These General Provisions
apply across all uses of funds under
public health and negative economic
impacts.
Specifically, this section considers
eligible uses for:
•Public Sector Capacity and
Workforce, which includes several
separate and non-mutually exclusive
categories articulated in the interim
final rule: public health and safety staff;
rehiring state, local, and Tribal
government staff; expenses for
administering COVID–19 response
programs; expenses to improve the
efficacy of public health or economic
relief programs; and administrative
expenses caused or exacerbated by the
pandemic. Treasury recognizes that
these are closely related and frequently
overlapping categories. The final rule
treats them as a single purpose,
supporting public sector capacity, and
provides coordinated guidance on the
standards and presumptions that apply
to them.
•Capital Expenditures, which was
addressed only under Public Health in
the interim final rule. The final rule
moves this expense to General
Provisions and provides more clarity on
the eligibility of capital expenditures
across all aspects of the public health
and negative economic impacts eligible
use category.
•Distinguishing Subrecipients versus
Beneficiaries, which describes the
differences between these two
categories. Recipient governments
responding to the public health and
negative economic impacts of the
pandemic may provide assistance to
beneficiaries or execute an eligible use
of funds through a subrecipient; some
types of entities (e.g., nonprofits) could
fit into either category depending on the
specific purpose of the use of funds.
•Uses Outside the Scope of this
Category, which addresses uses of funds
that are ineligible or generally ineligible
under this eligible use category in the
interim final rule. These uses of funds
remain ineligible under the final rule,
but Treasury has re-categorized where
they are addressed, as described below.
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241 In general, if an employee’s wages and salaries
are an eligible use of SLFRF funds, recipients may
treat the employee’s covered benefits as an eligible
use of SLFRF funds. For purposes of SLFRF funds,
covered benefits include costs of all types of leave
(vacation, family-related, sick, military,
bereavement, sabbatical, jury duty), employee
insurance (health, life, dental, vision), retirement
(pensions, 401(k)), unemployment benefit plans
(federal and state), workers compensation
insurance, and Federal Insurance Contributions Act
(FICA) taxes (which includes Social Security and
Medicare taxes). As described further in the section
Deposits into Pension Funds in Restrictions on Use,
that limitation on use does not apply to pension
contributions that are part of regular payroll
contributions for employees whose wages and
salaries are an eligible use of SLFRF funds.
242 Note that the interim final rule adapted prior
guidance issued for CRF that described these four
categories of employees; however, when listing the
specific occupations or types of employees in each
of these categories, the guidance collapses health
care and public health into one category titled
‘‘public health.’’ Therefore, the presumption
described around public health employees also
covers health care employees.
243 Note that this category encompasses both
public health and health care employees; both are
treated as public health employees for the purposes
of this eligible use category.
This section also addresses enumerated
eligible uses proposed by commenters
that Treasury has not incorporated into
the final rule.
Recipients should also note that the
Office of Management and Budget’s
(OMB) Uniform Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal Awards
(commonly called the ‘‘Uniform
Guidance’’) generally applies to SLFRF.
a. Public Sector Capacity and Workforce
Public Safety, Public Health, and
Human Services Staff
Summary of Interim Final Rule:
Under the interim final rule, funds may
be used for payroll and covered
benefits 241 for public safety, public
health, health care, human services, and
similar employees 242 of a recipient
government, for the portion of the
employee’s time that is spent
responding to COVID–19. For
administrative convenience, the
recipient may consider public health
and safety employees to be entirely
devoted to responding to COVID–19,
and therefore their full payroll and
covered benefits eligible to be covered,
if the employee, or his or her operating
unit or division, is ‘‘primarily
dedicated’’ to responding to COVID–19,
meaning that more than half of the
employee, unit, or division’s time is
dedicated to responding to COVID–19.
Recipients may consider other
presumptions for assessing the extent to
which an employee, division, or
operating unit is responding to COVID–
19. Recipients must periodically
reassess their determination and
maintain records to support their
assessment, such as payroll records,
attestations from supervisors or staff, or
regular work product or
correspondence; recipients need not
track staff hours. The interim final rule
also posed a question on how long
recipients should be able to use funds
for staff responding to COVID–19 and
what other measures or presumptions
might Treasury consider to assess the
extent to which public sector staff are
engaged in COVID–19 response in an
easily administrable manner.
Treasury also provided further
guidance on the types of employees
covered by this category of eligible use,
specifically: ‘‘Public safety employees
would include police officers (including
state police officers), sheriffs and deputy
sheriffs, firefighters, emergency medical
responders, correctional and detention
officers, and those who directly support
such employees such as dispatchers and
supervisory personnel. Public health
employees 243 would include employees
involved in providing medical and other
health services to patients and
supervisory personnel, including
medical staff assigned to schools,
prisons, and other such institutions, and
other support services essential for
patient care (e.g., laboratory technicians,
medical examiner, or morgue staff) as
well as employees of public health
departments directly engaged in matters
related to public health and related
supervisory personnel. Human services
staff include employees providing or
administering social services; public
benefits; child welfare services; and
child, elder, or family care, as well as
others.’’
Public Comment: Measuring Time
Spent on COVID–19 Response: Treasury
received public comments on several
components of this eligible use category.
Many commenters argued that it poses
an administrative burden to identify the
extent to which staff are responding to
COVID–19 and to maintain records to
support that assessment. Largely citing
administrative burden in assessing
eligibility, several commenters
recommended revisions to the
administrative convenience that the full
payroll and covered benefits for public
health and safety staff ‘‘primarily
dedicated’’ to responding to COVID–19
may be paid with SLFRF funds. Some
commenters recommended presuming
that all public health and safety staff are
primarily dedicated to COVID–19
response, while others proposed that
public health and safety workers who
primarily serve QCTs or low- and
moderate-income areas be presumed to
be primarily dedicated to COVID–19
response, given the disproportionate
impacts of the pandemic in those
communities. Similarly, Tribal
communities recommended that their
public health staff be presumed eligible
due to the disproportionate impact of
the pandemic on their communities.
Some commenters proposed that they be
able to use the administrative
convenience for staff outside of public
health and safety that are responding to
COVID–19 (i.e., to be able to pay the full
payroll and covered benefits for any
staff ‘‘primarily dedicated’’ to COVID–
19 response).
Treasury Response: In the final rule,
Treasury is maintaining the approach in
the interim final rule, including
elaborations issued in further guidance,
but providing additional clarification on
its application, including methods to
apply the approach to minimize
administrative burden. Treasury notes
that recipients may assess the extent to
which staff are dedicated to responding
to COVID–19 through a variety of
means, including establishing
presumptions or assessing public health
and safety staff at the division or
operating unit level. For example, a
recipient could consider the amount of
time spent by employees in its public
health department’s epidemiology
division in responding to COVID–19
and, if a majority of its employees are
dedicated to responding to COVID–19,
determine that the entire division is
primarily dedicated to responding to
COVID–19. Treasury also clarifies that
recipients may use reasonable estimates
to establish administrable
presumptions; for example, a recipient
could estimate, based on discussions
with staff, the general share of time that
employees in a specific role or type of
position spend on COVID–19 related
tasks and apply that share of time to all
employees in that position.
Recipients are generally required to be
able to support uses of SLFRF funds as
eligible, including, in this instance,
maintenance of records to support an
assessment that public health and safety
staff are primarily dedicated to
responding to COVID–19. As noted
above, recipients may use reasonable
estimates to implement this provision.
Recipients should maintain records on
how they developed these estimates and
need not track staff hours. Treasury
notes that records retained can include
payroll records (e.g., the number and
type of staff in various positions),
attestations from supervisors or staff
(e.g., self-attestation of share of time
spent on COVID–19), or regular work
product or correspondence (e.g.,
calendars, email correspondence,
documents, and other electronic
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records). Treasury anticipates that these
types of records are generally retained
in many government settings; recipients
should also consult the Award Terms
and Conditions for SLFRF funds for
requirements on length of record
retention. For example, a recipient
could establish a reasonable
presumption about the share of time
that an employee, division, or operating
unit is responding to COVID–19 and
simply retain those employees’
electronic records as a record to support
their assessment.
Public Comment: Public Health and
Safety Staff Primarily Dedicated to
COVID–19 Response: Some commenters
recommended expanding the
administrative convenience for public
health and safety staff primarily
dedicated to COVID–19 response to
further types of staff, to all public health
and safety staff, or to public health and
safety staff serving underserved areas.
Treasury Response: The interim final
rule recognized that COVID–19 response
continues to require substantial staff
resources and provides an
administrative convenience to make it
relatively simpler to identify the
eligibility of the types of workers—
public health and safety workers—
generally most involved in COVID–19
response. At the same time, many
public health and safety workers
perform roles unrelated to COVID–19;
coverage of all roles would be overbroad
compared to the workers responding to
COVID–19 in actuality. For this reason,
the final rule maintains the interim final
rule’s approach to permitting SLFRF
funds to be used for public health and
safety staff primarily dedicated to
responding to COVID–19. Finally, to the
extent that a greater proportion of public
health and safety staff time is needed to
respond to COVID–19 in
disproportionately impacted
communities, the ‘‘primarily dedicated’’
approach recognizes this increased
need.
Public Comment: Eligible Types of
COVID–19 Response: Some public
commenters also sought further
clarification on how to identify eligible
types of ‘‘COVID–19 response.’’ For
example, commenters requested
clarification on delineating COVID–19
response from general public health
response and defining COVID–19
response for public safety employees.
Treasury Response: Treasury is
clarifying that ‘‘responding to’’ COVID–
19 entails work needed to respond to
the public health or negative economic
impacts of the pandemic, apart from the
typical pre-pandemic job duties or
workload of an employee in a
comparable role, if one existed. For
example, responding to COVID–19 for a
public safety worker may entail working
in an emergency operations center to
coordinate pandemic-related supply
distribution, responding to an increased
volume of 911 calls, or implementing
COVID–19 prevention and mitigation
protocols in a carceral setting.
Public Comment: Eligible Employees:
Some commenters requested
clarification on the types of eligible
employees or expansion of eligible
employees to include additional types
of staff, including in behavioral health;
administrative, management, or
financial management positions; social
services; morgue staff; and nonprofit
staff supporting projects to undertake
eligible uses of funds under SLFRF.
Treasury Response: Treasury
provided further guidance on eligible
types of employees following the
interim final rule, which expressly
included social services and morgue
staff, and incorporates that guidance
into the final rule. In addition, Treasury
is clarifying that public health
‘‘employees involved in providing
medical and other health services to
patients and supervisory personnel’’
includes behavioral health services as
well as physical health services.
Treasury also is clarifying that this
provision only addresses employees of
the recipient government responding to
COVID–19. For discussion of eligible
expenses to administer SLFRF,
including eligible costs for subrecipients
performing eligible activities on behalf
of a recipient government, see section
Administrative Expenses in Program
Administration Provisions.
Finally, Treasury is clarifying that
indirect costs for administrative,
management, and financial management
personnel to support public health and
safety staff responding to COVID–19 are
not permissible under this provision,
given the relatively greater challenge of
differentiating the marginal increase in
staff time and workload due to
pandemic response for indirect versus
direct costs.
Public Comment: Time Period:
Finally, some commenters made
recommendations on the time period
during which this eligible use should be
available. Some commenters
recommended eligibility begin before
March 3, 2021, the period when
Treasury’s interim final rule permitted
recipients to begin to incur costs using
SLFRF funds; for discussion of this
topic, see section Timeline for Use of
SLFRF Funds in Program
Administration Provisions. As noted
above, Treasury also posed a question in
the interim final rule asking for how
long Treasury should maintain the
administrative convenience that SLFRF
funds may be used for the full payroll
and covered benefits of public health
and safety staff primarily dedicated to
COVID–19 response. Several
commenters recommended that
Treasury maintain this approach
throughout the program or through
December 31, 2024. Other commenters
requested clarification on whether
eligibility for this use of funds was tied
to the length of the state of emergency
or whether a jurisdiction has an active
state of emergency.
Treasury Response: In the final rule,
Treasury is clarifying that recipients
will be permitted to fund the full
payroll and covered benefits of public
health and safety staff primarily
dedicated to COVID–19 response
throughout the period of performance
for the SLFRF program, though
recipients should periodically reassess
their determination of primarily
dedicated staff, including as the public
health emergency and response evolves.
Government Employment and Rehiring
Public Sector Staff
The interim final rule permitted use
of funds for costs associated with
rehiring state, local, and Tribal
government staff in order to bolster the
government’s ability to effectively
administer services. Specifically,
recipients may pay for payroll, covered
benefits, and other costs associated with
the recipient increasing the number of
its employees up to the pre-pandemic
baseline, or the number of employees
that the recipient government employed
on January 27, 2020.
Public Comment: Many commenters
requested greater flexibility and
additional clarification on the
provision’s requirements, including the
pre-pandemic baseline and re-hiring
process. Some commenters requested
that the final rule allow for hiring above
the pre-pandemic baseline given
historic underinvestment in the public
sector workforce. Commenters suggested
a number of adjustments to the pre-
pandemic baseline, including adjusting
based on population or revenue growth,
while some recommended allowing
recipients to set their own hiring levels.
Others requested clarification on the
definition of the baseline and the re-
hiring process, including whether the
pre-pandemic baseline referred to
budgeted or filled positions and
whether new hires had to fill the same
roles as the previous hires. Commenters
also asked whether recipients need to
show if the reduction in number of
employees was due to the pandemic in
order to qualify for funding and
requested that workers dedicated to
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244 Recipients may determine that a portion of an
FTE’s time is dedicated to responding to the
COVID–19 public health emergency. Further, for
administrative convenience, the recipient may
consider public health and safety FTEs to be
entirely devoted to mitigating or responding to the
COVID–19 public health emergency if the FTE, or
his or her operating unit of division, is primarily
dedicated to responding to the COVID–19 public
health emergency. Recipients may also consider
other presumptions for assessing the extent to
which an FTE, division, or operating unit is
engaged in activities that respond to the COVID–19
public health emergency, provided that the
recipient reassesses periodically and maintains
records to support its assessment, such as payroll
records, attestations from supervisors or staff, or
regular work product or correspondence
demonstrating work on the COVID–19 response.
COVID–19 response be exempted from
the calculation of number of employees.
Many commenters also requested an
expanded set of eligible uses beyond
restoring their workforce up to the pre-
pandemic baseline. Commenters
requested that funding be able to be
used to avoid layoffs, provide back pay,
retain employees through pay increases
and other retention programs, or
reimburse salaries and benefits already
paid. Some commenters also requested
clarification as to whether recipients
can fund re-hired positions through the
period of performance and on the
definition of payroll and benefits. Other
commenters requested preferential
hiring for workers laid off, a strong
commitment to equity, and a
requirement that funds would not be
used to pay for contract or temporary
replacement workers during a labor
dispute.
Treasury Response: The final rule
allows for an expanded set of eligible
uses to restore and support public sector
employment. Eligible uses include
hiring up to a pre-pandemic baseline
that is adjusted for historic
underinvestment in the public sector,
providing additional funds for
employees who experienced pay cuts or
were furloughed, avoiding layoffs,
providing worker retention incentives,
and paying for ancillary administrative
costs related to hiring.
Restoring pre-pandemic employment.
In response to comments and
recognizing underinvestment in public
sector employment, the final rule
expands the ability to use SLFRF funds
to restore pre-pandemic employment.
Treasury is also clarifying how, and the
extent to which, recipients may use
SLFRF funds to rehire public
employees.
The final rule provides two options to
restore pre-pandemic employment,
depending on recipient’s needs. Under
the first and simpler option, recipients
may use SLFRF funds to rehire staff for
pre-pandemic positions that were
unfilled or were eliminated due the
pandemic without undergoing further
analysis. Under the second option, the
final rule provides recipients an option
to hire above the pre-pandemic baseline,
by adjusting the pre-pandemic baseline
for historical growth in public sector
employment over time, as well as
flexibility on roles for hire. Recipients
may choose between these options but
cannot use both.
To pursue the first option, recipients
may use SLFRF funds to hire employees
for the same positions that existed on
January 27, 2020 but that were unfilled
or eliminated as of March 3, 2021,
without undergoing further analysis. For
these employees, recipients may use
SLFRF funds for payroll and covered
benefit costs that are obligated by
December 31, 2024 and expended by
December 31, 2026, consistent with the
Uniform Guidance’s Cost Principles at 2
CFR part 200 Subpart E. This option
provides administrative simplicity for
recipients that would simply like to
restore pre-pandemic positions and
would not like to hire above the pre-
pandemic baseline.
To pursue the second option,
recipients should undergo the analysis
provided below. In short, this option
allows recipients to pay for payroll and
covered benefits associated with the
recipient increasing its number of
budgeted full-time equivalent
employees (FTEs) up to 7.5 percent
above its pre-pandemic employment
baseline, which adjusts for the
continued underinvestment in state and
local governments since the Great
Recession. State and local government
employment as a share of population in
2019 remained considerably below its
share prior to the Great Recession in
2007, which presented major risks to
recipients mounting a response to the
COVID–19 public health emergency.
The adjustment factor of 7.5 percent
results from estimating how much larger
2019 state and local government
employment would have needed to be
for the share of state and local
government employment to population
in 2019 to have been back at its 2007
level and is intended to correct for this
gap.
Recipients should complete the steps
described below. Recipients may choose
whether to conduct this analysis on a
government-wide basis or for an
individual department, agency, or
authority.
•Step One: Identify the recipient’s
budgeted FTE level on January 27, 2020.
This includes all budgeted positions,
filled and unfilled. This is called the
pre-pandemic baseline.
•Step Two: Multiply the pre-
pandemic baseline by 1.075 (that is, 1
+ adjustment factor). This is called the
adjusted pre-pandemic baseline.
•Step Three: Identify the recipient’s
budgeted FTE level on March 3, 2021,
which is the beginning of the period of
performance for SLFRF funds.
Recipients may, but are not required to,
exclude FTEs dedicated to responding
to the COVID–19 public health
emergency.244 This is called the actual
number of FTEs.
•Step Four: Subtract the actual
number of FTEs from the adjusted pre-
pandemic baseline to calculate the
number of FTEs that can be hired and
covered by SLFRF funds.
Recipients may use SLFRF funds to
cover payroll and covered benefit costs
obligated by December 31, 2024, and
expended by December 31, 2026, up to
the number of FTEs calculated in Step
Four, consistent with the Uniform
Guidance’s Cost Principles at 2 CFR part
200 Subpart E. Recipients may only use
SLFRF funds for additional FTEs hired
over the March 3, 2021 level of
budgeted FTEs (i.e., the actual number
of FTEs); note again that recipients may
choose whether to conduct the analysis
of FTEs that can be covered by SLFRF
funds on a government-wide basis or for
an individual department, agency, or
authority.
These FTEs must have begun their
employment on or after March 3, 2021,
which is the beginning of the period of
performance. For administrative
convenience, recipients do not need to
demonstrate that the reduction in
number of FTEs was due to the COVID–
19 pandemic, as Treasury assumes the
vast majority of employment reductions
during this time were due to pandemic
fiscal pressures on state and local
budgets. Recipients do not need to hire
for the same roles that existed pre-
pandemic.
For illustration, consider a
hypothetical recipient with 1,000
budgeted FTEs on January 27, 2020 (950
filled FTE positions and 50 unfilled FTE
positions). The recipient’s pre-
pandemic baseline is 1000 FTEs; its
adjusted pre-pandemic baseline is 1,000
* 1.075 = 1075 FTEs. Now, assume that
on March 3, 2021, the recipient had 800
budgeted FTEs in total (795 filled FTE
positions and 5 unfilled FTE positions),
with 50 FTEs primarily dedicated to
responding to the COVID–19 public
health emergency. The recipient would
have the option of using either 800 FTEs
or 750 FTEs as its actual number of
FTEs for the calculation; assuming it
chooses the lower number, it would be
able to fund up to 325 FTEs with SLFRF
funds (that is, 1,075¥750 = 325 FTEs).
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245 As part of accepting the Award Terms and
Conditions for SLFRF, each recipient agreed to
maintain a conflict-of-interest policy consistent
with 2 CFR 200.318(c)112 that is applicable to all
activities funded with the SLFRF award. Pursuant
to this policy, decisions concerning SLFRF must be
free of undisclosed personal or organizational
conflicts of interest, both in fact and in appearance.
A recipient may not use control over SLFRF for
their own private gain. Furthermore, no employee,
officer, or agent may participate in the selection,
award, or administration of a contract supported by
a federal award if he or she has a real or apparent
conflict of interest.
Specifically, the recipient would be able
to use SLFRF to fund payroll and
covered benefits for up to 325 FTEs that
begin their employment on or after
March 3, 2021, for costs obligated by
December 31, 2024, and expended by
December 31, 2026, consistent with the
Uniform Guidance’s Cost Principles, as
long as SLFRF funds are used for
additional FTEs hired over the
recipient’s 750 FTE level (which is its
March 3, 2021 budgeted FTE level).
In hiring new employees, the final
rule encourages recipients to ensure a
diverse workforce. The final rule also
prohibits recipients from using funds to
temporarily fill positions during a labor
dispute, as this would not constitute
responding to the public health or
negative economic impacts of the
pandemic. Further, recipients must
ensure that its hiring practices do not
violate conflict-of-interest policies.245
Total compensation for a hired
employee that is substantially in excess
of typical compensation for employees
of their experience and tenure within
the recipient’s government, without a
corresponding business case, may
indicate a potential conflict-of-interest
in fact or appearance.
Providing additional funding for
employees who experienced pay cuts
and furloughs. In recognition of the
economic hardship caused by pay cuts
and furloughs, additional funds may be
provided to employees who experienced
pay cuts or were furloughed since the
onset of the pandemic on January 27,
2020. Recipients must be able to
substantiate that the pay cut or furlough
was substantially due to the public
health emergency or its negative
economic impacts (e.g., fiscal pressures
on state and local budgets) and should
document their assessment. As a
reminder, this additional funding must
be reasonably proportional to the
negative economic impact of the pay cut
or furlough on the employee, which
would include taking into account
unemployment insurance (UI) benefits
that a furloughed employee may have
received during the furloughed period.
Treasury presumes that additional funds
beyond the difference in pay had the
employee not received a pay cut or been
furloughed would not be reasonably
proportional.
Recipients may also provide premium
pay to certain employees, as detailed
further in section Premium Pay.
Avoiding layoffs. Funds may be used
to maintain current compensation
levels, with adjustments for inflation, in
order to prevent layoffs that would
otherwise be necessary. Recipients must
be able to substantiate that layoffs were
likely in the absence of SLFRF funds
and would be substantially due to the
public health emergency or its negative
economic impacts (e.g., fiscal pressures
on state and local budgets) and should
document their assessment.
Retaining workers. Funds may be
used to provide worker retention
incentives, which are designed to
persuade employees to remain with the
employer as compared to other
employment options. Recipients must
be able to substantiate that the
employees were likely to leave
employment in the absence of the
retention incentive and should
document their assessment. For
example, a recipient may determine that
a retention bonus is necessary based on
the presence of an alternative
employment offer for an employee.
All worker retention incentives must
be narrowly tailored to need and should
not exceed incentives traditionally
offered by the recipient or compensation
that alternative employers may offer to
compete for the employees. Further,
because retention incentives are
intended to provide additional incentive
to remain with the employer, they must
be entirely additive to an employee’s
regular rate of wages and other
remuneration and may not be used to
reduce or substitute for an employee’s
normal earnings. Treasury will presume
that retention incentives that are less
than 25 percent of the rate of base pay
for an individual employee or 10
percent for a group or category of
employees are reasonably proportional
to the need to retain employees, as long
as the other requirements are met.
Ancillary administrative costs. Funds
may be used to pay for ancillary
administrative costs associated with
administering SLFRF-funded hiring and
retention programs detailed above,
including costs to publish job postings,
review applications, and onboard and
train new hires. For additional
information on administrative expenses,
see section Administrative Expenses in
Program Administration Provisions.
Effective Service Delivery:
Administrative Expenses
The interim final rule provided that
funds could be used for: ‘‘Expenses to
improve efficacy of public health or
economic relief programs:
Administrative costs associated with the
recipient’s COVID–19 public health
emergency assistance programs,
including services responding to the
COVID–19 public health emergency or
its negative economic impacts, that are
not federally funded.’’ In the final rule,
Treasury is clarifying that there are
several categories of eligible
administrative expenses.
First, recipients may use funds for
administrative costs to improve the
efficacy of public health or economic
relief programs through tools like
program evaluation, data analysis, and
targeted consumer outreach (see section
Effective Service Delivery: Program
Evaluation, Data, and Outreach).
Second, recipients may use funds for
administrative costs associated with
programs to respond to the public
health emergency and its negative
economic impacts, including programs
that are not funded by SLFRF or not
federally funded. In other words,
Treasury recognizes that responding to
the public health and economic impacts
of the pandemic requires many
programs and activities, some of which
are not funded by SLFRF. Executing
these programs effectively is a
component of responding to the public
health and negative economic impacts
of the pandemic.
Finally, recipients may use funds for
direct and indirect administrative costs
for administering the SLFRF program
and projects funded by the SLFRF
program. See section Administrative
Expenses in Program Administration
Provisions for details on this eligible use
category.
Effective Service Delivery: Program
Evaluation, Data, and Outreach
The Supplementary Information of
the interim final rule provided that
state, local and Tribal governments may
use SLFRF funds to improve the design
and execution of programs responding
to the COVID–19 pandemic and to
improve the efficacy of programs
addressing negative economic impacts.
The interim final rule included high-
level guidance about how SLFRF funds
could be used in this eligible use
category, including the use of targeted
consumer outreach, improvements to
data or technology infrastructure,
impact evaluations, and data analysis.
Since the publication of the interim
final rule, Treasury has also released
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246 Results for America, Invest in What Works
State Standard of Excellence (August 2020), https://
2020state.results4america.org/2020_State-
Standard-of-Excellence.pdf.
247 Learning Agendas are systematic plans to
identify, prioritize, answer important questions
about programs and policies using analytic
techniques that are appropriate to the type of
question asked. For more information on learning
agendas, please see OMB Memorandum M–19–23,
available at: https://www.whitehouse.gov/wp-
content/uploads/2019/07/M-19-23.pdf and OMB
Memorandum M–21–27, available at: https://
www.whitehouse.gov/wp-content/uploads/2021/06/
M-21-27.pdf.
248 Evidence Clearinghouses are databases of
research in particular program areas. Frequently
these Clearinghouses identify evidence-based
programs, the strength of the evidence for those
programs, and provide contextual or supporting
information in easy to understand formats. Many
federal departments have developed rigorous and
helpful Clearinghouses that cover a wide range of
uses enumerated in this final rule as well as other
programs that may be responsive to public health
or negative economic impacts of the pandemic. For
more information on Clearinghouses, please see the
Compliance and Reporting Guidance: U.S.
Department of the Treasury, Recipient Compliance
and Reporting Responsibilities, as of November 5,
2021; https://home.treasury.gov/policy-issues/
coronavirus/assistance-for-state-local-and-tribal-
governments/state-and-local-fiscal-recovery-funds/
recipient-compliance-and-reporting-responsibilities.
249 See FAQ 2.19. Coronavirus State and Local
Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
In the case of courts specifically, this includes
‘‘implementing COVID–19 safety measures to
facilitate court operations, hiring additional court
staff or attorneys to increase speed of case
supplementary information on data
analysis, evidence building, and
program evaluation in the Compliance
and Reporting Guidance.
Public Comment: Treasury received
positive comments about the
opportunity to invest in data and
technology upgrades with SLFRF funds.
For example, one commenter noted that
investing in technology for better
connectivity, coupled with software and
hardware upgrades, will allow the
workforce to be more productive.
Treasury also received comments
seeking clarification on using funds for
investments in data and technology,
including whether upgrading
government websites to improve
community outreach and investing in
technologies that support social
distancing were eligible uses.
Treasury Response: Governments
with high capacity to use data and
evidence to administer programs are
more likely to be responsive to the
needs of their community, more
transparent about their community
impact, and more resilient to
emergencies such as the pandemic and
its economic impacts.246 Treasury
recognizes that collecting high-quality
data and developing community-driven,
evidence-based programs requires
resources to hire and build the capacity
of staff, adopt new processes and
systems, and use new technology and
tools in order to effectively develop,
execute, and evaluate programs. As
such, Treasury is clarifying that
recipients may use SLFRF funds toward
the following non-exhaustive list of uses
to address the data, evidence, and
program administration needs of
recipients. Additional information may
be provided in the Compliance and
Reporting Guidance.
•Program evaluation and evidence
resources to support building and using
evidence to improve outcomes,
including development of Learning
Agendas 247 to support strategic
evidence building, selection of
evidence-based interventions, and
program evaluations including impact
evaluations (randomized control trials
and quasi-experimental designs) as well
as rapid-cycle evaluations, process or
implementation evaluations, outcome
evaluations, and cost-benefit analyses.
Recipients are encouraged to undertake
rigorous program evaluations when
practicable, assess the impact of their
programs by beneficiary demographics
(including race, ethnicity, gender,
income, and other relevant factors), and
engage with community stakeholders
(including intended beneficiaries) when
developing Learning Agendas and
designing evaluations to ensure that
programmatic, cultural, linguistic, and
historical nuances are accurately and
respectfully addressed.
Recipients are also encouraged to use
relevant evidence Clearinghouses,248
among other sources, to assess the level
of evidence for their interventions and
identify evidence-based models that
could be applied in their jurisdiction
(meaning models with strong or
moderate evidence; see Compliance and
Reporting Guidance for details on these
terms).
•Data analysis resources to gather,
assess, and use data for effective policy-
making and real-time tracking of
program performance to support
effective implementation of SLFRF-
funded programs and programs that
respond to the public health emergency
and its negative economic impacts, or
which households, small businesses, or
impacted industries are accessing
during the pandemic that are funded by
other sources. These resources include
but are not limited to data gathering,
data cleaning, data analysis, data
infrastructure, data management, data
sharing, data transparency, performance
management, outcomes-based
budgeting, outcomes-based
procurement, and other data needs.
Treasury encourages the disaggregation
of data to identify disparate program
impacts and the use of cross-
jurisdictional data sharing to better
measure and implement government
programs.
•Technology infrastructure resources
to improve access to and the user-
experience of government information
technology systems, including upgrades
to hardware and software as well as
improvements to public-facing websites
or to data management systems, to
increase public access and improve
public delivery of government programs
and services (including in the judicial,
legislative, or executive branches).
•Community outreach and
engagement resources to support the
gathering and sharing of information in
ways that improve equity and effective
implementation of SLFRF-funded
programs and programs that respond to
the public health emergency and its
negative economic impacts, or which
households, small businesses, or
impacted industries are accessing
during the pandemic that are funded by
other sources. These methods include
but are not limited to community
meetings, online surveys, focus groups,
human-centered design activities,
behavioral science techniques, and
other community engagement tools.
•Capacity building resources to
support using data and evidence in
designing, executing, and evaluating
programs, including hiring public sector
staff, contractors, academics,
consultants, and others with expertise
in evaluation, data, technology, and
community engagement as well as
technical assistance support for public
sector staff, staff of subrecipients, and
community partners to support effective
implementation of SLFRF-funded
programs and programs that respond to
the public health emergency and its
negative economic impacts, or which
households, small businesses, or
impacted industries are accessing
during the pandemic that are funded by
other sources.
Administrative Needs Caused or
Exacerbated by the Pandemic
As described in guidance and the
interim final rule, SLFRF funds may be
used to address administrative needs of
recipient governments that were caused
or exacerbated by the pandemic.
Guidance following the interim final
rule included several examples of this,
for example, uses of funds to address
backlogs resulting from pandemic-
related shutdowns (e.g., backlogs in
court systems).249 This also includes
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resolution, and other expenses to expedite case
resolution are eligible uses.’’
using funds for increased repair or
maintenance needs to respond to
significantly greater use of public
facilities during the pandemic (e.g.,
increased use of parks resulting in
damage or increased need for
maintenance). Some commenters
expressed support for the ability to use
funds for these purposes. Treasury is
maintaining these enumerated eligible
uses in the final rule and clarifying that
capital expenditures such as technology
infrastructure to adapt government
operations to the pandemic (e.g., video-
conferencing software, improvements to
case management systems or data
sharing resources), reduce government
backlogs, or meet increased
maintenance needs are eligible.
b. Capital Expenditures
The interim final rule expressly
permitted use of funds for a limited
number of capital expenditures that
mostly pertained to COVID–19
prevention and mitigation. These
included capital investments in public
facilities to meet pandemic operational
needs, such as physical plant
improvements to public hospitals and
health clinics; adaptations to public
buildings to implement COVID–19
mitigation tactics; ventilation
improvements in congregate settings,
health care settings, or other key
locations; assistance to small businesses
and nonprofits and aid to impacted
industries to implement COVID–19
prevention or mitigation tactics, such as
physical plant changes to enable social
distancing. For disproportionately
impacted populations and communities,
the interim final rule also expressly
permitted development of affordable
housing to increase the supply of
affordable and high-quality living units.
Public Comment: Many commenters
supported the interim final rule’s
allowance of capital expenditures in
facilities to meet pandemic operational
needs but requested that the final rule
explicitly allow for a broader range of
capital expenditures. Commenters
expressed an interest in investing in
equipment, real property, and facilities
that they argued will yield lasting
benefits beyond the SLFRF period of
performance. Some commenters stated
that the approach in the interim final
rule limited the vast majority of capital
expenditures to governments that
experienced revenue loss under
Sections 602(c)(1)(C) and 603(c)(1)(C)
and that this approach may prevent
some governments from fully meeting
the needs of their residents. A few
commenters argued that Treasury
should limit use of funds on capital
expenditures not related to addressing a
direct pandemic harm, such as general
economic development or workforce
development, and some expressed
support for generally limiting capital
expenditures to those that address the
needs of low-income communities and
communities of color.
Many commenters requested that
capital expenditures related to direct
COVID–19 public health response be
included as enumerated eligible uses.
The requested types of expenditures
include improvements and construction
of hospitals and health clinics
(including behavioral health clinics), as
well as other health-related
infrastructure improvements, such as
improvements to medical equipment or
public health information technology.
These commenters stated that
investments in health and public health
systems are vital to ensuring critical
infrastructure necessary to respond to
continued impacts of COVID–19 or to
address disparities in health, due to lack
of access to health care, that contributed
to disproportionate impacts of COVID–
19 on some communities. Further, some
commenters requested that construction
or improvements of emergency
management and public safety facilities
be deemed eligible, citing that some of
these sites serve as remote vaccination
sites or are otherwise crucial to the
pandemic public health response.
Commenters also requested use of
funds for capital expenditures that
support community needs apart from
health care, such as new construction or
improvements to schools, affordable
housing (beyond presumed
disproportionately impacted
communities), childcare facilities, and
community centers; some suggested that
all types of projects permissible under
the Community Development Block
Grant Program should be eligible both
for policy and administrability reasons.
Further, some commenters also asked
for clarification as to whether parks and
recreational facilities are eligible if built
in certain disproportionately impacted
areas, as well as public transportation
infrastructure.
Finally, some commenters also
requested use of funds for capital
expenditures in government
administration buildings, such as public
courthouses, as well as technology
infrastructure that would allow for
remote delivery of public benefits.
Others also asked about whether funds
could be used to renovate vacant
business district buildings or
commercial spaces to spur economic
recovery.
Treasury Response: Capital
expenditures, in certain cases, can be
appropriate responses to the public
health and economic impacts of the
pandemic, in addition to programs and
services. Like other eligible uses of
SLFRF funds in this category, capital
expenditures should be a related and
reasonably proportional response to a
public health or negative economic
impact of the pandemic. The final rule
clarifies and expands how SLFRF funds
may be used for certain capital
expenditures, including criteria and
documentation requirements specified
in this section, as applicable.
Treasury provides presumptions and
guidelines for capital expenditures that
are enumerated earlier in sections
Public Health, Negative Economic
Impacts, and General Provisions: Other
under the Public Health and Negative
Economic Impact eligible use category
(‘‘enumerated projects’’), along with
capital expenditures beyond those
enumerated by Treasury. In addition to
satisfying the two-part framework in
Standards: Designating a Public Health
Impact and Standards: Designating a
Negative Economic Impact for
identifying and designing a response to
a pandemic harm, Treasury will require
projects with total expected capital
expenditure costs of $1 million or
greater to undergo additional analysis to
justify their capital expenditure.
Increased reporting requirements will be
required for projects that are larger in
size, as well as projects that are not
enumerated as eligible by Treasury,
with certain exceptions for Tribal
governments discussed below. Smaller
projects with total expected capital
expenditures below $1 million will not
be required to undergo additional
analysis to justify their capital
expenditure, as such projects will be
presumed to be reasonably proportional,
provided that they are responding to a
harm caused or exacerbated by the
public health emergency. These
standards and documentation
requirements are designed to minimize
administrative burden while also
ensuring that projects are reasonably
proportional and supporting Treasury’s
risk-based approach to overall program
management and monitoring.
This section provides (1) an overview
of general standards governing capital
expenditures; (2) presumptions on
capital expenditures, which help guide
recipients in determining whether the
expenditure meets the standards and the
associated documentation requirements;
and (3) additional standards and
requirements that may apply.
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250 See 25 U.S.C. 5108.
Overview of General Standards
In considering whether a capital
expenditure would be eligible under the
public health and negative economic
impacts eligible use category, recipients
must satisfy the requirements for all
uses under the public health and
negative economic impacts eligible use
category, including identifying an
impact or harm and designing a
response that addresses or responds to
the identified impact or harm.
Responses must be reasonably designed
to benefit the individual or class that
experienced the impact or harm and
must be related and reasonably
proportional to the extent and type of
impact or harm. Recipients should
consult further details on this standard
provided in the sections Standards:
Designating a Public Health Impact and
Standards: Designating a Negative
Economic Impact under General
Provisions: Structure and Standards.
In addition to the framework
described above, for projects with total
expected capital expenditures of $1
million or greater, recipients must
complete and meet the substantive
requirements of a Written Justification
for their capital expenditure, except for
Tribal governments as discussed below.
This Written Justification helps clarify
the application of this interpretive
framework to capital expenditures,
while recognizing that the needs of
communities differ. In particular, this
justification reflects the fact that the
time required for a large construction
project may make capital expenditures
less responsive to pandemic-related
needs relative to other types of
responses. In addition, as discussed in
section Timeline for Use of SLFRF
Funds of this Supplemental
Information, SLFRF funds must be
obligated by December 31, 2024 and
expended by December 31, 2026.
Capital expenditures may involve long
lead-times, and the Written Justification
may support recipients in analyzing
proposed capital expenditures to
confirm that they conform to the
obligation and expenditure timing
requirements. Further, such large
projects may be less likely to be
reasonably proportional to the harm
identified. For example, construction of
a new, larger public facility for the
purpose of increasing the ability to
socially distance generally would not be
considered a reasonably proportional
response compared to other less time-
and resource-intensive options that may
be available and would be equally or
more effective. Other solutions, such as
improvements in ventilation, could be
made more quickly and are typically
more cost effective than construction of
a new, larger facility. The needs of
communities differ, and recipients are
responsible for identifying uses of
SLFRF funds that best respond to these
needs. The Written Justification
recognizes this while also establishing
consistent documentation and reporting
to support monitoring and compliance
with the ARPA and final rule. Finally,
the Written Justification also reflects the
fact that infrastructure projects are
generally not within scope of this
eligible use category. See section Uses
Outside the Scope of this Category in
General Provisions: Other.
As noted above, Tribal governments
are not required to complete the Written
Justification for projects with total
capital expenditures of $1 million or
greater. Tribal governments generally
have limited administrative capacity
due to their small size and
corresponding limited ability to
supplement staffing for short-term
programs. In addition, Tribal
governments are already subject to
unique considerations that require
additional administrative processes and
administrative burden for Tribal
government decision making, including
capital expenditures. Tribal
governments generally are subject to a
jurisdictionally complex sets of rules
and regulations in the case of
improvements to land for which the title
is held in trust by the United States for
a Tribe (Tribal Trust Lands).250 This
includes the requirement in certain
circumstances to seek the input or
approval of one or more federal agencies
such the Department of the Interior,
which holds fee title of Tribal Trust
Lands.
As a result of their limited
administrative capacity and unique and
complex rules and regulations
applicable to Tribal governments
operating on Tribal Trust Lands, Tribal
governments would experience
significant and redundant
administrative burden by also being
required to complete a Written
Justification for applicable capital
expenditures. While Tribal governments
are not required to complete the Written
Justification for applicable capital
expenditures, the associated substantive
requirements continue to apply,
including the requirement that a capital
expenditure must be reasonably
designed to benefit the individual or
class that experienced the identified
impact or harm and must be related and
reasonably proportional to the extent
and type of impact or harm. Note that,
as a general matter, Treasury may also
request further information on SLFRF
expenditures and projects, including
capital expenditures, as part of the
regular SLFRF reporting and
compliance process, including to assess
their eligibility under the final rule.
The Written Justification should (1)
describe the harm or need to be
addressed; (2) explain why a capital
expenditure is appropriate to address
the harm or need; and (3) compare the
proposed capital expenditure against
alternative capital expenditures that
could be made. The information
required for the Written Justification
reflects the framework applicable to all
uses under the public health and
negative economic impacts eligible use
category, providing justification for the
reasonable design, relatedness, and
reasonable proportionality of the capital
expenditure in response to the harm or
impact identified.
1. Description of harm or need to be
addressed: Recipients should provide a
description of the specific harm or need
to be addressed, and why the harm was
exacerbated or caused by the public
health emergency. When appropriate,
recipients may provide quantitative
information on the extent and type of
the harm, such as the number of
individuals or entities affected.
2. Explanation of why a capital
expenditure is appropriate: Recipients
should provide an independent
assessment demonstrating why a capital
expenditure is appropriate to address
the specified harm or need. This should
include an explanation of why existing
capital equipment, property, or facilities
would be inadequate to addressing the
harm or need and why policy changes
or additional funding to pertinent
programs or services would be
insufficient without the corresponding
capital expenditures. Recipients are not
required to demonstrate that the harm or
need would be irremediable but for the
additional capital expenditure; rather,
they may show that other interventions
would be inefficient, costly, or
otherwise not reasonably designed to
remedy the harm without additional
capital expenditure.
3. Comparison of the proposed capital
expenditure against alternative capital
expenditures: Recipients should provide
an objective comparison of the proposed
capital expenditure against at least two
alternative capital expenditures and
demonstrate why their proposed capital
expenditure is superior to alternative
capital expenditures that could be
made. Specifically, recipients should
assess the proposed capital expenditure
against at least two alternative types or
sizes of capital expenditures that are
potentially effective and reasonably
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4391 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
251 See, e.g., ‘‘Economic Perspectives on
Incarceration and the Criminal Justice System,’’
Council of Economic Advisers (April 2016), pg. 36–
43.
252 For instance, the CDC has published detailed
recommendations for nursing homes, long-term care
facilities, and correctional and detention facilities,
on infection prevention and control. Many of these
recommendations are relatively low cost, such as
proper use of PPE. In addition, increasing
vaccination rates among nursing home staff is
among the most important ways to decrease the
spread of the disease. Centers for Disease Control
and Prevention, Interim Infection Prevention and
Control Recommendations to Prevent SARS–CoV–
2 Spread in Nursing Homes (September 10, 2021),
https://www.cdc.gov/coronavirus/2019-ncov/hcp/
long-term-care.html#anchor_1631030153017.
253 For instance, researchers have found no
consistent positive relationship between building
sports facilities and local economic development.
As Siegfried and Zimbalist (2000, 103) write in a
review of the literature, ‘‘independent work on the
economic impact of stadiums and arenas has
uniformly found that there is no statistically
significant positive correlation between sports
facility construction and economic development.’’
John Siegfried and Andrew Zimbalist, The
Economics of Sports Facilities and Their
Communities, Journal of Economic Perspectives 14,
no. 3 (Summer 2000): 95–114, https://
www.aeaweb.org/articles?id=10.1257/jep.14.3.95.
feasible. Where relevant, recipients
should compare the proposal against the
alternative of improving existing capital
assets already owned or leasing other
capital assets. Recipients should use
quantitative data when available,
although they are encouraged to
supplement with qualitative
information and narrative description.
Recipients that complete analyses with
minimal or no quantitative data should
provide an explanation for doing so.
In determining whether their
proposed capital expenditure is superior
to alternative capital expenditures,
recipients should consider the following
factors against each selected alternative.
a. A comparison of the effectiveness of
the capital expenditures in addressing
the harm identified. Recipients should
generally consider the effectiveness of
the capital expenditures in addressing
the harm over the useful life of the
capital asset and may consider metrics
such as the number of impacted or
disproportionately impacted individuals
or entities served, when such
individuals or entities are estimated to
be served, the relative time horizons of
the project, and consideration of any
uncertainties or risks involved with the
capital expenditure.
b. A comparison of the expected total
cost of the capital expenditures.
Recipients should consider the expected
total cost of the capital expenditure
required to construct, purchase, install,
or improve the capital assets intended to
address the public health or negative
economic impact of the public health
emergency. Recipients should include
pre-development costs in their
calculation and may choose to include
information on ongoing operational
costs, although this information is not
required.
Recipients should balance the
effectiveness and costs of the proposed
capital expenditure against alternatives
and demonstrate that their proposed
capital expenditure is superior. Further,
recipients should choose the most cost-
effective option unless it substantively
reduces the effectiveness of the capital
investment in addressing the harm
identified.
As an example, a recipient
considering building a new diagnostic
testing laboratory to enhance COVID–19
testing capacity may consider whether
existing laboratories sufficiently meet
demand for COVID–19 testing,
considering the demand for test results
(along with their turnaround time) as
well as the impact of current testing
availability on the spread of COVID–19.
Recipients may also consider other
public health impacts of the level of
diagnostic testing capacity, for example
if insufficient capacity has decreased
testing for other health conditions. The
recipient may consider alternatives such
as expanding existing laboratories or
building a laboratory of a different size.
In comparing the effectiveness of the
capital expenditures, examples of
factors that the recipient may consider
include when the facilities will become
operational and for how long; the daily
throughput of COVID–19 tests; and the
effect on minimizing delays in test
results on the populations that such
tests will serve. In comparing costs, the
recipient may compare the total
expected cost of the new laboratory
(including costs of acquisition of real
property, construction of the laboratory,
and purchase of any necessary
equipment needed to operationalize the
lab), against the expected costs of
expanding existing laboratories
(whether by replacing current
equipment with higher throughout
devices or physically expanding space
to accommodate additional capacity) or
building a new laboratory of a different
size, including by leasing property. As
a reminder, recipients should only
consider alternatives that are potentially
effective and reasonably feasible.
Because, in all cases, uses of SLFRF
funds to respond to public health and
negative economic impacts of the
pandemic must be related and
reasonably proportional to a harm
caused or exacerbated by the pandemic,
some capital expenditures may not
eligible. For example, constructing a
new correctional facility would
generally not be a proportional response
to an increase in the rate of certain
crimes or overall crime as most
correctional facilities have historically
accommodated fluctuations in
occupancy.251 In addition, construction
of new congregate facilities, which
would generally be expected to involve
expenditures greater than $1 million,
would generally not be a proportional
response to mitigate or prevent COVID–
19, because such construction is
generally expected to be more costly
than alternative approaches or capital
expenditures that may be equally or
more effective in decreasing spread of
the disease.252 These alternatives
include personal protective equipment,
ventilation improvements, utilizing
excess capacity in other facilities or
wings, or temporary facility capacity
expansions.
Large capital expenditures intended
for general economic development or to
aid the travel, tourism, and hospitality
industries—such as convention centers
and stadiums—are, on balance,
generally not reasonably proportional to
addressing the negative economic
impacts of the pandemic, as the efficacy
of a large capital expenditure intended
for general economic development in
remedying pandemic harms may be very
limited compared to its cost.253
Presumptions on Capital Expenditures
For administrative convenience, the
final rule provides presumptions on
whether a Written Justification is
required—and required to be submitted
to Treasury through reporting—based on
the type and size of the capital
expenditure, as detailed in the table
below.
As discussed above, Tribal
governments are not required to
complete the Written Justification for
applicable capital expenditures, but the
associated substantive requirements
continue to apply, including the
requirement that a capital expenditure
must be reasonably designed to benefit
the individual or class that experienced
the identified impact or harm and must
be related and reasonably proportional
to the extent and type of impact or
harm.
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254 Whether or not a Written Justification is
required, recipients should still determine that the
response is related and reasonably proportional to
the public health emergency and its negative
economic impacts. Treasury recognizes that
enumerated eligible uses are ‘‘related’’ to the public
health emergency and its negative economic
impacts and presumed to be reasonably
proportional, except recipients pursuing projects
with expected total capital expenditures equal to or
greater than $1 million should still independently
determine that the expenditures are a reasonably
proportional response. Enumerated projects with
total expected capital expenditures under $1
million receive a safe harbor and deemed to meet
the related and reasonably proportional standard.
255 Whether or not a Written Justification is
required, recipients should still determine that the
response is related and reasonably proportional to
the public health emergency and its negative
economic impacts. Treasury presumes that projects
with total expected capital expenditures under $1
million are reasonably proportional in size to
responding to the public health emergency and its
negative economic impacts; however, recipients
should determine that the response otherwise meets
the requirements of the standard, including that the
response is related to the public health emergency
and its negative economic impacts.
If a project has total expected cap-
ital expenditures of
and the use is enumerated by Treasury as eligible,
then 254
and the use is beyond those enumerated by Treas-
ury as eligible, then 255
Less than $1 million ........................ No Written Justification required ............................... No Written Justification required.
Greater than or equal to $1 million,
but less than $10 million.
Written Justification required but recipients are not
required to submit as part of regular reporting to
Treasury.
Written Justification required and recipients must
submit as part of regular reporting to Treasury.
$10 million or more ......................... Written Justification required and recipients must
submit as part of regular reporting to Treasury.
In selecting these thresholds, Treasury
recognized that capital expenditures
vary widely in size and therefore would
benefit from tiered treatment to
implement eligibility standards while
minimizing administrative burden,
especially for smaller projects. For
example, Treasury selected $1 million
as a threshold for whether a recipient
needs to complete a Written
Justification as well as a threshold
under which capital expenditures
would be presumed reasonably
proportional. Treasury estimates that $1
million would encapsulate the costs of
a significant portion of equipment or
small renovations. These types of
smaller projects are often a necessary
and reasonably proportional part of a
response to the public health
emergency; therefore, the $1 million
threshold provides a simplified pathway
to complete smaller projects more likely
to meet the eligibility standard. At the
same time, Treasury selected $10
million as the threshold for more
intensive reporting requirements,
estimating that projects larger than $10
million would likely constitute
significant improvements or
construction of mid- or large-sized
facilities. As discussed above, given
their scale and longer time to
completion, these types of larger
projects may be less likely to be
reasonably proportional responses. The
$10 million threshold also generally
aligns with thresholds in other parts of
the SLFRF program, such as for
enhanced reporting on labor practices.
Expenditures from closely related
activities directed toward a common
purpose are considered part of the scope
of one project. These expenditures can
include capital expenditures, as well as
expenditures on related programs,
services, or other interventions. A
project includes expenditures that are
interdependent (e.g., acquisition of land,
construction of the school on the land,
and purchase of school equipment), or
are of the same or similar type and
would be utilized for a common
purpose (e.g., acquisition of a fleet of
ambulances that would be used for
COVID–19 emergency response).
Recipients must not segment a larger
project into smaller projects in order to
evade review. A recipient undertaking a
set of identical or similar projects (e.g.,
development of a number of new
affordable housing complexes across the
recipient jurisdiction) may complete
one Written Justification
comprehensively addressing the entire
set of projects.
Projects Enumerated as Eligible by
Treasury
Under the public health and negative
economic impacts eligible use category,
the final rule provides a non-exclusive
list of eligible uses of funding for
projects that respond to the public
health emergency or its negative
economic impacts. Treasury has
determined that these enumerated
projects are related to the public health
emergency and its negative economic
impacts; however, recipients (other than
Tribal governments) undertaking these
projects with total expected capital
expenditures of $1 million or greater
must still complete and meet the
substantive requirements of a Written
Justification as part of their
demonstration that the project is a
related and reasonably proportional
response to the harm identified.
•Projects with total expected capital
expenditures of under $1 million:
Treasury provides a safe harbor for
projects with total expected capital
expenditures of less than $1 million and
will not require recipients to complete,
submit, or meet the substantive
requirements of a Written Justification
for the capital expenditure. In essence,
recipients may pursue an enumerated
project with total expected capital
expenditures of under $1 million
without having to undergo additional
assessments to meet SLFRF
requirements.
•Projects with total expected capital
expenditures of at least $1 million but
under $10 million: Recipients should
complete a Written Justification for the
capital expenditure and make an
independent assessment of whether
their proposed capital expenditure
meets the substantive requirements of
the Written Justification. Recipients will
not be required to submit the Written
Justification as part of regular reporting
to Treasury but should keep
documentation for their records.
•Projects with total expected capital
expenditures of at least $10 million:
Similar to the above, recipients should
complete a Written Justification of the
capital expenditure and make an
independent assessment of whether
their proposed capital expenditure
meets the substantive requirements of
the Written Justification. Further,
recipients will be asked to submit the
Written Justification as part of regular
reporting to Treasury. Similar to other
parts of the SLFRF program, such as on
reporting on labor practices, Treasury
recognizes that projects with expected
total capital expenditures of at least $10
million may be less likely to meet
eligibility requirements and therefore
requires recipients to provide an
enhanced level of information to
Treasury.
Projects Beyond Those Enumerated as
Eligible by Treasury
As with all uses, recipients that
undertake capital expenditures beyond
those enumerated as eligible by
Treasury must meet the two-part
framework under Standards:
Designating a Public Health Impact and
Standards: Designating a Negative
Economic Impact under General
Provisions: Structure and Standards,
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4393 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
including the requirement that
responses are related and reasonably
proportional to the harm or impact
identified. As part of that assessment,
these recipients may also be asked to
complete a Written Justification.
Recipients (other than Tribal
governments) are subject to the
following presumptions for the Written
Justification of the capital expenditure,
based on the total expected capital
expenditures of the project:
•Projects with total expected capital
expenditures of under $1 million:
Treasury provides a safe harbor for
unenumerated projects with total
expected capital expenditures of under
$1 million and will not require
recipients to complete, submit, or meet
the substantive requirements of a
Written Justification of the capital
expenditure. Recipients should still
make a determination as to whether the
capital expenditure is part of a response
that is related and reasonably
proportional to the public health
emergency or its negative economic
impacts.
•Projects with total expected capital
expenditures of $1 million or over:
Recipients should complete a Written
Justification of the capital expenditure
and make an independent assessment
that their proposed capital expenditure
meets the substantive requirements of
the Written Justification. Further,
recipients will be asked to submit the
Written Justification as part of regular
reporting to Treasury.
Treasury employs a risk-based
approach to overall program
management and monitoring, which
may result in heightened scrutiny on
larger projects. Accordingly, recipients
pursuing projects with larger capital
expenditures should complete more
detailed analyses for their Written
Justification, commensurate with the
scale of the project.
Additional Provisions, Standards, and
Definitions
Strong Labor Standards in Construction
Treasury encourages recipients to
carry out projects in ways that produce
high-quality work, avert disruptive and
costly delays, and promote efficiency.
Treasury encourages recipients to use
strong labor standards, including project
labor agreements (PLAs) and
community benefits agreements that
offer wages at or above the prevailing
rate and include local hire provisions.
Treasury also recommends that
recipients prioritize in their
procurement decisions employers who
can demonstrate that their workforce
meets high safety and training standards
(e.g., professional certification,
licensure, and/or robust in-house
training), that hire local workers and/or
workers from historically underserved
communities, and who directly employ
their workforce or have policies and
practices in place to ensure contractors
and subcontractors meet high labor
standards. Treasury further encourages
recipients to prioritize employers
(including contractors and
subcontractors) without recent
violations of federal and state labor and
employment laws.
Treasury believes that such practices
will promote effective and efficient
delivery of high-quality projects and
support the economic recovery through
strong employment opportunities for
workers. Such practices will reduce
likelihood of potential project
challenges like work stoppages or safety
accidents, while ensuring a reliable
supply of skilled labor and minimizing
disruptions, such as those associated
with labor disputes or workplace
injuries. That will, in turn, promote on-
time and on-budget delivery.
Furthermore, among other
requirements contained in 2 CFR 200,
Appendix II, all contracts made by a
recipient or subrecipient in excess of
$100,000 with respect to a capital
expenditure that involve employment of
mechanics or laborers must include a
provision for compliance with certain
provisions of the Contract Work Hours
and Safety Standards Act, 40 U.S.C.
3702 and 3704, as supplemented by
Department of Labor regulations (29
CFR part 5).
Treasury will seek information from
recipients on their workforce plans and
practices related to capital expenditures
undertaken under the public health and
negative economic impacts eligible use
category with SLFRF funds. This
reporting will support transparency and
competition by enhancing available
information on the services being
provided.
Environmental, Uniform Guidance, and
Other Generally Applicable
Requirements
Treasury cautions that, as is the case
with all projects using SLFRF funds, all
projects must comply with applicable
federal, state, and local law. In the case
of capital expenditures in particular,
this includes environmental and
permitting laws and regulations.
Likewise, as with all capital expenditure
projects using the SLFRF funds, projects
must be completed in a manner that is
technically sound, meaning that it must
meet design and construction methods
and use materials that are approved,
codified, recognized, fall under standard
or acceptable levels of practice, or
otherwise are determined to be
generally acceptable by the design and
construction industry.
Further, as with all other uses of
funds under the SLFRF program, the
Uniform Guidance at 2 CFR part 200
applies to capital expenditures unless
stated otherwise. Importantly, this
includes 2 CFR part 200 Subpart D on
post-federal award requirements,
including property standards pertaining
to insurance coverage, real property,
and equipment; procurement standards;
sub-recipient monitoring and
management; and record retention and
access.
Definitions
Treasury adopts several definitions
from the Uniform Guidance at 2 CFR
200.1 under this section, including for
capital expenditures, capital assets,
equipment, and supplies.
Per the Uniform Guidance, the term
‘‘capital expenditures’’ means
‘‘expenditures to acquire capital assets
or expenditures to make additions,
improvements, modifications,
replacements, rearrangements,
reinstallations, renovations, or
alterations to capital assets that
materially increase their value or useful
life.’’ The term ‘‘capital assets’’ means
‘‘tangible or intangible assets used in
operations having a useful life of more
than one year which are capitalized in
accordance with [Generally Accepted
Accounting Principles].’’
Capital assets include lands, facilities,
equipment, and intellectual property.
Equipment means ‘‘tangible personal
property (including information
technology systems) having a useful life
of more than one year and a per-unit
acquisition cost which equals or
exceeds the lesser of the capitalization
level established by the non-Federal
entity for financial statement purposes,
or $5,000.’’ Supplies, which means all
tangible personal property other than
those included as ‘‘equipment,’’ are not
considered capital expenditures.
Recipients may also use SLFRF funds
for pre-project development costs that
are tied to or reasonably expected to
lead to an eligible capital expenditure.
For example, pre-project costs
associated with planning and
engineering for an eligible project are
considered an eligible use of funds.
c. Distinguishing Subrecipients Versus
Beneficiaries
Under the interim final rule, state,
local, and Tribal governments that
receive a federal award directly from a
federal awarding agency, such as
Treasury, are designated as ‘‘recipients,’’
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256 In this context, a pass-through entity means a
recipient of SLFRF funds.
and state, local, and Tribal governments
are authorized to transfer funds to other
entities, including private entities like
nonprofits. The interim final rule stated
that, ‘‘[a] transferee receiving a transfer
from a recipient under sections 602(c)(3)
and 603(c)(3) will be a subrecipient.
Subrecipients are entities that receive a
subaward from a recipient to carry out
a program or project on behalf of the
recipient with the recipient’s Federal
award funding.’’
For funds transferred to a
subrecipient, the interim final rule
noted that ‘‘[r]ecipients continue to be
responsible for monitoring and
overseeing the subrecipient’s use of
SLFRF funds and other activities related
to the award to ensure that the
subrecipient complies with the statutory
and regulatory requirements and the
terms and conditions of the award.
Recipients also remain responsible for
reporting to Treasury on their
subrecipients’ use of payments from the
SLFRF funds for the duration of the
award.’’
Public Comment: Treasury received
many comments requesting clarification
about which entities qualify as
subrecipients and are, in turn, subject to
subrecipient monitoring and reporting
requirements. For example, commenters
sought clarification about whether a
nonprofit that received a grant to
provide services under a program to
carry out an enumerated eligible use
would qualify as a subrecipient and be
subject to subrecipient monitoring and
reporting requirements. Similarly,
commenters also wondered if a
nonprofit that received a grant in
recognition of experiencing a negative
economic impact of the public health
emergency would also be a subrecipient
and subject to subrecipient reporting
requirements.
Treasury Response: Treasury is
clarifying the distinction between a
subrecipient and beneficiary in the final
rule. The Uniform Guidance definitions
for subaward and subrecipient inform
Treasury’s distinction between
subrecipients and beneficiaries.
First, per 2 CFR 200.1 of Uniform
Guidance ‘‘[s]ubaward means an award
provided by a pass-through entity 256 to
a subrecipient for the subrecipient to
carry out part of a Federal award
received by the pass-through entity. It
does not include payments to a
contractor or payments to an individual
that is a beneficiary of a Federal
program. A subaward may be provided
through any form of legal agreement,
including an agreement that the pass-
through entity considers a contract.’’
Further, 2 CFR 200.1 of the Uniform
Guidance defines a subrecipient, in that
‘‘[s]ubrecipient means an entity, usually
but not limited to non-Federal entities,
that receives a subaward from a pass-
through entity to carry out part of a
Federal award; but does not include an
individual that is a beneficiary of such
award. A subrecipient may also be a
recipient of other Federal awards
directly from a Federal awarding
agency.’’ Treasury is aligning the
definition of subrecipient in the final
rule with the definition of subrecipient
in the Uniform Guidance.
Treasury is maintaining the
monitoring and subrecipient reporting
requirements outlined in the final rule.
Per 2 CFR 200.101 (b)(2) of the Uniform
Guidance, the terms and conditions of
federal awards flow down to subawards
to subrecipients. Therefore, non-federal
entities, as defined in the Uniform
Guidance, must comply with the
applicable requirements in the Uniform
Guidance regardless of whether the non-
federal entity is a recipient or
subrecipient of a federal award. This
includes requirements such as the
treatment of eligible uses of funds,
procurement, and reporting
requirements.
The Uniform Guidance definitions for
both subaward and subrecipient specify
that payments to individuals or entities
that are direct beneficiaries of a federal
award are not considered subrecipients.
The final rule adopts this definition of
a beneficiary and outlines that
households, communities, small
businesses, nonprofits, and impacted
industries are all potential beneficiaries
of projects carried out with SLFRF
funds. Beneficiaries are not subject to
the requirements placed on
subrecipients in the Uniform Guidance,
including audit pursuant to the Single
Audit Act and 2 CFR part 200, subpart
F or subrecipient reporting
requirements.
The distinction between a
subrecipient and a beneficiary,
therefore, is contingent upon the
rationale for why a recipient is
providing funds to the individual or
entity. If the recipient is providing
funds to the individual or entity for the
purpose of carrying out a SLFRF
program or project on behalf of the
recipient, the individual or entity is
acting as a subrecipient. Acting as a
subrecipient, the individual or entity is
subject to subrecipient monitoring and
reporting requirements. Conversely, if
the recipient is providing funds to the
individual or entity for the purpose of
directly benefitting the individual or
entity as a result of experiencing a
public health impact or negative
economic impact of the pandemic, the
individual or entity is acting as a
beneficiary. Acting as a beneficiary, the
individual or entity is not subject to
subrecipient monitoring and reporting
requirements.
d. Uses Outside the Scope of This
Category
Summary of the Interim Final Rule and
Final Rule Structure
In the interim final rule, Treasury
noted that certain uses of funds are not
permissible under the eligible use
category of responding to the public
health and negative economic impacts
of the pandemic. In the final rule, these
uses remain impermissible, but
Treasury has re-categorized where they
are addressed to increase clarity.
Specifically, the interim final rule
provided that the following uses of
funds are not eligible under this eligible
use category: Contributions to rainy day
funds, financial reserves, or similar
funds; payment of interest or principal
on outstanding debt instruments; fees or
issuance costs associated with the
issuance of new debt; and satisfaction of
any obligation arising under or pursuant
to a settlement agreement, judgment,
consent decree, or judicially confirmed
debt restructuring plan in a judicial,
administrative, or regulatory
proceeding, except to the extent the
judgment or settlement requires the
provision of services that would
respond to the COVID–19 public health
emergency. These uses of funds remain
ineligible under the final rule; Treasury
has re-categorized these issues to the
section Restrictions on Use, which
describes restrictions that apply to all
eligible use categories, to clarify that
these uses are not eligible under any
eligible use category of SLFRF. Treasury
responds to public comments on this
issue in the section Restrictions on Use.
As noted above, the interim final rule
also posed several questions on what
other types of services or costs Treasury
should consider as eligible uses to
respond to the public health and
negative economic impacts of COVID–
19, including in disproportionately
impacted communities. In this section,
Treasury addresses proposed uses of
funds suggested by commenters that
Treasury has not included as
enumerated eligible uses of funds in this
eligible use category.
General Eligible Uses
Public Comment: Commenters
proposed a wide variety of additional
recommended enumerated eligible uses
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in all sections of the public health and
negative economic impacts eligible use
category, including in impacted and
disproportionately impacted
communities. The proposed additional
uses included general categories of
services (e.g., legal and social services,
long-term investments to remediate
long-term disparities, response to
natural disasters). Other suggested uses
of funds respond to needs widely
experienced across the country (e.g.,
access to and affordability of health
insurance). Finally, other suggested uses
of funds were highly specific (e.g.,
healthcare equipment for a specific
health condition, fire hydrants, weather
alert systems) or most applicable to the
particularized needs to certain
populations or geographic areas of the
United States (e.g., senior citizens,
immigrants, formerly incarcerated
individuals, responding to
environmental issues in certain
geographic regions). Other commenters
generally requested a high degree of
flexibility to respond to the particular
needs of their communities.
Treasury Response: Given the large
number and diversity of SLFRF
recipients, Treasury has aimed to
include as enumerated eligible uses
programs, services, and capital
expenditures that respond to public
health and negative economic impacts
of the pandemic experienced widely in
many jurisdictions across the country,
making it clear and simple for recipients
to pursue these enumerated eligible uses
under the final rule. This provides
enumerated eligible uses that many
recipients may want to pursue, while
including uses that are responsive to the
pandemic’s impacts across the diverse
range of SLFRF recipients. In the final
rule, Treasury has clarified several
additional uses that generally respond
to pandemic impacts experienced
broadly across jurisdictions and
populations.
Treasury has not chosen to include as
enumerated uses all uses proposed by
commenters; given the significant range,
and in some cases highly specific
nature, of the proposed uses Treasury
was not able to assess that the proposed
uses would respond to negative
economic impacts experienced
generally across the country, supporting
an enumerated eligible use available to
all recipients presumptively.
However, Treasury emphasizes that
the enumerated eligible uses are non-
exhaustive and that other uses, beyond
those enumerated, are eligible. Treasury
recognizes that the impacts of the
pandemic vary over time, by
jurisdiction, and by population; as such,
the final rule provides flexibility for
recipients to identify other public health
or negative economic impacts to
additional households, small
businesses, or nonprofits, including
classes of these entities, and pursue
programs and services that respond to
those impacts. Treasury also notes that
some populations are presumed to be
impacted or disproportionately
impacted by the pandemic, and thus
eligible for responsive services; these
presumed eligible populations may
encompass many individuals in the
specific populations for whom
commenters recommended services. For
details on these issues, see section
General Provisions: Structure and
Standards.
Infrastructure, Community
Development, and General Economic
Development
Some potential additions to
enumerated eligible uses were also
recommended by several commenters
each but are not included as enumerated
eligible uses in the final rule.
Public Comment: Infrastructure: In
the interim final rule, Treasury noted
that a ‘‘general infrastructure project, for
example, typically would not be
included [in this eligible use category]
unless the project responded to a
specific pandemic public health need.’’
Numerous commenters requested that
Treasury permit investments in
infrastructure as a response to the
public health and negative economic
impacts of the pandemic. While these
comments most commonly
recommended that constructing and
maintaining roads and surface
transportation infrastructure be eligible,
the proposed uses for infrastructure
ranged widely and included parking
lots, bridges, traffic management
infrastructure, solid waste disposal
facilities, and utility infrastructure
(outside of water, sewer, and
broadband).
Many commenters argued that
infrastructure development and
maintenance is a pressing need in their
communities and that their
communities had less need for water,
sewer, and broadband infrastructure or
other eligible uses to respond to the
public health and negative economic
impacts of the pandemic. Other
commenters argued that these uses
would stimulate the economy, attract
businesses, or allow for tourist
movement; these commenters argued
that, by generally supporting a stronger
economy or facilitating conditions that
are more conducive to business activity
and tourism, these uses respond to the
negative economic impacts of the
pandemic.
Treasury Response: In the final rule,
Treasury is maintaining the approach
under the interim final rule that general
infrastructure projects, including roads,
streets, and surface transportation
infrastructure, would generally not be
eligible, unless the project responded to
a specific pandemic public health need
or a specific negative economic impact.
The ARPA expressly includes
infrastructure if it is ‘‘necessary’’ and in
water, sewer, or broadband, suggesting
that the statute contemplates only those
types of infrastructure. Further,
responding to the public health and
negative economic impacts of the
pandemic requires identifying whether,
and the extent to which, there has been
a harm that resulted from the COVID–
19 public health emergency and
whether, and the extent to which, the
use would respond or address this
harm. Uses of funds intended to
generally grow the economy and
therefore enhance opportunities for
workers and businesses would not be an
eligible use, because such assistance is
not reasonably designed to impact
individuals or classes that have been
identified as having experienced a
negative economic impact. In other
words, there is not a reasonable
connection between the assistance
provided and an impact on the
beneficiaries. Such an activity would be
attenuated from and thus not reasonably
designed to benefit the households that
experienced the negative economic
impact.
Note, however, that Treasury has
clarified that capital expenditures that
are related and reasonably proportional
to responding to the public health and
economic impacts of the pandemic are
eligible uses of funds, in addition to
programs and services; for details on
eligibility criteria for capital
expenditures, see section Capital
Expenditures in General Provisions:
Other.
Public Comment: Community
Development Block Grant: Several
commenters recommended that
Treasury enumerate as eligible uses
those eligible under the Department of
Housing and Urban Development’s
Community Development Block Grant
(CDBG) or the Housing and Community
Development Act of 1974, which
established the CDBG program.
Commenters requested that these uses
be eligible either to respond to the
negative economic impacts of the
pandemic, or in the alternate the
disproportionate negative economic
impacts of the pandemic in certain
communities. Under the CDBG program,
recipient governments may undertake a
wide range of community and economic
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257 See, e.g., Matthew D. Mitchell et al., The
Economics of a Targeted Economic Development
Subsidy (Arlington, VA: Mercatus Center at George
Mason University, 2019), 5, available at https://
www.mercatus.org/publications/government-
spending/economics-targeted-economic-
development-subsidy; Timothy J. Bartik, Who
Benefits from Economic Development Incentives?
How Incentive Effects on Local Incomes and the
Income Distribution Vary with Different
Assumptions about Incentive Policy and the Local
Economy (Upjohn Institute Technical Report No.
13–034, W.E. Upjohn Institute for Employment
Research, March 1, 2018), available at: https://
research.upjohn.org/up_technicalreports/34/; Cailin
Slattery and Owen Zidar, Evaluating State and
Local Business Tax Incentives, Journal of Economic
Perspectives 34, no. 2 (2020): 90–118, available at:
https://www.aeaweb.org/articles?id=10.1257/
jep.34.2.90; Kenneth Thomas, The State of State and
Local Subsidies to Business (Mercatus Policy Brief,
Mercatus Center at George Mason University,
Arlington, VA, October 2019), available at: https://
www.mercatus.org/system/files/thomas_-_policy_
brief_-_the_state_of_state_and_local_subsidies_to_
business_-_v1.pdf; Dennis Coates, Growth Effects of
Sports Franchises, Stadiums, and Arenas: 15 Years
Later (Mercatus Working Paper, Mercatus Center at
George Mason University, Arlington, VA,
September 2015), available at: https://
www.mercatus.org/system/files/Coates-Sports-
Franchises.pdf; Dennis Coates and Brad R.
Humphreys, Do Economists Reach a Conclusion on
Subsidies for Sports Franchises, Stadiums, and
Mega-Events?, Econ Journal Watch 5, no. 3 (2008):
294–315, available at: https://econjwatch.org/
articles/do-economists-reach-a-conclusion-on-
subsidies-for-sports-franchises-stadiums-and-mega-
events; Matthew D. Mitchell, Daniel Sutter, and
Scott Eastman, The Political Economy of Targeted
Economic Development Incentives, Review of
Regional Studies 48, no. 1 (2018): 1–9, available at:
https://www.mercatus.org/publications/corporate-
welfare/political-economy-targeted-economic-
development-incentives.
development services and projects.
Commenters reasoned that many state
and local governments are familiar with
this program, and that aligning to its
eligible uses may help recipients easily
understand and pursue eligible projects.
Commenters also noted that Treasury
had chosen to align with existing federal
programs in other eligible use
categories, namely water infrastructure,
in the interim final rule.
Treasury Response: In the final rule,
Treasury is not including all categories
of projects permissible under CDBG as
enumerated eligible uses to respond to
the public health and negative economic
impacts of the pandemic. Because CDBG
permits such a broad range of activities,
including services to individual
households, communities, small
businesses, general economic
development activities, and capital
expenditures, Treasury determined that
it was more appropriate to assess the
underlying types of projects eligible
within CDBG and whether each type of
project responds to the negative
economic impacts of the pandemic. In
other words, Treasury considered
whether various types of community
and economic development projects
respond to the impacts of the pandemic
in different communities and
circumstances. In the final rule,
Treasury addresses the eligibility of
these various types of projects in each
relevant eligible use category within
public health and negative economic
impacts under SLFRF, including
assistance for impacted households,
disproportionately impacted
households, disproportionately
impacted small businesses, and capital
expenditures.
Public Comment: General Economic
Development: Treasury provided
guidance following the interim final
rule that general economic development
or workforce development would
generally not be eligible as it does not
respond to a negative economic impact
of the COVID–19 public health
emergency.
Some commenters recommended that
Treasury expand enumerated eligible
uses to include general economic
development activities, beyond those
that respond to negative economic
impacts of the pandemic, such as
creating an economic development
strategy for the jurisdiction’s overall
economic growth, creating a general
workforce development strategy, or
providing funds to businesses that did
not experience negative economic
impacts to carry out economic
development activities or to incentivize
the addition or retention of jobs.
Commenters supportive of assistance to
businesses for general economic
development activities argued that
subsidies to businesses increase job
growth and that, in some cases,
assistance to companies that excelled
during the public health emergency
would help create more job
opportunities for workers or expand the
jurisdiction’s tax base and produce
funds to support government services.
In contrast, other commenters argued
that academic research consistently
finds that economic development
subsidies have a negligible, or even
negative, economic effect, citing
research findings to this effect.257
Treasury Response: In the final rule,
Treasury maintains the interim final
rule’s approach that general economic
development or workforce development,
meaning activities that do not respond
to negative economic impacts of the
pandemic and rather seek to more
generally enhance the jurisdiction’s
business climate, would generally not
be eligible under this eligible use
category. As noted above, to identify an
eligible use of funds under this category,
a recipient must identify a beneficiary
or class of beneficiaries that experienced
a harm or impact due to the pandemic,
and eligible uses of funds must be
reasonably designed to respond to the
harm, benefit the beneficiaries that
experienced it, and be related and
reasonably proportional to that harm or
impact.
As noted above, recipients should
analyze eligible uses based on the
beneficiary of the assistance, and
recipients may not provide assistance to
small businesses or impacted industries
that did not experience a negative
economic impact. Provision of
assistance to a business that did not
experience a negative economic impact,
under the theory that such assistance
would generally grow the economy and
therefore enhance opportunities for
workers, would not be an eligible use,
because such assistance is not
reasonably designed to impact
individuals or classes that have been
identified as having experienced a
negative economic impact. In other
words, there is not a reasonable
connection between the assistance
provided and an impact on the
beneficiaries. Such an activity would be
attenuated from and thus not reasonably
designed to benefit the households that
experienced the negative economic
impact. Research cited by some
commenters finding that business
subsidies have limited or negative
economic impact also suggests that such
a response may not be reasonably
designed to benefit households and
other entities impacted by the
pandemic. Similarly, planning activities
for an economic development or
workforce strategy regarding general
future economic growth do not provide
a program, service, or capital
expenditure that responds to negative
economic impacts of the pandemic.
However, Treasury notes that the final
rule includes as enumerated eligible
uses many types of assistance that
respond to negative economic impacts
of the pandemic and may produce
economic development benefits. For
example, see sections Assistance to
Unemployed Workers, Assistance to
Small Businesses, and Capital
Expenditures.
B. Premium Pay
Background and Summary of the
Interim Final Rule
Sections 602(c)(1)(B) and 603(c)(1)(B)
of the Social Security Act, as added by
the ARPA, provide that SLFRF funds
may be used ‘‘to respond to workers
performing essential work during the
COVID–19 public health emergency by
providing premium pay to eligible
workers of the . . . government that are
performing such essential work, or by
providing grants to eligible employers
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258 See U.S. Department of Labor, Hazard Pay,
https://www.dol.gov/general/topic/wages/
hazardpay (last visited October 18, 2021).
259 Economic Policy Institute, Only 30% of those
working outside their home are receiving hazard
pay (June 16, 2020), https://www.epi.org/press/only-
30-of-those-working-outside-their-home-are-
receiving-hazard-pay-black-and-hispanic-workers-
are-most-concerned-about-bringing-the-
coronavirus-home/.
260 McCormack, supra note 65.
261 Id.
262 See H.R. 6800, 116th Cong. (2020).
263 Note that the sectors defined in the interim
final rule already include all state, local, and Tribal
government employees.
that have eligible workers who perform
essential work.’’
Premium pay is designed to
compensate workers that, by virtue of
their employment, were forced to take
on additional burdens and make great
personal sacrifices as a result of the
COVID–19 pandemic. Premium pay can
be thought of as hazard pay by another
name.258
During the public health emergency,
employers’ policies on COVID–19-
related premium pay or hazard pay have
varied widely, with many essential
workers not yet compensated for the
heightened risks they have faced and
continue to face.259 Many of these
workers earn lower wages on average
and live in socioeconomically
underserved communities as compared
to the general population.260 A recent
study found that 25 percent of essential
workers were estimated to have low
household income, with 13 percent in
high-risk households.261 The low pay of
many essential workers makes them less
able to cope with the financial
consequences of the pandemic or their
work-related health risks. As Americans
return to work and governments relax
certain rules, essential workers will
continue to bear the brunt of the risk of
maintaining the ongoing operation of
vital facilities and services. The added
health risk to essential workers is one
prominent way in which the pandemic
has amplified pre-existing
socioeconomic inequities. Premium pay
is designed to address the disparity
between the critical services provided
by and the risks taken by essential
workers and the relatively low
compensation they tend to receive.
The interim final rule established a
three-part framework for recipients
seeking to use SLFRF funds for
premium pay. First, to receive premium
pay one must be an eligible worker.
Second, an eligible worker must also
perform essential work. Finally,
premium pay must respond to workers
performing essential work during the
COVID–19 public health emergency.
Most of the comments received by
Treasury pertaining to premium pay
related to these three requirements.
Comments also addressed the definition
of premium pay generally and posed
questions regarding premium pay
program structuring. This section
responds to the comments by addressing
the three requirements in turn, then the
overall definition of premium pay and,
finally, program structure.
Eligible Workers
The ARPA defines ‘‘eligible workers’’
as ‘‘those workers needed to maintain
continuity of operations of essential
critical infrastructure sectors and
additional sectors as each . . .
[government] may designate as critical
to protect the health and wellbeing of
[its] residents.’’ The interim final rule
supplemented this definition by
identifying a list of ‘‘essential critical
infrastructure sectors’’ whose workers
are eligible workers, based on the list of
sectors in the HEROES Act, a bill
introduced in the House of
Representatives in 2020 that would have
provided premium pay to essential
workers.262 In addition to the critical
infrastructure sectors defined in the
interim final rule, the chief executive (or
equivalent) of a recipient government
may designate additional non-public 263
sectors as critical so long as doing so is
necessary to protecting the health and
wellbeing of the residents of such
jurisdiction.
Public Comment: Treasury received
multiple comments on the definition of
‘‘eligible worker’’ included in the
interim final rule. Many commenters
agreed with the definition of eligible
worker adopted by Treasury. Other
commenters sought clarification about
or changes to the definition of eligible
worker, including the definition of
eligible sectors, the inclusion of
government workers in the definition of
eligible workers, and the process for
designating additional non-public
sectors as eligible.
Some commenters asked Treasury to
change how it identifies eligible sectors,
including suggestions to add to or
subtract from the list of eligible sectors.
For example, some commenters asked
Treasury to consider using Bureau of
Labor Statistics (BLS)-Standard
Occupational Classifications to identify
specific sectors or occupations, in
contrast to the approach taken in the
interim final rule, which included a
mixture of economic sectors, industries,
and occupations. Many commenters
asked Treasury to explicitly clarify that
a particular industry or occupation is
covered by the definition of ‘‘essential
critical infrastructure sector.’’ Some of
these commenters represented public
employees, e.g., employees of facilities
and public works; public utilities;
courthouse employees; police, fire, and
emergency medical services; and waste
and wastewater services. Others were a
mixture of public and private sector
employees, e.g., coroners and medical
examiners; transportation infrastructure
(specifically electric vehicle
infrastructure and supply equipment);
electric utilities, natural gas, and steam
supply; and grocery employees. Other
commenters requested that Treasury
prohibit certain occupations currently
included in the eligible workers
definition (e.g., police and corrections
officers) from receiving premium pay for
performance of regular duties.
Commenters also asked Treasury to
clarify which government workers are
included in the definition of eligible
workers. The interim final rule included
as an essential critical infrastructure
sector, ‘‘any work performed by an
employee of a State, local, or Tribal
government.’’ Some commenters
requested that Treasury adopt a
definition of eligible worker that
includes all employees of the recipient
government; however, all public
employees of state, local, and Tribal
governments are already included in the
interim final rule definition of ‘‘eligible
worker.’’ Commenters asked whether
this includes governments that did not
receive SLFRF funds (i.e., ‘‘non
recipient governments’’). Many
commenters from Tribal governments
requested that the definition of eligible
worker, which includes ‘‘any work
performed by an employee of a . . .
Tribal government,’’ also include an
employee of a ‘‘Tribal enterprise’’ to
remove uncertainty regarding which
employees are included.
Finally, commenters made
suggestions for the process by which the
chief executive (or equivalent) of a
recipient government may designate
additional non-public sectors as critical.
Commenters asked that Treasury adopt
a requirement that Treasury must
approve or deny any additional non-
public sector identified by the chief
executive of a recipient government
prior to implementation of the
recipient’s program.
Some commenters asked Treasury to
clarify whether their chief executive (or
equivalent) could designate particular,
and in some cases all, employees of the
recipient government as eligible for
premium pay.
Treasury Response: In the final rule,
Treasury will preserve the definition of
‘‘eligible worker’’ as it was defined in
the interim final rule with minor
modifications to clarify that all public
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264 See, e.g., sources such as Bureau of Labor
Statistics, Occupational Outlook Handbook,
which provide information on which
professions or occupations are typically
included in interpretations of a sector, https://
www.bls.gov/ooh/.
265 Public sector workers are ‘‘eligible workers’’
under the interim final rule and final rule.
employees of recipient governments are
already included in the interim final
rule definition of ‘‘eligible worker.’’ A
more specific eligibility system (e.g.,
linking eligibility to specific
occupational or industry codes) would
have provided more certainty but would
have been much more rigid. In contrast,
the current definition is flexible enough
to give recipients the ability to tailor
their premium pay programs to meet
their needs while ensuring that
programs focus on sectors where
workers were forced to shoulder
substantial risk as a result of the
COVID–19 pandemic. Furthermore, the
critical infrastructure sectors defined in
the interim final rule already include
many of the occupations that
commenters requested be added. For
example, Treasury received many
comments from public workers asking
to be included in the definition of
‘‘eligible worker’’ even though these
workers already fall within the scope of
‘‘any work performed by an employee of
a State, local, or Tribal government.’’
Treasury has clarified in the final rule
that the chief executive’s discretion to
designate additional sectors as critical
relates only to ‘‘non-public’’ sectors,
since all public employees of recipient
governments are already included in the
definition of ‘‘eligible worker.’’ While
all such public employees are ‘‘eligible
workers’’ and the chief executive (or
equivalent) of a recipient government
may designate additional non-public
sectors as critical, in order to receive
premium pay, these workers must still
meet the other premium pay
requirements (e.g., performing essential
work).
Treasury recognizes that the list of
‘‘essential critical infrastructure sectors’’
includes both occupations and sectors.
Recipients, if uncertain which
occupations are included in a critical
infrastructure sector, may consult
government occupational classifications
if helpful but are not required to do
so.264 Furthermore, a recipient
government does not need to submit to
Treasury for approval its designation of
a sector as essential critical
infrastructure; rather, Treasury will
defer to the reasonable interpretation of
the recipient government and the
discretion of the recipient’s chief
executive in making such designations.
If a recipient is unsure if a non-public
sector is covered by the definition in the
final rule,265 the chief executive (or
equivalent) of a recipient government
may also identify the non-public sector
as critical so long as the chief executive
deems the non-public sector necessary
to protecting the health and wellbeing of
residents. Treasury has, where possible,
clarified the definition of ‘‘essential
critical infrastructure sectors.’’ For
instance, Treasury has clarified in the
final rule that work performed by an
employee of a Tribal government
includes an employee of a Tribal
enterprise and discussed in this
Supplementary Information how a
recipient may qualify other non-public
sectors as essential critical
infrastructure.
Essential Work
The interim final rule defined
‘‘essential work’’ as work that (1) is not
performed while teleworking from a
residence and (2) involves either (i)
regular, in-person interactions with
patients, the public, or coworkers of the
individual that is performing the work
or (ii) regular physical handling of items
that were handled by, or are to be
handled by, patients, the public, or
coworkers of the individual that is
performing the work. Treasury adopted
this definition of essential work to
ensure that premium pay is targeted to
workers that faced or face heightened
risks due to the character of their work
during a pandemic.
Public Comment: Some commenters
found the definition unclear and asked
Treasury to clarify what constitutes
‘‘essential work.’’ Others disagreed with
the essential work test altogether,
arguing that it forces recipients to
distinguish between essential and non-
essential employees, which may be
difficult to do. Accordingly, these
commenters asked Treasury to allow
recipients to determine which workers
qualify as essential. Treasury also
received several requests that specific
occupations be explicitly deemed
essential, including all public
employees, veterinarians, election
administrators, detention staff and
sheriff’s deputies, and employees of
utilities, such as electric power, natural
gas, steam supply, water supply, and
sewage removal.
Several commenters requested that
Treasury not distinguish between
remote and in-person work or amend
the standard so that employees
providing essential services would still
be eligible even if they worked
remotely. Finally, a few commenters
requested clarification as to the
definition of ‘‘regular’’ in-person
interactions and whether Treasury
could clarify which job functions merit
more (or less) premium pay.
Treasury Response: Treasury is
maintaining the definition of ‘‘essential
work’’ in the final rule without
modification. The test adopted in the
interim final rule was designed to
compensate workers facing
disproportionate risk due to the
pandemic. COVID–19 is transmitted
through person-to-person interactions,
and therefore, workers with regular in-
person interactions are the primary
group facing increased health risks.
Although COVID–19 is not transmitted
primarily by people handling items,
such work may present increased risk in
certain cases, and the final rule
maintains the interim final rule’s
inclusion of such work in order to give
recipient governments the flexibility to
include workers performing such work
as they determine appropriate. Changing
the test as some commenters suggested,
e.g., by eliminating the in-person work
requirement or allowing recipients to
designate which employees are
essential, even if not working in person,
would no longer focus the program on
workers taking on additional health
risks and instead allow premium pay to
be awarded to individuals who
experienced relatively little risk of
exposure to COVID–19. To maintain
flexibility, Treasury is not defining the
term ‘‘regular’’ with regard to in-person
interactions, allowing recipients to
develop programs based on the specific
workforce to be served and local
circumstances. Generally speaking,
however, recipients are encouraged to
consider an eligible worker’s risk of
exposure in designing premium pay
programs.
Respond To
As required by the ARPA, the interim
final rule required that premium pay
programs ‘‘respond to’’ eligible workers
performing essential work during the
COVID–19 public health emergency.
Premium pay responds to eligible
workers performing essential work if it
prioritizes low- and moderate-income
persons, given the significant share of
essential workers that are low- and
moderate-income and may be least able
to bear added costs associated with
illness. The level of the award limit—up
to $13 per hour not to exceed $25,000
in aggregate—in the ARPA supports this
reasoning.
Accordingly, the interim final rule
required written justification for how
premium pay to certain higher-income
workers responds to eligible workers
performing essential work: If a recipient
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266 See generally 29 U.S.C. 207(a); U.S.
Department of Labor, Overtime Pay Requirements of
the FLSA (Fact Sheet No. 23), https://www.dol.gov/
agencies/whd/fact-sheets/23-flsa-overtime-pay.
267 Department of Labor, Overtime Pay, https://
www.dol.gov/agencies/whd/overtime; see also 29
U.S.C. 207.
268 Among workers that report working overtime,
roughly 41–44 percent of workers earn above
$50,000 per year, which is slightly less than the
national average annual wage for all employees
according to the Bureau of Labor Statistics’
Occupational Employment and Wage Statistics,
available at https://www.bls.gov/oes/. See also U.S.
Census Bureau, Basic Monthly CPS, January 2019
through December 2019, available at https://
www.census.gov/data/datasets/time-series/demo/
cps/cps-basic.html. Notes: Annual earnings reflect
weekly wages multiplied by 52. Usual weekly
earnings are computed by BLS to include earnings
from work such as tips, overtime, regular wages,
etc., but not non-labor sources of income such as
government transfers and capital gains. Pre-
overtime earnings are computed by taking the
difference of usual weekly earnings and earnings
from overtime last week and multiplying by 52.
Note, some sources multiply weekly earnings by 50
instead of 52 to account for unpaid time off and
holidays, so these figures may be slightly larger
than those reported elsewhere. Either assumption
may overestimate earnings if workers do not work
year-round.
(or grantee) uses SLFRF funds to
provide premium pay to an employee
and the pay or grant would increase a
worker’s total pay above 150 percent of
their residing state or county’s average
annual wage for all occupations, as
defined by the BLS Occupational
Employment and Wage Statistics,
whichever is higher, on an annual basis,
then the recipient must provide,
whether for themselves or on behalf of
a grantee, written justification to
Treasury detailing how the award
responds to eligible workers performing
essential work.
Public Comment: Treasury received
numerous comments on the wage
threshold and the written justification
requirement. Several commenters
supported the threshold as a way to
encourage recipients to target premium
pay to lower-income, eligible workers.
Some commenters even asked Treasury
to make the wage threshold a firm
restriction, above which an eligible
worker could not receive premium pay.
Others agreed with the threshold but
also requested flexibility to use existing
worker classifications as an
administratively simple way to identify
workers for whom premium pay would
be responsive. For instance, a few
commenters asked Treasury to allow
recipients or grantees to presume that
premium pay ‘‘responds to’’ eligible
workers performing essential work
when it is provided to employees who
are not exempt from the Fair Labor
Standards Act (FLSA) overtime
provisions—a test that employers are
routinely required to apply.266
In contrast, several commenters
disagreed with the threshold and the
requirement for written justification. A
few commenters thought the threshold
was too low to capture employees in
certain critical infrastructure sectors
(e.g., public safety, waste collection) and
that it did not sufficiently account for
the variance in economic need across
different geographic areas and family
structures. Some smaller communities
argued that the threshold was difficult
to calculate and apply.
Other commenters proposed revisions
for how the threshold is calculated. For
instance, a few commenters asked
Treasury to consider using alternative
earnings measures such as median
income. Similarly, another commenter
asked Treasury to consider the incomes
of workers with different levels of
seniority in developing any income
thresholds for permitting or reporting on
premium pay.
Finally, there was also some
uncertainty as to the threshold and the
requirement for written justification.
Some commenters interpreted the
threshold as a hard cap on who was
eligible for premium pay, which is not
the case. Relatedly, some commenters
also requested further guidance on what
recipients should include in the written
justification submitted to the Secretary.
Treasury Response: The final rule
makes some modifications to the
determination of when premium pay
‘‘responds to’’ eligible workers
performing essential work during the
public health emergency. Under the
interim final rule, premium pay was
responsive if either the workers’ pay
was below a wage threshold or, if the
pay was above a wage threshold, the
recipient submitted written justification
to Treasury explaining how the
premium pay was responsive. The final
rule retains these two means of
establishing premium pay in response to
workers performing essential work and
adds an additional means of
demonstrating that premium pay is
responsive. Under the final rule, a
recipient may also show that premium
pay is responsive by demonstrating that
the eligible worker receiving premium
pay is not exempt from the FLSA
overtime provisions.267 This change will
expand the number of workers eligible
to receive premium pay 268 and does not
require recipients to provide written
justification to Treasury regarding the
workers who are not exempt from the
FLSA overtime provisions, making the
program easier to administer for
recipients. Incorporating this change
further simplifies application of the
final rule for recipients because
Treasury understands that most
employers, public and private, are
familiar with and are routinely required
to apply the FLSA.
With this addition, the final rule
provides that premium pay is
responsive to eligible workers
performing essential work during the
public health emergency if each eligible
worker who receives premium pay falls
into one of three categories: (1) The
worker’s pay is below the wage
threshold, (2) the worker is not exempt
from the FLSA overtime provisions, or
(3) the recipient has submitted a written
justification to Treasury.
The final rule makes it clear that
written justification to Treasury is not
necessary with respect to eligible
workers whose pay is less than the wage
threshold. Nor is written justification
necessary with respect to eligible
workers who are not exempt from the
FLSA overtime provisions. The written
justification is only necessary if the
worker’s pay (with or without the
premium) exceeds the threshold, and
the worker is exempt from the FLSA
overtime provisions. The final rule also
clarifies that a worker’s pay exceeds the
threshold if either the premium pay
increases the worker’s total pay above
the wage threshold or the worker’s total
pay was already above the threshold,
before receiving premium pay.
Treasury has also updated the final
rule to clarify that written justification
means a brief, written narrative
justification of how the premium pay or
grant is responsive to workers
performing essential work during the
public health emergency. This could
include a description of the essential
workers’ duties, health or financial risks
faced due to COVID–19, and why the
recipient determined that the premium
pay was responsive despite the workers’
higher income.
Recipients should refer to SLFRF
program reporting guidance, user
guides, and other documentation for
further guidance on the form and
content of the written justification.
Treasury anticipates that recipients will
easily be able to satisfy the justification
requirement for front-line workers, like
nurses and hospital staff.
Definition of Premium Pay
The statute defines premium pay as
‘‘an amount of up to $13 per hour ...,
in addition to wages or remuneration
the eligible worker otherwise receives,
for all work performed by the eligible
worker during the COVID–19 public
health emergency. Such amount may
not exceed $25,000 with respect to any
single eligible worker.’’ The interim
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4400 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
269 See 29 U.S.C. 207(a) (‘‘[A]t a rate not less than
one and one-half times the regular rate at which he
is employed.’’).
270 All recipients are required to comply with
otherwise applicable laws, including any wage and
hour requirements in the Fair Labor Standards Act.
See generally, Department of Labor, Wages and the
Fair Labor Standards Act, https://www.dol.gov/
agencies/whd/flsa.
271 In the second quarter of 2020, quarterly state
and local tax revenues as reported by the U.S.
Census Bureau fell 19 percent compared to the
second quarter of 2019; U.S. Census Bureau,
Quarterly Summary of State and Local Tax
Revenue, https://www.census.gov/programs-
surveys/qtax.html.
272 National Association of State Budget Officers,
Fiscal Survey of the States (Fall 2020), available at
https://higherlogicdownload.s3.amazonaws.com/
NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/
UploadedImages/Fiscal%20Survey/NASBO_Fall_
2020_Fiscal_Survey_of_States_S.pdf.
273 National League of Cities, City Fiscal
Conditions (2020), available at https://www.nlc.org/
wp-content/uploads/2020/08/City_Fiscal_
Conditions_2020_FINAL.pdf.
274 Surveys conducted by the Center for Indian
Country Development at the Federal Reserve Bank
of Minneapolis in March, April, and September
2020. Elijah Moreno & Heather Sobrepena, Tribal
entities remain resilient as COVID–19 batters their
finances, Federal Reserve Bank of Minneapolis
(Nov. 10, 2020), https://www.minneapolisfed.org/
article/2020/tribal-entities-remain-resilient-as-
covid-19-batters-their-finances.
final rule incorporated this definition
and emphasized that premium pay
should be in addition to compensation
typically received.
Public Comment: Several submitted
comments related to the definition of
‘‘premium pay.’’ Several commenters
asked Treasury to clarify certain aspects
of the interim final rule and statutory
definition of premium pay. For instance,
a few commenters asked whether the
$25,000 limit applies to the annual
amount of premium pay received or the
aggregate amount of premium pay
received over the period of performance.
A few commenters requested flexibility
as to how premium pay may be
awarded, including flexibility to make
monthly or quarterly payments or lump
sum payments. Finally, commenters
requested additional clarification as to
how premium pay should be calculated.
For instance, a commenter asked how to
calculate the amount of and account for
overtime pay and other incentive
pay.269
Treasury Response: Treasury has
clarified some of these issues in the
final rule. For example, Treasury has
clarified in the final rule that the
$25,000 per employee limit is for the
entire period of performance, not an
annual cap. Further, recipients have
discretion with respect to the way in
which premium pay is awarded to
eligible workers (e.g., monthly,
quarterly, lump sum), provided that the
total premium pay awarded to any
eligible worker does not exceed $13 per
hour or $25,000 over the period of
performance. Finally, a recipient may
award premium pay to an eligible
worker in addition to the overtime pay
already earned by the eligible worker
but in no instance may the portion of
the compensation funded with SLFRF
funds exceed $13 per hour, even if strict
time-and-a-half calculation requires
more.270 To the extent that an employer
is required under the FLSA to make
payments to an eligible worker in excess
of $13 per hour or $25,000 in the
aggregate over the period of
performance, the employer must use a
source of funding other than the SLFRF
funds to satisfy those obligations.
Program Structure
Public Comment: Several commenters
also requested elaboration on eligible
types of employees and permissible
structures for awarding premium pay. A
few commenters asked if premium pay
could be awarded to volunteers or those
in irregular and non-hourly or salaried
employment positions. Similarly,
various commenters asked if part-time
workers were eligible for premium pay.
Some commenters asked Treasury to
provide more detail on when premium
pay may be paid retroactively or if a
government could reimburse its general
fund for hazard pay already paid before
the start of the period of performance.
Treasury Response: Treasury has also
made clear in the final rule that a
recipient may award premium pay to
non-hourly or salaried workers as well
as part-time workers. Premium pay may
not, however, be awarded to volunteers.
If a recipient is interested in
compensating volunteers with SLFRF
funds, then it must do so consistent
with the requirements set forth in other
eligible use categories; for example, see
section Public Sector Capacity and
Workforce in Public Health and
Negative Economic Impacts.
Under the final rule, recipients may
award premium pay retroactively;
however, SLFRF funds may not be used
to reimburse a recipient or eligible
employer grantee for premium pay or
hazard pay already received by the
employee. To make retroactive premium
payments funded with SLFRF funds, a
recipient or eligible employer grantee
must make a new cash outlay for the
premium payments and the payments
must be in addition to any wages or
remuneration the eligible worker
already received, subject to the other
requirements and limitations set forth in
the ARPA and this final rule.
Finally, as part of accepting the
Award Terms and Conditions for
SLFRF, each recipient agreed to
maintain a conflict-of-interest policy
consistent with 2 CFR 200.318(c) that is
applicable to all activities funded with
the SLFRF award. This award term
requires recipients and subrecipients to
report to Treasury or the pass-through
agency, as appropriate, any potential
conflict of interest related to the award
funds per 2 CFR 200.112. Pursuant to
this policy, decisions concerning SLFRF
funds must be free of undisclosed
personal or organizational conflicts of
interest, both in fact and in appearance.
Consistent with this policy, elected
officials are prohibited from using their
official position and control over SLFRF
funds for their own private gain. This
policy also prohibits, among other
things, elected officials from steering
funds to projects in which they have a
financial interest or using funds to pay
themselves premium pay.
C. Revenue Loss
Background
Sections 602(c)(1)(C) and 603(c)(1)(C)
of the Social Security Act provide that
SLFRF funds may be used ‘‘for the
provision of government services to the
extent of the reduction in revenue of
such . . . government due to the
COVID–19 public health emergency
relative to revenues collected in the
most recent full fiscal year of the . . .
government prior to the emergency.’’
This provision allows recipients
experiencing budget shortfalls to use
payments from the SLFRF funds to
avoid cuts to government services and,
thus, enables state, local, and Tribal
governments to continue to provide
valuable services and ensures that fiscal
austerity measures do not hamper the
broader economic recovery.
State and local government budgets
experienced stress in fiscal year 2020 as
delayed tax filings and pandemic-
related business closures caused
revenues to decline sharply.271 Twenty-
two state governments took actions to
close budget gaps in fiscal year 2020 272
and nearly 80 percent of cities reported
being less able to meet the fiscal needs
of their communities relative to fiscal
year 2019.273 Surveys of Tribal
governments and Tribal enterprises
conducted in 2020 found majorities of
respondents reporting substantial cost
increases and revenue decreases, with
Tribal governments reporting reductions
in health care, housing, social services,
and economic development activities as
a result of reduced revenues.274
The economic recovery, aided by the
broad distribution of COVID–19
vaccines and the deployment of federal
stimulus, has led to a strong rebound in
total state and local government revenue
and is contributing to a brighter fiscal
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4401 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
275 Analysis of Quarterly Summary of State and
Local Tax Revenue, U.S. Census Bureau, supra note
271.
276 National League of Cities, City Fiscal
Conditions (2021), available at https://www.nlc.org/
wp-content/uploads/2021/10/2021-City-Fiscal-
Conditions-Report-2021.pdf.
277 Center for Indian Country Development and
Federal Reserve Bank of Minneapolis, One Year
Into COVID–19, Pandemic’s Negative Effects Persist
in Indian Country (May 2021), available at https://
www.minneapolisfed.org/article/2021/one-year-
into-covid-19-pandemics-negative-effects-persist-in-
indian-country.
278 See, e.g., Nora Fitzpatrick et al., Fiscal Drag
from the State and Local Sector?, Liberty Street
Economics Blog, Federal Reserve Bank of New York
(June 27, 2012), https://libertystreeteconomics.
newyorkfed.org/2012/06/fiscal-drag-from-the-state-
and-local-sector.html; Jiri Jonas, Great Recession
and Fiscal Squeeze at U.S. Subnational Government
Level, IMF Working Paper 12/184, (July 2012),
available at https://www.imf.org/external/pubs/ft/
wp/2012/wp12184.pdf; Gordon, supra note 16.
279 State and local government general revenue
from own sources, adjusted for inflation using the
Bureau of Economic Analysis’ implicit price
deflator for GDP. U.S. Census Bureau, Annual
Survey of State Government Finances and U.S.
Bureau of Economic Analysis, National Income and
Product Accounts, https://www.census.gov/
programs-surveys/gov-finances.html.
280 U.S. Bureau of Labor Statistics, All Employees,
State Government [CES9092000001] and All
Employees, Local Government [CES9093000001],
retrieved from FRED, Federal Reserve Bank of St.
Louis, https://fred.stlouisfed.org/series/
CES9092000001 and https://fred.stlouisfed.org/
series/CES9093000001.
281 Pew Research, State and Local Government
Job Growth Lags as Economy Recovers (September
2021), available at https://www.pewtrusts.org/en/
research-and-analysis/articles/2021/09/14/state-
and-local-government-job-growth-lags-as-economy-
recovers.
282 At the time the interim final rule was
published, the average annual growth across all
state and local government ‘‘General Revenue from
Own Sources’’ in the most recent three years of
available data (2015–2018) was 4.1%, which was
presented as one option for the growth adjustment.
Since the interim final rule was published, 2019
data has been made available, which increases this
rate to 5.2%. The final rule updates the percentage
to 5.2%, as shown in Step 2.
283 As explained below, in the final rule,
recipients must adjust actual revenue amounts
based on certain tax policy changes.
outlook for most jurisdictions as
compared to the earlier months of the
public health emergency. For the fiscal
year ending June 30, 2021, total state
and local government tax revenues
increased 21 percent relative to the
same period in 2020, reflecting the
combined impact of the modified tax
filing deadline in 2020 and an
improving economy.275 However,
despite a stable budget situation overall,
many governments face uncertainty as
the COVID–19 pandemic continues to
impact commuting patterns, hospitality
and tourism, and other drivers of
jurisdictions’ economies. Thirty-five
percent of cities still report being less
able to meet financial needs than in
fiscal year 2020,276 and over half of
surveyed Tribal governments and Tribal
enterprises reported losing at least 40
percent of their revenue since the start
of the pandemic.277 Budget challenges
persist as governments work to mitigate
and contain COVID–19 and help
citizens weather the economic
downturn.
State, local, and Tribal government
budgets affect the broader economic
recovery. During the period following
the 2007–2009 recession, state and local
government budget pressures led to
fiscal austerity that was a significant
drag on the overall economic
recovery.278 Inflation-adjusted state and
local government revenue did not return
to the previous peak until 2013,279
while employment in the sector
returned to the previous peak in August
2019, nearly a decade later.280 Just
months after recouping losses from the
previous downturn, the COVID–19
pandemic caused state and local
government employment to contract
again, but this time more sharply: By
May 2020, state and local government
payrolls fell 7.7 percent compared to
February 2020. Despite improvement,
non-federal public sector job growth
continues to lag behind the rest of the
U.S. labor market recovery.281
Summary of Interim Final Rule
As stated above, the Social Security
Act provides that SLFRF funds may be
used ‘‘for the provision of government
services to the extent of the reduction in
revenue of such . . . government due to
the COVID–19 public health emergency
relative to revenues collected in the
most recent full fiscal year of the . . .
government prior to the emergency.’’
The interim final rule provided a
formula for calculating revenue loss
through a four-step process:
•Step 1: Identify revenues collected
in the most recent full fiscal year prior
to the public health emergency (i.e., last
full fiscal year before January 27, 2020),
called the base year revenue.
•Step 2: Estimate counterfactual
revenue, which is the amount of
revenue the recipient would have
expected in the absence of the downturn
caused by the pandemic. The
counterfactual revenue is equal to base
year revenue * [(1 + growth adjustment)
∧ (n/12)], where n is the number of
months elapsed since the end of the
base year to the calculation date, and
growth adjustment is the greater of the
average annual growth rate across all
State and Local Government ‘‘General
Revenue from Own Sources’’ in the
most recent three years prior to the
emergency, 5.2 percent, or the
recipient’s average annual revenue
growth in the three full fiscal years prior
to the COVID–19 public health
emergency.282 This approach to the
growth rate provides recipients with the
option to use a standardized growth
adjustment when calculating the
counterfactual revenue trend and thus
minimizes administrative burden, while
not disadvantaging recipients with
revenue growth that exceeded the
national average prior to the COVID–19
public health emergency by permitting
these recipients to use their own
revenue growth rate over the preceding
three years.
•Step 3: Identify actual revenue,283
which equals revenues collected over
the twelve months immediately
preceding the calculation date.
•Step 4: The extent of the reduction
in revenue is equal to counterfactual
revenue less actual revenue. If actual
revenue exceeds counterfactual revenue,
the extent of the reduction in revenue is
set to zero for that calculation date.
For illustration, consider a
hypothetical recipient with base year
revenue equal to 100 (Step 1) that ends
on June 30, 2019. In Step 2, the
hypothetical recipient finds that the
average annual growth across all state
and local government ‘‘General Revenue
from Own Sources’’ in the most recent
three years of available data, 5.2
percent, is greater than the recipient’s
average annual revenue growth in the
three full fiscal years prior to the public
health emergency. In this illustration, n
(months elapsed) and counterfactual
revenue would be equal to:
As of: 12/31/2020 12/31/2021 12/31/2022 12/31/2023
n (months elapsed) .......................................................................................... 18 30 42 54
Counterfactual revenue:.................................................................................. 107.9 113.5 119.4 125.6
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The figure below illustrates the
reduction in revenue for the
hypothetical recipient calculated in
accordance with the methodology.
Finally, as explained in greater detail
below, the clear meaning of the
statutory phrase ‘‘due to the COVID–19
public health emergency’’ is that it is
referring to revenue reductions caused
by the public health emergency. As
such, it does not include revenue
reduced for reasons other than the
public health emergency. Treasury in
the interim final rule presumed that any
reduction in revenue relative to the
counterfactual estimate would be
considered revenue lost due to the
pandemic and thereby relieved
recipients of the administrative burden
of determining the extent to which
reduction in revenue was due to the
public health emergency. The
calculation methodology in the interim
final rule implicitly assumed that
recipients did not suffer a loss in
revenue due to the public health
emergency if they did not experience a
reduction in aggregate revenue
compared to the counterfactual
estimate. The interim final rule invited
comments on whether Treasury should
revise its presumption to ‘‘take into
account other factors, including actions
taken by the recipient as well as the
expiration of the COVID–19 public
health emergency, in determining
whether to presume that revenue losses
are ‘due to’ the COVID–19 public health
emergency.’’
Treasury received a substantial
number of comments on the revenue
loss provisions set forth in the interim
final rule. These comments largely
pertained to the following topics: The
overall methodology for calculating
revenue loss; the definition of
‘‘revenue’’; whether revenue should be
aggregated or calculated on some
alternative basis (e.g., source-by-source
or fund-by-fund); the appropriate
calculation dates (i.e., fiscal year or
calendar year); the presumption that all
revenue loss is due to the pandemic; the
base year; and the definition of
‘‘government services.’’
Overall Methodology for Calculating
Revenue Loss
As noted above, the interim final rule
provided a formula for recipients to
calculate revenue loss by comparing
actual revenues received during a given
time-period with a counterfactual
amount of revenue based on revenues in
the base year and an adjustment for
expected growth in revenue each year.
Public Comment: Treasury received
many public comments on the overall
methodology for calculating revenue
loss. Some recipients, including smaller
governments, have expressed concern
regarding the burden associated with
the calculation of revenue loss,
particularly the burden involved in
calculating the amount of general
revenue, given that the definition of
general revenue in the interim final rule
does not always align with the
definition of revenue already calculated
by recipients for other purposes, and
requested clarifications regarding a
number of components, including the
definition of revenue. Commenters also
asked for clarification on the
relationship between revenue loss
calculations across different calculation
dates. Other commenters argued that the
revenue loss formula does not precisely
capture the nuances of local revenues or
their particular situation. For example,
some commenters stated that requiring
that revenues be aggregated fails to
capture decreases in revenue sources
that cannot easily be made up for with
other revenue sources.
Treasury Response: In the final rule,
Treasury is largely maintaining the
revenue loss formula as set forth in the
interim final rule. To address comments
that the formula for calculating revenue
loss was difficult to apply, Treasury is
including an option for recipients to use
a standard allowance for revenue loss.
Specifically, in the final rule, recipients
will be permitted to elect a fixed
amount of loss that can then be used to
fund government services. This fixed
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•Actual Revenue
•Extent of reduction in revenue
130
•Base year revenue
120 ..... counterfactual revenue
110
100
90
80
Jun-19 Dec-20 Dec-21 Dec-22 Dec-23
4403 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
284 Because the Census Bureau’s state and local
government tax revenue data is reported on a
quarterly frequency, fiscal base year end dates of
March 31, June 30, September 30, and December 31
were used in this assessment.
285 Annual Survey of State and Local Government
Finances (2019).
286 This is the range of averages that Treasury
calculated by varying the aforementioned
assumptions.
287 See, e.g., Government Accountability Office,
State and Local Governments: Fiscal Conditions
During the COVID–19 Pandemic in Selected States
(July 2021) (noting that ‘‘[s]tate and local
government revenues partly depend on the overall
economy, and actions to stem the spread of the
virus drastically reduced economic activity.’’);
Board of Governors of the Federal Reserve System,
Monetary Policy Report (July 9, 2021) (noting that
the pandemic ‘‘pushed down state and local
government tax collections’’ and that while some of
the drag is ‘‘abating’’ state and local ‘‘government
payrolls . . . have only edged up from their lows
at the onset of the pandemic’’).
288 Local government tax revenue data in the
Census Bureau’s Quarterly Summary of State and
Local Tax Revenue, supra note 271, is provided on
an aggregated basis.
289 The Department also released guidance
clarifying how a recipient may determine whether
a particular entity is ‘‘part of the recipient’s
government.’’ See FAQ 3.14. Coronavirus State and
Local Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://home.
treasury.gov/system/files/136/SLFRPFAQ.pdf.
amount, referred to as the ‘‘standard
allowance,’’ is set at up to $10 million
total for the entire period of
performance not to exceed the
recipient’s SLFRF award amount.
Although Treasury anticipates that this
standard allowance will be most helpful
to smaller local governments and Tribal
governments, any recipient can use this
standard allowance instead of
calculating revenue loss pursuant to the
formula above, so long as recipients
employ a consistent methodology across
the period of performance (i.e., choose
either the standard allowance or the
regular formula). Treasury intends to
amend its reporting forms to provide a
mechanism for recipients to make a one-
time, irrevocable election to utilize
either the revenue loss formula or the
standard allowance.
The $10 million level is based on
average revenue loss across state and
local governments, taking into
consideration potential variation in
revenue types and losses and continued
uncertainty faced by many recipients
regarding revenue shortfalls. To
calculate this estimate, Treasury applied
a variation of the final rule’s revenue
loss calculation on available aggregate
state and local government tax revenue
data as reported by the Census Bureau
for the first calculation date of
December 31, 2020. This estimate
accounts for expected variation across
recipient experiences and reflects the
fact that the final rule revenue loss
calculation provides recipients several
options for specific aspects (e.g.,
calendar year or fiscal year basis; use of
average state and local revenue growth
rate or specific local rate). Treasury
compared actual calendar year 2020 tax
revenues, in aggregate for all state and
local governments, to several
counterfactual trends that vary based on
the end date of the fiscal base year.284
Treasury also assessed counterfactual
trends using different revenue growth
rates (e.g., the three-year average growth
rates of total state and local government
general revenue for both fiscal years
ending in 2016–2018 and fiscal years
ending in 2017–2019; the three-year
average growth rates of total state and
local government tax revenues for fiscal
years ending in 2017–2019; and the one-
year growth rate for total state and local
government tax revenue in the last full
fiscal year before the public health
emergency). To account for the fact that
the initial estimate, based on tax
revenue, only includes a subset of
recipient aggregate general revenue,
Treasury applied a scaling factor to
recognize that tax revenues generally
make up just over half of general
revenue collected by state and local
governments (i.e., Treasury scaled up its
estimate based on tax revenue to
produce an estimate for total general
revenue).285 The resulting calculation
was then extrapolated over the four-year
period of performance and divided by a
population of interest to arrive at an
average loss estimate.
As noted above, Treasury estimated a
range of scenarios to account for
different values of the variables that
would impact average losses. For
example, the end date of the fiscal base
year and growth rate of counterfactual
revenue impact the overall estimate of
revenue loss. In addition, this estimate
takes into consideration the limitations
in the available data. The governments
covered by the Census Bureau’s survey
do not entirely align with SLFRF
recipients. The Census Bureau’s figures
are based on 50 state governments, all
local government property tax collectors
and local government non-property tax
imposers, representing at a minimum
the more than 38,000 ‘‘General Purpose
Governments’’ defined by Census.
However, there are only roughly 32,000
recipients of SLFRF funds. Thus,
Treasury considered the difference
between the number and type of entities
in the Census Bureau data and the
SLFRF recipients.
Based on this methodology, Treasury
estimates that average revenue loss
(determined by comparing the
counterfactual revenue to actual
revenue) may range from $0 to $11.7
million per recipient over the period of
performance.286 Treasury settled on a
point estimate toward the upper end of
the range of potential averages, in part,
to account for significant variation in
the experiences of recipient
governments: Some recipients likely
experienced losses at the upper end of
this range of potential averages. A point
estimate toward the upper end of the
range errs toward ensuring more
recipients’ experiences are covered and
increases the utility of the standard
allowance for SLFRF recipients.
Specifically, the program includes a
very large number of recipients with
relatively smaller awards; these
recipients have tended to describe
having greater difficulty completing the
regular revenue loss calculation. Thus,
selecting a point estimate toward the
higher end of the expected range not
only increases the likelihood that the
standard allowance will reflect the
experience of a larger number of SLFRF
recipients but is more responsive to the
comments of those with smaller awards.
In addition, using a point estimate
toward the upper end of the range
accounts for the difficulty and
uncertainty in predicting revenue losses
years into the future, throughout the
period of performance.287
Finally, Treasury selected a single
allowance level, as opposed to varying
levels, to further the goals of simplicity,
flexibility, and administrability.
Furthermore, data limitations make it
difficult to distinguish between types of
local governments.288
General Revenue
The interim final rule adopted a
definition of ‘‘general revenue’’ based
largely on the components reported
under ‘‘General Revenue from Own
Sources’’ in the Census Bureau’s Annual
Survey of State and Local Government
Finances. Under the interim final rule,
general revenue included revenue
collected by a recipient and generated
from its underlying economy, and it
would capture a range of different types
of tax revenues, as well as other types
of revenue that are available to support
government services.289 Specifically,
revenue under the interim final rule
included money that is received from
tax revenue, current charges, and
miscellaneous general revenues and
excluded refunds and other correcting
transactions, proceeds from issuance of
debt or the sale of investments, agency
or private trust transactions, revenue
from utilities, social insurance trust
revenues, and intergovernmental
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4404 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
290 The interim final rule stated that ‘‘general
revenue’’ and ‘‘tax revenue’’ excludes refunds and
other correcting transactions. Instead of
‘‘excluding’’ refunds and other correcting
transactions, the Census Bureau methodology upon
which those definitions are based provides that
general revenue and tax revenue are determined
‘‘net of’’ refunds and other correcting transactions.
The use of ‘‘excluding’’ in the interim final rule is
substantively the same as the Census Bureau
methodology. However, to be consistent with the
terminology used by the Census Bureau, the final
rule uses ‘‘net of’’ instead of ‘‘excluding.’’ Current
charges are defined as ‘‘charges imposed for
providing current services or for the sale of
products in connection with general government
activities.’’ It includes revenues such as public
education institution, public hospital, and toll
revenues. Miscellaneous general revenue comprises
of all other general revenue of governments from
their own sources (i.e., other than utility and
insurance trust revenue), including rents, royalties,
lottery proceeds, and fines.
291 The interim final rule excluded governmental
transfers from the Federal Government, but it did
not exclude intergovernmental transfers from other
governmental units for purposes of the revenue loss
provisions.
292 U.S. Energy Information Administration,
Annual Electric Utility Data (October 2021),
available at https://www.eia.gov/electricity/sales_
revenue_price/.
293 FAQ 3.14 provides further guidance on how
to determine what entities constitute a government
for purposes of calculating revenue loss. See
Coronavirus State and Local Fiscal Recovery Funds,
Frequently Asked Questions, as of July 19, 2021;
https://home.treasury.gov/system/files/136/
SLFRPFAQ.pdf.
transfers from the federal government,
including transfers made pursuant to
section 9901 of the ARPA.290 In the case
of Tribal governments, it also included
revenue from Tribal business
enterprises.
Public Comment: Many commenters
asked Treasury to include certain items
in the definition of ‘‘general revenue.’’
For instance, several commenters that
operate their own utilities asked that
revenue from utilities be included,
arguing that declines in utility revenue
directly affect contributions to their
general funds. Many of these
commenters noted that moratoriums on
utility shutoffs and a decline in
collections have resulted in significant
budgetary pressures.
Some commenters also asked for the
exclusion of certain intergovernmental
transfers in the definition of general
revenue, including transfers of shared
revenue from the state.291 Other
commenters asked for the inclusion of
certain transfers from the federal
government, including fees paid for
services and grants that are, in effect,
paid for the provision of services.
Treasury also received multiple
requests to include revenue from Tribal
enterprises in the definition of ‘‘general
revenue’’ and that ‘‘Tribal enterprise’’ be
defined broadly. Others asked for the
ability to choose whether to include
revenue from Tribal enterprises.
Finally, some commenters requested
that the definition of general revenue
exclude certain sources of revenue, such
as revenue sources that do not support
a general fund (i.e., revenue sources that
are restricted in use). Commenters also
asked that general revenue exclude
revenue from special assessments,
settlements that make the recipient
whole for past expenditures, and one-
time revenues such as revenue from the
sale of property.
Treasury Response: In the final rule,
Treasury has maintained the definition
of ‘‘general revenue’’ from the interim
final rule with two exceptions.
Treasury has adjusted the definition
to allow recipients that operate utilities
that are part of their own government to
choose whether to include revenue from
these utilities in their revenue loss
calculation. This change responds to
comments from recipients indicating
that revenue from utilities is used to
fund other government services and that
utility revenues have declined on
aggregate.292 This approach is consistent
with other eligible uses, which
recognize decreased ability of many
households to make utility payments;
see section Assistance to Households,
which identifies utility assistance as an
enumerated eligible use of funds,
including through direct or bulk
payments to utilities for consumer
assistance. Furthermore, for utilities or
other entities (e.g., certain service
districts) that are not part of the
recipient government, a transfer from
the utility to the recipient constitutes an
intergovernmental transfer and therefore
is included in the definition of ‘‘general
revenue.’’293
Treasury has also added liquor store
revenue to the definition of general
revenue. The Supplemental Information
to the interim final rule stated that the
definition of tax revenue would include
liquor store revenue, but the text of the
rule did not include it. Accordingly, in
the final rule, Treasury is clarifying that
revenue includes liquor store revenue.
However, Treasury believes revenue
from government-owned liquor stores is
better classified as general revenue than
it is as tax revenue, so the final rule
includes it as part of general revenue.
In response to requests that the
definition of general revenue exclude
revenue from special assessments,
settlements that make the recipient
whole for past expenditures, and one-
time revenues such as revenue from the
sale of property, Treasury is maintaining
its position in the final rule that such
revenue is included in general revenue.
While such revenues may be less
predictable than other sources of
revenue (e.g., property taxes), these are
not uncommon sources of revenue for
recipients, and their inclusion provides
a more complete view of the financial
health of a recipient government and is
consistent with the Census Bureau
methodology. Treasury is also
maintaining the exclusion of all
payments from the federal government
(including payments for services) from
general revenue in order to avoid
substantial dilution of the definition of
revenue, particularly in light of
extraordinary fiscal support provided
during the pandemic. Treasury is
maintaining the inclusion of
intergovernmental transfers other than
from the federal government for the
reasons provided in the Supplemental
Information to the interim final rule; to
do otherwise would be to significantly
distort the revenue calculations for local
governments that regularly receive
revenue sharing payments, for example,
from their state governments. Treasury
is also maintaining the approach that
‘‘general revenue’’ includes revenue
from Tribal enterprises. This approach
recognizes that these enterprises often
form the revenue base for Tribal
governments’ budgets.
To ease the burden on recipients and
account for anomalous variations in
revenue, as mentioned above, Treasury
has incorporated a ‘‘standard
allowance’’ option into the final rule. A
recipient may choose to use the
standard allowance, which under the
final rule is set at up to $10 million, not
to exceed the recipient’s SLFRF award
amount, as an alternative to calculating
revenue loss according to the formula
described above. This addition will
promote administrative efficiency and
simplify the revenue loss calculation for
the vast majority of recipients. Treasury
intends to amend its reporting forms to
provide a mechanism for recipients to
elect to utilize either the revenue loss
formula or the standard allowance, in
addition to other changes made as part
of the final rule.
Aggregate Revenue Loss Calculation
Under the interim final rule, revenue
loss was calculated based on aggregate
revenues and therefore loss in one type
of revenue could be offset by gains in
another. The amount of SLFRF funds
available to provide government
services was based on overall net
revenue loss. In the Supplementary
Information to the interim final rule,
Treasury asked commenters to discuss
the advantages and disadvantages of,
and any potential concerns with, this
approach, including circumstances in
which it could be necessary or
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4405 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
appropriate to calculate the reduction in
revenue by source.
Public Comment: Treasury received
many comments stating that revenue
loss should be calculated on a source-
by-source basis. Some commenters
argued that a source-by-source approach
would be administratively simpler.
Other commenters argued that
calculating revenue loss source-by-
source would better reflect the impact of
the COVID–19 pandemic on their ability
to fund government services because
revenue gains in one source cannot
always be used to make up for losses in
another. For similar reasons, other
commenters asked that revenue loss be
calculated on a fund basis.
Treasury Response: Treasury
considered alternative methods (e.g.,
source-by-source, fund-by-fund) but
ultimately determined to maintain the
calculation of revenue loss in the
aggregate. The pandemic has had
different effects on recipients (and their
revenues), and Treasury recognized that
one particular type of revenue or one
particular source may have experienced
a greater amount of loss for some
recipients. However, the statute refers
only to ‘‘the reduction in revenue of
such State, local government, or Tribal
government.’’ The statute is thus clear
that Treasury is to refer to the aggregate
revenue reduction of the recipient due
to the public health emergency. Further,
this provision is designed to address
declines in the recipients’ overall ability
to pay for governmental services, and
calculating revenue loss on an aggregate
basis provides a more accurate
representation of the effect of the
pandemic on overall revenues and the
fiscal health of the recipient. In many
circumstances, recipient governments
have flexibility to use revenues from an
array of sources and offset declines in
some sources with gains in others.
While the details and configuration of
this flexibility vary widely across
recipient governments, calculating
revenue loss on a source-by-source or
fund-by-fund basis would not capture
how recipient governments balance
their budgets in the regular course of
business. Accordingly, the final rule
maintains the requirement that revenue
loss is to be calculated on an aggregate
basis.
Calculation Dates
Public Comment: Under the interim
final rule, recipients calculate revenue
loss as of the end of the calendar year.
Treasury received many comments
requesting that recipients be permitted
to calculate revenue loss as of the end
of their fiscal year. Commenters argued
that doing so would be simpler and less
burdensome on recipients and that
financial data as of the end of the fiscal
year is audited and therefore more
reliable. Commenters also argued that
recipients’ fiscal years are structured
around the timing of major revenue
sources, and that the Census Bureau
uses fiscal years in its Annual Survey.
Treasury also received comments
about the use of multiple calculation
dates. Several Tribal governments stated
that they would not see ongoing revenue
losses due to the COVID–19 public
health emergency and asked to be able
to determine revenue loss as of the first
calculation date. Several commenters
asked whether revenue loss is
determined independently for each
year, so that a gain in one year does not
offset a loss in another, or whether
revenue loss is cumulative from the
beginning of the pandemic.
Treasury Response: In the final rule,
Treasury has made adjustments to give
recipients more flexibility with respect
to calculation dates and to clarify
certain elements. Specifically, the final
rule provides recipients the option to
choose whether to calculate revenue
loss on a fiscal year or calendar year
basis, though they must choose a
consistent basis for loss calculations
throughout the period of performance.
Treasury has also clarified in the final
rule that revenue loss is calculated
separately for each year such that the
calculation of revenue lost in one year
does not affect the calculation of
revenue lost in prior or future years.
Presumption That Revenue Loss Is Due
to the Pandemic
As stated above, sections 602(c)(1)(C)
and 603(c)(1)(C) of the Social Security
Act provide that SLFRF funds may be
used ‘‘for the provision of government
services to the extent of the reduction in
revenue of such . . . government due to
the COVID–19 public health emergency
relative to revenues collected in the
most recent full fiscal year of the . . .
government prior to the emergency.’’ As
discussed in the interim final rule,
although revenue may decline for
reasons unrelated to COVID–19, in order
to minimize the administrative burden
on recipients in calculating revenue loss
and take into consideration the
devastating effects of the COVID–19
public health emergency, any reduction
in revenue relative to the counterfactual
estimate was presumed in the interim
final rule to be considered revenue lost
due to the pandemic.
Treasury stated in the Supplementary
Information to the interim final rule that
it was considering when, if ever, during
the period of performance it would be
appropriate to reevaluate the
presumption that all losses are
attributable to the public health
emergency. Treasury also sought
comment on whether to take into
account other factors, including actions
taken by the recipient as well as the
expiration of the COVID–19 public
health emergency, in determining
whether to presume that revenue losses
are ‘‘due to’’ the COVID–19 public
health emergency.
Public Comment: Treasury received
many comments in support of the
presumption, as well as some opposed.
Some commenters argued that the
presumption eases the administrative
burden on recipients because, without
it, it would be difficult to identify which
losses are attributable to the COVID–19
public health emergency. Many
commenters also argued that Treasury
should maintain the presumption
because recipients are likely to
experience losses due to the public
health emergency even after the end of
the public health emergency. Treasury
also received comments asking that it
adjust any revenue loss calculation to
account for tax changes enacted by the
recipient. In particular, some
commenters noted that some recipients
had increased taxes in order to meet
additional demands for government
services or to address declines in
revenue due to the pandemic. These tax
increases have in some cases offset some
or all of the actual revenue loss
attributable to the public health
emergency. Because the interim final
rule calculates revenue loss by reference
to actual revenue collected, commenters
argued that the calculation of revenue
loss ‘‘due to’’ the public health
emergency needs to take into
consideration the effects of tax increases
by deducting the effect of these tax
increases from actual revenue collected.
Treasury Response: In the final rule,
Treasury has maintained the
presumption that a reduction in a
recipient’s revenue is due to the public
health emergency with certain
adjustments to respond to comments
and to better account for revenue loss
‘‘due to the COVID–19 public health
emergency.’’ The final rule makes
adjustments to the presumption to take
into account certain government actions
to change tax policy. In particular,
Treasury is adjusting the presumption to
account for changes to tax policy by
providing that changes in revenue that
are caused by tax increases or decreases
adopted after the issuance of the final
rule will not be treated as due to the
public health emergency.
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4406 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
294 See also sections 602(a)(1) and 603(a) of the
Social Security Act (appropriating the funds for
payment to recipients in order to ‘‘mitigate the
fiscal effects stemming from the public health
emergency’’).
295 U.S. Postal Service v. Postal Regulatory
Comm’n, 640 F.3d 1263 (D.C. Cir. 2011); see Kimber
v. Thiokol Corp., 196 F.3d 1092, 1100 (10th Cir.
1999); Adams v. Director, OWCP, 886 F.2d 818, 821
(6th Cir. 1989).
296 Treasury considered whether to also eliminate
the presumption with respect to losses resulting
from other changes in policy, such as decreases in
user fees or fines. However, the effects of these
changes are more minor overall and would be more
challenging to accurately identify and quantify, so
the administrability benefit of the presumption for
recipients outweighs whatever distortion there
might be as a result of not reflecting such changes.
297 See generally, National Association of State
Budget Officers, Budget Processes in the States,
(2021), available at https://higherlogicdownload.
s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-
b750-0fca152d64c2/UploadedImages/Budget%20
Processess/NASBO_2021_Budget_Processes_in_the_
States_S.pdf.
Presumption of Revenue Loss ‘‘Due To’’
the Pandemic
In enacting sections 602(c)(1)(C) and
603(c)(1)(C) of the Social Security Act,
Congress provided that a state, local
government, or Tribal government could
use funds to ‘‘cover costs . . . for the
provision of government services,’’ but
only ‘‘to the extent of the reduction in
revenue . . . due to the COVID–19
public health emergency relative to
revenues collected in the most recent
full fiscal year . . . prior to the
emergency.’’ In doing so, Congress
recognized that the pandemic was
causing significant disruption to
economic activity and sought to
minimize the impact of associated
revenue losses on the ability of the
recipient to provide government
services when such services were
needed most.294 The text of the statute
itself reinforces this important context:
The law specifically limits funds to
cover revenue losses that both are ‘‘due
to the COVID–19 public health
emergency’’ and could impact ‘‘the
provision of government services.’’
Courts have recognized that the
phrase ‘‘due to’’ can refer to various
causal standards.295 Here, in the context
of Congress’s addressing economic
disruptions caused by the COVID–19
pandemic that could impact both
revenues and government services, the
key consideration is whether a revenue
loss experienced by the recipient
resulted from the exogenous impacts of
the public health emergency (and were
thus ‘‘due to’’ the pandemic) or instead
from the recipient’s own discretionary
actions (and, in this context, were not
‘‘due to’’ the pandemic). Reductions in
revenue due to the public health
emergency does not cover revenue
reductions that resulted from a
recipient’s own discretionary actions.
In the interim final rule, Treasury
included a presumption that all revenue
loss is due to the pandemic in order to
minimize the administrative burden on
recipients discussed above and take into
consideration the devastating effects of
the COVID–19 public health emergency.
Based on comments, Treasury believes
that the reasons for the presumption
continue to be valid and has determined
to maintain the presumption in the final
rule with certain modifications. In
particular, at this point in the course of
the pandemic, with the fiscal pressure
on state and local governments having
been significantly reduced, it is
appropriate for Treasury to reassess
aspects of this presumption. As
discussed below, the final rule requires
recipients to exclude the value of tax
policy changes adopted after January 6,
2022.
Recipients of the SLFRF range from
states to the smallest local governments.
At the time that the interim final rule
was adopted, it was important for
recipients to be able to calculate with
ease and certainty their amount of
revenue loss so that they could begin
deploying these funds to continue to
maintain essential government services.
To this end, the presumption in the
interim final rule provided a relatively
simple formula for all recipients to use,
but the exigent need for recipients to
immediately deploy funds for the
provision of government services has
decreased and the benefit of the
presumption in reducing administrative
burden is less relevant for those
governments that are not likely to avail
themselves of the standard allowance
described above.
Consistent with these considerations,
the final rule requires recipients to
exclude revenue loss due to tax changes
adopted after January 6, 2022.
Eliminating revenue loss due to tax
changes from the presumption is
appropriate given the significance of tax
revenue as a portion of all revenue for
state and local governments, the direct
impact of tax policy decisions on
revenue collected, and the relative ease
with which recipients can isolate the
estimated effect of a tax change on
revenue.296 Most state budgeting
processes require a ‘‘budget score,’’
often developed through a consensus
process with executive and legislative
branch experts,297 and Treasury expects
that larger localities, those most likely to
utilize the revenue loss formula rather
than the standard allowance, also
regularly use revenue or budget
estimates when considering changes to
tax policies. As such, in many cases,
recipients already prepare estimates of
the impact of tax changes on revenue,
and as discussed below, Treasury will
generally permit recipients to rely on
such estimates in adjusting their
revenue loss calculations.
Reductions in revenue that are not
attributable to tax changes would
continue to be subject to the
presumption. A requirement that
recipients evaluate the revenue effect of
changes in discretionary policy actions
other than tax changes would be more
difficult for recipients than evaluating
the changes attributable to tax changes
given that state and local governments
do not generally prepare estimates of the
revenue effects of other actions. Finally,
as noted above, taxes are the single
largest source of revenue for state and
local government recipients in the
aggregate.
Revisions to Presumption To Address
Tax Reductions
For these reasons, Treasury is
providing in the final rule that changes
in general revenue that are caused by
tax cuts adopted after the date of
adoption of the final rule (January 6,
2022) will not be treated as due to the
public health emergency, and the
estimated fiscal impact of such tax cuts
must be added to the calculation of
‘‘actual revenue’’ for purposes of
calculation dates that occur on or after
April 1, 2022. Tax cuts include final
legislative or regulatory action or a new
or changed administrative interpretation
that reduces any tax (by providing for a
reduction in a rate, a rebate, a
deduction, a credit, or otherwise) or
delays the imposition of any tax or tax
increase and that the recipient assesses
has had the effect of reducing tax
revenue relative to current law. This
includes the phase-in or taking effect of
any statute or rule if the phase-in or
taking effect was not prescribed prior to
the issuance of the final rule.
In assessing whether a tax change has
had the effect of reducing tax revenue,
recipients may either calculate the
actual effect on revenue or rely on
estimates prepared at the time the tax
change was adopted. More specifically,
recipients may rely on information
typically prepared in the course of
developing the budget (e.g., expected
revenues) and/or considering tax
changes (e.g., budget scores, revenue
notes) to determine the amount of
revenue that would have been collected
in the absence of the tax cut, as long as
those estimates are based on reasonable
assumptions and do not use dynamic
methodologies that incorporate the
projected effects of macroeconomic
growth, given that macroeconomic
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298 The final rule does not permit recipients to
reflect the effects of other changes in policy, such
as increases in fees adopted after adoption of the
final rule. Treasury understands that the main
beneficiaries of such a change would be those
recipients that will benefit from the standard
allowance provided for in the final rule and that for
other recipients the administrative burden on
recipients needed to calculate these adjustments
would outweigh the benefit of having a somewhat
larger amount of funds available for government
services.
299 The final rule also addresses the possibility
that some recipients may have fiscal years ending
during the period between January 6, 2022 and
April 1, 2022; such recipients’ election to reflect tax
changes from prior periods would also apply to
changes during this period with respect to the
calculation date in this period.
growth is accounted for in the
counterfactual growth assumptions.
Recipients that choose to calculate the
actual effect of a tax change on revenue
must similarly base their calculations on
reasonable estimates that do not use
dynamic methodologies. Recipients
should apply this adjustment in
determining their actual revenue totals
at Step 3 in the revenue loss calculation
described above.
Revisions to Presumption To Address
Tax Increases
As noted above, the calculation
methodology in the interim final rule
implicitly assumed that recipients did
not experience a reduction in revenue
due to the public health emergency if
they did not experience a reduction in
aggregate revenue relative to the
counterfactual estimate. Treasury
recognizes that some recipients may
have experienced a reduction in
revenue due to the public health
emergency that was offset by other
revenue, particularly in the case of
increases to tax revenue resulting from
a tax increase. The final rule requires
recipients that increased taxes to deduct
the amount of increases to revenue
attributable to such tax increase. This
change is also consistent with the
incorporation in the interim final rule
and final rule of a counterfactual growth
rate, which effectively permits
recipients to count revenue losses due
to the public health emergency that are
offset by increased tax revenue resulting
from organic growth.
For these reasons, Treasury is
providing in the final rule that
recipients must subtract from their
calculation of actual revenue the effect
of tax increases adopted after the date of
adoption of this final rule (January 6,
2022) for purposes of calculation dates
that occur on or after April 1, 2022. This
change and the change to the final rule
described above treat tax changes in a
consistent manner: In the case of
reduction in revenue resulting from a
tax cut, a recipient must add the amount
of that reduction to its calculation of
actual revenue, and in the case of an
increase in revenue resulting from a tax
increase, a recipient must subtract the
amount of additional revenue collected
as a result of the tax increase from its
calculation of actual revenue.298
As is the case with tax cuts, discussed
above, tax increases that must be
reflected in the calculation of revenue
include final legislative or regulatory
action or a new or changed
administrative interpretation that
increases any tax and that the recipient
assesses has had the effect of increasing
tax revenue relative to current law. In
assessing whether a tax change has had
the effect of increasing tax revenue,
recipients may either calculate the
actual effect on revenue or rely on
estimates prepared at the time the tax
change was adopted. Recipients may
rely on information typically prepared
in the course of developing the budget
(e.g., expected revenues) and/or
considering tax changes (e.g., budget
scores, revenue notes) to determine the
amount of revenue that was collected as
a result of the tax increase as long as
those estimates are based on reasonable
assumptions and do not use dynamic
methodologies that incorporate the
projected effects of macroeconomic
growth, given that macroeconomic
growth is accounted for in the
counterfactual growth assumptions.
Recipients that choose to calculate the
actual effect of a tax change on revenue
must similarly base their calculations on
reasonable estimates that do not use
dynamic methodologies. Recipients
should apply this adjustment in
determining their actual revenue totals
at Step 3 in the revenue loss calculation
described above.
Previously Adopted Tax Changes
As discussed above, the final rule will
not require recipients to reflect the
revenue effects of tax increases or
decreases adopted prior to the adoption
of the final rule. Recipients that adopted
a tax change in a previous period will
not be required to recalculate the
amount of revenue loss as of prior
calculation dates or to reflect the fiscal
impacts of such tax changes in
calculation dates after the effective date
of the final rule. However, the final rule
will permit recipients to elect to reflect
the revenue effects of their tax changes
adopted between the beginning of the
public health emergency and the
adoption of the final rule.299 If a
recipient elects to do so, it must do so
with respect to all of its tax changes
adopted between the beginning of the
public health emergency and the
adoption of the final rule. Treasury
intends to revise its reporting
requirements to permit recipients to
amend their previously reported
calculation periods to reflect such
changes.
Determination of the Base Year
Under the ARPA and interim final
rule, SLFRF funds may be used ‘‘for the
provision of government services to the
extent of the reduction in revenue . . .
relative to revenues collected in the
most recent full fiscal year’’ of the
recipient. Therefore, the base year for
the revenue loss calculation is the most
recent full fiscal year prior to the
COVID–19 public health emergency.
Public Comment: Treasury received
multiple comments asking for flexibility
in determining base year revenues. For
instance, some commenters asked to use
a different base year than the ‘‘most
recent full fiscal year’’ prior to the
pandemic for calculating revenue loss;
others asked to be able to average prior
years. Commenters stated that, for
various reasons, revenue was artificially
low in the last full fiscal year prior to
the public health emergency, and,
therefore, using revenue in that year as
the base year did not accurately reflect
expected revenue in a normal year. For
example, several Tribes stated that
unforeseeable weather events resulted
in forced closure of casinos which, in
turn, artificially deflated revenues in the
base year. Other commenters indicated
that one-time anomalies in the timing of
tax collection in that year artificially
pushed revenue into the following fiscal
year. Similarly, a few commenters noted
that tax changes that took effect in the
middle of the base year may artificially
skew the size of the revenue loss
experienced by the recipient
government.
Treasury Response: Treasury
understands that recipients may have
experienced events in the base year that
led to lower or higher revenues than
what they otherwise would have
collected. The ARPA provides that
revenue loss is to be determined with
respect to revenue in the most recent
full fiscal year prior to the pandemic,
and therefore the final rule maintains its
incorporation of the statutory definition.
In calculating revenue loss, recipients
may use data on a cash, accrual, or
modified accrual basis, provided that
recipients are consistent in their choice
of methodology throughout the covered
period, which might help recipients
adjust to certain delays in revenue
receipt. Both the standard allowance
and elements of the formula (e.g.,
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4408 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
300 Pay-go infrastructure funding refers to the
practice of funding capital projects with cash-on-
hand from taxes, fees, grants, and other sources,
rather than with borrowed sums.
counterfactual growth rate) incorporate
generous assumptions to give recipients
flexibility and to account for variation
among recipients’ experiences during
the pandemic.
Government Services
The SUPPLEMENTAL INFORMATION to the
interim final rule provided a non-
exhaustive list of examples of services
that are government services. The
interim final rule also discussed why
neither payment of debt service nor
replenishing financial reserves
constitutes government services, as
these expenditures do not provide
services but relate to the financing of
such services. Similarly, government
services under the interim final rule did
not include satisfaction of any
obligation arising under or pursuant to
a settlement agreement, judgment,
consent decree, or judicially confirmed
debt restructuring in a judicial,
administrative, or regulatory
proceeding, unless the judgment or
settlement required the provision of
government services.
Public Comment: Treasury received
several comments requesting further
clarification regarding the scope of
government services, including asking
for either a specific definition of
government services or that a specific
use be expressly deemed to be a
government service. Some commenters
disagreed with the exclusions from
government services in the interim final
rule. For instance, many of the
comments Treasury received suggested
that replenishing reserve funds and at
least certain types of debt service should
be treated as providing governmental
services. Some commenters also
suggested that a recipient should be able
to use funds for costs incurred before
March 3, 2021. Other commenters asked
Treasury to maintain the prohibition on
using the funds to pay debt service.
Treasury Response: Treasury
continues to believe that the lists of
activities that either are or are not
providing government services are
accurate but is clarifying here that,
generally speaking, services provided by
the recipient governments are
‘‘government services’’ under the
interim final rule and final rule, unless
Treasury has stated otherwise.
Government services include, but are
not limited to, maintenance or pay-go
funded building 300 of infrastructure,
including roads; modernization of
cybersecurity, including hardware,
software, and protection of critical
infrastructure; health services;
environmental remediation; school or
educational services; and the provision
of police, fire, and other public safety
services.
The aforementioned list of
government services is not exclusive.
However, recipients should be mindful
that other restrictions may apply,
including those articulated in the
section Restrictions on Use. In the final
rule, Treasury is maintaining the
limitations on government services
included in the interim final rule and
has addressed and responded to public
commenters on these issues in the
section Restrictions on Use.
D. Investments in Water, Sewer, and
Broadband Infrastructure
Summary of Interim Final Rule
Under the ARPA, recipients may use
funds to make necessary investments in
water, sewer, and broadband
infrastructure. The interim final rule
provided recipients with the ability to
use funds for a broad array of uses
within these categories.
The interim final rule discussed two
general provisions that apply across all
water, sewer, and broadband
infrastructure investments. First, the
interim final rule addressed the
meaning of ‘‘necessary’’ investments as
meaning those designed to provide an
adequate minimum level of service and
unlikely to be made using private
sources of funds. Second, the interim
final rule encouraged recipients to use
strong labor standards in water, sewer,
and broadband projects, as discussed
below.
Necessary Investments
The statute limits investments to
those that are necessary. As discussed in
more detail below, Treasury determined
that the types of water and sewer
projects that were authorized under the
interim final rule by reference to
existing Environmental Protection
Agency (EPA) programs would in all
cases be necessary investments given
the conditions applicable to such EPA
programs. Similarly, the interim final
rule’s definition of eligible broadband
projects as those designed to provide a
certain standard of service to those
households and businesses with limited
existing service was based on the
statutory requirement that investments
in water, sewer, and broadband must be
‘‘necessary.’’
As discussed further below, Treasury
has expanded the scope of what is an
eligible water and sewer infrastructure
project to include additional uses. In
particular, the final rule permits use of
SLFRF funds for certain dam and
reservoir restoration projects and certain
drinking water projects to support
population growth. The nature of these
additional uses is such that additional
factors must be considered in
determining whether one of these
additional uses is a necessary project. In
addition, Treasury recognizes that there
may be a need for improvements to
broadband beyond those households
and businesses with limited existing
service as defined in the interim final
rule. Treasury has replaced this specific
requirement based on an understanding
that broadband investments may be
necessary for a broader set of reasons.
Given this expansion of what is
considered in scope as a water, sewer,
or broadband infrastructure project, the
final rule provides a further elaboration
of Treasury’s understanding of the
conditions under which an
infrastructure project will be considered
to be a necessary investment. Treasury
considers a necessary investment in
infrastructure to be one that is (1)
responsive to an identified need to
achieve or maintain an adequate
minimum level of service, which may
include a reasonable projection of
increased need, whether due to
population growth or otherwise and (2)
a cost-effective means for meeting that
need, taking into account available
alternatives. In addition, given that
drinking water is a resource that is
subject to depletion, in the case of
investments in infrastructure that
supply drinking water in order to meet
projected population growth, the project
must be projected to be sustainable over
its estimated useful life.
Not included in the list of criteria
above is the requirement in the interim
final rule that the project be unlikely to
be made using private sources of funds.
Given that it may be difficult to assess
in a particular case what the probability
of private investment in a project would
be, Treasury has eliminated this
standard from the meaning of necessary
but still encourages recipients to
prioritize projects that would provide
the greatest public benefit in their
respective jurisdictions.
Strong Labor Standards in Water, Sewer,
and Broadband Construction
As stated in the Supplementary
Information to the interim final rule,
Treasury encourages recipients to carry
out investments in water, sewer, or
broadband infrastructure in ways that
produce high-quality infrastructure,
avert disruptive and costly delays, and
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4409 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
301 Treasury received several comments related to
its encouragement of certain wage and labor
standards in the Supplementary Information to the
interim final rule. Some commenters opposed this
encouragement, arguing that even encouragement
and reference to PLAs and prevailing wage laws
could lead to confusion or make it more likely that
recipients would apply labor standards in ways that
would discourage competition and raise project
costs. Conversely, some commenters supported the
encouragement of the use of certain standards,
including giving preference to employers that meet
certain employment standards (e.g., those that
maintain high safety and training standards)
because it would support the goal of completing
water, sewer, and broadband projects efficiently
and safely. As in the interim final rule, this
encouragement does not impose a legally binding
restriction on recipients.
302 See U.S. Department of the Treasury,
Compliance and Reporting Guidance, 21 (June 24,
2021), https://home.treasury.gov/system/files/136/
SLFRF-Compliance-and-Reporting-Guidance.pdf.
promote efficiency.301 Treasury
encourages recipients to use strong labor
standards, including project labor
agreements (PLAs) and community
benefits agreements that offer wages at
or above the prevailing rate and include
local hire provisions. Treasury also
recommends that recipients prioritize in
their procurement decisions employers
who can demonstrate that their
workforce meets high safety and
training standards (e.g., professional
certification, licensure, and/or robust in-
house training), that hire local workers
and/or workers from historically
underserved communities, and who
directly employ their workforce or have
policies and practices in place to ensure
contractors and subcontractors meet
high labor standards. Treasury further
encourages recipients to prioritize
employers (including contractors and
subcontractors) without recent
violations of federal and state labor and
employment laws.
Treasury believes that such practices
will promote effective and efficient
delivery of high-quality infrastructure
projects and support the economic
recovery through strong employment
opportunities for workers. Such
practices will also reduce the likelihood
of potential project challenges like work
stoppages or safety accidents, while
ensuring a reliable supply of skilled
labor and minimizing disruptions, such
as those associated with labor disputes
or workplace injuries. That will, in turn,
promote on-time and on-budget
delivery.
Furthermore, among other
requirements contained in 2 CFR 200,
Appendix II, all contracts made by a
recipient or subrecipient in excess of
$100,000 with respect to water, sewer,
or broadband infrastructure project that
involve employment of mechanics or
laborers must include a provision for
compliance with certain provisions of
the Contract Work Hours and Safety
Standards Act, 40 U.S.C. 3702 and 3704,
as supplemented by Department of
Labor regulations (29 CFR part 5).
Treasury will continue to seek
information from recipients on their
workforce plans and water, sewer, and
broadband projects undertaken with
SLFRF funds. This reporting will
support transparency and competition
by enhancing available information on
the services being provided. Since
publication of the interim final rule,
Treasury has provided recipients with
additional guidance and instructions on
the reporting requirements.302
Environmental and Other Generally
Applicable Requirements
Treasury cautions that, as is the case
with all projects engaged in using the
SLFRF funds, all projects must comply
with applicable federal, state, and local
law. In the case of infrastructure
projects in particular, this includes
environmental and permitting laws and
regulations. Likewise, as with all capital
expenditure projects using SLFRF
funds, projects must be undertaken and
completed in a manner that is
technically sound, meaning that they
must meet design and construction
methods and use materials that are
approved, codified, recognized, fall
under standard or acceptable levels of
practice, or otherwise are determined to
be generally acceptable by the design
and construction industry.
1. Water and Sewer Infrastructure
Sections 602(c)(1)(D) and Section
603(c)(1)(D) of the Social Security Act
provide that recipients may use the
SLFRF funds ‘‘to make necessary
investments in water [and] sewer . . .
infrastructure.’’ The interim final rule
permitted a broad range of necessary
investments in projects that improve
access to clean drinking water and
improve wastewater and stormwater
infrastructure systems. As discussed
below, after review of comments
received on the interim final rule,
Treasury has made changes in the final
rule to expand the scope of eligible
water and sewer projects.
Summary of Interim Final Rule and
Final Rule Structure
Background: In the interim final rule,
Treasury aligned eligible uses of the
SLFRF with the wide range of types or
categories of projects that would be
eligible to receive financial assistance
through the Clean Water State Revolving
Fund (CWSRF) or Drinking Water State
Revolving Fund (DWSRF) administered
by the Environmental Protection Agency
(EPA). By referring to these existing
programs, with which many recipients
are already familiar, Treasury intended
to provide flexibility to recipients to
respond to the needs of their
communities while facilitating
recipients’ identification of eligible
projects. Furthermore, by aligning
SLFRF eligible uses with these existing
programs, Treasury could ensure that
projects using the SLFRF are limited to
‘‘necessary investments.’’
Public Comment: Treasury received
many comments responding to the
water and sewer infrastructure
provisions of the interim final rule from
state, local, and Tribal governments,
industry trade associations, public
interest groups, private individuals, and
other interested parties. Commenters
requested that Treasury provide a wider
set of eligible uses for water and sewer
infrastructure beyond those uses
articulated by the DWSRF and CWSRF,
suggesting that Treasury expand the
definition of necessary water and sewer
infrastructure.
Treasury Response: In response to
commenters, Treasury is expanding the
eligible use categories for water and
sewer infrastructure, discussed in
further detail below. Because the
interim final rule aligned the definition
of necessary water and sewer
infrastructure with the eligible uses
included in the DWSRF and CWSRF,
Treasury is reflecting in the final rule a
revised standard for determining a
necessary water and sewer
infrastructure investment for eligible
water and sewer uses beyond those uses
that are eligible under the DWSRF and
CWSRF.
Interpretation of Necessary Investments
and Water and Sewer Infrastructure
Necessary Investments: As discussed
above, Treasury considers an
investment in infrastructure to be
necessary if it is (1) responsive to an
identified need to achieve or maintain
an adequate minimum level of service,
which for some eligible project
categories may include a reasonable
projection of increased need, whether
due to population growth or otherwise
and (2) a cost-effective means for
meeting that need, taking into account
available alternatives. In addition, in the
case of investments in drinking water
service infrastructure to supply drinking
water to satisfy a projected increase in
population, the project must also be
projected to be sustainable over its
estimated useful life. As detailed further
below, DWSRF and CWSRF eligible
projects continue to be presumed to be
necessary investments under the final
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4410 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
303 See 40 CFR 35.3520(b)(2)(vi).
304 In such cases, either the projects are
presumptively cost-effective (e.g., lead projects
would always be considered cost-effective given the
costs imposed by lead poisoning) or a cost-
effectiveness test is less relevant given the lack of
available alternatives or the relatively low cost of
the project.
305 In many jurisdictions, stormwater flows into
the sewer system rather than into a separate
stormwater system. The separate inclusion of
‘‘water’’ and ‘‘sewer’’ infrastructure also makes
clear that ‘‘water’’ in this context cannot refer to all
uses relevant to water. Given that sewer systems
carry wastewater (and often stormwater), if water
infrastructure were to refer to all water-related
infrastructure in this context, it would make the
inclusion of sewer infrastructure redundant.
rule, with the exception of projects for
the rehabilitation of dams and
reservoirs, which the EPA has permitted
in certain circumstances under the
DWSRF and, as discussed below, are
addressed separately in the final rule.
In evaluating whether a project would
respond to a need to achieve or
maintain an adequate minimum level of
service, a recipient should consider
whether it would meet the needs of the
population to be served and would
satisfy applicable standards. For
example, a drinking water project must
be sized such that it provides an
adequate volume of water to households
and other customers and must meet
applicable standards for drinking water
quality under the Safe Drinking Water
Act (SDWA). Similarly, a centralized
wastewater treatment project should be
designed to manage updated estimated
flow rates and comply with Clean Water
Act requirements. These requirements
are already reflected in the eligibility
criteria of the DWSRF and CWSRF,
respectively.
In evaluating whether a project is a
cost-effective means of providing the
water or sewer service, the recipient
should consider the need for the project,
the costs and benefits of the project
compared to alternatives, and the
effectiveness of the project in meeting
the identified need. Recipients are not
required to conduct a full cost-benefit
analysis; however, they should consider
and analyze relevant factors. For
example, a recipient may not use funds
to pursue a costly dam rehabilitation to
provide drinking water to a community
if it could provide the same service with
a significantly smaller investment by
drawing water from another available
reservoir, assuming that doing so would
meet the other requirements of the final
rule. As detailed further below,
recipients are only required to assess
cost-effectiveness of projects for the
creation of new drinking water systems,
dam and reservoir rehabilitation
projects, or projects for the extension of
drinking water service to meet
population growth needs.
Certain DWSRF eligibilities are
already subject to a cost-effectiveness
test. Specifically, projects that create
new drinking water systems must be a
cost-effective solution to addressing the
identified problem.303 The EPA also
imposes a cost-effectiveness condition
on dam and reservoir rehabilitation
projects undertaken pursuant to its class
deviation from the DWSRF rule. These
projects are particularly expensive and,
unlike in the case of other types of
eligible projects, there are often
available alternatives to conducting
these projects. Projects for the extension
of drinking water service to meet
population growth needs are also often
particularly expensive, and there are
often different ways to meet the needs
of expanding populations. Treasury will
accordingly require that recipients
engage in a cost-effectiveness analysis
when engaging in projects for the
creation of new drinking water systems,
dam and reservoir rehabilitation
projects, or projects for the extension of
drinking water service to meet
population growth needs. Other types of
eligible water or sewer projects will not
be subject to this cost-effectiveness test,
including lead line replacement and
lead remediation.304
In the case of projects that expand
drinking water service infrastructure to
satisfy a projected increase in
population, the project must also be
sustainable, meaning that the project
can continue providing the adequate
minimum level of service for its
estimated useful life, taking into
account projected impacts of changes to
the climate and other expected demands
on the source of water. For example, a
reservoir rehabilitation project may not
be pursued if the reservoir will no
longer be able to provide an adequate
source of drinking water before the end
of the estimated useful life of the
improvements to the reservoir. In areas
currently impacted by drought or where
drought conditions are expected to be
more frequent or more severe in the
future, sources of drinking water may be
diminished more quickly than in prior
periods. In considering how much of a
source of water will be available in the
future for the drinking water project, a
recipient must consider that a source of
water may be drawn upon or otherwise
used for other current and expected
uses, including use by fish and other
wildlife.
The final rule applies this
sustainability condition to projects that
expand drinking water service
infrastructure to satisfy a projected
increase in population but not to other
drinking water projects. When a new
source of water is required to remedy an
existing threat to public health, as in the
case of source projects eligible under the
DWSRF, sustainability should be a
consideration, but in some cases, the
need to replace a contaminated source
may mean that a less sustainable choice
may be made. When faced with such an
issue, such as in the case of a
contaminated well system, a project to
replace the contaminated source can be
said to be ‘‘necessary’’ even if the
replaced source is not sustainable over
the long term. Expediency may dictate
that a shorter-term solution is pursued
if it is cost-effective and will prevent
health issues while a longer-term
solution can be found. In contrast, an
expansion to accommodate population
growth cannot be said to be necessary if
it is not sustainable over its estimated
useful life.
Not included in the list of criteria
above is the requirement in the interim
final rule that the project be unlikely to
be made using private sources of funds.
Given that it may be difficult to assess
in a particular case what the probability
of private investment in a project would
be, Treasury has eliminated this
standard from the meaning of necessary
but nevertheless encourages recipients
to apply funds to projects that would
provide the greatest public benefit.
Water and Sewer Infrastructure: As
stated above, Congress provided that
SLFRF funds are available for
‘‘necessary water, sewer, and broadband
infrastructure.’’ Treasury interprets the
reference to water and sewer uses
consistent with the inclusion of
broadband uses. Water, sewer, and
broadband infrastructure all involve the
provision of essential services to
residents, businesses, and other
consumers. As the pandemic has made
clear, access to broadband has itself
become essential for individuals and
businesses to participate in education,
commerce, work, and civic matters and
to receive health care and social
services.
Water and sewer services provided
broadly to the public as essential
services include the provision of
drinking water and the removal,
management, and treatment of
wastewater and stormwater.305
Although governments are engaged in
other infrastructure related to water,
including irrigation projects,
transportation projects, and recreation
projects, such projects go beyond the
scope of what is provided to all
residents as an essential service.
Provision of drinking water and
removal, management, and treatment of
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306 In addition, Treasury interprets the eligible
uses of SLFRF funds against the background of the
Coronavirus Relief Fund (CRF), for which the
SLFRF funds are, in part, a successor. CRF
recipients expressed great interest in using the CRF
to pursue water infrastructure projects, including
provision of drinking water and internal plumbing
on Tribal lands and in Alaskan villages, and
broadband projects throughout the country;
Treasury permitted these projects given the
connection to the public health emergency (see
Coronavirus Relief Fund for States, Tribal
Governments, and Certain Eligible Local
Governments, 86 FR 4182, 4190, 4192 (Jan. 15,
2021), but the short deadline for use of funds made
it difficult to use CRF funds in this way. Congress’
inclusion of the water, sewer, and broadband clause
in the ARPA, along with the SLFRF funds’ longer
eligible use date, is responsive to this unmet need.
As discussed below, Congress in the Infrastructure
Investment and Jobs Act amended sections 602(c)
and 603(c) of the Social Security Act to add a new
paragraph as sections 602(c)(4) and 603(c)(5),
respectively, providing that SLFRF funds may be
used to meet non-federal matching requirements of
any authorized Bureau of Reclamation project. This
authority was added as a separately enumerated
eligible use regardless of whether the underlying
project would be an eligible use of SLFRF funds
under the water and sewer infrastructure eligible
use category.
307 See, e.g., section 502 of the Federal Water
Pollution Control Act (33 U.S.C. 1362), defining
‘‘green infrastructure’’ as ‘‘the range of measures
that use plant or soil systems, permeable pavement
or other permeable surfaces or substrates,
stormwater harvest and reuse, or landscaping to
store, infiltrate, or evapotranspirate stormwater and
reduce flows to sewer systems or to surface waters.’’
308 Specifically, this would include desalination
projects that decrease the burden on aquifers where
there is causal relationship between aquifer
withdrawals and saltwater intrusion if the projects
implement a nonpoint source pollution
Continued
wastewater and stormwater are the
typical responsibilities of ‘‘water and
sewer’’ authorities throughout the
country, and there is a tremendous need
for improvements to the ability of state,
local, and Tribal governments to
provide such services, including to
address the consequences of deferred
maintenance and additional resiliency
needed to adapt to changes to the
climate.306
Although the meaning of water and
sewer infrastructure for purposes of
sections 602(c)(1)(D) and 603(c)(1)(D) of
the Social Security Act does not include
all water-related uses, Treasury has
made clear in this final rule that
investments to infrastructure include a
wide variety of projects. Treasury
interprets the word ‘‘infrastructure’’ in
this context broadly to mean the
underlying framework or system for
achieving the given public purpose,
whether it be provision of drinking
water or management of wastewater or
stormwater.307 As discussed below, this
can include not just storm drains and
culverts for the management of
stormwater, for example, but also
bioretention basins and rain barrels
implemented across a watershed,
including on both public and private
property, that together reduce the
amount of runoff that needs to be
managed by traditional infrastructure.
Further, Treasury understands that
investments in infrastructure include
improvements that increase the capacity
of existing infrastructure and extend the
useful life of existing infrastructure.
Accordingly, water and sewer
infrastructure investment projects
include those that conserve water,
thereby reducing pressure on
infrastructure for the provision of
drinking water, and that recycle
wastewater and stormwater, thereby
reducing pressure on the infrastructure
for treating and managing wastewater
and stormwater.
As with other infrastructure projects
and capital expenditure projects that are
permitted as responses to the public
health emergency and its negative
economic impacts, costs for planning
and design and associated pre-project
costs are eligible uses of SLFRF funds.
Costs for the acquisition of land are also
eligible, but only if needed for the
purposes of locating eligible project
components. Recipients should ensure
that they have the technical, financial,
and managerial capability to ensure
compliance with the requirements of the
SDWA, or that the assistance will
ensure compliance and the owners or
operators of the systems will undertake
feasible and appropriate changes in
operations to ensure compliance over
the long-term.
Drinking Water State Revolving Fund
and Clean Water State Revolving Fund
Background: As stated above, in the
interim final rule, Treasury included
eligible uses of the DWSRF and the
CWSRF as eligible uses of the SLFRF in
the water and sewer infrastructure
category. By providing that projects
eligible under the DWSRF and the
CWSRF are also eligible uses of SLFRF
funds, the interim final rule permitted a
broad range of projects that improve
drinking water infrastructure, such as
building or upgrading facilities and
transmission, distribution, and storage
systems, including replacement of lead
service lines. With respect to clean
water and wastewater infrastructure, the
interim final rule provided that
recipients may use SLFRF funds to
construct publicly owned treatment
infrastructure, manage and treat
stormwater or subsurface drainage
water, and facilitate water reuse, among
other uses. Consistent with the DWSRF
and the CWSRF, the interim final rule
provided that SLFRF funds may be used
for cybersecurity needs to protect water
or sewer infrastructure, such as
developing effective cybersecurity
practices and measures at drinking
water systems and publicly owned
treatment works.
Use of DWSRF and CWSRF to Support
Climate Change Adaptations. Many of
the types of projects eligible under
either the DWSRF or CWSRF also
support efforts to address climate
change. For example, by taking steps to
manage potential sources of pollution
and preventing these sources from
reaching sources of drinking water,
projects eligible under the DWSRF and
CWSRF may reduce energy required to
treat drinking water. Similarly, projects
eligible under the DWSRF and CWSRF
include measures to conserve and reuse
water, for example through projects to
reuse or recycle wastewater, stormwater,
or subsurface drainage water. Treasury
encourages recipients to consider green
infrastructure investments and projects
to improve resilience to the effects of
climate change. For example, more
frequent and extreme precipitation
events combined with construction and
development trends have led to
increased instances of stormwater
runoff, water pollution, and flooding.
Green infrastructure projects that
support stormwater system resiliency
could include bioretention basins that
provide water storage and filtration
benefits, and green streets, where
vegetation, soil, and engineered systems
are combined to direct and filter
rainwater from impervious surfaces. In
cases of a natural disaster, recipients
may also use SLFRF funds for water
infrastructure to provide relief, such as
interconnecting water systems or
rehabilitating existing wells during an
extended drought.
Public Comment: Many commenters
expressed support for the interim final
rule’s alignment of the use of funds for
water and sewer infrastructure under
the SLFRF with the project categories
provided through the EPA’s DWSRF and
CWSRF programs.
Many commenters also provided
recommendations about the specific
types of water infrastructure projects
that should be eligible under the final
rule. In many of these cases,
commenters recommended that
Treasury include project types that are
already eligible under the DWSRF and
CWSRF and thus eligible under the
interim final rule and final rule. For
example, several commenters requested
that aquifer recharge projects, or other
groundwater protection and restoration
projects, be included as eligible uses of
SLFRF when certain aquifer recharge
projects that (1) implement a nonpoint
source pollution management
program 308 or (2) constitute reuse of
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4412 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
management program under section 319 of the
Clean Water Act. This could include projects in
which desalinated seawater is injected into the
aquifer to mitigate or prevent salt water intrusion,
as well as projects in which brackish water is
removed from an aquifer, desalinated, and returned
to the aquifer.
309 See 42 U.S.C. 300j–12(a)(2)(B) (limiting
financial assistance used by a public water system
to expenditures (including expenditures for
planning, design, siting, and associated
preconstruction activities, or for replacing or
rehabilitating aging treatment, storage, or
distribution facilities of public water systems, but
not including monitoring, operation, and
maintenance expenditures of a type or category
which the Administrator of the EPA has
determined, through guidance, will facilitate
compliance with national primary drinking water
regulations applicable to the system under 42
U.S.C. 300g–1 or otherwise significantly further the
health protection objectives of the SWDA); See also
40 CFR 35.3520(b).
310 See 40 CFR 35.3520(d)(1).
311 See id at §35.3520(e)(2)–(4).
312 33 U.S.C. 1383(c).
313 33 U.S.C. 1292.
314 33 U.S.C. 1329.
315 33 U.S.C. 1330.
wastewater, stormwater, or subsurface
drainage water are in fact eligible uses
under the CWSRF. Furthermore, under
the DWSRF, eligible projects include
certain aquifer storage and recovery
systems for water storage.
Treasury Response: Eligible projects
articulated in the DWSRF and CWSRF
continue to be eligible uses of SLFRF
funds under the final rule. Recognizing
that recipients have faced challenges
interpreting eligible use categories
under the interim final rule or cross-
referencing EPA program materials to
interpret eligible project types, Treasury
is including in this Supplementary
Information additional information on
the types of projects eligible under the
DWSRF and CWSRF. Treasury
emphasizes that this further clarification
does not represent a change in
eligibility. Treasury encourages
recipients to reference EPA handbooks
for the DWSRF and CWSRF, which
provide further information and detail
about the types of projects eligible
under those programs and thus under
the final rule.
Eligible projects under the DWSRF.
Eligibilities under the DWSRF, the
interim final rule, and the final rule
include projects that address present or
prevent future violations of health-based
drinking water standards. These include
projects needed to maintain compliance
with existing national primary drinking
water regulations for contaminants with
acute and chronic health effects.
Projects to replace aging infrastructure
are also eligible uses if they are needed
to maintain compliance or further the
public health protection objectives of
section 1452 of the SDWA.309 The
following project categories are eligible
under the DWSRF, were eligible under
the interim final rule, and continue to
be eligible under the final rule:
(i) Treatment projects, including
installation or upgrade of facilities to
improve the quality of drinking water to
comply with primary or secondary
standards and point of entry or central
treatment under section 1401(4)(B)(i)(III)
of the SDWA.
(ii) Transmission and distribution
projects, including installation or
replacement of transmission and
distribution pipes to improve water
pressure to safe levels or to prevent
contamination caused by leaks or breaks
in the pipes.
(iii) Source projects, including
rehabilitation of wells or development
of eligible sources to replace
contaminated sources.
(iv) Storage projects, including
installation or upgrade of eligible
storage facilities, including finished
water reservoirs, to prevent
microbiological contaminants from
entering a public water system.
(v) Consolidation projects, including
projects needed to consolidate water
supplies where, for example, a supply
has become contaminated or a system is
unable to maintain compliance for
technical, financial, or managerial
reasons.
(vi) Creation of new systems,
including those that, upon completion,
will create a community water system to
address existing public health problems
with serious risks caused by unsafe
drinking water provided by individual
wells or surface water sources. Eligible
projects are also those that create a new
regional community water system by
consolidating existing systems that have
technical, financial, or managerial
difficulties. Projects to address existing
public health problems associated with
individual wells or surface water
sources must be limited in scope to the
specific geographic area affected by
contamination. Projects that create new
regional community water systems by
consolidating existing systems must be
limited in scope to the service area of
the systems being consolidated.
Ineligible projects under the DWSRF.
Federally-owned public water systems
and for-profit noncommunity water
systems are not eligible to receive
DWSRF funds and therefore SLFRF
funds.310 The acquisition of water
rights, laboratory fees for routine
compliance monitoring, and operation
and maintenance expenses are not costs
associated with investments in
infrastructure and thus would not be
eligible under the final rule. 311 Projects
needed primarily to serve future
population growth are also ineligible
under the DWSRF; the treatment of such
projects under the final rule is discussed
separately below under ‘‘Expansion of
Drinking Water Service.’’ Projects
eligible under the DWSRF must be sized
only to accommodate a reasonable
amount of population growth expected
to occur over the useful life of the
project.
Eligible projects under the CWSRF.
The final rule continues to allow the use
of SLFRF funds for projects eligible
under the CWSRF, consistent with the
interim final rule. Under the CWSRF, a
project must meet the criteria of one of
the following CWSRF eligibilities to be
eligible for assistance. Section 603(c) of
the Clean Water Act (CWA)312 provides
that the CWSRF can provide assistance:
(i) to any municipality, intermunicipal,
interstate, or state agency for construction of
publicly owned treatment works (as defined
in section 212 of the CWA);313
(ii) for the implementation of a
management program established under
section 319 of the CWA;314
(iii) for the development and
implementation of a conservation and
management plan under section 320 of the
CWA;315
(iv) for the construction, repair, or
replacement of decentralized wastewater
treatment systems that treat municipal
wastewater or domestic sewage. Eligible
projects include, but are not limited to, the
construction of new decentralized systems
(e.g., individual onsite systems and cluster
systems), as well as the upgrade, repair, or
replacement of existing systems.
(v) for measures to manage, reduce,
treat, or recapture stormwater or
subsurface drainage water. Publicly and
privately owned, permitted and
unpermitted projects that manage,
reduce, treat, or recapture stormwater or
subsurface drainage water are eligible.
For example, projects that are
specifically required by a Municipal
Separate Storm Sewer System (MS4)
permit are eligible, regardless of
ownership. Projects may include, but
are not limited to green roofs,
bioretention basins, roadside plantings,
porous pavement, and rainwater
harvesting.
(vi) to any municipality,
intermunicipal, interstate, or state
agency for measures to reduce the
demand for publicly owned treatment
works capacity through water
conservation, efficiency, or reuse.
Eligible projects include, but are not
limited to, the installation, replacement,
or upgrade of water meters; plumbing
fixture retrofits or replacement; and gray
water recycling. Water audits and water
conservation plans are also eligible.
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316 33 U.S.C. 1274.
Equipment to reuse effluent (e.g., gray
water, condensate, and wastewater
effluent reuse systems) is eligible.
(vii) for the development and
implementation of watershed projects
meeting the criteria set forth in section
122 of the CWA.316 Projects that
develop or implement a watershed pilot
project related to at least one of the six
areas identified in section 122 of the
CWA are eligible: Watershed
management of wet weather discharges,
stormwater best management practices,
watershed partnerships, integrated
water resource planning, municipality-
wide stormwater management planning,
or increased resilience of treatment
works.
(viii) to any municipality,
intermunicipal, interstate, or state
agency for measures to reduce the
energy consumption needs for publicly
owned treatment works. Projects may
include, but are not limited to, the
installation of energy efficient lighting,
HVAC, process equipment, and
electronic equipment and systems at
publicly owned treatment works.
Planning activities, such as energy
audits and optimization studies are also
eligible.
(ix) for reusing or recycling
wastewater, stormwater, or subsurface
drainage water. Projects involving the
reuse or recycling of wastewater,
stormwater, or subsurface drainage
water are eligible. This includes, as part
of a reuse project, the purchase and
installation of treatment equipment
sufficient to meet reuse standards. Other
eligible projects include, but are not
limited to, distribution systems to
support effluent reuse, including piping
the effluent on the property of a private
consumer, recharge transmission lines,
injection wells, and equipment to reuse
effluent (e.g., gray water, condensate,
and wastewater effluent reuse systems).
(x) for measures to increase the
security of publicly owned treatment
works. Security measures for publicly
owned treatment works might include,
but are not limited to, vulnerability
assessments, contingency/emergency
response plans, fencing, security
cameras/lighting, motion detectors,
redundancy (systems and power),
secure chemical and fuel storage,
laboratory equipment, securing large
sanitary sewers, and tamper-proof
manholes. The CWSRF cannot fund
operations and maintenance activities.
Therefore, maintaining a human
presence (i.e., security guards) and
monitoring activities are not eligible.
Other Clarifications of DSWRF and
CWSRF Eligible Project Categories
Public Comment: Several commenters
requested that Treasury provide
clarification of the requirements
associated with use of SLFRF funds for
necessary investments in water and
sewer infrastructure.
Treasury Response: After release of
the interim final rule, Treasury clarified
in further guidance that, while
recipients must ensure that water and
sewer infrastructure projects pursued
are eligible under the final rule,
recipients are not required to obtain
project pre-approval from Treasury or
any other federal agency when using
SLFRF funds for necessary water and
sewer infrastructure projects unless
otherwise required by federal law. For
projects that are being pursued under
the eligibility categories provided
through the DWSRF or CWSRF
programs, project eligibilities are based
on federal project categories and
definitions for the programs and not on
each state’s eligibility or definitions.
While reference in the final rule to the
DWSRF, CWSRF, or other federal water
programs is provided to assist recipients
in understanding the types of water and
sewer infrastructure projects eligible to
be funded with SLFRF, recipients do
not need to apply for funding from the
applicable state programs or through
any federal water program. Similarly,
besides eligible project categories, the
final rule does not incorporate other
program requirements or guidance that
attach to the DWSRF, CWSRF, or other
federal water programs. However, as
noted above, recipients should be aware
of other federal or state laws or
regulations that may apply to
construction projects or water and sewer
projects, independent of SLFRF funding
conditions, and that may require pre-
approval from another federal or state
agency.
Expanded Eligible Uses for Water and
Sewer Infrastructure
Summary
Public Comment: Many commenters
requested broader flexibility in the use
of SLFRF funds for water and sewer
infrastructure projects that are not
eligible under the DWSRF and CWSRF.
These commenters argued that localities
are best situated to identify the highest-
need water and sewer projects in their
communities. Several Tribal
government commenters noted that
Tribes have different water and sewer
infrastructure needs than states and
localities and that additional flexibility
in the use of funds would lift current
barriers to improving infrastructure on
Tribal lands.
To achieve additional flexibility,
commenters suggested a range of
options for broadening the eligible use
of SLFRF funds for necessary water and
sewer infrastructure. For example,
several commenters suggested Treasury
broaden the eligibilities provided under
the interim final rule to include project
types eligible under other federal water
and sewer programs.
Treasury Response: Treasury agrees
that additional flexibility for use of
SLFRF funds is warranted and is
providing expanded eligibilities as
described below, several of which
address specific areas of need outlined
by Tribal and rural communities.
As discussed below, Treasury has
incorporated into the final rule projects
that are eligible under certain programs
established by the EPA under the Water
Infrastructure Improvements for the
Nation Act (WIIN Act). Other water-
related grant programs cited by
commenters include projects that are
otherwise already covered by the final
rule, for example because they are
covered as eligible under the DWSRF or
the CWSRF, or projects that are
ineligible under the final rule because
they are beyond the scope of the
meaning of water and sewer projects for
purposes of ARPA. To minimize the
need for recipients of SLFRF funds to
cross reference eligibilities across
multiple federal programs, which may
exacerbate current challenges to
understanding eligibility under SLFRF,
Treasury is providing detailed
information related to expanded
eligibilities within the text of this
SUPPLEMENTARY INFORMATION for the
final rule.
Stormwater Infrastructure
Public Comment: Several commenters
requested that additional stormwater
infrastructure projects be included as
eligible uses of SLFRF funds under the
final rule. Commenters suggested that
culvert repair and resizing and
replacement of storm sewers is
necessary to address increased rainfall
brought about by a changing climate.
Other commenters noted that rural
communities that do not manage their
own sewer systems may rely on this
type of water infrastructure.
Treasury Response: The CWSRF
includes a broad range of stormwater
infrastructure projects, and as such
these projects were eligible under the
interim final rule and continue to be
eligible under the final rule. These
projects include gray infrastructure
projects, such as traditional pipe,
storage, and treatment systems. Projects
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4414 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
317 The White House, Updated Fact Sheet:
Bipartisan Infrastructure Investment and Jobs Act
(August 2, 2021), https://www.whitehouse.gov/
briefing-room/statements-releases/2021/08/02/
updated-fact-sheet-bipartisan-infrastructure-
investment-and-jobs-act/.
318 See EPA Science Advisory Board, Evaluation
of the Effectiveness of Partial Lead Service Line
Replacements, (September 2011), https://
www.epa.gov/sdwa/science-advisory-board-
evaluation-effectiveness-partial-lead-service-line-
replacements (advising against partial lead service
line replacement).
319 Environmental Protection Agency, supra note
188.
320 Environmental Protection Agency, National
Primary Drinking Water Regulations: Lead and
Copper Rule Revisions, 86 FR 4198. 40 CFR 141.84,
and preamble at 4215, January 15, 2021, https://
www.federalregister.gov/d/2020-28691; scheduled
to become effective December 16, 2021,
Environmental Protection Agency, 86 FR 31939,
https://www.federalregister.gov/d/2021-12600.
321 Eligible uses of funds include those eligible
under the Small, Underserved, and Disadvantaged
Communities Grant (Section 2104), Reduction in
Lead Exposure via Drinking Water Grant Program
(Section 2105) and Lead Testing in School and
Child Care Program Drinking Water Grant Program
(Section 2107).
322 Such testing and remediation programs would
be an eligible use of SLFRF funds given that they
that manage, reduce, treat, or recapture
stormwater or subsurface drainage water
are also eligible, including real-time
control systems for combined sewer
overflow management, and sediment
control. Culvert infrastructure projects
are eligible under the CWSRF if they (1)
implement a nonpoint source
management plan, (2) implement
National Estuary Program
Comprehensive Conservation and
Management Plan, or (3) implement a
stormwater management plan with the
goal of providing a water quality benefit.
Stormwater projects under the CWSRF
also encompass a number of eligible
green infrastructure categories, such as
green roofs, green streets, and green
walls, rainwater harvesting collection,
storage, management, and distribution
systems, real-time control systems for
harvested rainwater, infiltration basins,
constructed wetlands, including surface
flow and subsurface flow (e.g., gravel)
wetlands, bioretention/bioswales (e.g.,
bioretention basins, tree boxes),
permeable pavement, wetland, riparian,
or shoreline creation, protection, and
restoration, establishment or restoration
of urban tree canopy, and replacement
of gray infrastructure with green
infrastructure including purchase and
demolition costs.
In addition to the eligible uses under
the CWSRF, Treasury is expanding the
eligible uses under the final rule to
include stormwater system
infrastructure projects regardless of
whether there is an expected water
quality benefit from the project.
Treasury anticipates that this eligible
use will allow recipients to manage
increased volumes of stormwater as a
result of changes to the climate. For
example, the final rule now permits the
use of SLFRF funds for the repair,
replacement, or removal of culverts or
other road-stream crossing
infrastructure to the extent the purpose
of the project is to manage stormwater.
In addition, Treasury understands that
the repair, replacement, or removal of
culverts may necessitate the repair or
upgrade of roads. As noted in guidance
issued after the interim final rule,
recipients may use SLFRF funds for
road repairs and upgrades that interact
directly with an eligible stormwater
infrastructure project. All stormwater
infrastructure projects undertaken
should incorporate updated design
features and current best practices.
Private Wells and Septic Systems
Public Comment: Several commenters
requested that the scope of eligible
projects be expanded to allow for the
expenditure of SLFRF funds on private
wells or septic systems. Commenters
noted that wells may be contaminated
with dangerous substances, including
arsenic, lead, radon, and PFAS (per- and
polyfluoroalkyl). Commenters also
suggested that, because rural and
underserved communities are often
reliant on these infrastructure types for
their drinking water or wastewater
needs, lack of appropriate funding to
maintain these systems could present
health and safety issues that
disproportionately affect certain
communities.
Treasury Response: Consistent with
the CWSRF, the installation, repair, or
replacement of private septic units
continues to be an eligible use of SLFRF
funds under the final rule. For example,
eligible projects include those that
address groundwater contamination
resulting from faulty septic units and
those that would connect failing septic
systems to centralized wastewater
treatment. Consistent with the DWSRF,
connecting homes served by a private
well to a public water system is an
eligible use of SLFRF funds.
In addition, Treasury has provided in
the final rule that recipients may use
SLFRF funds for an expanded set of
infrastructure projects that improve
access to and provision of safe drinking
water for individuals served by
residential wells. Eligible projects under
this category include rehabilitation of
private wells, testing initiatives to
identify contaminants in wells, and
treatment activities and remediation
strategies that address contamination.
Remediating Lead in Water
Public Comment: Several commenters
emphasized the need to fully remediate
lead contamination, especially in
structures that serve the public or
populations like children that are
particularly vulnerable to the effects of
lead exposure, such as schools and
daycares. Many American households
and an estimated 400,000 schools and
childcare centers currently lack safe
drinking water.317
Treasury Response: The replacement
of lead service lines, up to premise
plumbing, is an eligible use under the
DWSRF and continues to be an eligible
use of SLFRF funds. Such projects are
eligible regardless of the pipe material
of the replacement lines and ownership
of the property on which the service
line is located. Lead service line
replacement projects can serve
households, schools, or any other
entities. Given the lifelong impacts of
lead exposure for children and the
widespread prevalence of lead service
lines, Treasury encourages recipients to
consider projects to replace lead service
lines.
In addition, Treasury is providing in
the final rule that for lead service line
replacement projects, recipients must
replace the full length of the service
line, and not just a partial portion of the
service line. Some water utilities, when
replacing service lines, will only replace
the ‘‘public portion’’ of the service line
and physically slice through the lead
service line at the public/private line.
This action can result in elevated
drinking water lead levels for some
period of time after replacement,
suggesting the potential for harm, rather
than benefit during that time period.318
Requiring replacement of the full length
of the service line is also consistent with
the requirements of the EPA’s Lead and
Copper Rule Revisions for water
systems that have an action level
exceedance for lead 319 and certain other
water systems.320
Treasury is expanding eligible uses of
SLFRF funds to include infrastructure
projects eligible under EPA grant
programs authorized by the WIIN
Act.321 Eligible projects under these
programs include the installation or re-
optimization of corrosion control
treatment, replacing lead service lines,
replacing galvanized pipes downstream
of a lead service line (other than lead
pipes within a home as discussed
below), and maintaining an inventory of
the drinking water system’s service
lines. Water quality testing, compliance
monitoring, and remediation activities
in schools and other childcare facilities,
as well as activities necessary to
respond to a contaminant, are eligible
uses of SLFRF funds.322 Remediation
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would help a recipient determine whether an
infrastructure project, such as a lead line
replacement, is necessary. In contrast, as mentioned
above, the costs of continual testing that is part of
a drinking water or wastewater facilities’ operating
costs would not be considered part of an
infrastructure project.
323 See EPA, Approval of Class Exception from
the Regulatory Prohibitions on the Use of Drinking
Water State Revolving Fund for Rehabilitation of
Dams and Reservoirs (July 14, 2021), available at
https://www.epa.gov/system/files/documents/2021-
07/dwsrf-class-deviation-dam-reservoir-rehab-2021_
0.pdf.
324 As noted in the EPA’s class deviation,
examples of dam rehabilitation projects include
spillway reconstruction or repair; dam resurfacing,
patching, or other structural repairs, including
minimal height increases if needed to maintain the
structural integrity of the dam; grouting for seepage
control or liquefaction remediation (e.g., epoxy
resin, asphalt, or rock); repair or replacement of
drainage systems; and seismic stability efforts (e.g.,
anchors). Examples of reservoir rehabilitation
projects include sedimentation dredging and
reservoir lining.
activities such as replacement of
faucets, internal plumbing, and fixtures
in schools and childcare facilities are
also an eligible use of SLFRF funds.
Consistent with the EPA programs,
replacement of lead pipes within a
home is not eligible under the final rule
because the vast majority of lead
contamination cases can be solved by
replacing lead service lines (including
on public and private property) and
faucets and fixtures themselves. As
such, replacement of lead pipes within
a home would not be considered a cost-
effective means for achieving the
desired level of service and thus would
not be a ‘‘necessary’’ investment. The
provision of bottled water is also not an
eligible use of SLFRF funds under this
eligible use category, as it is not an
investment in infrastructure. However,
bottled water in areas with an action
level exceedance for lead in water may
be an eligible use of SLFRF funds under
a separate eligible use category for
‘‘remediation of lead paint and other
lead hazards;’’ see Assistance to
Households in Public Health and
Negative Economic Impacts.
Water filtration systems are eligible
under the EPA grant programs and the
final rule as long as they are installed as
a permanent part of a facility’s system
and not intended for temporary use.
Conducting remediation, follow-up
monitoring, and conducting public
education and outreach about the
availability of infrastructure programs,
such as water testing and fixture
replacement programs funded with
SLFRF funds or otherwise, are also
eligible projects. Finally, recipients
should note that ‘‘remediation of lead
paint and other lead hazards’’ is a
separate eligible use category and a
broader range of programs and services
may be eligible under that section,
including investments that are not
infrastructure; see the eligible use for
‘‘remediation of lead paint and other
lead hazards’’ in section Assistance to
Households in Public Health and
Negative Economic Impacts.
Dams and Reservoirs
Public Comment: Many commenters
requested that Treasury broaden
eligibilities to include dams and
reservoirs, infrastructure that
commenters noted may in its current
state be unsafe and could put
surrounding communities at risk. Some
commenters argued that dams and
reservoirs play an important role in
providing municipal water supply and
water to irrigate farmland, including in
areas impacted by recent droughts.
Other commenters noted that a large
number of dams are currently classified
as high-hazard structures, the failure of
which would have severe consequences
for public safety and the local
environment. With respect to reservoirs,
commenters articulated that changing
climate conditions have necessitated
upgrades to reservoir infrastructure to
ensure existing facilities can meet the
local water needs of a community.
Commenters noted that communities
facing drought may also need to adjust
or enhance reservoirs to maintain
adequate water supply.
In contrast, several commenters
suggested that infrastructure projects
related to dams and reservoirs should
not be considered eligible uses of SLFRF
funds. These commenters noted that
alternate sources of funding exist for
dam and reservoir projects and that
dams and reservoir infrastructure could
result in negative impacts to Tribal
communities and negative
environmental impacts, including harm
to wildlife habitats.
Treasury Response: Treasury
understands that many dams and
reservoirs in need of rehabilitation are
dams and reservoirs whose primary
purpose is to provide drinking water. As
discussed above, SLFRF funds are
available for projects related to the
provision of drinking water. Moreover,
since issuance of the interim final rule,
the EPA has adopted a class deviation
from the DWSRF regulations that
permits such dam and reservoir
rehabilitation projects in certain
circumstances.323 In approving this
class deviation, the EPA recognized that
many dams used for drinking water are
aging and deteriorating and pose a
public health risk to communities; that
current dam conditions do not meet
state safety standards; and that reservoir
capacity has diminished and requires
dredging to meet drinking water needs
of the existing population.
Treasury’s final rule provides that
funds may be used for rehabilitation of
dams and reservoirs if the primary
purpose of the dam or reservoir is for
drinking water supply and the
rehabilitation project is necessary for
continued provision of drinking water
supply. In considering whether a dam or
reservoir project is necessary for the
provision of drinking water supply, a
recipient may take into consideration
future population growth in certain
circumstances, as discussed under
‘‘Expansion of Drinking Water Service
Infrastructure’’ below, but the project
must in any case be designed to support
no more than a reasonable level of
projected increased need. The recipient
must also determine that the project is
cost-effective, i.e., that there are not
significantly superior alternatives that
are available, taking into consideration
the relative costs and benefits of the
project as compared to those
alternatives.
This change to the final rule would
permit a wide variety of projects.324 The
limitation in the final rule to
rehabilitation of existing dams and
reservoirs reflects the scope of the EPA
class deviation referenced above and
Treasury’s understanding of the
significant need for investments in
rehabilitation to address deterioration of
dams and the diminished capacity of
reservoirs. Further, Treasury expects
that in many cases it would be
considerably more difficult to
demonstrate that construction of a new
dam or reservoir would be necessary for
the purpose of the provision of drinking
water than is the case for rehabilitation
of dams and reservoirs already serving
that purpose for a particular population,
particularly given opportunities to meet
drinking water needs through water
reuse and conversation efforts. For these
reasons, and given that the relatively
short period of availability of the funds
makes new dam and reservoir
construction with these funds less
likely, Treasury has limited the scope of
the final rule to dam and reservoir
rehabilitation projects.
As discussed above, Treasury has
determined that ARPA does not
authorize the use of SLFRF funds for
uses other than the provision of
drinking water and the management of
wastewater and storm water. As such,
the final rule does not include
infrastructure projects related to dams
and reservoirs as eligible uses of SLFRF
funds unless they meet the conditions
discussed above.
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4416 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
325 See 40 CFR 35.3520(e)(5).
326 See Public Law 117–58, 40909(a)–(b) (Nov. 15,
2021).
327 See Public Law 117–58 §40909(c).
Public Comment: Several commenters
requested that the removal of dams and
associated habitat restoration should be
eligible uses of SLFRF funds, noting that
in some cases, dam removal will
improve water quality while removing
long-term operational expenses for the
recipient.
Treasury Response: Dam removal
projects and associated stream and
habitat restoration projects are eligible
uses of the CWSRF and continue to be
eligible under the final rule when the
removal implements either a nonpoint
source management program plan or a
National Estuary Program
Comprehensive Conservation and
Management Plan or when the removal
will provide a water quality benefit.
Habitat restoration projects more
generally may also be eligible under the
CWSRF and the final rule if they
constitute a form of stormwater
infrastructure.
Expansion of Drinking Water Service
Infrastructure
Public Comment: Commenters asked
for the ability to use funds for drinking
water projects for the purpose of
meeting needs arising from future
growth, which, given the restrictions
applicable to the DWSRF, was not
permitted under the interim final rule.
Treasury Response: As provided for in
the SDWA, the DWSRF is meant to
serve the public health needs of the
existing population. The EPA regulation
implementing the DWSRF program
provides that projects needed primarily
to serve future population growth are
not eligible uses of the DWSRF. A
project that is intended primarily to
address public health or regulatory
compliance issues for the existing
service population may be sized for a
‘‘reasonable’’ amount of population
growth over the useful life of the
project.325
ARPA does not include the same
limitation as the SDWA. Accordingly,
the final rule provides that recipients
may use SLFRF funds for projects that
are needed to support increased
population in certain cases. ARPA
limits projects to those investments that
are ‘‘necessary.’’ As discussed above,
Treasury interprets this to mean that the
investments must be (1) responsive to
an identified need to achieve or
maintain an adequate minimum level of
service, which for some eligible project
categories may include a reasonable
projection of increased need, whether
due to population growth or otherwise
and (2) a cost-effective means for
meeting that need, taking into account
available alternatives. For this eligible
use category, expansion of drinking
water service infrastructure, the project
must also be projected to be sustainable
over its estimated useful life.
Investments must be determined to be
necessary when they are initiated.
Accordingly, Treasury is clarifying in
the final rule that the need identified for
a water or sewer project may include a
need arising from reasonable
expectations of future population
growth, provided that it is necessary at
the time the investment is initiated for
the recipient to make the investment to
meet this growth. For example, a
recipient expecting increased
population during the period of
performance may install a drinking
water treatment plant to meet that
growth. In addition, a recipient
expecting increased population growth
outside the period of performance may
install the treatment plant if the
planning and construction timeline for
the project would require work to begin
during the performance period in order
to meet the expected population growth.
A recipient may install transmission
lines as part of the development of new
housing occurring during the period of
performance. In this case, the housing
development must be in progress; a
recipient may not use the SLFRF funds
to install a water main, for example, to
an undeveloped tract in the expectation
that in the future that tract will be
developed with housing, because there
would be no need for that investment to
be made at the time it is initiated.
For the reasons discussed above, if a
project is undertaken to address
expected growth in population, the
project must also be sustainable,
meaning that the project can continue
providing the adequate minimum level
of service for its estimated useful life,
taking into account projected impacts of
changes to the climate and other
expected demands on the source of
water. In considering how much of a
source of water will be available in the
future for the drinking water project, a
recipient must consider that a source of
water may be drawn upon or otherwise
used for other current and expected
uses, including use by fish and other
wildlife. A drinking water project that is
designed to address a growing
population cannot be considered a
necessary investment if the source of
drinking water will cease to be available
to meet the population’s needs before
the end of the estimated useful life of
the project. In such a case, a recipient
should consider alternative sources for
drinking water. See ‘‘Interpretation of
Necessary Investments and Water and
Sewer Infrastructure’’ above for more
information.
Non-Federal Matching Requirements for
Authorized Bureau of Reclamation
Projects
The Infrastructure Investment and
Jobs Act amends sections 602(c) and
603(c) of the Social Security Act to add
an additional eligible use of SLFRF
funds, providing that SLFRF funds
‘‘may be used for purposes of satisfying
any non-Federal matching requirement
required for [an authorized Bureau of
Reclamation project].’’326
This amendment permits the use of
SLFRF funds to meet non-federal
matching requirements of any
authorized Bureau of Reclamation
project, regardless of whether the
underlying project would be an eligible
use of SLFRF funds under the water and
sewer infrastructure eligible use
category. These amendments are
effective as of March 11, 2021, as if
included in the ARPA at the time of its
enactment.327 Treasury will provide
further guidance to recipients on the
scope of Bureau of Reclamation water
projects and expenses covered by this
provision.
Floodplain Management and Flood
Mitigation Projects
Public Comment: Several commenters
requested that projects to address
floodwater, including floodplain
management and flood mitigation
projects, be included as an eligible use
of SLFRF funds. Within this category of
floodplain management and flood
mitigation infrastructure, several
commenters requested that the
installation of levees, flood walls, sea
walls, elevation projects, dredging, or
nature-based flood mitigation projects
be included as eligible projects.
Treasury Response: Treasury notes
that some floodplain management and
flood mitigation infrastructure projects,
including green infrastructure designed
to protect treatment works from flood
waters and flood impact are currently
eligible under the CWSRF and therefore
continue to be eligible under the final
rule.
Treasury has not included floodplain
management and flood mitigation
projects more generally as eligible under
the final rule. Although floodplain
management and flood mitigation are
functions of many state and local
governments, they are not the sort of
generally-provided essential services
included within the meaning of water
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4417 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
328 See FAQ 6.8, 6.9, 6.11. Coronavirus State and
Local Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
329 See FAQ 6.10. Id.
330 See FAQ 6.12. Id.
331 See FAQ 6.16. Id.
332 See FAQ 6.4, 6.17. Id.
and sewer projects under the ARPA, as
discussed above.
Irrigation
Public Comment: Some commenters
requested that irrigation projects be an
eligible use because they consider such
projects to be critical infrastructure.
Several commenters supported this
request by noting that irrigation systems
may be used to replenish aquifers and
recharge wells, in addition to delivering
water for irrigation. One commenter also
noted that the national irrigation system
is antiquated and in need of repair.
Treasury Response: Some irrigation
projects were eligible under the interim
final rule and continue to be eligible
under the final rule as a result of their
inclusion as eligible projects under the
CWSRF. For example, water efficient
irrigation equipment that reduces the
runoff of nutrients and implements a
management program established under
section 319 of the CWA and/or a
conservation and management plan
under section 320 of the CWA are
eligible uses under the CWSRF and
therefore continue to be an eligible use
of SLFRF funds under the final rule.
Likewise, projects to receive and
distribute reclaimed water for irrigation
systems or other agricultural use are
eligible under the CWSRF and therefore
continue to be an eligible use under the
final rule. Unlike projects for the
improvement of irrigation systems
generally, these reclaimed water
projects are related to wastewater
treatment and stormwater management,
which are within the scope of the
meaning of water and sewer
infrastructure for purposes of ARPA.
Treasury considered commenter
requests for inclusion of additional
irrigation infrastructure and determined
that irrigation projects more generally
are not permitted under the final rule.
Although these types of projects may be
water-related infrastructure, they are not
the sort of generally-provided essential
services included within the meaning of
water and sewer projects under ARPA,
as discussed above.
Consumer Incentive Programs
Public Comment: One commenter
requested that consumer incentive
programs in the areas of water use
efficiency, conservation, green
infrastructure, reuse, and other
distributed solutions be an allowable
use of SLFRF.
Treasury Response: The DWSRF and
CWSRF eligibilities include the
development and implementation of
incentive and educational programs that
address and promote water
conservation, source water protection,
and efficiency related to infrastructure
improvements, e.g., incentives such as
rebates to install green infrastructure
such as rain barrels or promote other
water conservation activities. Treasury
clarifies that such project types were
eligible under the interim final rule and
continue to be eligible under the final
rule.
2. Broadband Infrastructure
Under the ARPA, recipient
governments may use SLFRF funds to
make ‘‘necessary investments in . . .
broadband infrastructure.’’ In the
Supplementary Information to the
interim final rule, Treasury interpreted
necessary investments in infrastructure
as investments ‘‘designed to provide an
adequate minimum level of service and
[that] are unlikely to be made using
private sources of funds.’’ Treasury
explained that, with respect to
broadband specifically, such necessary
investments include projects that
‘‘establish [] or improve [] broadband
service to underserved populations to
reach an adequate level to permit a
household to work or attend school, and
that are unlikely to be met with private
sources of funds.’’
Summary of Interim Final Rule, Public
Comments, and Treasury Response
Summary of Interim Final Rule: In
implementing the ARPA, the interim
final rule provided that eligible
broadband infrastructure investments
are limited to those that are designed to
provide service to unserved or
underserved households or businesses,
defined as those that lack access to a
wireline connection capable of reliably
delivering at least minimum speeds of
25 Mbps download and 3 Mbps upload.
The interim final rule also provided that
eligible projects under the SLFRF are
limited to those that are designed to
deliver, upon project completion,
service that reliably meets or exceeds
symmetrical upload and download
speeds of 100 Mbps. In instances where
it would not be practicable for a project
to deliver such service speeds because
of the geography, topography, or
excessive costs associated with such a
project, the interim final rule provided
that the project would be required to be
designed to deliver, upon project
completion, service that reliably meets
or exceeds 100 Mbps download speed
and between at least 20 Mbps and 100
Mbps upload speeds and be scalable to
a minimum of 100 Mbps symmetrical
for download and upload speeds.
In addition, Treasury, in the
Supplementary Information to the
interim final rule, encouraged recipients
to pursue a number of other objectives.
First, Treasury encouraged recipients to
prioritize investments in fiber-optic
infrastructure wherever feasible and
focus on projects that deliver a physical
broadband connection by prioritizing
projects that achieve last-mile
connections. Second, Treasury
encouraged recipients to integrate
affordability options into their program
design. Third, Treasury encouraged
recipients to prioritize support for local
networks owned, operated, or affiliated
with local governments, nonprofits, and
cooperatives. Fourth, Treasury
encouraged recipients to avoid investing
in locations with existing agreements to
build reliable wireline service with
minimum speeds of 100 Mbps
download and 20 Mbps upload by
December 31, 2024, in order to avoid
duplication of efforts and resources.
Finally, following release of the interim
final rule, Treasury provided further
guidance clarifying some aspects of
broadband infrastructure eligibility,
specifically on flexibility for recipients
to determine eligible areas to be
served,328 middle-mile projects,329 pre-
project development costs,330
broadband connections to schools or
libraries,331 and the applicability of the
National Environmental Policy Act
(NEPA) and the Davis-Bacon Act.332
Summary of Public Comments:
Treasury received several comments on
the interim final rule’s requirements
regarding eligible areas for investment
and build-to speed standards, as well as
Treasury’s encouragements in the
Supplementary Information of the
interim final rule. Many commenters
found the interim final rule’s
requirement to limit projects to those
designed to provide service to unserved
or underserved households or
businesses to be appropriately focused
on hard-to-reach areas. In contrast, other
commenters argued that this
requirement was too restrictive and that
it would limit the ability for some
recipients, particularly local
governments, to invest in broadband
infrastructure.
Separately, some commenters
supported the interim final rule’s
requirement that eligible projects be
built to reliable speeds of 100 Mbps
symmetrical, with an exception for areas
where it was impracticable, and
encouragement that projects be built
with fiber-optic infrastructure, while a
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4418 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
333 See FAQ 6.10. Coronavirus State and Local
Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
334 See FAQ 6.12. Id.
335 See FAQ 6.16. Id.
336 See FAQ 6.4, 6.17. Id.
337 In the remainder of this Supplementary
Information, ‘‘25/3 Mbps’’ refers to broadband
infrastructure that is designed to reliably meet or
exceed at least 25 Mbps download speeds and 3
few others argued that the interim final
rule should remain technology-neutral
and that lower speed standards would
be more appropriate for today’s usage
needs.
Summary of Treasury Response: In
response to the comments, the final rule
expands eligible areas for investment by
requiring recipients to invest in projects
designed to provide service to
households and businesses with an
identified need for additional
broadband infrastructure investment,
which would include but not be limited
to a lack of broadband service reliably
delivering certain speeds. In addition, as
discussed further below, the final rule
further supports the expansion of
affordable access to broadband service
for households by requiring that
recipients use a provider that
participates in a qualifying affordability
plan. Treasury encourages recipients to
prioritize projects that are designed to
provide service to locations not
currently served by a wireline
connection that reliably delivers at least
100 Mbps of download speed and 20
Mbps of upload speed.
The final rule maintains the interim
final rule’s requirement that eligible
projects be designed to, upon
completion, reliably meet or exceed
symmetrical 100 Mbps download and
upload speeds. As was the case under
the interim final rule, in cases where it
is not practicable, because of the
excessive cost of the project or
geography or topography of the area to
be served by the project, eligible
projects may be designed to reliably
meet or exceed 100 Mbps download
speed and between at least 20 Mbps and
100 Mbps upload speed and be scalable
to a minimum of 100 Mbps download
speed and 100 Mbps upload speed.
Treasury continues to encourage
recipients to prioritize investments in
fiber-optic infrastructure wherever
feasible and to focus on projects that
will achieve last-mile connections,
whether by focusing directly on funding
last-mile projects or by ensuring that
funded middle-mile projects have
commitments in place to support new
and/or improved last-mile service.
The final rule requires recipients to
address the affordability needs of low-
income consumers in accessing
broadband networks funded by SLFRF,
given that such a project cannot be
considered a necessary investment in
broadband infrastructure if it is not
affordable to the population the project
would serve. Recipients must require
the service provider for a completed
broadband infrastructure investment
project that provides service to
households to either participate in the
Federal Communications Commission’s
(FCC) Affordable Connectivity Program
(ACP), or otherwise provide access to a
broad-based affordability program to
low-income consumers in the proposed
service area of the broadband
infrastructure that provides benefits to
households commensurate with those
provided under the ACP.
Treasury also recognizes the
importance of affordable broadband
access for all consumers beyond those
that are low-income. As part of their
project selection process, recipients are
encouraged to consult with the
community on the general affordability
needs of the target markets in the
proposed service area. Additionally,
recipients are encouraged to require that
services provided by a broadband
infrastructure project include at least
one low-cost option offered without
data usage caps and at speeds that are
sufficient for a household with multiple
users to simultaneously telework and
engage in remote learning. Recipients
will be required to report speed, pricing,
and any data allowance information as
part of mandatory reporting to Treasury.
The final rule also clarifies that
subsidies to households and
communities impacted by the pandemic
to access the internet, broadband
adoption programs, digital literacy
programs, and device programs are
eligible programs to respond to the
public health and negative economic
impacts of the pandemic under sections
602(c)(1)(A) and 603(c)(1)(A). See
section Assistance to Households in
Negative Economic Impacts.
Treasury continues to encourage
recipients to prioritize support for
broadband networks owned, operated
by, or affiliated with local governments,
nonprofits, and cooperatives. In
addition, to the extent recipients are
considering deploying broadband to
locations where there are existing
enforceable federal or state funding
commitments for reliable service at
speeds of at least 100 Mbps download
speed and 20 Mbps upload speed,
recipients must ensure that SLFRF
funds are designed to address an
identified need for additional
broadband investment that is not met by
existing federal or state funding
commitments. Recipients must also
ensure that SLFRF funds will not be
used for costs that will be reimbursed by
the other federal or state funding
streams. Further, Treasury highlights
that recipients are subject to the
prohibition on use of grant funds to
procure or obtain certain
telecommunications and video
surveillance services or equipment as
outlined in 2 CFR 200.216 and 2 CFR
200.471 and clarifies that modernization
of cybersecurity for existing and new
broadband networks are eligible uses of
funds under sections 602(c)(1)(D) and
603(c)(1)(D).
Finally, this Supplementary
Information to the final rule
incorporates and confirms guidance
issued by Treasury following the
interim final rule regarding middle-mile
projects,333 pre-project development
costs,334 broadband connections to
schools or libraries,335 and applicability
of the National Environmental Policy
Act (NEPA) and Davis-Bacon Act.336
The remainder of this section
provides additional details on the final
rule. Specifically, these sections
address: (1) Eligible areas for
investment; (2) build-to speed
standards; (3) affordability; (4) public
networks; (5) duplication of efforts and
resources; (6) cybersecurity; and (7) use
of funds to meet non-federal match
under the Infrastructure Investment and
Jobs Act.
Eligible Areas for Investment
The interim final rule limited eligible
broadband investments to projects
focused on delivering service to
unserved or underserved locations,
defined as households or businesses
that lack access to a wireline connection
capable of reliably delivering at least
minimum speeds of 25 Mbps download
and 3 Mbps upload. This targeted
approach was generally consistent with
certain speed thresholds used in other
federal programs to identify eligible
areas for federal investment in
broadband infrastructure, such as the
FCC’s Rural Digital Opportunity Fund
(RDOF) program and the National
Telecommunication and Information
Administration’s (NTIA’s) Broadband
Infrastructure Program, and generally
aligns with the FCC’s benchmark for an
‘‘advanced telecommunications
capability’’ for wireline broadband
services.
Public Comment: Many commenters
discussed the disadvantages of such an
approach. Some commenters, including
several local government recipients,
argued that limiting investments to
locations without access to reliable
wireline 25/3 Mbps 337 was too
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4419 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
Mbps upload speeds. ‘‘100 Mbps’’ symmetrical
refers to broadband infrastructure that is designed
to reliably meet or exceed at least 100 Mbps
download speeds and 100 Mbps upload speeds.
338 See FAQ 6.11. Coronavirus State and Local
Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
339 Legacy technologies such as copper telephone
lines (typically using Digital Subscriber Line
technology) and early versions of cable system
technology (DOCSIS 2.0 or earlier) typically lag on
speeds, latency, and other factors, as compared to
more modern technologies like fiber-optic. See, e.g.,
https://www.fcc.gov/sites/default/files/tech_
transitions_network_upgrades_that_may_affect_
your_service.pdf (comparing copper to fiber and
noting that copper wire networks have ‘‘limited
speeds,’’ are ‘‘susceptible to signal interference/
loss,’’ and have a ‘‘relatively short life’’); https://
Continued
restrictive because some urban
jurisdictions are already mostly or
entirely covered by a network with at
least 25/3 Mbps speeds yet lack
widespread broadband adoption for
various reasons. Commenters suggested
that recipients would benefit from
greater flexibility to provide necessary
investments in broadband access in
areas that are nominally covered by
speeds of at least 25/3 Mbps, such as to
provide affordable broadband access in
low-income areas or to address service
quality and reliability issues. Further,
commenters argued that Treasury’s
requirement that new projects meet
minimum reliable speeds of 100 Mbps
symmetrical was inconsistent with the
requirement that broadband
infrastructure projects focus on those
with access to significantly lower
speeds, and further noted that several
states have already expanded the focus
of their broadband programs beyond
those without reliable access to speeds
of 25/3 Mbps. Commenters argued that
if the limitation to unserved and
underserved households and businesses
were maintained, the definition of
unserved and underserved households
and businesses should be revised to
include households and businesses
currently served by higher standards.
Commenters proposed a number of
alternative cutoff speeds, including 25/
25 Mbps, 50/10 Mbps, and 100 Mbps
symmetrical. Others expressed support
for providing flexibility for recipients to
make their own determination on
eligible areas for investment. These
commenters referenced studies
indicating that 25/3 Mbps is inadequate
for today’s modern household or
business needs.
Some commenters advocated for
unserved and underserved areas to be
prioritized while providing flexibility
for recipients to serve areas beyond
those designated as unserved or
underserved. Reflecting the perceived
restrictiveness of the interim final rule
approach, some commenters asked for
assurance that projects conducted under
other categories of SLFRF eligible uses,
specifically to respond to the public
health and negative economic impacts
of the pandemic under sections
602(c)(1)(A)–(C) and 603(c)(1)(A)–(C),
were not barred by the presence of 25/
3 Mbps service, including ‘‘gap
networks,’’ which are networks
designed to offer low-cost or no-cost
internet access for lower-income
households with low broadband
adoption rates.
Commenters suggested additional
factors to be incorporated in the
consideration of locations that are
eligible to be served. Many commenters
suggested that affordability should be
considered a key factor when
determining whether a community has
access to broadband, as the presence of
25/3 Mbps service does not necessarily
mean the service is financially
accessible to the area’s residents.
Commenters noted that surveys indicate
that affordability, not lack of coverage,
is the most significant barrier for most
Americans who do not have robust
broadband service in their households.
Some advocated that the final rule allow
for investments in areas with existing
reliable wireline access at or above
25/3 Mbps as long as existing broadband
service has been unaffordable for a
certain segment of the population;
others advocated that Treasury presume
eligibility when investments are made
in certain areas, such as Qualified
Census Tracts or neighborhoods with
persistent poverty, or are made by Tribal
governments. Separately, some
commenters noted that Treasury should
provide more clarification on what
constitutes a ‘‘reliabl[e]’’ connection,
including providing details as to
latency, jitter, and other technical
specifications that would meet that
standard, and what it means for certain
technologies, such as copper and other
outdated technologies, to be deemed
presumptively unreliable.
Other commenters supported the
interim final rule’s approach on eligible
areas for investment or suggested
tightening eligibility even further. They
argued that higher speed thresholds
beyond 25/3 Mbps would likely lead to
investments in or building of new
broadband infrastructure in areas
already served by broadband at speeds
these commenters considered sufficient;
these areas, commenters suggested, are
less in need of federal assistance and
permitting investments here could
divert funding away from rural areas to
more densely populated areas.
Treasury Response: The final rule
expands eligible areas for investment by
requiring recipients to invest in projects
designed to provide service to
households and businesses with an
identified need for additional
broadband infrastructure investment.
Recipients have flexibility to identify a
need for additional broadband
infrastructure investment: Examples of
need include lack of access to a
connection that reliably meets or
exceeds symmetrical 100 Mbps
download and upload speeds, lack of
affordable access to broadband service,
or lack of reliable broadband service.
Recipients are encouraged to prioritize
projects that are designed to provide
service to locations not currently served
by a wireline connection that reliably
delivers at least 100 Mbps of download
speed and 20 Mbps of upload speed, as
many commenters indicated that those
without such service constitute hard-to-
reach areas in need of subsidized
broadband deployment.
Households and businesses with an
identified need for additional
broadband infrastructure investment do
not have to be the only ones in the
service area served by an eligible
broadband infrastructure project.
Indeed, serving these households and
businesses may require a holistic
approach that provides service to a
wider area, for example, in order to
make ongoing service of certain
households or businesses within the
service area economical.
Consistent with further guidance
issued by Treasury,338 in determining
areas for investment, recipients may
choose to consider any available data,
including but not limited to
documentation of existing broadband
internet service performance, federal
and/or state collected broadband data,
user speed test results, interviews with
community members and business
owners, reports from community
organizations, and any other
information they deem relevant.
In evaluating such data, recipients
may take into account a variety of
factors, including whether users
actually receive internet service at or
above the speed thresholds at all hours
of the day, whether factors other than
speed such as latency, jitter, or
deterioration of the existing connections
make their user experience unreliable,
and whether the existing service is
being delivered by legacy technologies,
such as copper telephone lines
(typically using Digital Subscriber Line
technology) or early versions of cable
system technology (DOCSIS 2.0 or
earlier),339 and other factors related to
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data.fcc.gov/download/measuring-broadband-
america/2020/2020-Fixed-Measuring-Broadband-
America-Report.pdf (comparing fiber with DSL and
cable technologies on a number of dimensions);
https://www.eff.org/wp/case-fiber-home-today-why-
fiber-superior-medium-21st-century-broadband
(providing a technical background comparing fiber
technology to other legacy technologies).
340 Using the Federal Communications
Commission (FCC) Broadband Speed Guide, a
household with two telecommuters and two to
three remote learners today is estimated to need 100
Mbps download to work simultaneously. See
Federal Communications Commission, Broadband
Speed Guide, available at https://www.fcc.gov/
consumers/guides/broadband-speed-guide (last
visited October 28, 2021).
341 United States’ Mobile and Broadband Internet
Speeds—Speedtest Global Index, available at
https://www.speedtest.net/global-index/united-
states#fixed.
342 Bennett Cyphers, The Case for Fiber to the
Home, Today: Why Fiber is a Superior Medium for
21st Century Broadband, Electronic Frontier
Foundation (October 16, 2019), https://www.eff.org/
wp/case-fiber-home-today-why-fiber-superior-
medium-21st-century-broadband.
343 See FAQ 6.10, Coronavirus State and Local
Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
the services to be provided by the
project. In addition, recipients may
consider the actual experience of
current broadband customers when
making their determinations; whether
there is a provider serving the area that
advertises or otherwise claims to offer
broadband at a given speed is not
dispositive.
Build-To Speed Standards
The interim final rule provided that a
recipient may use funds to make
investments in broadband infrastructure
that is designed to, upon completion,
reliably meet or exceed symmetrical 100
Mbps download and upload speeds. In
cases where it is not practicable,
because of the excessive cost of the
project or the geography or topography
of the area to be served by the project,
eligible projects may be designed to
reliably meet or exceed 100 Mbps
download speed and between at least 20
Mbps and 100 Mbps upload speed, so
long as it is scalable to a minimum of
100 Mbps download speed and 100
Mbps upload speed. Relatedly, Treasury
in the SUPPLEMENTARY INFORMATION to
the interim final rule encouraged
recipients to prioritize investments in
fiber-optic infrastructure wherever
feasible and to prioritize projects that
achieve last-mile connections.
Public Comment: Many commenters
discussed the advantages of setting
minimum symmetrical download and
upload speeds of reliable 100 Mbps as
the speed threshold for new projects.
Some commenters indicated support for
the interim final rule’s standard as it
takes into account growing demands on
internet use resulting from pandemic
broadband usage and suggested that
such a standard will help to ensure that
networks built with SLFRF funds
remain valuable for years to come, even
as demands continue to accelerate,
particularly on upload speeds. Some
also indicated that the interim final rule
standard has the effect of prioritizing
the use of fiber-optic infrastructure to
deliver such speeds, which some noted
was a ‘‘gold standard’’ future-proof
technology, although some commenters
noted that other technologies like fixed
wireless have been shown to deliver
such speeds in certain circumstances.
Other commenters suggested that 100
Mbps symmetrical speeds were
unnecessary given current broadband
usage needs and that such high
standards may have the potential to
slow down expansion to unserved or
underserved rural areas. Some argued
that setting this symmetrical threshold
may limit the type of technologies that
can be used, thereby decreasing
competition and limiting flexibility to
recipients whose communities might be
better served by technologies such as
wireless solutions or inexpensive gap
networks. Commenters suggested
alternate minimum speeds, ranging from
25/3 Mbps (which some argued best
balances reaching all communities and
maximizing the impact of federal funds)
to 100/20 Mbps (which some argued
best serves the typical broadband usage
patterns of households and businesses,
including new pandemic-driven needs).
A few commenters suggested a higher
minimum speed, such as gigabit speeds,
advocating that such speeds were
necessary for a network to last at least
a decade.
Many commenters supported the
interim final rule’s lower speed
standards for projects where it is
impracticable to meet minimum reliable
speeds of 100 Mbps symmetrical, as it
provides flexibility for recipients to
invest in hard-to-reach areas, such as
those in mountainous regions. A few
commenters indicated that Treasury
should more clearly define the
characteristics of a location eligible for
this exception. Some indicated that the
minimum standard for all new projects
should be 100 Mbps symmetrical. In
contrast, others argued that scalability to
100 Mbps symmetrical should not be a
requirement to meet today’s demands,
particularly in hard-to-reach areas.
Some commenters requested that
Treasury clarify eligibility for middle-
mile projects as these projects
potentially provide connectivity to far-
reaching areas, while other commenters
suggested that last-mile projects
generally require more capital
investment and are therefore most in
need of government support.
Treasury Response: The final rule
maintains the interim final rule’s
requirement that eligible projects be
designed to, upon completion, reliably
meet or exceed symmetrical 100 Mbps
download and upload speeds, with the
interim final rule’s exception for
projects where it is impracticable to
build to such speeds due to excessive
cost, geography, or topography of the
area to be served by the project. Given
the build time associated with
broadband infrastructure projects, these
standards will enable SLFRF funds to
fund lasting infrastructure that will be
able to accommodate increased network
demand once the network is
complete,340 while providing flexibility
for certain locations to meet lower speed
standards where 100 Mbps symmetrical
speeds are impracticable.
To illustrate the accelerating need for
higher upload speeds, by one measure,
mean upload speeds as of October 2021
increased to 75.21 Mbps as compared to
62.11 Mbps a year earlier.341
Jurisdictions are increasingly
responding to the growing demands of
their communities for high speeds; for
example, Illinois requires 100 Mbps
symmetrical service as the construction
standard for their state broadband grant
programs. The 100 Mbps symmetrical
standard accounts for increased
pandemic internet usage and provides
adequate upload speeds for individuals
and businesses to accommodate
interactive applications such as virtual
learning and videoconferencing, while
also helping ensure that funding is
responsibly used to provide a true and
lasting benefit for years to come.
Treasury continues to encourage
recipients to prioritize investments in
fiber-optic infrastructure wherever
feasible, as such advanced technology
enables the next generation of
application solutions for all
communities and is capable of
delivering superior, reliable
performance and is generally most
efficiently scalable to meet future
needs.342 In designing these projects,
recipients should ensure that the
broadband infrastructure provides
‘‘reliable’’ service at required speeds
and are not required to rely on
providers’ advertised speeds in their
assessments.
Consistent with further guidance
issued by Treasury,343 while recipients
are permitted to make investments in
‘‘middle-mile’’ connections that
otherwise satisfy the requirements of the
final rule, Treasury continues to
encourage recipients to focus on
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344 The Executive Office of the President,
Community-Based Broadband Solutions (January
2015), https://obamawhitehouse.archives.gov/sites/
default/files/docs/community-based_broadband_
report_by_executive_office_of_the_president.pdf.
projects that will achieve last-mile
connections—whether by focusing
directly on funding last-mile projects or
by ensuring that funded middle-mile
projects have commitments in place to
support new and/or improved last-mile
service.
Affordability
The interim final rule encouraged
recipients to consider ways to integrate
affordability options into their program
design but did not require recipients to
take particular actions. The interim final
rule also provided that assisting
households with internet access and
digital literacy is an eligible use of
SLFRF funds under sections
602(c)(1)(A) and 603(c)(1)(A) to respond
to the negative economic impacts of
COVID–19.
Public Comment: Many commenters
suggested that Treasury provide
recipients with a broader set of tools to
tackle what the commenters
characterized as an affordability crisis in
the broadband sector. As noted above,
some commenters proposed that
Treasury consider affordability when
determining whether an area is
unserved or underserved by broadband.
Some commenters indicated that the
final rule should allow for the
construction of broadband networks in
low-income neighborhoods including
low-cost or no-cost gap networks, even
in areas with existing service at the
speeds required under the interim final
rule. Other commenters voiced support
for direct subsidies to low-income
communities to afford broadband
service, which would provide
additional incentives for providers to
serve these communities.
Treasury Response: In response to
many commenters that highlighted the
importance of affordability in providing
meaningful access to necessary
broadband infrastructure, the final rule
provides additional requirements to
address the affordability needs of low-
income consumers in accessing
broadband networks funded by SLFRF.
Recipients must require the service
provider for a completed broadband
infrastructure investment project that
provides service to households to:
•Participate in the Federal
Communications Commission’s (FCC)
Affordable Connectivity Program (ACP);
or
•Otherwise provide access to a
broad-based affordability program to
low-income consumers in the proposed
service area of the broadband
infrastructure that provides benefits to
households commensurate with those
provided under the ACP.
Recipients must require providers to
participate in or provide access to these
programs through the life of the ACP.
This requirement will no longer apply
once the SLFRF-funded broadband
infrastructure is no longer in use.
Furthermore, Treasury also recognizes
the importance of affordable broadband
access for all consumers beyond those
that are low income. As part of their
project selection process, recipients are
encouraged to consult with the
community on the general affordability
needs of the target markets in the
proposed service area. Additionally,
recipients are encouraged to require that
services provided by a broadband
infrastructure project include at least
one low-cost option offered without
data usage caps at speeds that are
sufficient for a household with multiple
users to simultaneously telework and
engage in remote learning. Treasury will
require recipients to report speed,
pricing, and any data allowance
information as part of their mandatory
reporting to Treasury.
Further, Treasury is clarifying that, as
a response to the public health and
negative economic impacts of the
pandemic, recipients may provide
households and communities impacted
by the pandemic with subsidies to help
pay for internet service, digital literacy
programs, broadband adoption
programs, and device programs that
provide discounted or no-cost devices
for low-income households to access the
internet. For further discussion of this
eligible use category, see the section
internet Assistance in Assistance to
Households in Public Health and
Negative Economic Impacts.
Public Networks
The interim final rule encouraged
recipients to prioritize support for local
networks owned, operated, or affiliated
with local governments, nonprofits, and
cooperatives.
Public Comment: Many commenters
voiced their support for Treasury’s
encouragement that recipients work
with governmental or community
entities to establish local networks,
arguing that they have been shown to
effectively provide broadband access to
areas that would otherwise be left with
unaffordable or insufficient service.
These commenters suggested that, since
these entities are less driven by
financial returns to investment than
private providers, in some
circumstances they may be able to
provide robust service at a lower price
as compared to private providers, along
with potentially increasing local
competition in a service area.
Other commenters argued against
Treasury’s encouragement, remarking
that private businesses have a robust
track record of serving hard-to-reach
customers. These commenters argued
that commercial providers have greater
technical and operational expertise in
deploying and operating broadband
networks and may be able to construct
broadband networks with greater
efficiency. Additionally, some
commenters argued that providing what
they considered an unfair competitive
advantage for government- or
community-owned or operated
networks may hurt consumers over
time.
Treasury Response: The final rule
maintains the interim final rule’s
encouragement for recipients to
prioritize support for broadband
networks owned, operated by, or
affiliated with local governments,
nonprofits, and cooperatives, given that
these networks have less pressure to
generate profits and a commitment to
serve entire communities.344 This
encouragement provides flexibility for
recipients to select providers that best
fit their needs, while noting the critical
role that networks owned, operated, or
affiliated with local governments and
community organizations can play in
providing sufficient coverage, affordable
access, or increased competition in the
broadband sector.
Duplication of Efforts and Resources
Public Comment: Some commenters
raised concerns that Treasury’s
encouragement in the interim final rule
that recipients avoid funding projects in
locations with an existing agreement to
provide service that reliably delivers
100/20 Mbps by December 31, 2024 was
too restrictive. Commenters noted that
many plans do not always lead to a
successful and complete deployment, as
issues may arise that prevent such
infrastructure from deploying on time or
at all, and that several existing federal
grants were designed and awarded
before the onset of the COVID–19
pandemic and do not meet the critical
broadband needs highlighted by the
pandemic. Other commenters argued
that Treasury’s encouragement to avoid
duplication of resources should be
strengthened, as investing in areas with
existing agreements would be an
inefficient duplication of efforts.
Treasury Response: Given the final
rule’s revised requirements on eligible
areas for investment, this
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4422 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
345 For more on the importance of cybersecurity
to the reliability and resiliency of broadband
networks, see: Federal Communications
Commission, https://docs.fcc.gov/public/
attachments/FCC-10-63A1.doc; Brookings Institute,
Protecting the Cybersecurity of America’s Networks
(February 11, 2021), https://www.brookings.edu/
blog/techtank/2021/02/11/protecting-the-
cybersecurity-of-americas-networks/.
346 See Infrastructure Investment and Jobs Act,
Public Law 117–58 (2021).
Supplementary Information to the final
rule also modifies the interim final
rule’s requirements around duplication
of resources. Since recipients must
ensure that the objective of the
broadband projects is to serve locations
with an identified need for additional
broadband investment, the final rule
provides that, to the extent recipients
are considering deploying broadband to
locations where there are existing
enforceable federal or state funding
commitments for reliable service at
speeds of at least 100 Mbps download
speed and 20 Mbps upload speed,
recipients must ensure that SLFRF
funds are designed to address an
identified need for additional
broadband investment that is not met by
existing federal or state funding
commitments. Recipients must also
ensure that SLFRF funds will not be
used for costs that will be reimbursed by
the other federal or state funding
streams.
Cybersecurity
Public Comment: Several commenters
expressed concern about the
cybersecurity of new broadband projects
funded with SLFRF funds and urged
Treasury to prohibit recipients from
utilizing SLFRF funds to procure
equipment from certain providers from
the People’s Republic of China that may
pose a national security risk. These
commenters pointed out that the 2019
National Defense Authorization Act
(NDAA) and the FCC’s Universal
Service Fund have similar prohibitions.
Further, several commenters requested
that Treasury explicitly include
cybersecurity costs as an eligible use for
broadband infrastructure investment
given the growing threat of cyber-attacks
and cyber-intrusions into the nation’s
infrastructure.
Treasury Response: Treasury
highlights that investments in
broadband infrastructure must be
carried out in ways that comply with
applicable federal laws, including the
2019 NDAA. Among other requirements
contained in 2 CFR part 200, 2 CFR
200.216 implements certain provisions
of the NDAA and contains prohibitions
on the use of federal financial assistance
to procure or obtain certain
telecommunications and video
surveillance services or equipment
provided or produced by designated
entities, including certain entities
owned or controlled by the People’s
Republic of China. In addition, 2 CFR
200.471 provides that certain
telecommunications and video
surveillance costs associated with 2 CFR
200.216 are unallowable.
Further, the final rule allows for
modernization of cybersecurity for
existing and new broadband
infrastructure as an eligible use under
sections 602(c)(1)(D) and 603(c)(1)(D) as
such investments are necessary for the
reliability and resiliency of broadband
infrastructure.345 Recipients may
provide necessary investments in
cybersecurity, including modernization
of hardware and software, for existing
and new broadband infrastructure
regardless of their speed delivery
standards. The final rule maintains the
interim final rule’s provision that allows
for broader modernization of
cybersecurity, including hardware,
software, and protection of critical
infrastructure as an eligible provision of
government services, to the extent of
revenue loss due to the pandemic,
under sections 602(c)(1)(C) and
603(c)(1)(C).
Use of Funds To Meet Non-Federal
Match Under the Infrastructure
Investment and Jobs Act
The Infrastructure Investment and
Jobs Act specifies that, except as
otherwise provided, an entity using
funding under section 60102 of the law
for broadband deployment ‘‘shall
provide, or require a subgrantee to
provide, a contribution, derived from
non-Federal funds (or funds from a
Federal regional commission or
authority) . . . of not less than 25
percent of project costs.’’346 It further
states that the matching contribution
may include funds provided to an
eligible entity or subgrantee under the
American Rescue Plan Act for the
purpose of deployment of broadband
service, which includes funds provided
under the SLFRF program.
SLFRF and the program established
under section 60102 of the
Infrastructure Investment and Jobs Act
are separate programs with separate
requirements. While section 60102
allows states and other eligible entities
to use SLFRF funds as the source of
matching funds for broadband
deployment, the requirements of the
SLFRF program still apply. As such,
recipients that use SLFRF funds to meet
the section 60102 matching requirement
will continue to be subject to the
requirements of the SLFRF program.
III. Restrictions on Use
While recipients have considerable
flexibility to use funds to address the
diverse needs of their communities,
some restrictions on use of funds apply.
The ARPA includes two statutory
provisions that further define the
boundaries of the statute’s eligible uses.
First, section 602(c)(2)(A) of the Social
Security Act provides that states and
territories may not ‘‘use the funds . . .
to either directly or indirectly offset a
reduction in . . . net tax revenue . . .
resulting from a change in law,
regulation, or administrative
interpretation during the covered period
that reduces any tax . . . or delays the
imposition of any tax or tax increase.’’
Second, sections 602(c)(2)(B) and
603(c)(2) prohibit all recipients, except
Tribal governments, from using funds
for deposit into any pension fund. These
restrictions support use of funds only
for the congressionally permitted
purposes described in the Eligible Uses
section by providing a backstop against
the use of funds for purposes outside of
the eligible use categories provided for
in the statute.
In addition to the restrictions on use
of funds provided for in the ARPA
statute, the interim final rule noted that
several uses of funds would be
ineligible under any eligible use
category, including as a response to the
public health and negative economic
impacts of the pandemic or as a
‘‘government service’’ under the
revenue loss eligible use category.
Specifically, use of funds for debt
service, to replenish financial reserves,
or to satisfy an obligation arising from
a judicial settlement or judgment were
ineligible uses of funds under the
eligible use categories for public health
and negative economic impacts and
revenue loss. These restrictions apply to
all recipients.
Recipients should note that
restrictions on use of funds for debt
service, to replenish financial reserves,
or to satisfy an obligation arising from
a judicial settlement or judgment apply
to all eligible use categories, not just the
eligible use categories in which they
were discussed in the interim final rule.
Recipients are also subject to other
restrictions on use of funds in the
ARPA, the Award Terms and
Conditions, and other federal laws. As
discussed further below, uses of funds
may not conflict with the overall
statutory purpose of the ARPA to reduce
the spread of COVID–19. Per the Award
Terms and Conditions, recipients must
adopt and abide by policies to prevent
conflicts of interest. Finally, recipients
are reminded that other federal laws
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347 In this sub-section, ‘‘recipient governments’’
refers only to states and territories. In other
sections, ‘‘recipient governments’’ refers more
broadly to eligible governments receiving funding
from the SLFRF.
348 For brevity, this phrase is referred to as
‘‘changes in law, regulation, or interpretation’’ for
the remainder of this SUPPLEMENTARY INFORMATION.
also apply to uses of funds, including
environmental and civil rights laws.
To enhance clarity, this
SUPPLEMENTARY INFORMATION for the
final rule consolidates these restrictions
on use of funds into one section and
makes clear that they apply to all
eligible use categories and any use of
funds under the program by recipients
to whom each specific restriction
applies.
This section discusses the
aforementioned restrictions, public
comments received, and Treasury’s
response to these comments. For clarity,
Treasury has divided the following
discussion into (A) statutory restrictions
under the ARPA, which include (1)
offsetting a reduction in net tax revenue,
and (2) deposits into pension funds, and
(B) other restrictions on use, which
include (1) debt service and
replenishing reserves, (2) settlements
and judgments, and (3) general
restrictions.
A. Ineligible Uses of Funds Under the
ARPA Statute
1. Offset a Reduction in Net Tax
Revenue
For states and territories (recipient
governments 347), section 602(c)(2)(A)—
the offset provision—prohibits the use
of SLFRF funds to directly or indirectly
offset a reduction in net tax revenue
resulting from a change in law,
regulation, or administrative
interpretation 348 during the covered
period. If a state or territory uses SLFRF
funds to offset a reduction in net tax
revenue resulting from a change in law,
regulation, or interpretation, the ARPA
provides that the state or territory must
repay to Treasury an amount equal to
the lesser of (i) the amount of the
applicable reduction attributable to the
impermissible offset and (ii) the amount
of SLFRF funds received by the state or
territory. A state or territory that uses
SLFRF funds to offset a reduction in net
tax revenue does not forfeit its entire
allocation of SLFRF funds (unless it
misused the full allocation to offset a
reduction in net tax revenue) or any
non-SLFRF funding.
The interim final rule implements
these conditions by establishing a
framework for states and territories to
determine the cost of changes in law,
regulation, or interpretation that reduce
tax revenue and to identify and value
the sources of funds that will offset—
i.e., cover the cost of—any reduction in
net tax revenue resulting from such
changes. The interim final rule
recognizes three sources of funds that
may offset a reduction in net tax
revenue other than SLFRF funds:
Organic revenue growth, increases in
revenue due to policy changes (e.g., an
increase in a tax rate), and certain cuts
in spending.
Specifically, the interim final rule
establishes a step-by-step process for
determining whether, and the extent to
which, SLFRF funds have been used to
offset a reduction in net tax revenue,
based on information reported by the
recipient government:
•First, each year, each recipient
government will identify and value the
changes in law, regulation, or
interpretation that would result in a
reduction in net tax revenue, as it would
in the ordinary course of its budgeting
process. The sum of these values in the
year for which the government is
reporting is the amount it needs to ‘‘pay
for’’ with sources other than SLFRF
funds (total value of revenue reducing
changes).
•Second, the interim final rule
recognizes that it may be difficult to
predict how a change would affect net
tax revenue in future years and,
accordingly, provides that if the total
value of the changes in the year for
which the recipient government is
reporting is below a de minimis level,
as discussed below, the recipient
government need not identify any
sources of funding to pay for revenue
reducing changes and will not be
subject to recoupment.
•Third, a recipient government will
consider the amount of actual tax
revenue recorded in the year for which
it is reporting. If the recipient
government’s actual tax revenue is
greater than the amount of tax revenue
received by the recipient for the fiscal
year ending 2019, adjusted annually for
inflation, the recipient government will
not be considered to have violated the
offset provision because there will not
have been a reduction in net tax
revenue.
•Fourth, if the recipient
government’s actual tax revenue is less
than the amount of tax revenue received
by the recipient government for the
fiscal year ending 2019, adjusted
annually for inflation, in the reporting
year the recipient government will
identify any sources of funds that have
been used to permissibly offset the total
value of covered tax changes other than
SLFRF funds. These are:
Æ State or territory tax changes that
would increase any source of general
fund revenue, such as a change that
would increase a tax rate; and
Æ Spending cuts in areas not being
replaced by SLFRF funds.
The recipient government will
calculate the value of revenue reduction
remaining after applying these sources
of offsetting funding to the total value of
revenue reducing changes—that is, how
much of the tax change has not been
paid for. The recipient government will
then compare that value to the
difference between the baseline and
actual tax revenue. A recipient
government will not be required to
repay to Treasury an amount that is
greater than the recipient government’s
actual tax revenue shortfall relative to
the baseline (i.e., fiscal year 2019 tax
revenue adjusted for inflation). This
‘‘revenue reduction cap,’’ together with
Step 3, ensures that recipient
governments can use organic revenue
growth to offset the cost of revenue
reductions.
•Finally, if there are any amounts
that could be subject to recoupment,
Treasury will provide notice to the
recipient government of such amounts
along with an explanation of such
amounts. This process is discussed in
greater detail in section Remediation
and Recoupment of this Supplementary
Information.
Together, these steps allow Treasury
to identify the amount of reduction in
net tax revenue that both is attributable
to covered changes and has been
directly or indirectly offset with SLFRF
funds.
Overview of Comments: Many
commenters supported the framework
established under the interim final rule.
These commenters argued that the offset
provision, and the interim final rule’s
implementation of the offset provision,
was essential to ensuring SLFRF funds
are used in a manner consistent with the
statute’s defined eligible uses and, in
particular, to support the use of SLFRF
funds to build public sector capacity.
Several commenters argued that the
framework should be made more
restrictive; for example, some comments
advocated that the offset provision be
applied to local governments.
Other commenters argued that the
offset provision and the interim final
rule’s implementation of the offset
provision is too restrictive, with some
asserting that the offset provision
prohibits states from making changes to
reduce taxes. Many of these commenters
argued that the offset provision presents
constitutional concerns. These
commenters asserted that the offset
provision is ambiguous and the
restriction is unrelated to the purpose of
the ARPA. These commenters also
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349 See, e.g., State of West Virginia v. U.S.
Department of the Treasury, No. 7:21–cv–00465–
LSC, 2021 WL 2952863 (N.D. Ala. Jul. 14, 2021);
State of Ohio v. Yellen, No. 1:21–cv–181, 2021 WL
2712220 (S.D. Ohio Jul. 1, 2021).
350 National Fed’n of Indep. Bus. v. Sebelius
(NFIB), 567 U.S. 519, 580 (2012) (plurality opinion);
see, e.g., South Dakota v. Dole, 483 U.S. 203, 206–
208 (1987); Gruver v. Louisiana Bd. of Supervisors
for Louisiana State Univ. Agric. & Mech. Coll., 959
F.3d 178, 183 (5th Cir.), cert. denied, 141 S. Ct. 901
(2020). For additional discussion of these issues,
see, e.g., Brief Reply for Appellants, Ohio v. Yellen,
No. 21–3787 (6th Cir. Oct. 26, 2021).
351 Sabri v. United States, 541 U.S. 600, 608
(2004).
352 The new federal funds offered by the
Affordable Care Act totaled $100 billion per year.
Even the dissenting Justices agreed that ‘‘Congress
could have made just the new funding provided
under the ACA contingent on acceptance of the
terms of the Medicaid Expansion,’’ although they
disagreed with the majority about whether that
funding condition was severable. NFIB at 687–688
(joint dissent).
353 For example, a state law that sets its earned
income tax credit (EITC) at a fixed percentage of the
federal EITC will see its EITC payments
automatically increase—and thus its tax revenue
reduced—because of the federal government’s
expansion of the EITC in the ARPA See, e.g., Tax
argued that the generous amount of
SLFRF funds provided to those
governments gave recipient
governments little choice as to whether
to accept the SLFRF funds and, as a
result, the offset provision is coercive.
In describing these concerns and
arguments, several of these commenters
referenced litigation regarding the offset
provision.349 Many of these commenters
also expressed concern regarding the
interim final rule’s implementation of
the offset provision. Some of these
commenters argued that Treasury lacked
the authority to implement the
provision, asserting that the significance
of the provision required Congress to
make an explicit delegation of
rulemaking authority and provide
clearer principles by which Treasury
should implement the provision.
Finally, one commenter argued that the
offset provision should only apply if the
recipient expressly and intentionally
uses SLFRF funds to offset a reduction
in revenue, arguing that the term
‘‘offset’’ implies a deliberate use SLFRF
funds to ‘‘pay for’’ a tax cut.
As discussed in the interim final rule,
the offset provision does not prevent a
recipient government from enacting a
broad variety of tax changes. Rather, the
offset provision prevents a recipient
government from using SLFRF funds to
offset a revenue reduction resulting
from a tax cut. A recipient government
would only be considered to have used
SLFRF funds to offset a reduction in net
tax revenue resulting from changes in
law, regulation, or interpretation if, and
to the extent that, the recipient
government could not identify sufficient
funds from sources other than SLFRF
funds to offset the reduction in net tax
revenue. Only if sufficient funds from
other sources cannot be identified to
cover the full cost of the reduction in
net tax revenue resulting from changes
in law, regulation, or interpretation, will
the remaining amount not covered by
these sources be considered to have
been offset by SLFRF funds, in
contravention of the offset provision.
Consistent with the statutory text, the
approach taken in the interim final rule
recognizes that, because money is
fungible, even if SLFRF funds are not
explicitly or directly used to cover the
costs of changes that reduce net tax
revenue, those funds may be used in a
manner inconsistent with the statute by
indirectly being used to substitute for
the state’s or territory’s funds that
would otherwise have been needed to
cover the costs of the reduction. As
discussed below, the scope of changes
in law, regulation, or interpretation is
further limited to those that the
recipient government voluntarily
enacted during the covered period.
Congress has the authority under the
Spending Clause in Article I, section 8
of the Constitution to specify the
permissible and impermissible uses of
federal grants. The Supreme Court has
repeatedly ‘‘upheld Congress’s authority
to condition the receipt of funds on the
States’ complying with restrictions on
the use of those funds, because that is
the means by which Congress ensures
that the funds are spent according to its
view of the ‘general Welfare.’’’350 ‘‘The
power to keep a watchful eye on
expenditures . . . is bound up with
congressional authority to spend in the
first place.’’351 Assertions that the
amount of SLFRF funds are sufficiently
large to be coercive are inconsistent
with the Supreme Court’s reasoning in
NFIB, which distinguished between
conditions placed on new federal funds
and conditions placed on existing
federal funds and not based on the size
of funds.352 Further, the conditions
placed on the use of SLFRF funds under
the ARPA—both the eligible uses and
additional limitations on deposits into
pension funds and the offset
provision—were well known to
recipient governments prior to recipient
governments requesting to receive
SLFRF funds. Finally, the ARPA
provides Treasury with the express
authority ‘‘to issue such regulations as
may be necessary or appropriate to carry
out’’ section 602, which includes the
offset provision.
A number of commenters expressed
concern regarding the burden associated
with complying with the offset
provision and the interim final rule.
Similarly, other commenters argued that
the framework provided in the interim
final rule complicated implementation
of the offset provision. Treasury took
several steps to minimize burden for
recipient governments in the interim
final rule. For example, the interim final
rule incorporates the types of
information and modeling already used
by states and territories in their own
fiscal and budgeting processes. By
incorporating existing budgeting
processes and capabilities, states and
territories will be able to assess and
evaluate the relationship of tax and
budget decisions to uses of SLFRF funds
based on information they likely have or
can readily obtain. This approach
ensures that recipient governments have
the information they need to understand
the implications of their decisions
regarding the use of SLFRF funds—and,
in particular, whether they are using the
funds to directly or indirectly offset a
reduction in net tax revenue resulting
from a change in law, regulation, or
interpretation, making the funds
potentially subject to recoupment. To
further reduce burden, Treasury is
considering whether the scope of
reporting requirements can be further
tailored.
As described in greater detail below,
Treasury is finalizing its
implementation of the offset provision
largely without change. This approach
is consistent with the text of the ARPA.
The remainder of this section discusses
and responds to comments on specific
aspects of the framework.
1. Definitions
Covered change. The offset provision
is triggered by a reduction in net tax
revenue resulting from ‘‘a change in
law, regulation, or administrative
interpretation.’’ Consistent with this
language, the interim final rule defines
a ‘‘covered change’’ to include any final
legislative or regulatory action, a new or
changed administrative interpretation,
and the phase-in or taking effect of any
statute or rule where the phase-in or
taking effect was not prescribed prior to
the start of the covered period. Thus, the
offset provision applies only to actions
for which the change in policy occurs
during the covered period; it excludes
regulations or other actions that
implement a change or law
substantively enacted prior to March 3,
2021. For example, covered changes do
not include a change in rate that is
triggered automatically and based on
statutory or regulatory criteria in effect
prior to the covered period.353 Changed
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Policy Center, How do state earned income tax
credits work?, https://www.taxpolicycenter.org/
briefing-book/how-do-state-earned-income-tax-
credits-work/ (last visited May 9, 2021).
354 Assistance must be consistent with eligible
uses of SLFRF funds. See section Eligible Uses of
this SUPPLEMENTARY INFORMATION.
355 See Statement on State Fiscal Recovery Funds
and Tax Conformity, April 7, 2021, available at
https://home.treasury.gov/news/press-releases/
jy0113.
356 U.S. Census Bureau, Annual Survey of State
and Local Government Finances Glossary, https://
www.census.gov/programs-surveys/state/about/
glossary.html (last visited Apr. 30, 2021).
administrative interpretations would
not include corrections to replace prior
inaccurate interpretations; such
corrections would instead be treated as
changes implementing legislation
enacted or regulations issued prior to
the covered period. The operative
change in those circumstances is the
underlying legislation or regulation that
occurred prior to the covered period.
Moreover, only changes within the
control of the state or territory are
considered covered changes. Finally,
covered changes do not include changes
that simply conform with recent
changes in federal law (including those
to conform to recent changes in federal
taxation of unemployment insurance
benefits and taxation of loan forgiveness
under the Paycheck Protection
Program).
Scope of Covered Changes
Public Comment: Several commenters
argued that the definition of covered
change, and thus the limitations of the
offset provision, should apply to
subsidies for businesses. Similarly,
other commenters requested that
Treasury clarify that the offset provision
applies to tax abatements and
reductions in corporate taxes, even if
administered by a sub-unit of the
recipient government. Citing to
empirical research and other evidence,
these commenters argued that these
types of economic development policies
were poorly administered, reduced
public sector capacity, and were
ineffective at achieving stated objectives
of creating jobs, increasing income, and
increasing economic growth. On the
other hand, some commenters argued
that, because subsidies were
economically similar to some tax cuts,
neither action should be considered a
covered change and subject to the offset
provision. Finally, other commenters
requested that Treasury clarify whether
covered changes must be broad-based
policies or whether administrative
decisions applicable to individuals
would be considered covered changes.
Treasury Response: Section
602(c)(2)(A) applies to any change that
‘‘reduces any tax (by providing for a
reduction in a rate, a rebate, a
deduction, a credit, or otherwise or
delays the imposition of any tax or tax
increase.’’ Accordingly, and consistent
with this statutory text, the final rule
applies to covered changes that reduce
any tax, which can include tax
abatements, but does not apply to loans,
grants, or other types of interventions
that do not reduce tax revenue.354 In
addition, by including changes in
regulation or administrative
interpretation, in addition to changes in
law, within the scope of the offset
provision, the ARPA recognizes that a
recipient government may make a
covered change through its legislature or
may delegate the authority to make a
covered change including, but not
limited to, to a sub-unit of government.
Treasury has revised the definition of
‘‘covered change’’ in the final rule using
the statutory language above to make
clear that the offset provision only
applies to such changes in law,
regulation, or administrative
interpretation. With respect to the
question of whether covered changes
could include administrative decisions
applicable to individuals, as discussed
above, a covered change includes a
change in law, regulation, or
administrative interpretation that
reduces any tax. Such changes may
apply to one or more individuals or
entities, provided that—consistent with
the statutory text—they result from a
change in law, regulation, or
administrative interpretation.
Prior Enactment and Phase-In
Public Comment: A number of
commenters expressed concern, or
requested clarification, regarding
changes that were enacted prior to the
covered period but take effect or phase-
in during the covered period. Several
commenters argued that the definition
of covered change should include
changes that were made prior to the
covered period but that phase-in during
the covered period.
Treasury Response: As discussed
above, the offset provision is triggered
by a reduction in net tax revenue
resulting from ‘‘a change in law,
regulation, or administrative
interpretation’’ made during the covered
period. Consistent with the statutory
text, ‘‘covered change’’ is defined to
include any final legislative or
regulatory action, a new or changed
administrative interpretation, and the
phase-in or taking effect of any statute
or rule where the phase-in or taking
effect was not prescribed prior to the
start of the covered period.
Conformity
Public Comment: A number of
commenters requested clarification on
the scope of covered changes.
Specifically, several commenters
requested clarification on the scope of
changes that would be considered as
conforming to recent changes in federal
law. These commenters requested that
Treasury clarify whether actions to
selectively conform with federal law
would be considered covered changes
and requested clarification regarding the
extent to which changes would be
considered ‘‘recent.’’ For example, these
commenters requested clarification
regarding conformance with the Global
Intangible Low-Taxed Income provision
of the 2017 Tax Cuts and Jobs Act. Some
commenters further argued that changes
that selectively conform or decouple
from the Internal Revenue Code should
be included within scope of covered
changes and thus subject to the offset
provision.
Treasury Response: The final rule
maintains the treatment of changes that
simply conform with recent changes in
federal law, such as those to conform to
recent changes in federal taxation of
unemployment insurance benefits and
taxation of loan forgiveness under the
Paycheck Protection Program 355 and
including other changes over the past
several years. Regardless of the
particular method of conformity and the
effect on net tax revenue, Treasury
views such changes as permissible
under the offset provision.
Accordingly, and for the reasons
discussed above, Treasury is
maintaining the definition of covered
change without change.
Tax revenue. The interim final rule’s
definition of ‘‘tax revenue’’ is based on
the Census Bureau’s definition of taxes,
used for its Annual Survey of State
Government Finances.356 It provides a
consistent, well-established definition
with which states and territories will be
familiar and is consistent with the
approach taken in section Revenue Loss
of this SUPPLEMENTARY INFORMATION
describing the implementation of
sections 602(c)(1)(C) and 603(c)(1)(C) of
the Social Security Act regarding
revenue loss. A number of commenters
expressed concern and requested
clarification regarding the definition of
‘‘tax revenue.’’ These comments and
responses are discussed in section
Revenue Loss of this Supplemental
Information and, for the reasons
discussed above, Treasury is finalizing
the definition of tax revenue without
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357 As discussed in section Revenue Loss of this
Supplementary Information, for purposes of
measuring revenue lost due to the pandemic under
sections 602(c)(1)(C) and 603(c)(1)(C), recipients
must adjust the amount of revenue lost to reflect
changes that resulted from a tax increase or
decrease. These adjustments do not apply to or
affect the definition of tax revenue.
358 U.S. Department of Commerce, Bureau of
Economic Analysis, GDP Price Deflator, https://
www.bea.gov/data/prices-inflation/gdp-price-
deflator (last visited Apr. 30, 2021). The FY 2019
baseline revenue is adjusted annually for inflation
to allow for direct comparison of actual tax revenue
in each year (reported in nominal terms) to baseline
revenue in common units of measurement; without
inflation adjustment, each dollar of reported actual
tax revenue would be worth less than each dollar
of baseline revenue expressed in 2019 terms.
359 Economy Statement by Catherine Wolfram,
Acting Assistant Secretary for Economy Policy, for
the Treasury Borrowing Advisory Committee
November 1, 2021 (Nov. 1, 2021), available at
https://home.treasury.gov/news/press-releases/
jy0453.
360 One commenter requested clarification that
references to fiscal year refer to the fiscal year of
the recipient. ‘‘Reporting year’’ is defined in the
interim final rule and final rule to mean ‘‘a single
year or partial year within the covered period,
aligned to the current fiscal year of the State or
Territory during the covered period.’’
361 By permitting recipient governments to use
actual or estimated values, the interim final rule
and final rule provide flexibility to recipients and
thus minimizes burden.
change and maintaining a consistent
definition of ‘‘tax revenue.’’357
Baseline. For purposes of measuring a
reduction in net tax revenue, the interim
final rule measures actual changes in tax
revenue relative to a revenue baseline
(baseline). The baseline is calculated as
fiscal year 2019 (FY 2019) tax revenue
indexed for inflation in each year of the
covered period, with inflation
calculated using the Bureau of
Economic Analysis’s Implicit Price
Deflator.358
Public Comment: Some commenters
expressed concern regarding the choice
of FY 2019 as the baseline, arguing that
the choice lacked justification and
would make the offset provision more
restrictive as applied to recipient
governments that experienced a decline
in revenue independent of making any
covered changes.
Treasury Response: Measuring a
‘‘reduction’’ in net tax revenue requires
identification of a baseline. In other
words, a ‘‘reduction’’ can be assessed
only by comparing two amounts. The
Act defines ‘‘covered period’’ to begin
on March 3, 2021, and thus the baseline
year must end prior to March 3, 2021.
As discussed in the interim final rule,
FY 2019 is the last full fiscal year prior
to the COVID–19 public health
emergency, and thus is consistent with
the statutory definition and does not
include the extraordinary effects of the
pandemic that began in 2020. Further,
as discussed above, the interim final
rule recognizes three potential ways that
a recipient government may offset or
‘‘pay for’’ a reduction in net tax revenue
due to a covered change: Increases in
taxes, decreases in spending, and
organic revenue growth. U.S. gross
domestic product rebounded to exceed
its pre-pandemic level in 2021,359
suggesting that an FY 2019 pre-
pandemic baseline is a reasonable
comparator for future revenue levels
and provides recipients with flexibility
to identify organic growth as a
permissible offset. Finally, this baseline
year is consistent with the approach
directed by sections 602(c)(1)(C) and
603(c)(1)(C), which identify the ‘‘most
recent full fiscal year of the [state,
territory, or Tribal government] prior to
the emergency’’ as the comparator for
measuring revenue loss. For these
reasons, Treasury is finalizing the
definition of ‘‘baseline’’ without change.
The interim final rule includes several
other definitions that are applicable to
the implementation of the offset
provision, such as the term ‘‘reporting
year.’’360 Commenters did not express
concern regarding other definitions in
the interim final rule.
2. Framework
The interim final rule provides a step-
by-step framework, to be used in each
reporting year, to determine whether a
state or territory used SLFRF funds to
offset a reduction in net tax revenue.
Consistent with section 602(c)(2) and
the interim final rule, the final rule
applies to states and territories:
(1) Covered changes that reduce tax
revenue. Under the interim final rule, a
recipient government identifies and
values covered changes that the
recipient government predicts will have
the effect of reducing tax revenue in a
given reporting year, similar to the way
it would in the ordinary course of its
budgeting process. The interim final
rule states that the value of these
covered changes may be reported based
on estimated values produced by a
budget model, incorporating reasonable
assumptions, that aligns with the
recipient government’s existing
approach for measuring the effects of
fiscal policies, and that measures these
effects relative to a current law baseline.
If the recipient would prefer, the
covered changes may also be reported
based on actual values using a statistical
methodology to isolate the change in
year-over-year revenue attributable to
the covered change(s), relative to the
current law baseline prior to the
change(s).361 Further, estimation
approaches may not use dynamic
methodologies that incorporate the
projected effects of macroeconomic
growth because macroeconomic growth
is accounted for separately in the
framework.
Estimation
Public Comment: A number of
commenters expressed concern that
estimating the value of covered changes
required a number of assumptions and
that the actual effects of covered
changes on tax revenue would be
difficult to predict. Several commenters
expressed support for the interim final
rule’s approach to dynamic scoring
methodologies, and one commenter
argued that the final rule should
prohibit the use of prior cash balances
in calculations of permissible tax cuts.
Treasury Response: Treasury
recognizes that estimating the effects of
covered changes requires assumptions
and that many other factors influence
the amount of tax revenue received. The
interim final rule addresses these
concerns in several ways. First, in
general and where possible, reporting
should be produced by the agency of the
recipient government responsible for
estimating the costs and effects of fiscal
policy changes. This approach offers
recipient governments the flexibility to
determine their reporting methodology
based on their existing budget scoring
practices and capabilities. In addition,
by relying on scoring methodologies
that do not incorporate projected effects
of macroeconomic growth, the
estimation of the value of covered
changes relies on fewer assumptions
and thus provide greater consistency
among states and territories. Finally, as
discussed below, the interim final rule
includes a de minimis threshold, below
which the sum of covered changes will
be deemed not to have any revenue-
reducing effects.
Timing of the Impact of Covered
Changes
Public Comment: Several commenters
expressed concern that recipient
governments, to evade the offset
provision, may backload the costs of
certain covered changes outside of the
covered period, and advocated that
covered changes be instead evaluated as
the net present value in the year that the
covered change is enacted. These
commenters argued that some tax cuts
could have effects on tax revenue for
many decades or could be structured to
take effect after the end of the covered
period.
Treasury Response: As discussed in
section Timeline for Use of SLFRF
Funds, SLFRF funds must be used to
cover costs incurred prior to December
31, 2024. Accordingly, SLFRF funds
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362 Data provided by the Urban-Brookings Tax
Policy Center for state-level EITC changes for 2004–
2017.
generally would not be able to offset a
reduction in net tax revenue occurring
after December 31, 2024.
For these reasons, Treasury is
maintaining this element of the interim
final rule without change.
(2) In excess of the de minimis. Under
the framework established in the
interim final rule, after establishing that
a covered change occurred, the recipient
government next calculates the total
value of all covered changes in the
reporting year resulting in revenue
reductions, identified in Step 1. If the
total value of the revenue reductions
resulting from these changes is below
the de minimis level, the recipient
government is deemed not to have any
revenue-reducing changes for the
purpose of determining the recognized
net reduction. If the total is above the de
minimis level, the recipient government
must identify sources of in-year revenue
to cover the full costs of changes that
reduce tax revenue. Under the interim
final rule, the de minimis level is
calculated as 1 percent of the reporting
year’s baseline.
Public Comment: Many commenters
supported the inclusion of the de
minimis, noting that the de minimis
protects recipients from penalty
resulting from minor or incidental
changes, minimizes administrative
burden, and enhances predictability of
the application of the offset provision.
Some commenters expressed concern
that the fixed threshold could result in
cliff effects.
Treasury Response: A clear de
minimis threshold supports recipient
governments’ compliance with the offset
provision. A de minimis level
recognizes the inherent challenges and
uncertainties that recipient governments
face, and thus allows relatively small
reductions in tax revenue without
consequence. In other words, states and
territories may make many small
changes to alter the composition of their
tax revenues or implement other
policies with marginal effects on tax
revenues. They may also make changes
based on projected revenue effects that
turn out to differ from actual effects,
unintentionally resulting in minor
revenue changes that are not fairly
described as ‘‘resulting from’’ tax law
changes. However, a de minimis does
not automatically result in
consequences under the offset
provision, since a recipient government
could demonstrate that other, non-
SLFRF funds to offset a net reduction in
tax revenue. Accordingly, any cliff
effects associated with a clear de
minimis threshold are mitigated by
other aspects of the framework.
Public Comment: Commenters
expressed a range of views regarding the
amount of the de minimis. Some
commenters argued that the de minimis
was too generous, noting that the choice
of 1 percent could, in some cases,
permit reductions in net tax revenue of
hundreds of millions of dollars. These
commenters advocated that the de
minimis be lowered (e.g., to 25 basis
points) or be tied to a fixed amount.
Other commenters argued that the
choice of de minimis was not well
supported by the statute, advocated for
a larger de minimis and suggested that
the amount be tied to the recipient
government’s total expenditures in the
prior fiscal year.
Treasury Response: Treasury adopted
a de minimis threshold as an
administrative accommodation for the
reasons discussed above. As discussed
in the interim final rule, Treasury
determined that the 1 percent de
minimis level reflects the historical
reductions in revenue due to minor
changes in state fiscal policies and was
determined by assessing the historical
effects of state-level tax policy changes
in state EITCs implemented to effect
policy goals other than reducing net tax
revenues.362
For these reasons, Treasury is
adopting the 1 percent de minimis
without change.
(3) Safe harbor. Next, under the
interim final rule, if the revenue
reduction caused by the covered
changes exceeds the 1 percent de
minimis threshold, the recipient
government compares the reporting
year’s actual tax revenue to the baseline.
If actual tax revenue is greater than the
baseline, Treasury will deem the
recipient government not to have any
recognized net reduction for the
reporting year, and therefore to be in a
safe harbor and outside the ambit of the
offset provision. This approach is
consistent with the ARPA, which
contemplates recoupment of SLFRF
funds only in the event that such funds
are used to offset a reduction in net tax
revenue. If net tax revenue has not been
reduced, the offset provision does not
apply. In the event that actual tax
revenue is above the baseline, the
organic revenue growth that has
occurred, plus any other revenue-raising
changes, by definition must have been
enough to offset the in-year costs of any
covered changes. One commenter
argued that the offset for organic growth
be adjusted to reflect population growth.
To minimize administrative burden, and
for the reasons discussed above,
Treasury is maintaining the
measurement of actual tax revenue
without adjustment for population
growth.
(4) Consideration of other sources of
funding. The recipient government will
then identify and calculate the total
value of changes that could pay for
revenue reduction due to covered
changes and sum these items. This
amount can be used to pay for up to the
total value of revenue-reducing changes
in the reporting year. These changes
consist of two categories:
(a) Tax and other increases in
revenue. The recipient government must
identify and consider covered changes
in policy that the recipient government
predicts will have the effect of
increasing general revenue in a given
reporting year. Recipient governments
should use the same approach to
identify and value covered changes that
increase tax revenue as applied to
covered changes that reduce tax
revenue. For the reasons discussed
above, Treasury is adopting these
aspects of identifying and valuing
covered changes without change.
(b) Covered spending cuts. A recipient
government also may cut spending in
certain areas to pay for covered changes
that reduce tax revenue, up to the
amount of the recipient government’s
net reduction in total spending as
described below. These changes must be
reductions in government outlays in an
area where the recipient government has
not spent SLFRF funds. To better align
with existing reporting and accounting,
the interim final rule considers the
department, agency, or authority from
which spending has been cut and
whether the recipient government has
spent SLFRF funds on that same
department, agency, or authority. If the
recipient government has not spent
SLFRF funds in a department, agency,
or authority, the full amount of the
reduction in spending counts as a
covered spending cut, up to the
recipient government’s net reduction in
total spending. If they have spent SLFRF
funds in such department, agency, or
authority, the SLFRF funds generally
would be deemed to have replaced the
amount of spending cut and only
reductions in spending above the
amount of SLFRF funds spent on the
department, agency, or authority would
count. This approach—allowing only
spending reductions in areas where the
recipient government has not spent
SLFRF funds to be used as an offset for
a reduction in net tax revenue—aims to
prevent recipient governments from
using SLFRF funds to supplant state or
territory funding in the eligible use
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4428 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
363 This cap is applied in section 35.8(c) of the
final rule, calculating the amount of funds used in
violation of the tax offset provision.
364 See Reporting Guidance, Section C.11,
available at https://home.treasury.gov/system/files/
136/SLFRF-Compliance-and-Reporting-
Guidance.pdf.
areas, and then using those state or
territory funds to offset tax cuts. Such
an approach helps ensure that SLFRF
funds are not used to ‘‘indirectly’’ offset
revenue reductions due to covered
changes.
Department, Agency, or Authority
Public Comment: Several commenters
supported the interim final rule’s
approach to considering spending cuts
at the department, agency, or authority
level, on the basis that this approach is
supported by the statutory language
prohibiting SLFRF funds from being
used to ‘‘directly or indirectly’’ offset a
reduction in net tax revenue. On the
other hand, some commenters argued
that the methodology for identifying
offsetting spending cuts was too
restrictive; specifically, that
measurement at the agency or
department-level may not adequately
account for the size and various
programs that could occur in one agency
or department. One commenter argued
that recipient governments should
instead be permitted to consider
spending cuts on a more granular sub-
unit of a department but noted that this
additional flexibility would come at the
cost of transparency and clarity.
Treasury Comment: Treasury
recognizes that some recipients may
vary in their budgeting processes, with
some budgeting on a department level
and others budgeting at more or less
granular sub-units of government.
Relying on spending at a department,
agency, or authority level allows
recipient governments to report how
SLFRF funds have been spent using
reporting units already incorporated
into their budgeting process.
Spending Cuts Baseline
Under the interim final rule, to
calculate the amount of spending cuts
that are available to offset a reduction in
tax revenue, the recipient government
must first consider whether there has
been a reduction in total net spending,
excluding SLFRF funds (net reduction
in total spending). This approach
ensures that reported spending cuts
actually create fiscal space, rather than
simply offset other spending increases.
A net reduction in total spending is
measured as the difference between
total spending in each reporting year,
excluding SLFRF funds spent, relative
to total spending for the recipient’s
fiscal year ending in 2019, adjusted for
inflation. Measuring reductions in
spending relative to 2019 reflects the
fact that the fiscal space created by a
spending cut persists so long as
spending remains below its original
level, even if it does not decline further,
relative to the same amount of revenue.
Public Comment: Several commenters
expressed concern regarding the
measurement of spending cuts relative
to the recipient’s FY 2019, for example
arguing that the choice did not take into
account increases in spending in 2020.
As one commenter noted, the fiscal year
2020 required extraordinary
intervention by recipient governments
and the ongoing public health
emergency continues to require
extraordinary intervention.
Treasury Response: FY 2019 provides
a reasonable and relatively generous
baseline for considering spending
because it is the last full fiscal year prior
to the COVID–19 public health
emergency and governments’
extraordinary efforts to address the
impact of the pandemic. This approach
also aligns with the FY 2019 baseline for
measuring revenue loss. Measuring
spending cuts from year to year would,
by contrast, not recognize any available
funds to offset revenue reductions
unless spending continued to decline,
failing to reflect the actual availability of
funds created by a persistent change and
limiting the discretion of states and
territories.
For the reasons discussed above,
Treasury is adopting the approach taken
in the interim final rule without change.
(5) Identification of amounts subject
to recoupment. If a recipient
government (i) reports covered changes
that reduce tax revenue (Step 1); (ii) to
a degree greater than the de minimis
(Step 2); (iii) has experienced a
reduction in net tax revenue (Step 3);
and (iv) lacks sufficient revenue from
other, permissible sources to pay for the
entirety of the reduction (Step 4), then
the recipient government will be
considered to have used SLFRF funds to
offset a reduction in net tax revenue, up
to the amount that revenue has actually
declined. That is, the maximum value of
the reduction revenue due to covered
changes that a recipient government
must cover is capped at the difference
between the baseline and actual tax
revenue.363 In the event that the
baseline is above actual tax revenue but
the difference between them is less than
the sum of revenue reducing changes
that are not paid for with other,
permissible sources, organic revenue
growth has implicitly offset a portion of
the reduction. The revenue reduction
cap implements this approach for
permitting organic revenue growth to
cover the cost of tax cuts.
Finally, a recipient government may
request reconsideration of any amounts
identified in a notice from Treasury as
subject to recoupment under this
framework. Comments and responses to
the recoupment process are discussed in
section Remediation and Recoupment of
this Supplemental Information.
3. Reporting
To facilitate the implementation of
the framework above, and in addition to
reporting required on eligible uses,
recipient governments are required to
report certain information. The interim
final rule indicated that Treasury would
provide additional guidance at a later
date and that, on an annual basis, it
expected each recipient government
would be required to provide the
following information:
•Actual net tax revenue for the
reporting year;
•Each revenue-reducing change
made to date during the covered period
and the in-year value of each change;
•Each revenue-raising change made
to date during the covered period and
the in-year value of each change; and
•Each covered spending cut made to
date during the covered period, the in-
year value of each cut, and
documentation demonstrating that each
spending cut is covered as prescribed
under the interim final rule.
Since the adoption of the interim final
rule, Treasury has provided guidance on
reporting regarding eligible uses and has
required recipient governments to
indicate whether they have made
covered changes and the value of such
changes.364
Reporting Burden
Public Comment: Some commenters
argued that the framework for
identifying and reporting impermissible
offsets was burdensome and that the
burdens should be accounted for under
Executive Order 13132 (Federalism,
August 4, 1999).
Treasury Response: Taking into
consideration comments received
regarding burden, Treasury is
considering a tiered approach to
reporting on the offset provision.
Specifically, under this approach, a
recipient would only be required to
report information to the extent needed
to determine whether SLFRF funds had
been used to offset a reduction in net tax
revenue. For example, a recipient
government would be required to report
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4429 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
365 ‘‘[G]overnment services would not include
interest or principal on any outstanding debt
instrument, including, for example, short-term
revenue or tax anticipation notes, or fees or
issuance costs associated with the issuance of new
debt. For the same reasons, government services
would not include satisfaction of any obligation
arising under or pursuant to a settlement agreement,
judgment, consent decree, or judicially confirmed
debt restructuring in a judicial, administrative, or
regulatory proceeding, except if the judgment or
settlement required the provision of government
services.’’ 86 FR 26796–97 (May 17, 2021).
information regarding permissible
offsets only if it had also reported
covered changes that were in excess of
the de minimis and had reported a net
reduction in tax revenue. Treasury will
provide additional guidance and
instructions on the reporting
requirements at a later date.
As discussed in section Regulatory
Analyses of this Supplemental
Information, Treasury maintains that the
final rule does not have federalism
implications within the meaning of
Executive Order 13132 (Federalism,
August 4, 1999). In the ARPA, Congress
requires states and territories to repay
the Secretary for amounts used in
violation of the prohibition on using
SLFRF funds to offset reductions in net
tax revenue, and it authorizes the
Secretary to issue regulations to carry
out this limitation and other
requirements of the statute. Section 6(b)
of Executive Order 13132 contemplates
that certain regulations will be required
by statute, as is the case with the
interim final rule and the final rule, in
which case section 6(b)(2)(B)’s
requirement to include a federalism
summary impact statement in the
Supplementary Information to the
regulation does not apply.
Notwithstanding the above, Treasury
has engaged in efforts to consult and
work cooperatively with affected state,
local, and Tribal government officials
and associations in the process of
developing the interim final rule.
Reporting Transparency
Public Comment: Several commenters
argued that information supporting the
net tax offset calculation should be
publicly available. Some of these
commenters requested that reporting be
made available in a machine-readable
format, and others advocated that
recipient governments disclose this
information on their local budget
agency’s website. These commenters
argued that making information
regarding tax changes publicly available
would increase transparency and
accountability. Further, several
commenters suggested that Treasury
provide a mechanism for citizens to
register their concerns about particular
tax actions.
Treasury Response: As discussed in
other sections, reporting requirements
promote transparency and
accountability for the general public and
constituents of recipient governments to
understand how state, local, and Tribal
governments have used SLFRF funds.
Since the publication of the interim
final rule, Treasury issued
supplementary reporting guidance in
the Compliance and Reporting Guidance
and in the User Guide: Treasury’s Portal
for Recipient Reporting (User Guide),
which addresses the particular content
and form of required reporting. Treasury
will continue to issue updated guidance
prior to each reporting period clarifying
any modifications to requested report
content and will continue to consider
how reporting can best support
transparency and accountability while
minimizing recipient administrative
burden. Further, as discussed in the
section Remediation and Recoupment,
Treasury may address potential
violations of this final rule based on
both information submitted from
recipients, either through quarterly
reports or self-reporting, and from other
sources of information (e.g., information
submitted from the public).
2. Deposit Into Pension Funds
Background: Subsection 602(c)(2)(B)
of the Social Security Act provides that
‘‘[n]o State or territory may use funds
made available under this section for
deposit into any pension fund.’’
Similarly, subsection 603(c)(2) of the
Social Security Act provides that ‘‘[n]o
metropolitan city, nonentitlement unit
of local government, or county may use
funds made available under this section
for deposit into any pension fund.’’
For purposes of this restriction on
pension deposits, the interim final rule
defined deposit to mean ‘‘an
extraordinary payment of an accrued,
unfunded liability.’’ The interim final
rule also specified that a deposit does
not include routine contributions made
as part of a payroll obligation, such as
the normal cost component of a pension
contribution or the component that
consists of amortization of unfunded
liabilities calculated by reference to the
employer’s payroll costs. The interim
final rule applied the restriction on
pension deposits to all recipients.
Public Comment: Several commenters
observed that the statutory restriction on
deposits into pension funds does not
apply to Tribal governments.
Treasury Response: In response,
Treasury is clarifying in the final rule
that the pension restriction does not
apply to Tribal governments.
Public Comment: Treasury also
received a comment expressing concern
that the interim final rule permitted
recipients to make a larger than usual
pension contribution, so long as the
timing of that contribution aligns with
the historical timing of contributions.
Treasury Response: The interim final
rule prohibited the use of SLFRF funds
from the ARPA to make extraordinary
payments, and the SUPPLEMENTARY
INFORMATION to the interim final rule
said that a payment would be an
extraordinary payment if it reduces a
liability incurred prior to the start of the
COVID–19 public health emergency and
occurs outside the recipient’s regular
timing for making the payment. At the
same time, however, as suggested by the
comment Treasury received, a payment
made at the regular time for pension
contributions may very well be an
extraordinary payment, for example, if it
is larger than a regular payment would
have been. Such a payment would be a
restricted use.
Public Comment: Other commenters
asked which pension contributions are
permitted.
Treasury Response: To be an eligible
use of SLFRF funds, a use must (1) be
eligible under one of the eligible use
categories and (2) not contravene any of
the applicable restrictions on uses of
funds. Some pension contributions may
be eligible because they both fit within
an eligible use category and do not
contravene the restriction on deposits
into pension funds (i.e., they are not an
extraordinary payment of an accrued,
unfunded liability). For example,
payroll and covered benefits for public
health and safety staff responding to
COVID–19 are an eligible use of funds
to respond to the public health and
negative economic impacts of the
pandemic; routine pension
contributions as part of an employee’s
regular covered benefits are permissible
under that eligible use category.
B. Other Restrictions on Use of Funds
1. Debt Service and Replenishing
Financial Reserves
The SUPPLEMENTARY INFORMATION to
the interim final rule provided that debt
service is not an eligible use of funds
either to respond to the public health
emergency or its negative economic
impacts or as a provision of government
services to the extent of revenue loss.365
The interim final rule also provided that
replenishing financial reserves (e.g.,
rainy day funds) is not an eligible use
of funds either to respond to the public
health emergency or its negative
economic impacts or as a provision of
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4430 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
366 ‘‘In addition, replenishing financial reserves
(e.g., rainy day or other reserve funds) would not
be considered provision of a government service,
since such expenses do not directly relate to the
provision of government services.’’
367 Table Z.1 of the Financial Accounts of the
United States, Board of Governors of the Federal
Reserve System, and Table 1.1.5 of National Income
and Product Accounts, Bureau of Economic
Analysis.
government services to the extent of
revenue loss.366
As explained in greater detail below,
Treasury, in the final rule, has retained
these restrictions and is clarifying that
these restrictions on the use of SLFRF
funds apply to all eligible use
categories.
Public Comments
Several commenters suggested that
debt service and reserve replenishment
should qualify as the provision of a
government service and be an eligible
use of funds, up to the amount of
revenue loss due to the pandemic. Many
commenters indicated that they had
been forced to borrow money or dip into
reserve funds to continue providing
government services during the public
health emergency and that using SLFRF
funds for resulting debt service or
reserve replenishment costs should
therefore be considered a government
service.
Many comments from Tribal
governments noted that their
governments depend on revenue from
Tribal enterprises to pay government
debts and provide services. The
comments suggest that it should be an
eligible use of SLFRF to replace lost
revenue from these enterprises that
would typically be used to pay debt
service costs. Other commenters argued
that paying the interest or principal on
debt should in some cases be considered
provision of government services and an
eligible use of funds as such
expenditures facilitate the provision of
government services.
Some commenters argued that debt
costs or reserve drawdowns during the
public health emergency constitute a
negative economic impact to recipient
governments, and thus debt service or
reserve replenishment should be an
eligible use to respond to that negative
economic impact. For example, several
commenters suggested that there should
be a specific carve-out allowing the use
of SLFRF funds for debt service on debt
incurred for government services after
January 27, 2020, the start of the public
health emergency, or short-term debt
incurred for this purpose. Others
suggested that recipient governments
should be able to service debt, up to the
amount of debt incurred in direct
response to the pandemic. These
commenters generally reasoned that the
cost of responding to the public health
emergency and its negative economic
impacts prior to APRA’s passage
constitutes a negative economic impact
of the pandemic.
Some commenters argued that the
specific impacts of the pandemic on the
travel, tourism, and hospitality sector
had affected their ability to meet debt
service costs. For example, some
commenters explained that specific tax
streams (e.g., hotel room taxes) or
revenue sources (e.g., hospitality
generally) are tied to specific debt
instruments and that these revenue
sources had declined during the public
health emergency; commenters argued
that this constitutes a negative economic
impact that SLFRF funds should be
permitted to address.
Finally, some commenters questioned
why servicing debt incurred after March
3, 2021 for an otherwise eligible project
(e.g., a broadband infrastructure project)
would not be an eligible use of funds.
On the other hand, many commenters
expressed support for the interim final
rule’s prohibition on use of funds for
debt service and reserve replenishment.
These commenters largely argued that
SLFRF funds should be used to provide
current services to communities in
response to the public health emergency
and that use of funds for debt service or
reserve replenishment represented,
respectively, payment for past costs or
savings for potential future costs. In
addition to the prohibition on debt
service and reserve replenishment, some
commentors suggested that the final rule
should also prevent funds from being
used for state UI trust fund
replenishment or for paying off debt
owed through UI trust funds. One
commenter argued that Treasury should
further restrict recipient governments,
for example by preventing recipients
from making cuts to an allowable budget
item, filling the budget gap with SLFRF
funds, and then using the savings from
the initial cut for debt service or reserve
replenishment.
Treasury Response
The final rule maintains the
restriction on the use of funds for debt
service or reserve replenishment for the
reasons described below and clarifies
that this restriction applies to all eligible
use categories.
First, debt service and reserve
replenishment costs do not constitute
the provision of services to constituents.
As noted in the interim final rule,
financing expenses—such as issuance of
debt or payment of debt service—do not
provide services or aid to citizens.
Similarly, contributions to rainy day
funds and similar financial reserves
constitute savings for future spending
needs. As such, these expenses do not
respond to the current and ongoing
public health and negative economic
impacts of the pandemic, nor do they
provide a government service.
Second, payments from the SLFRF are
intended to be used prospectively (see
section Timeline for Use of SLFRF
Funds). The interim final rule provided
that funds may be used for costs
incurred beginning on March 3, 2021,
which Treasury has maintained in the
final rule. Use of funds for debt service
on indebtedness issued prior to March
3, 2021 necessarily entails using funds
for costs incurred during prior time
periods, rather than the present
response to the public health emergency
and its negative economic impacts or to
provide government services.
Third, SLFRF funds provide
recipients with substantial latitude to
use funds to support the diverse needs
in their communities. With SLFRF
resources available, recipients have less
need to incur debt for otherwise-eligible
SLFRF uses.
Finally, given the strong performance
of overall revenues and low municipal
bond yields, state and local
governments generally do not face high
levels of fiscal stress. Limits on debt
service or replenishment of reserves
would not have a substantial impact on
recipients’ ability to provide services.
The ratio of state and local debt-to-GDP,
which spiked briefly during the
pandemic, has recovered to its pre-
pandemic level and remains well below
levels seen during the Great
Recession.367
2. Settlements and Judgments
The interim final rule also provided
that satisfaction of any obligation arising
under or pursuant to a settlement
agreement, judgment, consent decree, or
judicially confirmed debt restructuring
in a judicial, administrative, or
regulatory proceeding would not be an
eligible use of funds to respond to the
public health and negative economic
impacts of the pandemic or as a
government service provided under the
revenue loss eligible use category.
However, if the judgment or settlement
requires the recipient to provide
services that are otherwise eligible
under an SLFRF eligible use category,
specifically if the settlement or
judgment requires the recipient to
provide services to respond to the
COVID–19 public health emergency or
its negative economic impacts or to
provide government services, then those
costs are eligible uses of SLFRF funds.
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368 See Sec. 602(a)(1); 603(a)(1); 602(c)(1);
603(c)(1).
369 See 35.6(b); Coronavirus State and Local Fiscal
Recovery Funds, 86 FR at 26786.
370 Specifically, the Award Terms and Conditions
provide that ‘‘[r]ecipient understands and agrees it
must maintain a conflict of interest policy
consistent with 2 CFR 200.318(c), and that such
conflict-of-interest policy is applicable to each
activity funded under this award. Recipients and
subrecipients must disclose in writing to Treasury
or the pass-through agency, as appropriate, any
potential conflict of interest affecting the awarded
funds in accordance with 2 CFR 200.112.’’
371 An exception is statutes that do not apply
unless explicitly stated, including, e.g., the National
Environmental Policy Act and the Davis-Bacon Act.
In other words, satisfaction of a
settlement or judgment itself is not itself
an eligible use of funds, unless the
settlement requires the recipient to
provide services or incur other costs
that are eligible uses of SLFRF funds.
In the final rule, Treasury is
maintaining the interim final rule
approach and clarifying that it applies
to all eligible use categories and any use
of funds under the SLFRF program.
3. General Restrictions
In addition to the above restrictions,
there are three general restrictions that
apply to SLFRF funds. These
restrictions, which reflect existing laws
and regulations, the Award Terms and
Conditions, and application of the
ARPA statute, applied under the interim
final rule, and they continue to apply
under the final rule.
A primary purpose of the SLFRF in
the ARPA is to support efforts to stop
the spread of COVID–19.368 As
discussed above, recipients of SLFRF
funds are required to comply with the
Award Terms and Conditions
established for the use of such funds.
The interim final rule and final rule
implement this objective by, in part,
providing that recipients may use
SLFRF funds for COVID–19 mitigation
and prevention.369 See section Public
Health in Public Health and Negative
Economic Impacts.
The CDC has provided
recommendations and guidelines to
help mitigate and prevent COVID–19
and has identified vaccines and masks
as two of the best tools to prevent the
spread of COVID–19. The interim final
rule and final rule help support
recipients in stopping the spread of
COVID–19 through these
recommendations and guidelines.
Consistent with the purpose of the
ARPA and as implemented through the
interim final rule and final rule, a
recipient may not use SLFRF funds for
a program, service, or capital
expenditure that includes a term or
condition that undermines efforts to
stop the spread of COVID–19. A
program or service that imposes
conditions on participation or
acceptance of the service that would
undermine efforts to stop the spread of
COVID–19 or discourage compliance
with recommendations and guidelines
in CDC guidance for stopping the spread
of COVID–19 is not a permissible use of
SLFRF funds.
In other words, recipients may not use
funds for a program that undermines
practices included in the CDC’s
guidelines and recommendations for
stopping the spread of COVID–19. This
includes programs that impose a
condition to discourage compliance
with practices in line with CDC
guidance (e.g., paying off fines to
businesses incurred for violation of
COVID–19 vaccination or safety
requirements), as well as programs that
require households, businesses,
nonprofits, or other entities not to use
practices in line with CDC guidance as
a condition of receiving funds (e.g.,
requiring that businesses abstain from
requiring mask use or employee
vaccination as a condition of receiving
SLFRF funds).
Second, a recipient may not use
SLFRF funds in violation of the conflict
of interest requirements contained in
the Award Terms and Conditions or the
Office of Management and Budget’s
Uniform Guidance, including any self-
dealing or violation of ethics rules.
Recipients are required to establish
policies and procedures to manage
potential conflicts of interest.370
Treasury may provide further guidance
on the types of activities or conflicts
that the recipient’s policies and
procedures must cover.
Lastly, recipients should also be
cognizant that federal, state, and local
laws and regulations, outside of SLFRF
program requirements, may apply.
Recipients may not use revenue loss
funds, for instance, to violate other
background laws that limit the scope of
activities that may be conducted as
‘‘government services,’’ including other
state and federal laws. State and local
procurement, contracting, and conflicts-
of-interest laws and regulations may
include applicable requirements,
including, for example, required
procurement processes for contractor
selection or competitive price setting.
Furthermore, recipients are also
required to comply with other federal,
state, and local background laws,
including environmental laws 371 and
federal civil rights and
nondiscrimination requirements, which
include prohibitions on discrimination
on the basis of race, color, national
origin, sex, (including sexual orientation
and gender identity), religion, disability,
or age, or familial status (having
children under the age of 18).
IV. Program Administration Provisions
The interim final rule included
several sections that described the
processes and requirements for
administering the program on an
ongoing basis, specifically: Distribution
of funds, transfer of funds, use of funds
for program administration, reporting on
the use of funds, and remediation and
recoupment of funds used for ineligible
purposes.
To enhance clarity, this
SUPPLEMENTARY INFORMATION for the
final rule organizes these issues into one
section on Program Administration
Provisions. Recipients should also
consult Treasury’s Compliance and
Reporting Guidance for additional
information on program administration
processes and requirements, including
the applicability of the Uniform
Guidance.
A. Payments in Tranches to Local
Governments and Certain States
Section 602(b)(6)(A)(ii) of the Social
Security Act authorizes the Secretary to
withhold payment of up to 50 percent
of the amount allocated to each state
and territory for a period of up to 12
months from the date on which the state
or territory provides its statutorily-
required certification to the Secretary.
The Social Security Act requires any
such withholding be based on the
unemployment rate in the state or
territory as of the date of the
certification.
Under the interim final rule, Treasury
provided that it would withhold 50
percent of the amount allocated from
any state that had an unemployment
rate less than two percentage points
above its unemployment rate in
February 2020 as of the date the state
submitted its initial certification for
payment of funds pursuant to section
602(d)(1) of the Social Security Act.
Based on data available at the time of
the issuance of the interim final rule,
this threshold was expected to result in
a majority of states being paid in two
tranches. Treasury did not split the
payments of any territories.
Public Comment: One commenter
asked Treasury to allow a state to
request release of the portion of the
state’s second tranche payment after the
state could demonstrate that it had
allocated the entirety of the first
tranche, a need to continue ongoing
programs, and a desire to avoid
borrowing costs. Another commenter
asked Treasury to clarify whether states
that received half their funding in the
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4432 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
372 Treasury’s Update on Interpretation for the 75
Percent Budget Cap Calculation can be found at:
https://home.treasury.gov/system/files/136/NEU-
Update-75-Percent-Budget-Cap.pdf.
373 The Guidance on Distribution of Funds to
Nonentitlement Units of Local Government can be
found at this link: https://home.treasury.gov/
system/files/136/NEU_Guidance.pdf. The
Nonentitlement Unit of Local Government
Definitional and Data Methodology can be found at
this link: https://home.treasury.gov/system/files/
136/NEU_Methodology.pdf.
374 Treasury has interpreted NEU to generally
include both incorporated places and MCDs with
active functioning governments, subject to the state
determining, in the case of weak-MCD States, that
a weak MCD has the legal and operational capacity
to accept SLFRF funds and provides a broad range
of services that would constitute eligible uses under
ARPA. More details can be found in the
Nonentitlement Unit of Local Government
Definitional and Data Methodology, available at
https://home.treasury.gov/system/files/136/NEU_
Methodology.pdf.
first payment would receive their
second half payment within 12 months.
Similarly, some recipients requested
clarification on whether they could
obligate second tranche funds before
receipt or use second tranche funds for
costs incurred prior to receipt.
Treasury Response: The final rule
maintains the approach in the interim
final rule with two modifications. As
described in the interim final rule,
splitting payments for most states
provides consistency with payments to
local governments and encourages states
to adapt their use of funds to
developments that arise in the course of
the economic recovery. Moreover,
SLFRF funds may be used for costs
incurred during the period of
performance. Recipients may use their
jurisdiction’s budgeting and
procurement practices and laws to
determine how and when second
tranche funds may be obligated.
The final rule makes two adjustments
for operational purposes. First, the final
rule provides that Treasury expects to
make all second tranche payments to
states available beginning 12 months
from the date that funding was first
made available by Treasury (May 10,
2021) regardless of when each
individual state submitted its initial
certification. This should increase
clarity and consistency on the timing of
second tranche payments for both states
and Treasury. Second, also to ease
recipient states’ administrative burden,
the final rule strikes a requirement from
the interim final rule that states must
certify for their second tranche
payments and file all required reports at
least 30 days prior to the date on which
their second payment is made available.
The final rule simply requires that states
certify for their second tranche payment
and file all required reports before
receiving their second tranche payment,
with no 30 day wait period required.
B. Payments to Nonentitlement Units of
Local Government (NEUs) and Units of
Local Government (UGLGs) Within Non-
UGLG Counties
The interim final rule established
requirements related to distributions of
SLFRF funds by states and territories to
NEUs and UGLGs within non-UGLG
counties. Specifically, the interim final
rule provided that the total distribution
to an NEU cannot exceed 75 percent of
the most recent budget for the NEU (the
75 percent budget cap); a requirement
set forth in section 603(b)(2)(C)(iii) of
the Social Security Act. The interim
final rule SUPPLEMENTARY INFORMATION
defined the NEU’s budget for purposes
of calculating the 75 percent budget cap
as the NEU’s ‘‘most recent annual total
operating budget, including its general
fund and other funds, as of January 27,
2020.’’ The interim final rule further
provided that states and territories must
permit NEUs without formal budgets as
of January 27, 2020 to self-certify their
most recent annual expenditures as of
January 27, 2020 for the purpose of
calculating the 75 percent budget cap.
Further, the interim final rule
prohibited states and territories from
placing additional conditions or
requirements on distributions to NEUs
beyond those required by the statute,
the interim final rule, or Treasury’s
guidance and from offsetting any debt
owed by such NEUs against such
distributions.
Commenters predominantly focused
on the definition of an NEU’s budget for
purposes of calculating the 75 percent
budget cap, NEU allocations and
eligibility, and the prohibition on states
and territories imposing additional
conditions or requirements in the NEU
distribution process.
Definition of NEU Budget
Public Comment: Commenters
suggested that Treasury provide greater
clarification on the definition of an
NEU’s ‘‘most recent budget’’ for
purposes of the 75 percent budget cap
calculation. Treasury provided updated
guidance on its interpretation of the 75
percent budget cap on June 30, 2021,
and a commenter suggested that
Treasury incorporate such updated
interpretation into the SUPPLEMENTARY
INFORMATION of the final rule.
Treasury Response: Consistent with
the Update on Interpretation for the 75
Percent Budget Cap Calculation
published on June 30, 2021,372 the
SUPPLEMENTARY INFORMATION of the final
rule defines an NEU’s budget for
purposes of calculating the 75 percent
budget cap as its total annual budget,
including both operating and capital
expenditure budgets, in effect as of
January 27, 2020. The guidance also
gives states and territories flexibility to
provide further guidance to their NEUs
to operationalize the 75 percent budget
cap. Given the variance in local
financial accounting, this updated
definition will better facilitate states’
and territories’ distribution of SLFRF
funds to NEUs.
Allocations and Eligibility
Public Comment: Many commenters
provided feedback on specific allocation
calculations and eligibility of local
governments for NEU funding.
Commenters addressed how a locality
was classified as an NEU or
metropolitan city, deviations between
Treasury’s allocation calculations and
earlier estimates from other sources,
treatment of unincorporated areas,
sources for population data, and
Treasury’s allocation of NEU funding to
states and territories based on the
population of a state and territory
outside of its metropolitan cities. Two
commenters proposed that Treasury
provide an appeal process for localities
that were not identified on the List of
Local Governments used by states and
territories as part of the process in
which a state or territory determines the
eligibility of an NEU in accordance with
Treasury guidance, or for Minor Civil
Divisions (MCDs) that were denied
funding as part of a facts-and-
circumstances test undertaken by a
weak-MCD state.
Treasury Response: Neither the
interim final rule nor the final rule
addresses eligibility or allocations
issues, and comments on these topics
are outside the scope of this rulemaking.
These questions are addressed in other
Treasury guidance, including the
Guidance on Distribution of Funds to
Non-entitlement Units of Local
Government and Non-entitlement Unit
of Local Government Definitional and
Data Methodology guidance documents
available on Treasury’s website.373
Because Treasury interpreted the
definition of an NEU 374 in accordance
with the statute and established an NEU
distribution process in May 2021, the
final rule does not incorporate an
appeals process regarding the
definitions or the facts-and-
circumstances test used for eligibility
determinations.
Prohibition on Additional Conditions or
Requirements in the NEU Distribution
Process
Public Comment: One commenter
expressed support for Treasury’s
prohibition on states and territories
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4433 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
placing additional conditions or
requirements on distributions to NEUs.
This prohibition restricts states and
territories from imposing limitations on
NEUs’ use of SLFRF funds based on an
NEU’s proposed spending plan or other
policies, offsetting any debt owed by an
NEU against the NEU’s distribution, or
providing funding on a reimbursement
model. In particular, the commenter
noted that a reimbursement model
would lead to inequities in accessing
SLFRF funds.
Treasury Response: The final rule
maintains and finalizes the prohibition
on states and territories placing
additional conditions or requirements
on distributions to NEUs as well as to
any UGLGs within counties that are
non-UGLGs. Such conditions or
requirements may contravene the
statutory requirement that states and
territories make distributions based on
population and within the statutorily
defined timeframe.
Other Provisions
Treasury did not receive substantive
comments on the requirement that states
and territories permit NEUs without
formal budgets as of January 27, 2020 to
self-certify their most recent annual
expenditures as of January 27, 2020 for
the purpose of calculating the 75
percent budget cap, or Treasury’s
interpretation of the 75 percent budget
cap applying only to a consolidated
government’s NEU allocation under
section 603(b)(2) but not to a
consolidated government’s county
allocation under section 603(b)(3).
Further, Treasury did not receive
substantive comments on the interim
final rule’s allowance that states and
territories be able to use SLFRF funds
under section 602(c)(1)(A) to fund
expenses related to administering
payments to NEUs and units of general
local government. As such, the final rule
maintains these provisions as written in
the interim final rule without
modification.
Treasury received some comments
that are not addressed because they are
beyond the scope of the NEU provision
of the interim final rule or not
authorized by the statute, including
comments related to state accounting
practices, re-allocations of NEU
allocations that exceed the 75 percent
budget cap, and concerns around
eligible uses under SLFRF that small
local governments may find particularly
salient.
C. Timeline for Use of SLFRF Funds
The interim final rule provided that
‘‘[a] recipient may only use funds to
cover costs incurred during the period
beginning March 3, 2021 and ending
December 31, 2024.’’ The interim final
rule also provides that the period of
performance will run until December
31, 2026, which will provide recipients
an additional two years during which
they may expend funds for costs
incurred (i.e., obligated).
As explained in more detail below, in
the final rule Treasury is maintaining
these time periods. Treasury will retain
March 3, 2021 as the first date when
costs may be incurred, to provide for
forward-looking or prospective use of
funds and to align with the start date of
the ‘‘covered period’’ as such term is
used in section 602(c)(2)(A). The
deadline for costs to be incurred—
which the final rule clarifies means
obligated—December 31, 2024, is
specified in the ARPA statute, and
Treasury will retain December 31, 2026
as the end of the period of performance
to provide a reasonable amount of time
for recipients to liquidate obligations
incurred by the statutory deadline.
Public Comments. Some commenters
expressed concerns about costs incurred
before March 3, 2021 not being covered
and recommended the ‘‘start date’’ be
changed to January 2020 to coincide
with the declaration of the public health
emergency. These commenters argued
that recipient governments began
incurring costs to respond to COVID–19
and its economic impacts in January
2020 and that prior federal fiscal relief,
such as relief provided in the
Coronavirus Aid, Relief, and Economic
Security Act, did not fully compensate
recipient governments for these costs.
These commenters recommended that
costs incurred before March 3, 2021 that
otherwise fit within eligible use
categories for SLFRF should be
permissible uses of funds.
Some commenters asked Treasury to
clarify whether local governments are
subject to the same covered period as
states and territories beginning March 3,
2021. Commenters noted that section
603(g) of the Social Security Act does
not contain the same definition of
‘‘covered period’’ as section 602(g)(1) of
the Social Security Act, which
references a statutory provision that
only applies to states and territories.
Many commenters requested that the
deadline for costs to be incurred and the
period of performance be extended due
to the longer timeline for completing
water and sewer projects. One
commenter requested that recipients be
able to split projects into different
phases so that funds could be expended
on larger, longer term projects (e.g., by
obligating funds on one portion of the
project by the statutory deadline). One
commenter recommended that the
period of performance be extended for
at least two additional years beyond the
expenditure deadline set forth in the
interim final rule, i.e., until December
31, 2028. One commenter wrote that the
final rule should allow for extended
projects (e.g., over a time horizon of
more than ten years) for recipients
working to develop long-term water
supplies to prepare for extreme drought.
Treasury Response. In the final rule,
Treasury is maintaining March 3, 2021
as the date when recipients may begin
to incur costs using SLFRF funds. As
described in the interim final rule, use
of SLFRF funds is forward looking and
the eligible use categories provided by
statute are all prospective in nature.
While recipients may identify and
respond to negative economic impacts
that occurred during 2020, the costs
incurred to respond to these impacts
remain prospective. Further, Treasury
considers the beginning of the covered
period for purposes of determining
compliance with section 602(c)(2)(A) to
be a relevant reference point for this
purpose that provides some flexibility
for recipients that began incurring costs
in the anticipation of enactment of the
ARPA or in advance of the issuance of
the interim final rule and receipt of
payment.
Finally, establishing an earlier start
date would permit governments to use
funds received in 2021 to satisfy
obligations incurred in 2020. This use
raises a substantial risk of SLFRF funds
being used to supplant other recipient
funds previously used to pay for such
2020 obligations, freeing funds for
recipients to use for any purpose rather
than eligible uses of SLFRF funds under
the ARPA. Permitting such usage would
undermine the provisions setting forth
permissible and impermissible uses in
the statute. Therefore, a reading of the
statute permitting use of funds prior to
March 3, 2021 would be inconsistent
with the statutory structure.
In the final rule, Treasury is also
maintaining the deadlines by which
funds must be obligated (i.e., December
31, 2024) and by which such obligations
must be liquidated (i.e., December 31,
2026). The December 31, 2024 deadline
by which eligible costs must be incurred
is established by statute. Treasury is
finalizing its interpretation of
‘‘incurred’’ to be equivalent to the
definition of ‘‘obligation,’’ based on the
definition used for purposes of the
Uniform Guidance. Treasury is also
maintaining the period of performance,
which will run through December 31,
2026, and provides the deadline by
which recipients must expend obligated
funds. Most recipients received SLFRF
funds in the spring and summer of 2021,
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4434 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
375 Coronavirus State and Local Fiscal Recovery
Funds, Frequently Asked Questions, as of July 19,
2021; https://home.treasury.gov/system/files/136/
SLFRPFAQ.pdf. 376 See FAQ 4.10. Id.
meaning that they have over three years
to obligate and over five years to expend
funds. This provides a sufficient amount
of time for recipients to plan and
execute projects.
D. Transfers of Funds
Under section 602(c)(3) of the Social
Security Act, a state, territory, or Tribal
government may transfer SLFRF funds
to a ‘‘private nonprofit organization . . .
a Tribal organization . . . a public
benefit corporation involved in the
transportation of passengers or cargo, or
a special-purpose unit of state or local
government.’’ Similarly, section
603(c)(3) authorizes a local government
to transfer SLFRF funds to the same
entities (other than Tribal
organizations). Separately, section
603(c)(4) authorizes a local government
to transfer SLFRF funds to the state in
which it is located.
Entities Eligible for a Transfer Under
Sections 602(c)(3) and 603(c)(3)
Regarding transfers permitted under
sections 602(c)(3) and 603(c)(3) of the
Act, the interim final rule
Supplementary Information clarified
that the lists of transferees in these
sections are not exclusive and that state,
local, territorial, and Tribal governments
may transfer funds to other constituent
units of government or private entities
beyond those specified in the statute.
Public Comment: Several commenters
supported Treasury’s interpretation of
eligible transferees in sections 602(c)(3)
and 603(c)(3) as nonexclusive. However,
many commenters asked for greater
clarity as to whether specific entities not
listed in Treasury’s examples of eligible
subrecipients, such as nonprofits and
Tribal governments, were eligible
transferees. One commenter also asked
whether a recipient may transfer SLFRF
funds to a higher level of government,
such as a locality to the county in which
it is located.
Treasury Response: The final rule
clarifies that, in addition to the entities
enumerated in sections 602(c)(3) and
603(c)(3), recipients may transfer SLFRF
funds to any entity to carry out as a
subrecipient an eligible use of funds by
the transferor, as long as they comply
with the Award Terms and Conditions
and other applicable requirements,
including the Uniform Guidance at 2
CFR 200.331–200.333. Eligible
subrecipients include, but are not
limited to, other units of government
(including Tribal governments),
nonprofits and other civil society
organizations, and private entities.
Further, the final rule clarifies that
transfers may be made to both
constituent or non-constituent units of
government. For example, county A
may transfer SLFRF funds to county B
as long as county B abides by the use
restrictions applicable to county A and
the transfer would constitute an eligible
use of the funds by county A. County A
must receive a benefit proportionate to
the amount transferred.
As detailed in the interim final rule
Supplementary Information, once
transfers are received, the transferee
must abide by the restrictions on use
applicable to the transferor under the
ARPA and other applicable law,
regulations, and program guidance.
Further, the transferor remains
responsible for monitoring and
overseeing the subrecipient’s use of
SLFRF funds and other activities related
to the award to ensure that the
subrecipient complies with the statutory
and regulatory requirements and the
Award Terms and Conditions.
Recipients also remain responsible for
reporting to Treasury on their
subrecipients’ use of payments from the
SLFRF for the duration of the award.
Pooling Funds
Public Comment: Several commenters
asked for clarification about whether
they may pool SLFRF funds for a project
with other recipients, including when
doing so involves a transfer to another
entity, such as a regional organization or
government that undertakes projects on
behalf of a number of local
governments. Commenters also asked
for clarification on the oversight and
reporting obligations that would result
from such transfers.
Treasury Response: Consistent with
guidance issued following the interim
final rule,375 the final rule clarifies that
recipients may pool SLFRF funds for
projects, provided that the project is
itself an eligible use of SLFRF funds for
each recipient that is contributing to the
pool of funds and that recipients are
able to track the use of funds in line
with the reporting and compliance
requirements of the SLFRF. In general,
when pooling funds for regional
projects, recipients may expend funds
directly on the project or transfer funds
to another government or other entity
that is undertaking the project on behalf
of multiple recipients. To the extent
recipients undertake regional projects
via transfer to another organization or
government, recipients would need to
comply with the rules on transfers
specified in the final rule
SUPPLEMENTARY INFORMATION. A
recipient may transfer funds to a
government outside its boundaries (e.g.,
county transfers to a neighboring
county), provided that the transferor can
document that the transfer constitutes
an eligible expense of the transferor
government and that its jurisdiction
receives a benefit proportionate to the
amount transferred.
Blending and Braiding of Funds
Treasury is clarifying in the final rule
that, consistent with further guidance
issued by Treasury following the
interim final rule,376 recipients may
fund a project with both SLFRF funds
and other sources of funding, provided
that the costs are eligible costs under
each source program and are compliant
with all other related statutory and
regulatory requirements and policies.
The recipient must comply with
applicable reporting requirements for all
sources of funds supporting the SLFRF
projects and with any requirements and
restrictions on the use of funds from the
supplemental funding sources and the
SLFRF program. Specifically,
•All funds provided under the
SLFRF program must be used for
projects, investments, or services that
are eligible under the SLFRF program.
SLFRF funds may not be used to fund
an activity that is not, in its entirety, an
eligible use under the SLFRF program.
For example:
Æ SLFRF funds may be used in
conjunction with other sources of funds
to make an investment in water
infrastructure that is eligible under
section 602 or 603 of the Social Security
Act and the final rule.
Æ SLFRF funds could not be used to
fund the entirety of a water
infrastructure project that was partially,
although not entirely, an eligible use
under Treasury’s final rule. However,
the recipient could use SLFRF funds
only for a smaller component project
that does constitute an eligible use,
while using other funds for the
remaining portions of the larger planned
water infrastructure project that do not
constitute an eligible use. In this case,
the ‘‘project’’ for SLFRF purposes under
this program would be only the eligible
use component of the larger project.
•In addition, because SLFRF funds
must be obligated by December 31,
2024, and recipients must expend all
funds under the award no later than
December 31, 2026, recipients must be
able to, at a minimum, determine and
report to Treasury on the amount of
SLFRF funds obligated and expended
and when such funds were obligated
and expended.
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377 U.S. Department of the Treasury, Recipient
Compliance and Reporting Responsibilities, as of
November 5, 2021; https://home.treasury.gov/
policy-issues/coronavirus/assistance-for-state-local-
and-tribal-governments/state-and-local-fiscal-
Continued
Scope of a 603(c)(4) Transfer
Unlike in the case of a transfer under
sections 602(c)(3) or 603(c)(3), the
interim final rule SUPPLEMENTARY
INFORMATION specified that transfers
from a local government to the state
under section 603(c)(4) will result in a
cancellation or termination of the award
on the part of the transferor local
government and a modification of the
award to the transferee state.
Public Comment: Two commenters
suggested that Treasury expand section
603(c)(4) beyond transfers from
localities to the state to include transfers
from counties to their constituent local
governments, which would incentivize
counties to augment funds to address
the needs of local governments. These
commenters noted that counties are
disincentivized to make transfers under
section 603(c)(3), as is currently
allowed, as such transfers would require
that counties provide oversight and
monitoring over its subrecipients.
Treasury Response: Section 603(c)(4),
by its terms, applies only to transfers
from local governments to states.
Accordingly, the final rule must
maintain the interim final rule’s
limitation of section 603(c)(4) transfers
as applicable only to transfers from local
governments to states. Expansions of
section 603(c)(4) transfer authority
beyond transfers from local
governments to states were not
explicitly authorized by Congress. As
such, transfers under section 603(c)(4)
may only be made by local governments
to the state in which they are located.
Congress enumerated two separate
transfer provisions for local
governments—section 603(c)(3) and
section 603(c)(4)—that use different
language and were intended to operate
differently. Section 603(c)(4) contains
prefatory language (‘‘Notwithstanding
paragraph (1)’’—a reference to the
eligible SLFRF uses) that section
603(c)(3) does not. In other words,
section 603(c)(4) transfers are not
required to constitute an eligible use of
the funds from the perspective of the
transferor local government, but section
603(c)(3) transfers are required to
constitute an eligible use. A transfer to
accomplish an eligible use fits within
the recipient-subrecipient framework.
Further, treating section 603(c)(3)
transfers as leading to a cancellation of
the award for the transferor local
government would result in scenarios
that are inconsistent with the statutory
language. An award cancellation
pursuant to a section 603(c)(3) transfer
would result in either (1) non-
governmental entities becoming award
recipients under the program, which
would contravene the purpose of SLFRF
or (2) transfers to governmental and
non-governmental entities being treated
in a distinct and inconsistent manner.
That is, section 603(c)(3) transfers to
governmental entities would lead to
award cancellation but section 603(c)(3)
transfers to non-governmental entities
would lead to a recipient-subrecipient
relationship. Therefore, in the final rule,
Treasury maintains its distinct
treatment of a section 603(c)(3) transfer
and section 603(c)(4) transfer.
The final rule clarifies that a transfer
under section 603(c)(4) will result in a
modification, termination, or
cancellation of the award on the part of
the transferor local government and a
modification of the award to the
transferee state or territory. As detailed
in the SUPPLEMENTARY INFORMATION to
the interim final rule, the transferor
must provide notice of the transfer to
Treasury in a format specified by
Treasury. Until the local government
provides such notice and Treasury
provides confirmation of its acceptance
of the notice, the local government will
remain responsible for ensuring that the
SLFRF award is being used in
accordance with the Award Terms and
Conditions, section 602 or 603 of the
Social Security Act, the final rule, and
program guidance including reporting
on such uses of the award funds to
Treasury.
A state that receives a transfer from a
local government under section
603(c)(4) will be bound, by statute, by
all of the use restrictions set forth in
section 602(c) with respect to the use of
those SLFRF funds, including the
prohibitions on use of such SLFRF
funds to offset certain reductions in
taxes or to make deposits into pension
funds. The state will be responsible as
the prime recipient for the use and
reporting on any funds transferred
under section 603(c)(4) by the local
government. Such transferred funds will
be subject to the Award Terms and
Conditions previously accepted by the
state in connection with its SLFRF
award.
Subrecipient Transfers
Public Comment: Commenters sought
clarification as to how funds may be
transferred from a recipient to another
entity. For instance, one commenter
requested that recipients be able to
advance funds to subrecipients as
opposed to reimbursing subrecipients
for expenses incurred.
Treasury Response: Treasury did not
specify in the interim final rule whether
recipients may advance funds to
subrecipients. This omission was not
intended to prevent recipients from
advancing funds to subrecipients,
consistent with the various methods
permitted under the Uniform Guidance.
Given the broad flexibility that
recipients have in selecting eligible uses
and the broad variety of potential
subrecipients, Treasury believes that
specifying a single method of
advancement or reimbursement would
add unnecessary administrative
difficulty to program administration.
Recipients may determine the optimal
payment structure for the transfer of
funds (e.g., advance payments,
reimbursement basis, etc.) from
recipients to subrecipients. Ultimately,
recipients must comply with the eligible
use requirements and any other
applicable laws or requirements and are
responsible for the actions of their
subrecipients.
E. Administrative Expenses
The interim final rule permitted,
under the heading ‘‘[e]xpenses to
improve efficacy of public health or
economic relief programs,’’ use of funds
for ‘‘[a]dministrative costs associated
with the recipient’s COVID–19 public
health emergency assistance programs,
including services responding to the
COVID–19 public health emergency or
its negative economic impacts, that are
not federally funded.’’
Following release of the interim final
rule, Treasury issued Compliance and
Reporting Guidance that provided that
‘‘recipients may use funds for
administering the SLFRF program,
including costs of consultants to
support effective management and
oversight, including consultation for
ensuring compliance with legal,
regulatory, and other requirements.
Further, costs must be reasonable and
allocable as outlined in 2 CFR 200.404
and 2 CFR 200.405. Pursuant to the
SLFRF Award Terms and Conditions,
recipients are permitted to charge both
direct and indirect costs to their SLFRF
award as administrative costs. Direct
costs are those that are identified
specifically as costs of implementing the
SLFRF program objectives, such as
contract support, materials, and
supplies for a project. Indirect costs are
general overhead costs of an
organization where a portion of such
costs are [sic] allocable to the SLFRF
award such as the cost of facilities or
administrative functions like a director’s
office.’’377 Several commenters
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4436 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
recovery-funds/recipient-compliance-and-reporting-
responsibilities.
378 Id.
379 Coronavirus Relief Fund for States, Tribal
Governments, and Certain Eligible Local
Governments, 86 FR at 4192.
380 See FAQ 4.11. Coronavirus State and Local
Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
381 See U.S. Government Accountability Office,
Principles of Federal Appropriations Law, Third
Edition, Volume II, p. 10–99, GAO–06–382SP
(February 2006), https://www.gao.gov/assets/gao-
06-382sp.pdf.
requested clarity on which
administrative expenses are permissible
uses of funds and how recipients should
structure administrative costs.
In the final rule, Treasury is clarifying
that direct and indirect administrative
expenses are permissible uses of SLFRF
funds and are a separate eligible use
category from ‘‘[e]xpenses to improve
efficacy of public health or economic
relief programs,’’ which refers to efforts
to improve the effectiveness of public
health and economic programs through
use of data, evidence, and targeted
consumer outreach. For details on
permissible direct and indirect
administrative costs, recipients should
refer to Treasury’s Compliance and
Reporting Guidance.378 Costs incurred
for the same purpose in like
circumstances must be treated
consistently as either direct or indirect
costs.
F. Treatment of Loans
The interim final rule allowed
recipients to use SLFRF funds to make
loans for uses that are otherwise eligible
(for example, for small business
assistance). Subsequent guidance
clarified how recipients must track and
dispose of program income from loans,
consistent with the statutory
requirements for the timing of SLFRF
expenditures.
SLFRF funds must be used to cover
‘‘costs incurred’’ by the recipient
between March 3, 2021 and December
31, 2024. The interim final rule
provided that SLFRF funds must be
obligated by December 31, 2024 and
expended by December 31, 2026. In
using SLFRF funds to make loans,
recipients must be able to determine the
amount of funds used to make a loan
and must comply with restrictions on
the timing of the use of funds and with
restrictions in the Uniform Guidance.
When SLFRF funds are used as the
principal for loans, there is an
expectation that a significant share of
the loaned funds will be repaid. Thus,
recipients may not simply consider the
full amount of loaned funds to be
permanently expended and must
appropriately account for the return of
loaned funds.
For loans that mature or are forgiven
on or before December 31, 2026, the
recipient must account for the use of
funds on a cash flow basis, consistent
with Treasury’s guidance regarding
loans made by recipients using
payments from the Coronavirus Relief
Fund.379 Recipients may use SLFRF
funds to fund the principal of the loan
and in that case must track repayment
of principal and interest (i.e., ‘‘program
income,’’ as defined under 2 CFR 200).
When the loan is made, recipients must
report the principal of the loan as an
expense.
Repayment of principal may be re-
used only for eligible uses and is subject
to restrictions on the timing of the use
of funds. Interest payments received
prior to the end of the period of
performance will be considered an
addition to the total award and may be
used for any purpose that is an eligible
use of funds under the statute and final
rule. Recipients are not subject to
restrictions under 2 CFR 200.307(e)(1)
with respect to such payments.
For loans with maturities longer than
December 31, 2026, the recipient must
estimate the cost to the recipient of
extending the loan over the life of the
loan. In other words, at origination, the
recipient must measure the projected
cost of the loan and may use SLFRF
funds for the projected cost of the loan.
Recipients have two options for
estimating this amount: They may
estimate the subsidy cost (i.e., net
present value of estimated cash flows)
or the discounted cash flow under
current expected credit losses (i.e.,
CECL method). See further guidance
issued by Treasury for further
explanation.380
Public Comment: Many commenters
asked for further clarification on the
treatment of loans and the calculation of
‘‘costs incurred.’’ Some commenters
requested that grants made for eligible
activities prior to December 31, 2024 to
a revolving loan fund, an economic
development corporation, a land bank,
or a similar facility should be
considered obligated and expended at
the time of the grant. This would allow
funds to be expended by the grantee
beyond the covered period and for
funds returned to the grantee to be re-
invested in further uses outside of the
covered period.
Treasury Response: The final rule
maintains the treatment of loans from
the interim final rule and subsequent
guidance, as discussed above. This
approach is consistent with the
statutory requirement that funds be used
for costs incurred for eligible purposes
by December 31, 2024 and is consistent
with standard accounting practices and
the Uniform Guidance.
G. Use of Funds for Match or Cost-Share
Requirements
As a general matter and as referenced
in the SUPPLEMENTARY INFORMATION to
the interim final rule, funds provided
under one federal program may not be
used by a recipient to meet the non-
federal match or cost-share
requirements of another federal
program.
However, Treasury has since
determined that, consistent with this
general principle and the requirements
of the Uniform Guidance at 2 CFR
200.306(b)(5), the funds available under
sections 602(c)(1)(C) and 603(c)(1)(C) of
the Social Security Act for the provision
of government services, up to the
amount of the recipient’s reduction in
revenue due to the public health
emergency, generally may be used to
meet the non-federal cost-share or
matching requirements of other federal
programs. Federal funds that constitute
revenue sharing to state and local
governments may generally be used to
meet non-federal match
requirements.381 The broad eligible uses
of the SLFRF funds available under
sections 602(c)(1)(C) and 603(c)(1)(C) of
the Social Security Act, combined with
the purpose of these provisions (which
is to provide general fiscal assistance to
governments facing revenue losses due
to the public health emergency),
demonstrate that these funds are
revenue sharing. They thus should
generally be permitted to be used to
meet the non-federal match and cost-
share requirements of other federal
programs. As such, the SLFRF funds
available for the provision of
government services, up to the amount
of the recipient’s reduction in revenue
due to the public health emergency,
may be used to meet the non-federal
match requirements of the Drinking
Water State Revolving Fund and Clean
Water State Revolving Fund programs
administered by the EPA, for example.
Pursuant to 2 CFR 200.306(b) of the
Uniform Guidance, if funds are legally
available to meet the match or cost-
share requirements of an agency’s
federal program, such awarding agency
is required to accept such funds for the
purpose of that program’s match or cost-
share requirements except in the
circumstances enumerated in that
section. The Office of Management and
Budget has authority under 2 CFR
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4437 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
382 U.S. Department of the Treasury, Recipient
Compliance and Reporting Responsibilities, as of
November 5, 2021; https://home.treasury.gov/
policy-issues/coronavirus/assistance-for-state-local-
and-tribal-governments/state-and-local-fiscal-
recovery-funds/recipient-compliance-and-reporting-
responsibilities. 383 Id.
200.102 of the Uniform Guidance to
issue waivers of this requirement on
request of the relevant awarding agency.
Analogous requirements and waiver
authorities may be present in other
regulations. If a recipient seeks to use
SLFRF funds to satisfy match or cost-
share requirements for a federal grant
program, it should first confirm with the
relevant awarding agency that no waiver
has been granted for that program, that
no other circumstances enumerated
under 2 CFR 200.306(b) would limit the
use of SLFRF funds to meet the match
or cost-share requirement, and that there
is no other statutory or regulatory
impediment to using the SLFRF funds
for the match or cost-share requirement.
Note that SLFRF funds may not be used
as the non-federal share for purposes of
a state’s Medicaid and CHIP programs
because the Office of Management and
Budget has approved a waiver as
requested by the Centers for Medicare &
Medicaid Services pursuant to 2 CFR
200.102 of the Uniform Guidance and
related regulations.
SLFRF funds beyond those that are
available under sections 602(c)(1)(C) or
603(c)(1)(C) of the Social Security Act
for the provision of government services
may not be used to meet the non-federal
match or cost-share requirements of
other federal programs other than as
specifically provided for by statute. For
example, as discussed in other sections
of this final rule, section 40909 of the
Infrastructure Investment and Jobs Act
provides that SLFRF funds may be used
to meet the non-federal match
requirements of any authorized Bureau
of Reclamation project, and section
60102 of the Infrastructure Investment
and Jobs Act provides that the SLFRF
may be used to meet the non-federal
match requirements of the broadband
infrastructure program authorized under
that section (see sections Water and
Sewer Infrastructure and Broadband
Infrastructure).
H. Reporting
The interim final rule established
Treasury’s authority to collect
information from recipients through
requested reports and any additional
requests for information. The interim
final rule also provided Treasury
flexibility to extend or accelerate
reporting deadlines and to modify
requested content for the Interim
Report, Project and Expenditure reports,
and Recovery Plan Performance reports.
The SUPPLEMENTARY INFORMATION of
the interim final rule provided initial
guidance on the reporting requirements
for the SLFRF funds. States (defined to
include the District of Columbia),
territories, metropolitan cities, counties,
and Tribal governments were required
to submit one interim report and
quarterly Project and Expenditure
reports thereafter. Non-entitlement units
of local government were not required
to submit an interim report. States,
territories, and metropolitan cities and
counties with a population greater than
250,000 residents were also required to
submit an annual Recovery Plan
Performance report to Treasury. The
Supplementary Information of the
interim final rule provided guidance on
the deadlines and content required for
each type of report.
Public Comment: Treasury received
many comments on the content and
specific data elements required of
program reporting. Some commenters
expressed enthusiasm for including
particular details in reporting to
promote transparency. Other
commenters requested that Treasury
streamline reporting requirements to
avoid imposing undue administrative
burdens and compliance costs. Many
commenters requested further
clarification on or amendments to
particular elements of reporting content.
Some commenters requested that
reports and specific reporting elements
be public, including a request for a
public website with a number of
programmatic data metrics about the use
of SLFRF funds. Some commenters
sought clarification and guidance for
using the reporting portal, which allows
recipients to upload the required
information, or requested user
modifications to the portal. Finally,
some commenters requested that
Treasury provide example materials and
reporting metrics to aid recipient
understanding.
Treasury Response: Since the
publication of the interim final rule,
Treasury issued supplementary
reporting guidance in the Compliance
and Reporting Guidance and in the User
Guide: Treasury’s Portal for Recipient
Reporting (User Guide).382 Treasury has
addressed many of these comments in
the Compliance and Reporting Guidance
and User Guide and will continue to
issue updated guidance prior to each
reporting period clarifying any
modifications to requested report
content. Treasury notes that the interim
final rule did not address the specific
content and data elements required in
reporting, the reporting portal or
submission process, and the specific
form of reporting (e.g., example
templates, machine readability);
comments on these topics are outside
the scope of the final rule and, as noted,
are addressed instead in Compliance
and Reporting Guidance.
Reporting Deadlines
Public Comment: Treasury received
comments requesting various changes to
reporting deadlines to ease compliance
burdens. For example, Treasury
received several comments requesting
that Treasury delay early reporting
deadlines for various reasons, including
to align with the timeline for issuing a
final rule and to allow for more time for
recipients to determine SLFRF
allocations. Commenters also requested
changes to the immediacy of reporting,
for example requesting that Treasury
allow expenses to be reported with a lag
instead of the quarter in which they
were accrued or that reports be due 90
days after period close instead of 30
days after the close of a reporting
period. Some commenters requested
changes to the reporting frequency, for
example to report biannually rather than
quarterly.
Treasury Response: Treasury has
clarified reporting deadlines in the
Compliance and Reporting guidance.383
Treasury is retaining the reporting
deadline of 30 days after the close of the
reporting period to ensure timely
accounting of the use of SLFRF funds;
this timeline also aligns with practices
in many other federal programs. The
final rule maintains Treasury’s
discretion to extend or delay reporting
deadlines.
Administrative Costs for Reporting and
Compliance
Public Comment: Many commenters
sought clarification about whether
various administrative costs related to
reporting and compliance were eligible
uses of funds and asked for clarification
on the limits of such use.
Treasury Response: Treasury notes
that administrative costs are generally
allowable uses of SLFRF funds,
including for reporting. For additional
information on administrative expenses,
please see section Administrative
Expenses under Program
Administration Provisions.
Uniform Guidance
Public Comment: The SUPPLEMENTARY
INFORMATION of the interim final rule
clarified that SLFRF funds were
generally subject to the provisions of the
Uniform Administrative Requirements,
Cost Principles, and Audit
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384 Id.
385 Treasury will also consider the tax offset
provision on an annual basis.
386 Funds subject to recoupment cannot later be
returned.
Requirements for Federal Awards (2
CFR part 200) (the Uniform Guidance),
including the cost principles and
restrictions on general provisions for
selected items of cost. Treasury received
many comments requesting clarification
about or modifications to the
applicability of the Uniform Guidance
on various issues.
For example, one commenter
requested that Treasury remove
requirements that expenditures of funds
be made in conformance with the
Uniform Guidance, particularly in case
of expenditures made during period
from March 3, 2021 to the release of the
interim final rule, while other
comments requested that Treasury raise
the single-audit threshold from
$750,000 to $5 million. Commenters
sought clarification on items such as:
The applicability of the Uniform
Guidance for funds that are used for the
provision of government services, the
applicability of particular sections of the
cost principles provided in subpart E of
the Uniform Guidance, the applicability
of the procurement provisions of the
Uniform Guidance, and requirements
for subrecipient reporting.
Treasury Response: Recipients of
SLFRF funds are subject to the
provisions of the Uniform Guidance (2
CFR part 200) from the date of award to
the end of the period of performance on
December 31, 2026 unless otherwise
specified in this rule or program-
specific guidance. Costs must follow the
requirements in 2 CFR 200 Subpart E,
Cost Principles, including procurement
standards. Recipients that receive an
aggregate amount of federal financial
assistance in a given fiscal year that
exceeds the Single Audit threshold are
subject to the requirements in 2 CFR 200
Subpart F, Audit Requirements, unless
otherwise specified in program-specific
guidance.
SLFRF funds transferred to
subrecipients are also subject to
reporting and Uniform Guidance
requirements. Additional information
about the definition of subrecipients is
available in the section Distinguishing
Subrecipients versus Beneficiaries.
Recipients should refer to the
Assistance Listing for details on the
specific provisions of the Uniform
Guidance that do not apply to this
program. The Assistance Listing is
available on SAM.gov. Additional
changes to compliance and reporting
guidelines, including any clarifications
on Uniform Guidance requirements,
will be addressed in Compliance and
Reporting Guidance and the User
Guide.384
I. Remediation and Recoupment
Sections 602(e) and 603(e) of the
Social Security Act provide the
Secretary with the power to recoup
‘‘funds used in violation’’ of the Social
Security Act. The interim final rule
implemented these provisions by
establishing a process for recoupment.
Treasury may identify funds used in
violation of the Social Security Act
based on information submitted by
recipients, including as part of reporting
requirements, as well as information
from other sources.385 If a potential
violation is identified, Treasury will
provide the recipient an initial written
notice of the amount subject to
recoupment along with an explanation
of such amounts. A recipient then has
60 calendar days following receipt of a
recoupment notice to submit a request
for reconsideration containing any
information it believes supports its use
of funds. Within 60 calendar days of
receipt of the request for
reconsideration, the interim final rule
provided that a recipient will receive a
final notice of the Secretary’s decision
to affirm, withdraw, or modify the
recoupment notice. If the recipient did
not submit a request for reconsideration,
the initial notice of recoupment would
be deemed a final notice. A recipient
would then be required to repay any
amounts subject to recoupment within
120 calendar days of either the initial
recoupment notice, if the recipient does
not request reconsideration, or the final
recoupment notice, if the recipient does
request reconsideration.
Public Comments
Treasury received several comments
on the process for recoupment. For
instance, some commenters, including
many Tribal governments, requested
additional time to file a request for
reconsideration and submit repayment
to ensure that small entities have the
time necessary to carry out any
logistical steps and consult with
counsel. Treasury was also asked to
align its recoupment process with that
of the Office of the Inspector General
and other departmental administrative
processes to resolve findings, agency
decisions, and related timelines. One
commenter asked if the 120-calendar-
day time limit for repayment was based
on the initial notice, rather than a final
decision issued by the Secretary.
Several commenters expressed concern
regarding the recoupment process,
arguing that consideration of ‘‘all
relevant facts and circumstances’’
provided Treasury with too much
authority and created ambiguity. Other
commenters urged Treasury to establish
a robust enforcement and compliance
program and process and advocated for
the creation of a whistleblower
mechanism or public complaint process
to allow public and private entities to
report suspected misuses of funds.
Finally, some commenters requested
clarification regarding the process after
a violation is identified and becomes
final. One commenter also asked to
allow recipients to amend reports
deemed to contain ineligible expenses
and inform recipients how the agency
intends to resolve instances where a use
was later deemed unacceptable. Another
commenter asked if recouped funds
could be released back to the recipient.
Commenters also expressed concern
about Treasury’s authority to recoup
funds used in violation of the tax offset
provision. Some commenters requested
additional clarity around when tax cuts
would trigger Treasury’s recoupment
authority and the duration of Treasury’s
authority to seek recoupment of such
funds.
Treasury Response
The final rule largely preserves the
process established in the interim final
rule but includes several adjustments to
clarify certain elements.
Like the interim final rule, the final
rule provides that, after an initial
determination is made that a recipient
has used SLFRF funds in violation of
the law, a recipient may submit a
request for reconsideration concerning
any amounts identified in a notice
provided by Treasury. If a recipient
chooses to seek reconsideration of the
initial notice, the recipient must submit
a request for reconsideration as
provided under the final rule. If a
recipient does not request
reconsideration, the initial notice that
the recipient received will be deemed
the final notice.386 Treasury has
clarified that a recipient must invoke
and exhaust the procedures available
under section 35.10 of the final rule
prior to seeking judicial review of a
recoupment decision. Consistent with
Section 602(b)(6)(A)(ii)(III) of the Social
Security Act, if a state or territory is
required to repay funds pursuant to the
Secretary’s recoupment authority, the
Secretary may reduce the amount
payable to the state or territory in a
second tranche payment by the amount
that the state or territory would be
required to repay as recoupment.
In the final rule, Treasury has
clarified that, if it identifies a potential
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388 Treasury may address potential violations
based on information submitted from recipients,
either through quarterly reports or self-reported
information, and from other sources of information
as Treasury deems necessary and appropriate (e.g.,
press, information submitted from the public).
389 Treasury intends to work with recipients to
support the use of SLFRF funds consistent with the
law.
violation,387 it may request additional
information from a recipient before
initiating the recoupment process and,
where necessary, provide written notice
to the recipient along with an
explanation of such amounts potentially
subject to recoupment. Furthermore,
Treasury has also made clear that it
retains the ability to expedite or extend
timelines in any adjudication or pre-
adjudication process pursuant to section
35.4(b) of the final rule, although the
general timelines set forth in the interim
final rule are maintained in the final
rule.
This process is intended to provide
the recipient with an adequate
opportunity to present additional
information regarding its uses of funds
and provides flexibility for recipients to
determine the information relevant to
the particular facts and circumstances. It
is also flexible enough to align with
other adjudication procedures in other
ARPA recovery programs administered
by the Office of Recovery Programs at
Treasury. As discussed above, the initial
notice will provide recipients with an
explanation of the identified potential
violation in order to provide recipients
with a meaningful opportunity to
respond. Such initial notice will
generally include information regarding
the specific use of SLFRF funds and the
source of such information.388 This
process also will allow the Secretary to
take into consideration the information
provided by recipients, along with other
relevant information, to ensure SLFRF
funds are used in a manner consistent
with the Social Security Act.
Finally, Treasury expects to work
with recipients to support the use of
SLFRF funds consistent with the law.
For example, Treasury may request
additional information from a recipient
before initiating the recoupment
process. In addition, Treasury may
pursue other forms of remediation and
monitoring in conjunction with, or as an
alternative to, recoupment.389 These
efforts may include working with
recipients to identify and substitute
permissible uses of SLFRF funds or
amending uses of SLFRF funds to
comply with applicable restrictions.
In response to comments regarding
the amount of time provided to respond
to an initial notice, the final rule
clarifies that Treasury retains the ability
to expedite or extend timelines in any
adjudication or pre-adjudication process
pursuant to section 35.4(b) of the final
rule, although the general timelines set
forth in the interim final rule are
maintained in the final rule.
V. Regulatory Analyses
Executive Orders 12866 and 13563
Regulatory Impact Assessment
This final rule is a ‘‘significant
regulatory action’’ under section 3(f) of
Executive Order 12866 for the purposes
of Executive Orders 12866 and 13563
because it is likely to have an annual
effect on the economy of $100 million
or more.
As explained below, this regulation
meets a substantial need: ensuring that
recipients—states, territories, Tribal
governments, and local governments—
of SLFRF funds fully understand the
requirements and parameters of the
program as set forth in the statute and
deploy funds in a manner that best
reflects Congress’ intent to provide
necessary relief to recipient
governments adversely impacted by the
COVID–19 public health emergency.
Furthermore, as required by Executive
Orders 12866 and 13563, Treasury has
weighed the costs and benefits of this
final rule and varying alternatives and
has reasonably determined that the
benefits of the final rule to recipients
and their communities far outweigh any
costs.
The rule has been reviewed by the
Office of Management and Budget
(OMB) in accordance with Executive
Order 12866.
Executive Orders 12866 and 13563
Under Executive Order 12866, OMB
must determine whether this regulatory
action is ‘‘significant,’’ and therefore,
subject to the requirements of the
Executive Order and subject to review
by OMB. Section 3(f) of Executive Order
12866 defines a significant regulatory
action as an action likely to result in a
rule that may, among other things, have
an annual effect on the economy of $100
million or more. This rule is likely to
have an annual effect on the economy
of $100 million or more, and therefore,
it is subject to review by OMB under
section 3(f) of Executive Order 12866.
Treasury has also reviewed these
regulations under Executive Order
13563, which supplements and
explicitly reaffirms the principles,
structures, and definitions governing
regulatory review established in
Executive Order 12866. To the extent
permitted by law, section 1(b) of
Executive Order 13563 requires that an
agency: (1) Propose or adopt regulations
only upon a reasoned determination
that their benefits justify their costs
(recognizing that some benefits and
costs are difficult to quantify); (2) tailor
its regulations to impose the least
burden on society, consistent with
obtaining regulatory objectives taking
into account, among other things, and to
the extent practicable, the costs of
cumulative regulations; (3) select, in
choosing among alternative regulatory
approaches, those approaches that
maximize net benefits (including
potential economic, environmental,
public health and safety, and other
advantages; distributive impacts; and
equity); (4) to the extent feasible, specify
performance objectives, rather than the
behavior or manner of compliance a
regulated entity must adopt; and (5)
identify and assess available alternatives
to direct regulation, including providing
economic incentives—such as user fees
or marketable permits—to encourage the
desired behavior, or providing
information that enables the public to
make choices. Executive Order 13563
also requires an agency ‘‘to use the best
available techniques to quantify
anticipated present and future benefits
and costs as accurately as possible.’’
OMB’s Office of Information and
Regulatory Affairs (OIRA) has
emphasized that these techniques may
include ‘‘identifying changing future
compliance costs that might result from
technological innovation or anticipated
behavioral changes.’’
Based on the analysis that follows and
the reasons stated elsewhere in this
document, Treasury believes that this
final rule is consistent with the
principles set forth in Executive Orders
12866 and 13563. This Regulatory
Impact Analysis discusses the need for
regulatory action, the potential benefits,
and the potential costs. Treasury has
assessed the potential costs and
benefits, both quantitative and
qualitative, of this regulatory action, and
is issuing this final rule only on a
reasoned determination that the benefits
exceed the costs. In choosing among
alternative regulatory approaches,
Treasury selected those approaches that
would maximize net benefits.
Need for Regulatory Action
This final rule implements the $350
billion SLFRF program of the ARPA,
which Congress passed to help states,
territories, Tribal governments, and
localities respond to the ongoing
COVID–19 public health emergency and
its economic impacts. As the agency
charged with execution of these
programs, Treasury has concluded that
this final rule is needed to ensure that
recipients of SLFRF funds fully
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390 See, e.g., Gabriel Chodorow-Reich et al., Does
state Fiscal Relief During Recessions Increase
Employment? Evidence from the American
Recovery and Reinvestment Act, 4 American
Economic Journal 118–145 (2012) http://dx.doi.org/
10.1257/pol.4.3.118.
391 See, e.g., Fitzpatrick, supra note 278.
understand the requirements and
parameters of the program as set forth in
the statute and deploy funds in a
manner that best reflects Congress’
mandate for targeted fiscal relief. This
final rule governs the use of $350 billion
in grant funds from the federal
government to states, territories, Tribal
governments, and localities, generating
a significant macroeconomic effect on
the U.S. economy. Treasury has sought
to implement the program in ways that
maximize its potential benefits while
minimizing its costs. It has done so by:
aiming to target relief in key areas
according to the congressional mandate;
offering clarity to states, territories,
Tribal governments, and localities while
maintaining their flexibility to respond
to local needs; and limiting
administrative burdens.
Analysis of Benefits
Relative to a pre-statutory baseline,
the SLFRF funds provide a combined
$350 billion to state, local, and Tribal
governments for fiscal relief and support
for costs incurred responding to the
COVID–19 pandemic. Treasury believes
that this transfer will generate
substantial additional economic
activity, although given the flexibility
accorded to recipients in the use of
funds, it is not possible to precisely
estimate the extent to which this will
occur and the timing with which it will
occur. Economic research has
demonstrated that state fiscal relief is an
efficient and effective way to mitigate
declines in jobs and output during an
economic downturn.390 Absent such
fiscal relief, fiscal austerity among state,
local, and Tribal governments could
exert a prolonged drag on the overall
economic recovery, as occurred
following the 2007–2009 recession.391
This final rule provides benefits
across several areas by implementing
the four eligible use categories, as
defined in statute: strengthening the
response to the COVID–19 public health
emergency and its negative economic
impacts; replacing lost revenue to ease
fiscal pressure on state, local, and Tribal
governments that might otherwise lead
to harmful cutbacks in employment or
government services; providing
premium pay to essential workers; and
making necessary investments in water,
sewer, and broadband infrastructure.
These benefits are achieved in the
final rule through a broadly flexible
approach that sets clear guidelines on
eligible uses of SLFRF funds and
provides state, local, and Tribal
government officials discretion within
those eligible uses to direct SLFRF
funds to areas of greatest need within
their jurisdiction. While preserving
recipients’ overall flexibility, the final
rule includes several provisions that
implement statutory requirements and
will help support use of SLFRF funds to
achieve the intended benefits.
Preserving flexibility for recipients not
only serves an important public policy
goal by allowing them to meet
particularized and diverse needs of their
local communities but also enhances the
economic benefits of the final rule by
allowing recipients to choose eligible
uses of funds that provide the highest
utility in their jurisdictions.
In implementing the ARPA, Treasury
has also prioritized supporting
underserved communities that have
been disproportionately impacted by the
pandemic. The SLFRF program as
implemented by the final rule provides
even greater flexibility to recipients for
uses of funds in underserved
communities, recognizing that pre-
existing health and economic disparities
in these communities amplified the
impact of the pandemic there. In
general, investments in improving
health outcomes and economic
opportunities provide high economic
returns, so this approach is likely to
achieve substantial near-term economic
and public health benefits, in addition
to the longer-term benefits arising from
the allowable investments in water,
sewer, and broadband infrastructure.
The remainder of this section clarifies
how Treasury’s approach to key
provisions in the final rule will
contribute to greater realization of
benefits from the program.
Public Health and Negative Economic
Impacts
The eligible use category for
responding to the public health and
negative economic impacts of the
pandemic covers a wide range of
eligible uses of funds. Treasury
addresses several key uses of funds in
this analysis, as well as ways that
Treasury has structured this eligible use
to minimize recipient administrative
burden while also maintaining targeting
of the funding to entities that
experienced negative impacts from the
pandemic.
Government Employment: In order to
bolster the government’s ability to
effectively administer services, the final
rule allows for a broader set of eligible
uses to restore and support public sector
employment relative to the interim final
rule. In particular, eligible uses include
hiring up to a pre-pandemic baseline
that is adjusted for historic
underinvestment in the public sector by
allowing funds to be used to pay for
payroll and covered benefits associated
with the recipient increasing its number
of employees up to 7.5 percent above its
pre-pandemic baseline. Eligible uses
also include providing additional funds
for employees who experienced pay
cuts or were furloughed, avoiding
layoffs, providing worker retention
incentives, and paying for ancillary
administrative costs related to hiring.
Treasury believes this expanded
approach, relative to the interim final
rule, provides useful flexibility to
recipients, which may increase a state or
local government’s ability to effectively
deliver services to its residents. While
the interim final rule already explicitly
permitted using funds to restore
recipients’ workforces up to pre-
pandemic levels, the final rule’s
inclusion of an upward adjustment
factor recognizes that, as the population
or economy of a jurisdiction grows over
time, more workers are generally needed
to effectively meet responsibilities. It
also provides recipients greater room to
employ funds toward building back the
public sector workforce after years of
chronic underinvestment since the
Great Recession. Treasury arrived at the
7.5 percent adjustment factor through an
analysis of data from the Bureau of
Labor Statistics on state and local
government employment and data from
the Census Bureau on population to
estimate the extent of underinvestment
in the public sector since the onset of
the Great Recession. While Treasury
considered a range of methodologies
and point estimates to set the
adjustment factor, a 7.5 percent factor
errs on the side of recipient flexibility.
Treasury believes this adjustment
enhances recipients’ ability to identify
and meet the particularized needs of
their communities. Treasury also
believes that the additional enumerated
eligible uses for supporting the
workforce provide recipients several
means to help retain current workers,
decreasing turnover costs.
Identifying Eligible Populations
Treasury has provided several
methods for recipients to identify
households, populations, and
communities eligible for services that
respond to the public health and
negative economic impacts of the
pandemic. In general, these methods
seek to provide recipients options to
identify eligible populations with
minimal administrative burden, while
also maintaining targeting of the funds
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392 See U.S. Bureau of Labor Statistics,
Occupational Employment and Wage Estimates,
https://www.bls.gov/oes/current/oes_nat.htm (last
visited November 9, 2021).
to entities impacted by the pandemic.
Recipients also retain flexibility to
identify and serve other populations
and entities that experienced pandemic
impacts, ensuring that recipients can
meet the particularized needs of their
local communities.
Defining Low and Moderate Income:
To streamline the provision of funds
relating to negative economic impacts
resulting from the pandemic, Treasury
has created an eligibility standard
making it easier for recipients to provide
assistance to low- and moderate-income
populations without needing to identify
and document a specific negative
economic impact. Populations falling
under the definition of low income are
presumed to have been
disproportionately impacted by the
pandemic, while those falling under the
definition of moderate income are
presumed to have been impacted by the
pandemic. In addition, the final rule
recognizes categorical eligibility for
certain enumerated programs and
populations if a recipient chooses to
implement categorical eligibility when
identifying impacted and
disproportionately impacted
populations. Treasury considered
several options for eligibility standards
that would reduce administrative
burdens for recipients when
determining who qualifies as low and
moderate income.
One option involved defining a
household as low income or moderate
income based only on FPG thresholds
and could use levels lower than those
selected. This option involved setting
uniform thresholds throughout the
country.
A second option took a broader
approach, defining a household as low
income if it has (i) income at or below
185 percent of the FPG for the size of
its household or (ii) income at or below
40 percent of the AMI for its county and
size of household. The option defined a
household as moderate income if it has
(i) income at or below 300 percent of the
FPG for the size of its household or (ii)
income at or below 65 percent of the
AMI for its county and size of
household. The combination of an FPG
floor with AMI allows for a regional
adjustment in areas with substantially
higher costs and incomes. Finally,
Treasury also considered a range of FPG
and AMI thresholds above and below
these levels.
Treasury chose the second option.
Treasury believes that the higher FPG
floor will ease administrative burdens
by making more households
presumptively eligible for funds meant
to address negative economic impacts in
a targeted manner. With respect to the
low-income cutoff, 185 percent of the
FPG for a family of four is $49,025,
which is approximately the wage
earnings for a two-earner household
where both earners receive the median
wage in occupations, such as waiters
and waitresses and hotel clerks, that
were heavily impacted by COVID–19.
As such, this cutoff is likely to include
more workers in industries heavily
impacted by COVID–19, who may be
most likely to face disproportionate
impacts of the pandemic, than a lower
threshold.392 With respect to the
moderate-income cutoff, many
households with incomes between 200
percent and 300 percent of the FPG
struggle with a lack of economic
security, suggesting that 300 percent of
the FPG was an appropriate cutoff for
moderate income.
Treasury also considered relatively
higher thresholds for both an FPG and
AMI approach; however, increasing
income thresholds for presumed
eligibility increases the likelihood that
higher-income workers, who generally
experienced fewer economic impacts
from the pandemic, would become
presumed eligible for responsive
services. Providing services to
households that did not experience a
negative economic impact, or
experienced a relatively minimal
impact, would provide much less
benefit than serving households that
experienced more severe impacts,
diluting the benefits of the SLFRF
funds.
In all, Treasury anticipates that these
selected thresholds, combined with the
regional adjustment, will allow
resources to be targeted toward
individuals and households with the
greatest need while also reducing
administrative burdens on recipients.
Disproportionately Impacted
Populations: In the interim final rule,
Treasury enumerated a broader set of
eligible uses for disproportionately
impacted communities, in recognition
of the pre-existing health, economic,
and social disparities that contributed to
disproportionate pandemic impacts in
certain communities and that
addressing root causes of those
disparities constitutes responding to the
public health and negative economic
impacts of the pandemic. To identify
these communities and reduce
administrative burden, Treasury
allowed recipients to presume that
certain populations—those in QCTs and
those being served by Tribal
governments—were disproportionately
impacted. In the final rule, to further
decrease administrative burden and
enhance recipient flexibility, Treasury is
allowing recipients to also presume that
low-income households were
disproportionately impacted. Treasury
anticipates that adding low-income
households as a presumed eligible
population will maintain targeting of
funds to populations and communities
most likely to have experienced severe
pandemic impacts, while providing a
more flexible approach for recipients.
Identifying Impacted Classes: In the
final rule, Treasury reiterated its stance
in the interim final rule allowing
recipients to designate a class of
households or other entities as impacted
or disproportionately impacted and
provide responsive services. After
designating a class, recipients can serve
a household or entity by simply
identifying that the household or entity
is a member of the class. Relative to
restricting services to only presumed
eligible populations identified by
Treasury, this decision provides vital
administrative flexibility for recipients
that may identify particular impacted
classes in the context of their
jurisdiction. Treasury anticipates that
SLFRF funds will be targeted to
impacted or disproportionately
impacted communities, as recipients
must demonstrate that the designated
class experienced negative economic
impacts or meaningfully more severe
negative economic impacts. This
approach maintains the requirement
that entities served have to have
experienced a negative economic
impact, while simultaneously
minimizing any administrative costs
associated with meeting this
requirement.
Additional Enumerated Uses
The interim final rule enumerated
eligible uses of SLFRF funds to serve
both impacted and disproportionately
impacted communities. For example,
enumerated eligible uses to serve
impacted communities included food
assistance; rent, mortgage, or utility
assistance; and counselling and legal aid
to prevent eviction or homelessness.
Examples of enumerated eligible uses to
serve disproportionately impacted
communities included remediation of
lead paint or other lead hazards and
housing vouchers and assistance
relocating to neighborhoods with higher
levels of economic opportunity. In the
final rule, Treasury had the option to
retain, expand, or reduce enumerated
eligible uses, or shift use eligibility
between disproportionately impacted
and impacted communities. Many
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public comments suggested potential
expansions of uses, including shifting
enumerated eligible uses for
disproportionately impacted
communities to serve a broader
population of impacted communities.
Taking these comments into account,
Treasury generally took this approach,
in anticipation that the benefits of the
program will increase while recipient
administrative costs in identifying and
justifying non-enumerated uses of funds
will decrease.
Specifically, Treasury added
enumerated eligible uses for impacted
populations including paid sick,
medical, or family leave; health
insurance subsidies; and services for the
unbanked and underbanked, on the
basis that impacts of the pandemic that
were broadly experienced by many
communities would be addressed by
these uses. Treasury also shifted some
eligible uses, formerly restricted only to
disproportionately impacted
communities, to impacted communities.
These uses included community
violence intervention, assistance
accessing or applying to public benefits
and services, affordable housing
development, and services to promote
healthy childhood environments like
childcare and early learning. These uses
were shifted on the basis that the
associated impacts of the pandemic
were experienced by a broader
population, and responses are,
accordingly, eligible to benefit a broader
population.
Additionally, the final rule clarified
that investments in parks and other
public outdoor recreation spaces are
enumerated eligible uses for
disproportionately impacted
communities. In including these uses,
Treasury took into account evidence on
the social determinants of health, or the
ways that social context, like the
neighborhood built environment,
impacts health outcomes. By taking a
more holistic approach to public health,
the final rule allows recipients to
respond more broadly to factors that
contributed to the pandemic’s health
impacts and more fully mitigate those
health impacts.
To balance administrative flexibility
with a maintenance of focus on impacts
of the pandemic, Treasury considered,
but did not include, other proposed
enumerated uses that did not respond to
the impacts of the pandemic or
responded to impacts that were not
experienced generally across the
country by many jurisdictions and
populations. For example, Treasury did
not include pollution remediation
broadly, a proposed enumerated eligible
use for disproportionately impacted
communities, on the basis that
associated projects would only respond
to disproportionate impacts of the
pandemic depending on the specific
issue addressed. In sum, Treasury
expanded enumerated eligible uses
while retaining a focus on broadly
experienced impacts of the pandemic.
Treasury anticipates that this will give
recipients further flexibility to presume
eligibility and respond to pandemic
impacts without increasing
administrative burden.
Capital Expenditures: In the interim
final rule, Treasury permitted funds to
be used for a limited number of capital
expenditures mostly related to the
COVID–19 public health response. This
decision granted recipients some
discretion to use SLFRF funds to
address COVID–19 prevention and
mitigation through certain investments
in equipment, real property, and
facilities, which Treasury recognized as
critical components of the public health
response. In the final rule, Treasury
considered maintaining the provisions
in the interim final rule or expanding
allowable capital expenditures to
provide recipients greater flexibility to
pursue other capital investments that
are responsive to the public health
emergency and its negative economic
impacts. While expanding allowable
capital expenditures may increase the
risk that recipients will undertake large
expenditures that do not sufficiently
address intended harms, or address
harms in a less cost-efficient manner
than an alternative investment (e.g., a
program or service), expanding
allowable capital expenditures would
likely help fill critical gaps in
recipients’ response to the pandemic
and provide equipment and facilities
that generate benefits beyond SLFRF’s
period of performance. To preserve
flexibility while mitigating risks, the
final rule allows recipients to undertake
an expanded set of capital expenditures
while requiring additional written
justifications for projects with an
expected total cost at or over $1 million.
Treasury believes this approach
balances the implementation of
appropriate risk-based compliance
requirements and the provision of
administrative convenience for smaller
capital expenditures, while generally
allowing recipients the flexibility to
undertake a greater variety of responsive
capital expenditures.
Revenue Loss
Revenue Loss Formula: In this final
rule, Treasury’s approach to revenue
loss allows recipients to compute the
extent of reduction in revenue by
comparing actual revenue to a
counterfactual trend representing what
could have plausibly been expected to
occur in the absence of the pandemic.
The counterfactual trend begins with
the last full fiscal year prior to the
public health emergency (as required by
statute) and projects forward with an
annualized growth adjustment. Treasury
has made several adjustments in the
final rule to decrease administrative
burden, reducing costs for recipients,
while still accurately capturing
reductions in revenue due to the
pandemic.
Under the interim final rule, Treasury
specified that recipients calculate
revenue loss on a calendar year basis. In
this final rule, Treasury is providing
recipients the option to calculate
revenue loss on a calendar year or fiscal
year basis, which will allow recipients
the administrative flexibility to
minimize administrative burdens based
on the data available to them.
Treasury’s decision to incorporate a
growth adjustment into the calculation
of revenue loss ensures that the formula
more fully captures revenue shortfalls
relative to recipients’ pre-pandemic
expectations. Recipients will have the
opportunity to calculate revenue loss at
several points throughout the program,
recognizing that some recipients may
experience revenue effects with a lag.
This option to re-calculate revenue loss
on an ongoing basis is intended to result
in more support for recipients to avoid
harmful cutbacks in future years. In
calculating revenue loss, recipients will
look at general revenue in the aggregate,
rather than on a source-by-source basis,
given that recipients may have
experienced offsetting changes in
revenues across sources. The final rule
also provides for removing the impact of
tax increasing or decreasing changes,
which affect the amount of revenue
collected but are not ‘‘due to’’ the
pandemic, from the calculation of
revenue loss due to the public health
emergency. Both of these components of
Treasury’s approach provide a more
accurate representation of the effect of
the pandemic on overall revenues.
Revenue Loss Standard Allowance: In
addition to largely preserving the
formula to calculate revenue loss from
the interim final rule, Treasury also
added an alternative ‘‘standard
allowance’’ option for the revenue loss
calculation to this final rule. Treasury’s
decision to elect to allow a fixed amount
of loss that can be used to fund
‘‘government services’’ allows recipients
the flexibility to use minimal
administrative capacity on the
calculation if desired. The decision also
benefits recipients by allowing them to
avoid expending administrative
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393 Further, the final rule encourages, but does not
require, that recipients pursue broadband
infrastructure projects in locations not currently
served by a wireline connection that reliably
delivers at least 100 Mbps of download speed and
20 Mbps of upload speed.
394 Data from the Federal Communications
Commission shows that as of June 2020, 9.07
percent of the U.S. population had no available
cable or fiber broadband providers providing greater
than 25 Mbps download speeds and 3 Mbps upload
speeds. Federal Communications Commission,
Fixed Broadband Deployment, https://
broadbandmap.fcc.gov/#/ (last visited May 9, 2021).
395 See Federal Communications Commission,
Broadband Speed Guide, available at https://
www.fcc.gov/consumers/guides/broadband-speed-
guide (last visited October 28, 2021).
resources to determine how unique
variations in revenue interact with the
revenue loss formula.
Premium Pay
Per the ARPA statute, recipients have
broad latitude to designate critical
infrastructure sectors and make grants to
third-party employers for the purpose of
providing premium pay. While the final
rule provides significant flexibility to
implement the statutory requirement
that premium pay respond to essential
workers, it requires recipients give
written justification in the case that
premium pay would increase a worker’s
annual pay above a certain threshold or
is awarded to an individual whose
annual pay is already above that
threshold. To set this threshold,
Treasury analyzed data from the Bureau
of Labor Statistics to determine a level
that would not require further
justification for premium pay to the vast
majority of essential workers, while
requiring higher scrutiny for provision
of premium pay to higher earners who,
even without premium pay, would
likely have greater personal financial
resources to cope with the effects of the
pandemic. Alternatively, a recipient
need not submit written justification to
Treasury if the worker receiving
premium pay is eligible for overtime
under the FLSA. Treasury believes this
alternative, which is an addition to the
final rule, will give recipients more
flexibility and will simplify application
of the final rule as employers, public
and private, are already legally required
to determine whether an employee is
eligible for overtime pay under the
FLSA. Treasury believes the threshold
and overtime eligibility provision in the
final rule strike the appropriate balance
between preserving flexibility and
helping encourage use of these
resources to help those in greatest need.
The final rule also requires that workers
eligible for premium pay have regular
in-person interactions or regular
physical handling of items that were
also handled by others. This
requirement will help encourage use of
financial resources for those who have
endured the heightened risk of
performing essential work.
Water and Sewer Infrastructure
In the interim final rule, Treasury
aligned eligible uses of funds for water
and sewer infrastructure to those
projects eligible to receive financial
assistance through the DWSRF and
CWSRF administered by the EPA.
The benefits of this approach
included giving recipients an existing
list that would provide them clarity as
well as flexibility in identifying eligible
projects, particularly given the broad
range of projects eligible under the
CWSRF and DWSRF. The approach also
ensured that projects would conform to
vetted project types from a widely used
program. Treasury received comments
from recipients requesting additional
project categories to be considered
eligible, indicating a potential cost to
maintaining alignment with the CWSRF
and DWSRF.
For the final rule, Treasury has
expanded eligibility to include several
additional project types beyond those
covered by the CWSRF and DWSRF.
Treasury believes that expanded
eligibility will benefit recipients by
allowing them additional flexibility to
pursue beneficial projects, including
project categories that support the
provision of drinking water and the
removal, management, and treatment of
wastewater and stormwater: Additional
stormwater management projects,
private well infrastructure, additional
projects that address lead in water, and
certain dam and reservoir rehabilitation
projects undertaken to address the
provision of drinking water. A potential
cost of this approach is that uses beyond
the CSWRF and DWSRF may have less
public guidance available to understand
project eligibilities. However, Treasury
anticipates that this eligibility
expansion will provide a net benefit to
recipients by allowing them to pursue
projects relevant to their goals that were
ineligible under the interim final rule.
The expansion to allow private well
infrastructure may also affect the
distributional impact of SLFRF. Private
wells disproportionately serve rural
Americans, including low-income
households, and expanding eligibility to
include this use may allow SLFRF funds
to benefit such households. While
distributional impacts are uncertain,
Treasury believes that the potential for
benefits to accrue to rural and low-
income households makes it important
to clarify that these types of projects are
eligible.
Broadband Infrastructure
In the final rule, Treasury expands
eligible areas for broadband investment
by requiring that recipients invest in
projects designed to provide service to
households and businesses with an
identified need for additional
broadband investment, including
increasing access to high-speed
broadband, increasing the affordability
of broadband services, and improving
the reliability of broadband service.393
Treasury considered multiple
alternatives when selecting this
standard. The threshold for the interim
final rule allowed benefits to accrue in
a more targeted manner to the
approximately 9 percent of the country
with access to speeds under the 25/3
Mbps threshold.394 However, since
SLFRF funds are distributed to tens of
thousands of governments across the
country with a variety of broadband
needs, Treasury believes that allowing
recipients greater flexibility to
determine locations to serve in their
jurisdictions—including considering
affordability and competition barriers—
will lead to greater long-term public
benefit. Further, given that many federal
broadband grant programs are focused
solely on unserved and underserved
areas, Treasury believes that the final
rule’s flexibility enables these funds to
fill an important role in the overall
federal broadband landscape.
In the final rule, Treasury also
requires that broadband projects must
meet a standard of reliably delivering at
least 100 Mbps download speeds and
upload speeds, or in cases where it is
not practicable to do so, reliably
delivering at least 100 Mbps download
speed and between at least 20 Mbps and
100 Mbps upload speed while being
scalable to 100 Mbps upload and
download speeds. Treasury expects that
this threshold will yield long-term
benefits and allow networks to meet
both pandemic-related and future needs.
The Federal Communications
Commission (FCC) estimates that
currently a household with two to three
remote learners using the internet
simultaneously needs a connection
supporting 100 Mbps download
speeds.395 While a lower threshold may
have resulted in lower near-term costs
to build, it would have potentially
constrained future utility from the
infrastructure by producing
infrastructure that would more
quickly—potentially in the near-term—
become obsolete and no longer meet
household needs, potentially requiring
sooner replacement and generally
decreasing the return on investment. As
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such, projects meeting a lower threshold
could not be considered ‘‘necessary’’
investments in broadband
infrastructure, so Treasury has retained
the threshold from the interim final
rule.
Further, the final rule adds a
requirement that recipients address the
affordability needs of low-income
consumers in accessing broadband
networks funded by SLFRF, either by
requiring service providers that provide
service to households to either
participate in the FCC’s Affordable
Connectivity Program (ACP), or a broad-
based affordability program with
commensurate benefits. Treasury
believes that this requirement will
increase the number of customers that
are able to take advantage of broadband
infrastructure funded by SLFRF,
increasing the effectiveness of funds in
connecting households and businesses
to high-speed internet that is critical to
work, health, and education. There is a
potential that this requirement may
marginally increase project costs for
recipients and providers, but this
impact is uncertain, given the varying
business models and pricing structures
of broadband projects and providers.
Labor Standards
In this Supplementary Information for
the final rule, Treasury encourages
recipients to ensure that capital
expenditures to respond to the public
health and negative economic impacts
of the pandemic and water, sewer, and
broadband projects use strong labor
standards, including, for example,
project labor agreements and
community benefits agreements that
offer wages at or above the prevailing
rate and include local hire provisions.
Treasury believes that its
encouragement of labor standards
carries benefits because it will ensure
that workers have access to strong
employment opportunities associated
with infrastructure projects, which will
in turn aid the economic recovery.
Treasury believes that infrastructure
projects may also benefit from stronger
labor standards due to the potential of
these standards to ensure a stronger
skilled labor supply and minimize labor
disputes and workplace injuries, which
can result in costly disruptions to
projects. Treasury assesses that these
benefits will increase the economy and
efficiency of infrastructure projects
undertaken through SLFRF and will
outweigh the potential for a marginal
increase in labor costs.
Splitting Payments to Recipients
Treasury is required by statute to
deliver funds to local governments in
two payments separated by at least
twelve months, and the interim final
rule provided for split payments to a
majority of states as well. As discussed
above, splitting payments ensures that
recipients can adapt spending plans to
evolving economic conditions and that
at least some of the economic benefits
will be realized in 2022 or later.
However, consistent with authorities
granted to Treasury in the statute,
Treasury recognizes that a subset of
states with significant remaining
elevation in the unemployment rate
could face heightened additional near
term needs to aid unemployed workers
and stimulate the recovery. Therefore,
for a subset of state governments,
Treasury has provided funds in one
payment. Treasury believes that this
approach strikes an appropriate balance
between the general reasons to provide
funds in two payments and the
heightened additional near-term needs
in specific states. As discussed above,
Treasury set a threshold based on
historical analysis of unemployment
rates in recessions.
Reaching Underserved Communities
Finally, the final rule aims to promote
and streamline the provision of
assistance to individuals and
communities in greatest need,
particularly communities that have been
historically underserved and have
experienced disproportionate impacts of
the COVID–19 crisis. Targeting relief is
in line with Executive Order 13985,
‘‘Advancing Racial Equity and Support
for Underserved Communities Through
the Federal Government,’’ which laid
out an Administration-wide priority to
support ‘‘equity for all, including people
of color and others who have been
historically underserved, marginalized,
and adversely affected by persistent
poverty and inequality.’’ To this end,
the final rule enumerates a list of
services that may be provided using
SLFRF funds in disproportionately
impacted communities, including low-
income areas, to address the more
severe impacts of the pandemic in these
communities; establishes the
characteristics of essential workers
eligible for premium pay and
encouragement to serve workers based
on financial need; provides that
recipients may use SLFRF funds to
restore state and local workforces,
where women and people of color are
disproportionately represented; and
requires that broadband infrastructure
projects participate in programs to
support affordability of broadband
service. Collectively, these provisions
will promote use of resources to
facilitate the provision of assistance to
individuals and communities with the
greatest need.
Analysis of Costs
This regulatory action will generate
administrative costs relative to a pre-
statutory baseline. This includes,
chiefly, costs required to administer
SLFRF funds, oversee subrecipients and
beneficiaries, and file periodic reports
with Treasury. It also requires states to
allocate SLFRF funds to nonentitlement
units, which are smaller units of local
government that are statutorily required
to receive their funds through states.
Treasury expects that the administrative
burden associated with this program
will be moderate for a grant program of
its size. Treasury expects that many
recipients receive direct or indirect
funding from federal government
programs and that many have
familiarity with how to administer and
report on federal funds or grant funding
provided by other entities. In particular,
states, territories, and large localities
will have received funds from the
Coronavirus Relief Fund (CRF) and
Treasury expects them to rely heavily
on established processes developed
through that program or other prior
grant funding, mitigating burden on
these governments. Treasury has
enhanced the level of recipient
reporting as compared to the CRF,
incorporating feedback from the
Government Accountability Office and
others that additions would improve the
oversight of recipients’ use of funds. To
balance the oversight benefits with the
costs of added reporting burdens,
Treasury has incorporated other
mechanisms to mitigate burden. For
example, Treasury is ‘‘tiering’’ reporting
requirements so that recipients that
receive relatively lesser amounts of
SLFRF funds are required to submit less
frequent reports than recipients
receiving greater amounts of funds.
Treasury is noting administrative costs
as a generally allowable use of SLFRF
funds, which defrays administrative
expenses to recipients that may be
needed to comply with reporting
requirements. Treasury has also
provided options for recipients to use
eligibility thresholds they are already
familiar with during administration of
SLFRF funds, which will enable
recipients to avoid the costs of setting
up new programs and reporting
mechanisms to meet reporting and
compliance requirements. For example,
Treasury has permitted recipients to use
‘‘categorical eligibility’’ when delivering
assistance to particular groups, such as
impacted or disproportionately
impacted households.
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396 See Coronavirus State and Local Fiscal
Recovery Funds, Frequently Asked Questions, 10.2,
as of July 19, 2021; https://home.treasury.gov/
system/files/136/SLFRPFAQ.pdf.
In making implementation choices,
Treasury has hosted numerous
consultations with a diverse range of
direct recipients—states, cities,
counties, and Tribal governments—
along with various communities across
the United States, including those that
are underserved. Furthermore, Treasury
has made clear in guidance that SLFRF
funds may be used to cover certain
expenses related to administering
programs established using SLFRF
funds.396
Executive Order 13132
Executive Order 13132 (entitled
Federalism) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial, direct compliance costs on
state, local, and Tribal governments, and
is not required by statute, or preempts
state law, unless the agency meets the
consultation and funding requirements
of section 6 of the Executive Order. This
final rule does not have federalism
implications within the meaning of the
Executive Order and does not impose
substantial, direct compliance costs on
state, local, and Tribal governments or
preempt state law within the meaning of
the Executive Order. The compliance
costs are imposed on state, local, and
Tribal governments by sections 602 and
603 of the Social Security Act, as
enacted by the ARPA. Notwithstanding
the above, Treasury has engaged in
efforts to consult and work
cooperatively with affected state, local,
and Tribal government officials and
associations in the process of
developing the interim final rule and
this final rule. Pursuant to the
requirements set forth in section 8(a) of
Executive Order 13132, Treasury
certifies that it has complied with the
requirements of Executive Order 13132.
Administrative Procedure Act
The Administrative Procedure Act
(APA), 5 U.S.C. 551 et seq., generally
requires public notice and an
opportunity for comment before a rule
becomes effective. However, the APA
provides that the requirements of 5
U.S.C. 553 do not apply ‘‘to the extent
that there is involved . . . a matter
relating to agency . . . grants.’’ The
APA also provides an exception to
ordinary notice-and-comment
procedures ‘‘when the agency for good
cause finds (and incorporates the
finding and a brief statement of reasons
therefor in the rules issued) that notice
and public procedure thereon are
impracticable, unnecessary, or contrary
to the public interest.’’ 5 U.S.C.
553(b)(B). The interim final rule was
issued without prior notice and
comment procedures because it
implemented statutory conditions on
the eligible uses of SLFRF funds, and
addressed the payment of those funds,
the reporting on uses of funds, and
potential consequences of ineligible
uses to help address the economic and
public health emergency. See the
SUPPLEMENTARY INFORMATION section of
the May 17, 2021 interim final rule for
the applicability of the requirements of
5 U.S.C. 553. In addition, under the
exception discussed in that section for
matters relating to agency grants, the
requirements of 5 U.S.C. 553 also do not
apply to this final rule. After careful
consideration of the comments received,
this final rule adopts the May 17, 2021
interim final rule with the revisions
discussed in this SUPPLEMENTARY
INFORMATION.
Congressional Review Act
The Administrator of OIRA has
determined that this is a major rule for
purposes of Subtitle E of the Small
Business Regulatory Enforcement and
Fairness Act of 1996 (also known as the
Congressional Review Act or CRA) (5
U.S.C. 804(2) et seq.). Under the CRA,
a major rule generally may take effect no
earlier than 60 days after the rule is
published in the Federal Register. 5
U.S.C. 801(a)(3).
Paperwork Reduction Act
The information collections
associated with the SLFRF program
have been reviewed and approved by
OMB pursuant to the Paperwork
Reduction Act (44 U.S.C. Chapter 35)
(PRA) and assigned control number
1505–0271. Under the PRA, an agency
may not conduct or sponsor, and a
respondent is not required to respond
to, an information collection unless it
displays a valid OMB control number.
Estimates of hourly burden under this
program are set forth in the table below.
Reporting Number
respondents
Number
responses
per
respondent
Total
responses
Hours per
response
Total
burden
in hours
Cost to
respondents
($48.80 per
hour*)
Recipient Payment Form ...................................... 5,050 1 5,050 .25 (15 minutes) .... 1,262.5 $61,610
Acceptance of Award Terms ................................ 5,050 1 5,050 .25 (15 minutes) .... 1,262.5 61,610
Title VI Assurances .............................................. 5,050 1 5,050 .50 (30 minutes) .... 2,525 123,220
Tribal Employment Information Form ................... 584 1 584 .75 (45 minutes) .... 438 21,374
Request for Extension Form ................................96 1 96 1 ............................96 4,685
Annual Recovery Plan Performance Report ........ 430 1 430 100 ........................ 43,000 2,098,400
NEU Distribution Template ...................................55 2 110 10 .......................... 1,100 53,680
Non-UGLG Distribution Template ........................55 2 110 5 ............................ 550 26,840
Transfer Forms ..................................................... 1,500 1 1,500 1 ............................ 1,500 73,200
Project and Expenditure Report ........................... 37,000 1 37,000 5 ............................ 185,000 9,028,000
Total .............................................................. 54,870 .................... 54,980 ............................... 236,735 11,552,619
*Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Accountants and Auditors, on the internet at https://
www.bls.gov/ooh/business-and-financial/accountants-and-auditors.htm (visited March 28, 2020). Base wage of $33.89/hour increased by 44 per-
cent to account for fully loaded employer cost of employee compensation (benefits, etc.) for a fully loaded wage rate of $48.80.
Regulatory Flexibility Analysis
The Regulatory Flexibility Act (RFA)
generally requires that when an agency
issues a proposed rule, or a final rule
pursuant to section 553(b) of the
Administrative Procedure Act or
another law, the agency must prepare a
regulatory flexibility analysis that meets
the requirements of the RFA and
publish such analysis in the Federal
Register. 5 U.S.C. 603, 604.
Rules that are exempt from notice and
comment under the APA or any other
law are also exempt from the RFA
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requirements, including the requirement
to conduct a regulatory flexibility
analysis, when among other things the
agency for good cause finds that notice
and public procedure are impracticable,
unnecessary, or contrary to the public
interest. Because this rule is exempt
from the notice and comment
requirements of the APA, Treasury is
not required to conduct a regulatory
flexibility analysis.
Rule Text
List of Subjects in 31 CFR Part 35
Executive compensation, State and
Local Governments, Tribal
Governments, Public health emergency.
For the reasons stated in the
preamble, the United States Department
of the Treasury amends 31 CFR part 35
as follows:
PART 35—PANDEMIC RELIEF
PROGRAMS
■1. Revise Subpart A to read as follows:
Subpart A—Coronavirus State and
Local Fiscal Recovery Funds
Sec.
35.1 Purpose.
35.2 Applicability.
35.3 Definitions.
35.4 Reservation of authority, reporting.
35.5 Use of funds.
35.6 Eligible uses.
35.7 Pensions.
35.8 Tax.
35.9. Compliance with applicable laws.
35.10. Recoupment.
35.11 Payments to States.
35.12. Distributions to nonentitlement units
of local government and units of general
local government.
Authority: 42 U.S.C. 802(f); 42 U.S.C.
803(f).
§35.1 Purpose.
This part implements section 9901 of
the American Rescue Plan Act (Subtitle
M of Title IX of Pub. L. 117–2), which
amends Title VI of the Social Security
Act (42 U.S.C. 801 et seq.) by adding
sections 602 and 603 to establish the
Coronavirus State Fiscal Recovery Fund
and Coronavirus Local Fiscal Recovery
Fund.
§35.2 Applicability.
This part applies to states, territories,
Tribal governments, metropolitan cities,
nonentitlement units of local
government, counties, and units of
general local government that accept a
payment or transfer of funds made
under section 602 or 603 of the Social
Security Act.
§35.3 Definitions.
Baseline means tax revenue of the
recipient for its fiscal year ending in
2019, adjusted for inflation in each
reporting year using the Bureau of
Economic Analysis’s Implicit Price
Deflator for the gross domestic product
of the United States.
Capital expenditures has the same
meaning given in 2 CFR 200.1.
County means a county, parish, or
other equivalent county division (as
defined by the Census Bureau).
Covered benefits include, but are not
limited to, the costs of all types of leave
(vacation, family-related, sick, military,
bereavement, sabbatical, jury duty),
employee insurance (health, life, dental,
vision), retirement (pensions, 401(k)),
unemployment benefit plans (Federal
and State), workers’ compensation
insurance, and Federal Insurance
Contributions Act taxes (which includes
Social Security and Medicare taxes).
Covered change means a change in
law, regulation, or administrative
interpretation that reduces any tax (by
providing for a reduction in a rate, a
rebate, a deduction, a credit, or
otherwise) or delays the imposition of
any tax or tax increase. A change in law
includes any final legislative or
regulatory action, a new or changed
administrative interpretation, and the
phase-in or taking effect of any statute
or rule if the phase-in or taking effect
was not prescribed prior to the start of
the covered period.
Covered period means, with respect to
a state or territory, the period that:
(1) Begins on March 3, 2021; and
(2) Ends on the last day of the fiscal
year of such State or territory in which
all funds received by the State or
territory from a payment made under
section 602 or 603 of the Social Security
Act have been expended or returned to,
or recovered by, the Secretary.
COVID–19 means the Coronavirus
Disease 2019.
COVID–19 public health emergency
means the period beginning on January
27, 2020 and lasting until the
termination of the national emergency
concerning the COVID–19 outbreak
declared pursuant to the National
Emergencies Act (50 U.S.C. 1601 et
seq.).
Deposit means an extraordinary
payment of an accrued, unfunded
liability. The term deposit does not refer
to routine contributions made by an
employer to pension funds as part of the
employer’s obligations related to
payroll, such as either a pension
contribution consisting of a normal cost
component related to current employees
or a component addressing the
amortization of unfunded liabilities
calculated by reference to the
employer’s payroll costs.
Eligible employer means an employer
of an eligible worker who performs
essential work.
Eligible workers means workers
needed to maintain continuity of
operations of essential critical
infrastructure sectors, including health
care; emergency response; sanitation,
disinfection, and cleaning work;
maintenance work; grocery stores,
restaurants, food production, and food
delivery; pharmacy; biomedical
research; behavioral health work;
medical testing and diagnostics; home-
and community-based health care or
assistance with activities of daily living;
family or childcare; social services
work; public health work; vital services
to Tribes; any work performed by an
employee of a State, local, or Tribal
government; educational work, school
nutrition work, and other work required
to operate a school facility; laundry
work; elections work; solid waste or
hazardous materials management,
response, and cleanup work; work
requiring physical interaction with
patients; dental care work;
transportation and warehousing; work at
hotel and commercial lodging facilities
that are used for COVID–19 mitigation
and containment; work in a mortuary;
and work in critical clinical research,
development, and testing necessary for
COVID–19 response.
(1) With respect to a recipient that is
a metropolitan city, nonentitlement unit
of local government, or county, workers
in any additional non-public sectors as
each chief executive officer of such
recipient may designate as critical to
protect the health and well-being of the
residents of their metropolitan city,
nonentitlement unit of local
government, or county; or
(2) With respect to a State, territory,
or Tribal government, workers in any
additional non-public sectors as each
Governor of a State or territory, or each
Tribal government, may designate as
critical to protect the health and well-
being of the residents of their State,
territory, or Tribal government.
Essential work means work that:
(1) Is not performed while
teleworking from a residence; and
(2) Involves:
(i) Regular in-person interactions with
patients, the public, or coworkers of the
individual that is performing the work;
or
(ii) Regular physical handling of items
that were handled by, or are to be
handled by patients, the public, or
coworkers of the individual that is
performing the work.
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Funds means, with respect to a
recipient, amounts provided to the
recipient pursuant to a payment made
under section 602(b) or 603(b) of the
Social Security Act or transferred to the
recipient pursuant to section 603(c)(4)
of the Social Security Act.
General revenue means money that is
received from tax revenue, current
charges, and miscellaneous general
revenue, excluding refunds and other
correcting transactions and proceeds
from issuance of debt or the sale of
investments, agency or private trust
transactions, and intergovernmental
transfers from the Federal Government,
including transfers made pursuant to
section 9901 of the American Rescue
Plan Act. General revenue also includes
revenue from liquor stores that are
owned and operated by state and local
governments. General revenue does not
include revenues from utilities, except
recipients may choose to include
revenue from utilities that are part of
their own government as general
revenue provided the recipient does so
consistently over the remainder of the
period of performance. Revenue from
Tribal business enterprises must be
included in general revenue.
Intergovernmental transfers means
money received from other
governments, including grants and
shared taxes.
Low-income household means a
household with:
(1) Income at or below 185 percent of
the Federal Poverty Guidelines for the
size of its household based on the
poverty guidelines published most
recently by the Department of Health
and Human Services; or
(2) Income at or below 40 percent of
the Area Median Income for its county
and size of household based on data
published most recently by the
Department of Housing and Urban
Development.
Micro-business means a small
business that has five or fewer
employees, one or more of whom owns
the small business.
Moderate-income household means a
household with:
(1) Income at or below 300 percent of
the Federal Poverty Guidelines for the
size of its household based on poverty
guidelines published most recently by
the Department of Health and Human
Services; or
(2) Income at or below 65 percent of
the Area Median Income for its county
and size of household based on data
published most recently by the
Department of Housing and Urban
Development.
Metropolitan city has the meaning
given that term in section 102(a)(4) of
the Housing and Community
Development Act of 1974 (42 U.S.C.
5302(a)(4)) and includes cities that
relinquish or defer their status as a
metropolitan city for purposes of
receiving allocations under section 106
of such Act (42 U.S.C. 5306) for fiscal
year 2021.
Net reduction in total spending is
measured as the State or territory’s total
spending for a given reporting year
excluding its spending of funds,
subtracted from its total spending for its
fiscal year ending in 2019, adjusted for
inflation using the Bureau of Economic
Analysis’s Implicit Price Deflator for the
gross domestic product of the United
States for that reporting year.
Nonentitlement unit of local
government means a ‘‘city,’’ as that term
is defined in section 102(a)(5) of the
Housing and Community Development
Act of 1974 (42 U.S.C. 5302(a)(5)), that
is not a metropolitan city.
Nonprofit means a nonprofit
organization that is exempt from Federal
income taxation and that is described in
section 501(c)(3) or 501(c)(19) of the
Internal Revenue Code.
Obligation means an order placed for
property and services and entering into
contracts, subawards, and similar
transactions that require payment.
Pension fund means a defined benefit
plan and does not include a defined
contribution plan.
Period of performance means the time
period described in §35.5 during which
a recipient may obligate and expend
funds in accordance with sections
602(c)(1) and 603(c)(1) of the Social
Security Act and this subpart.
Premium pay means an amount of up
to $13 per hour that is paid to an
eligible worker, in addition to wages or
remuneration the eligible worker
otherwise receives, for all work
performed by the eligible worker during
the COVID–19 public health emergency.
Such amount may not exceed $25,000 in
total over the period of performance
with respect to any single eligible
worker. Premium pay may be awarded
to non-hourly and part-time eligible
workers performing essential work.
Premium pay will be considered to be
in addition to wages or remuneration
the eligible worker otherwise receives if,
as measured on an hourly rate, the
premium pay is:
(1) With regard to work that the
eligible worker previously performed,
pay and remuneration equal to the sum
of all wages and remuneration
previously received plus up to $13 per
hour with no reduction, substitution,
offset, or other diminishment of the
eligible worker’s previous, current, or
prospective wages or remuneration; or
(2) With regard to work that the
eligible worker continues to perform,
pay of up to $13 per hour that is in
addition to the eligible worker’s regular
rate of wages or remuneration, with no
reduction, substitution, offset, or other
diminishment of the worker’s current
and prospective wages or remuneration.
Qualified census tract has the same
meaning given in 26 U.S.C.
42(d)(5)(B)(ii)(I).
Recipient means a State, territory,
Tribal government, metropolitan city,
nonentitlement unit of local
government, county, or unit of general
local government that receives a
payment made under section 602(b) or
603(b) of the Social Security Act or
transfer pursuant to section 603(c)(4) of
the Social Security Act.
Reporting year means a single year or
partial year within the covered period,
aligned to the current fiscal year of the
State or territory during the covered
period.
Secretary means the Secretary of the
Treasury.
State means each of the 50 States and
the District of Columbia.
Small business means a business
concern or other organization that:
(1) Has no more than 500 employees
or, if applicable, the size standard in
number of employees established by the
Administrator of the Small Business
Administration for the industry in
which the business concern or
organization operates, and
(2) Is a small business concern as
defined in section 3 of the Small
Business Act (15 U.S.C. 632).
Tax revenue means revenue received
from a compulsory contribution that is
exacted by a government for public
purposes excluding refunds and
corrections and, for purposes of §35.8,
intergovernmental transfers. Tax
revenue does not include payments for
a special privilege granted or service
rendered, employee or employer
assessments and contributions to
finance retirement and social insurance
trust systems, or special assessments to
pay for capital improvements.
Territory means the Commonwealth
of Puerto Rico, the United States Virgin
Islands, Guam, the Commonwealth of
the Northern Mariana Islands, or
American Samoa.
Title I eligible schools means schools
eligible to receive services under section
1113 of Title I, Part A of the Elementary
and Secondary Education Act of 1965,
as amended (20 U.S.C. 6313), including
schools served under section
1113(b)(1)(C) of that Act.
Tribal enterprise means a business
concern:
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(1) That is wholly owned by one or
more Tribal governments, or by a
corporation that is wholly owned by one
or more Tribal governments; or
(2) That is owned in part by one or
more Tribal governments, or by a
corporation that is wholly owned by one
or more Tribal governments, if all other
owners are either United States citizens
or small business concerns, as these
terms are used and consistent with the
definitions in 15 U.S.C. 657a(b)(2)(D).
Tribal government means the
recognized governing body of any
Indian or Alaska Native Tribe, band,
nation, pueblo, village, community,
component band, or component
reservation, individually identified
(including parenthetically) in the list
published on January 29, 2021, pursuant
to section 104 of the Federally
Recognized Indian Tribe List Act of
1994 (25 U.S.C. 5131).
Unemployment rate means the U–3
unemployment rate provided by the
Bureau of Labor Statistics as part of the
Local Area Unemployment Statistics
program, measured as total
unemployment as a percentage of the
civilian labor force.
Unemployment trust fund means an
unemployment trust fund established
under section 904 of the Social Security
Act (42 U.S.C. 1104).
Unit of general local government has
the meaning given to that term in
section 102(a)(1) of the Housing and
Community Development Act of 1974
(42 U.S.C. 5302(a)(1)).
§35.4 Reservation of authority, reporting.
(a) Reservation of authority. Nothing
in this part shall limit the authority of
the Secretary to take action to enforce
conditions or violations of law,
including actions necessary to prevent
evasions of this subpart.
(b) Extensions or accelerations of
timing. The Secretary may extend or
accelerate any deadline or compliance
date of this part, including reporting
requirements that implement this
subpart, if the Secretary determines that
such extension or acceleration is
appropriate. In determining whether an
extension or acceleration is appropriate,
the Secretary will consider the period of
time that would be extended or
accelerated and how the modified
timeline would facilitate compliance
with this subpart.
(c) Reporting and requests for other
information. During the period of
performance, recipients shall provide to
the Secretary periodic reports providing
detailed accounting of the uses of funds,
modifications to a State or Territory’s
tax revenue sources, and such other
information as the Secretary may
require for the administration of this
section. In addition to regular reporting
requirements, the Secretary may request
other additional information as may be
necessary or appropriate, including as
may be necessary to prevent evasions of
the requirements of this subpart. False
statements or claims made to the
Secretary may result in criminal, civil,
or administrative sanctions, including
fines, imprisonment, civil damages and
penalties, debarment from participating
in Federal awards or contracts, and/or
any other remedy available by law.
§35.5 Use of funds.
(a) In general. A recipient may only
use funds to cover costs incurred during
the period beginning March 3, 2021, and
ending December 31, 2024, for one or
more of the purposes enumerated in
sections 602(c)(1) and 603(c)(1) of the
Social Security Act, as applicable,
including those enumerated in §35.6,
subject to the restrictions set forth in
sections 602(c)(2) and 603(c)(2) of the
Social Security Act, as applicable.
(b) Costs incurred. A cost shall be
considered to have been incurred for
purposes of paragraph (a) of this section
if the recipient has incurred an
obligation with respect to such cost by
December 31, 2024.
(c) Return of funds. A recipient must
return any funds not obligated by
December 31, 2024. A recipient must
also return funds obligated by December
31, 2024 but not expended by December
31, 2026.
§35.6 Eligible uses.
(a) In general. Subject to §§35.7 and
35.8, a recipient may use funds for one
or more of the purposes described in
paragraphs (b) through (f) of this
section.
(b) Responding to the public health
emergency or its negative economic
impacts. A recipient may use funds to
respond to the public health emergency
or its negative economic impacts if the
use meets the criteria provided in
paragraph (b)(1) of this section or is
enumerated in paragraph (b)(3) of this
section; provided that, in the case of a
use of funds for a capital expenditure
under paragraphs (b)(1) or (b)(3) of this
section, the use of funds must also meet
the criteria provided in paragraph (b)(4)
of this section. Treasury may also
articulate additional eligible programs,
services, or capital expenditures from
time to time that satisfy the eligibility
criteria of this paragraph (b), which
shall be eligible under this paragraph
(b).
(1) Identifying eligible responses to
the public health emergency or its
negative economic impacts. (i) A
program, service, or capital expenditure
is eligible under this paragraph (b)(1) if
a recipient identifies a harm or impact
to a beneficiary or class of beneficiaries
caused or exacerbated by the public
health emergency or its negative
economic impacts and the program,
service, or capital expenditure responds
to such harm.
(ii) A program, service, or capital
expenditure responds to a harm or
impact experienced by an identified
beneficiary or class of beneficiaries if it
is reasonably designed to benefit the
beneficiary or class of beneficiaries that
experienced the harm or impact and is
related and reasonably proportional to
the extent and type of harm or impact
experienced.
(2) Identified harms: Presumptions of
impacted and disproportionately
impacted beneficiaries. A recipient may
rely on the following presumptions to
identify beneficiaries presumptively
impacted or disproportionately
impacted by the public health
emergency or its negative economic
impacts for the purpose of providing a
response under paragraph (b)(1) or (b)(3)
of this section:
(i) Households or populations that
experienced unemployment;
experienced increased food or housing
insecurity; qualify for the Children’s
Health Insurance Program (42 U.S.C.
1397aa et seq.), Childcare Subsidies
through the Child Care and
Development Fund Program (42 U.S.C.
9857 et seq. and 42 U.S.C. 618), or
Medicaid (42 U.S.C. 1396 et seq.); if
funds are to be used for affordable
housing programs, qualify for the
National Housing Trust Fund (12 U.S.C.
4568) or the Home Investment
Partnerships Program (42 U.S.C. 12721
et seq.); if funds are to be used to
address impacts of lost instructional
time for students in kindergarten
through twelfth grade, any student who
did not have access to in-person
instruction for a significant period of
time; and low- and moderate-income
households and populations are
presumed to be impacted by the public
health emergency or its negative
economic impacts;
(ii) The general public is presumed to
be impacted by the public health
emergency for the purposes of providing
the uses set forth in subparagraphs
(b)(3)(i)(A) and (b)(3)(i)(C); and
(iii) The following households,
communities, small businesses, and
nonprofit organizations are presumed to
be disproportionately impacted by the
public health emergency or its negative
economic impacts:
(A) Households and populations
residing in a qualified census tract;
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households and populations receiving
services provided by Tribal
governments; households and
populations residing in the territories;
households and populations receiving
services provided by territorial
governments; low-income households
and populations; households that
qualify for Temporary Assistance for
Needy Families (42 U.S.C. 601 et seq.),
the Supplemental Nutrition Assistance
Program (7 U.S.C. 2011 et seq.), Free
and Reduced Price School Lunch and/
or Breakfast programs (42 U.S.C. 1751 et
seq. and 42 U.S.C. 1773), Medicare Part
D Low-income Subsidies (42 U.S.C.
1395w–114), Supplemental Security
Income (42 U.S.C. 1381 et seq.), Head
Start (42 U.S.C. 9831 et seq.), Early Head
Start (42 U.S.C. 9831 et seq.), the
Special Supplemental Nutrition
Program for Women, Infants, and
Children (42 U.S.C. 1786), Section 8
Vouchers (42 U.S.C. 1437f), the Low-
Income Home Energy Assistance
Program (42 U.S.C. 8621 et seq.), Pell
Grants (20 U.S.C. 1070a), and, if SLFRF
funds are to be used for services to
address educational disparities, Title I
eligible schools;
(B) Small businesses operating in a
qualified census tract, operated by
Tribal governments or on Tribal lands,
or operating in the territories; and
(C) Nonprofit organizations operating
in a qualified census tract, operated by
Tribal governments or on Tribal lands,
or operating in the territories.
(3) Enumerated eligible uses:
Responses presumed reasonably
proportional. A recipient may use funds
to respond to the public health
emergency or its negative economic
impacts on a beneficiary or class of
beneficiaries for one or more of the
following purposes unless such use is
grossly disproportionate to the harm
caused or exacerbated by the public
health emergency or its negative
economic impacts:
(i) Responding to the public health
impacts of the public health emergency
for purposes including:
(A) COVID–19 mitigation and
prevention in a manner that is
consistent with recommendations and
guidance from the Centers for Disease
Control and Prevention, including
vaccination programs and incentives;
testing programs; contact tracing;
isolation and quarantine; mitigation and
prevention practices in congregate
settings; acquisition and distribution of
medical equipment for prevention and
treatment of COVID–19, including
personal protective equipment; COVID–
19 prevention and treatment expenses
for public hospitals or health care
facilities, including temporary medical
facilities; establishing or enhancing
public health data systems; installation
and improvement of ventilation systems
in congregate settings, health facilities,
or other public facilities; and assistance
to small businesses, nonprofits, or
impacted industries to implement
mitigation measures;
(B) Medical expenses related to
testing and treating COVID–19 that are
provided in a manner consistent with
recommendations and guidance from
the Centers for Disease Control and
Prevention, including emergency
medical response expenses, treatment of
long-term symptoms or effects of
COVID–19, and costs to medical
providers or to individuals for testing or
treating COVID–19;
(C) Behavioral health care, including
prevention, treatment, emergency or
first-responder programs, harm
reduction, supports for long-term
recovery, and behavioral health
facilities and equipment; and
(D) Preventing and responding to
increased violence resulting from the
public health emergency, including
community violence intervention
programs, or responding to increased
gun violence resulting from the public
health emergency, including payroll and
covered benefits associated with
community policing strategies;
enforcement efforts to reduce gun
violence; and investing in technology
and equipment;
(ii) Responding to the negative
economic impacts of the public health
emergency for purposes including:
(A) Assistance to households and
individuals, including:
(1) Assistance for food; emergency
housing needs; burials, home repairs, or
weatherization; internet access or digital
literacy; cash assistance; and assistance
accessing public benefits;
(2) Paid sick, medical, or family leave
programs, or assistance to expand access
to health insurance;
(3) Childcare, early learning services,
home visiting, or assistance for child
welfare-involved families or foster
youth;
(4) Programs to address the impacts of
lost instructional time for students in
kindergarten through twelfth grade;
(5) Development, repair, and
operation of affordable housing and
services or programs to increase long-
term housing security;
(6) Financial services that facilitate
the delivery of Federal, State, or local
benefits for unbanked and underbanked
individuals;
(7) Benefits for the surviving family
members of individuals who have died
from COVID–19, including cash
assistance to surviving spouses or
dependents of individuals who died of
COVID–19;
(8) Assistance for individuals who
want and are available for work,
including those who are unemployed,
have looked for work sometime in the
past 12 months, who are employed part
time but who want and are available for
full-time work, or who are employed but
seeking a position with greater
opportunities for economic
advancement;
(9) Facilities and equipment related to
the provision of services to households
provided in subparagraphs
(b)(3)(ii)(A)(1)–(8);
(10) The following expenses related to
Unemployment Trust Funds:
(i) Contributions to a recipient
Unemployment Trust Fund and
repayment of principal amounts due on
advances received under Title XII of the
Social Security Act (42 U.S.C. 1321) up
to an amount equal to the difference
between the balance in the recipient’s
Unemployment Trust Fund as of
January 27, 2020 and the balance of
such account as of May 17, 2021 plus
the principal amount outstanding as of
May 17, 2021 on any advances received
under Title XII of the Social Security
Act between January 27, 2020 and May
17, 2021; provided that if a recipient
repays principal on Title XII advances
or makes a contribution to an
Unemployment Trust Fund after April
1, 2022, such recipient shall not reduce
average weekly benefit amounts or
maximum benefit entitlements prior to
December 31, 2024; and
(ii) Any interest due on such advances
received under Title XII of the Social
Security Act (42 U.S.C. 1321); and
(11) A program, service, capital
expenditure, or other assistance that is
provided to a disproportionately
impacted household, population, or
community, including:
(i) Services to address health
disparities of the disproportionately
impacted household, population, or
community;
(ii) Housing vouchers and relocation
assistance;
(iii) Investments in communities to
promote improved health outcomes and
public safety such as parks, recreation
facilities, and programs that increase
access to healthy foods;
(iv) Capital expenditures and other
services to address vacant or abandoned
properties;
(v) Services to address educational
disparities; and
(vi) Facilities and equipment related
to the provision of these services to the
disproportionately impacted household,
population, or community.
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(B) Assistance to small businesses,
including:
(1) Programs, services, or capital
expenditures that respond to the
negative economic impacts of the
COVID–19 public health emergency,
including loans or grants to mitigate
financial hardship such as declines in
revenues or impacts of periods of
business closure, or providing technical
assistance; and
(2) A program, service, capital
expenditure, or other assistance that
responds to disproportionately
impacted small businesses, including
rehabilitation of commercial properties;
storefront and fac¸ade improvements;
technical assistance, business
incubators, and grants for start-ups or
expansion costs for small businesses;
and programs or services to support
micro-businesses;
(C) Assistance to nonprofit
organizations including programs,
services, or capital expenditures,
including loans or grants to mitigate
financial hardship such as declines in
revenues or increased costs, or technical
assistance;
(D) Assistance to tourism, travel,
hospitality, and other impacted
industries for programs, services, or
capital expenditures, including support
for payroll costs and covered benefits
for employees, compensating returning
employees, support for operations and
maintenance of existing equipment and
facilities, and technical assistance; and
(E) Expenses to support public sector
capacity and workforce, including:
(1) Payroll and covered benefit
expenses for public safety, public
health, health care, human services, and
similar employees to the extent that the
employee’s time is spent mitigating or
responding to the COVID–19 public
health emergency;
(2) Payroll, covered benefit, and other
costs associated with programs or
services to support the public sector
workforce and with the recipient:
(i) Hiring or rehiring staff to fill
budgeted full-time equivalent positions
that existed on January 27, 2020 but that
were unfilled or eliminated as of March
3, 2021; or
(ii) Increasing the number of its
budgeted full-time equivalent
employees by up to the difference
between the number of its budgeted full-
time equivalent employees on January
27, 2020, multiplied by 1.075, and the
number of its budgeted full-time
equivalent employees on March 3, 2021,
provided that funds shall only be used
for additional budgeted full-time
equivalent employees above the
recipient’s number of budgeted full-time
equivalent employees as of March 3,
2021;
(3) Costs to improve the design and
execution of programs responding to the
COVID–19 pandemic and to administer
or improve the efficacy of programs
addressing the public health emergency
or its negative economic impacts; and
(4) Costs associated with addressing
administrative needs of recipient
governments that were caused or
exacerbated by the pandemic.
(4) Capital expenditures. A recipient,
other than a Tribal government, must
prepare a written justification for certain
capital expenditures according to Table
1 to paragraph (b)(4) of this section.
Such written justification must include
the following elements:
(i) Describe the harm or need to be
addressed;
(ii) Explain why a capital expenditure
is appropriate; and
(iii) Compare the proposed capital
expenditure to at least two alternative
capital expenditures and demonstrate
why the proposed capital expenditure is
superior.
TABLE 1 TO PARAGRAPH (b)(4)
If a project has total expected
capital expenditures of and the use is enumerated in (b)(3), then and the use is not enumerated in (b)(3), then
Less than $1 million ........................ No Written Justification required ............................... No Written Justification required.
Greater than or equal to $1 million,
but less than $10 million.
Written Justification required but recipients are not
required to submit as part of regular reporting to
Treasury.
Written Justification required and recipients must
submit as part of regular reporting to Treasury.
$10 million or more ......................... Written Justification required and recipients must
submit as part of regular reporting to Treasury.
(c) Providing premium pay to eligible
workers. A recipient may use funds to
provide premium pay to eligible
workers of the recipient who perform
essential work or to provide grants to
eligible employers that have eligible
workers who perform essential work,
provided that any premium pay or
grants provided under this paragraph (c)
must respond to eligible workers
performing essential work during the
COVID–19 public health emergency. A
recipient uses premium pay or grants
provided under this paragraph (c) to
respond to eligible workers performing
essential work during the COVID–19
public health emergency if:
(1) The eligible worker’s total wages
and remuneration, including the
premium pay, is less than or equal to
150 percent of the greater of such
eligible worker’s residing State’s or
county’s average annual wage for all
occupations as defined by the Bureau of
Labor Statistics’ Occupational
Employment and Wage Statistics;
(2) The eligible worker is not exempt
from the Fair Labor Standards Act
overtime provisions (29 U.S.C. 207); or
(3) The recipient has submitted to the
Secretary a written justification that
explains how providing premium pay to
the eligible worker is responsive to the
eligible worker performing essential
work during the COVID–19 public
health emergency (such as a description
of the eligible workers’ duties, health, or
financial risks faced due to COVID–19,
and why the recipient determined that
the premium pay was responsive
despite the worker’s higher income).
(d) Providing government services. A
recipient may use funds for the
provision of government services to the
extent of the reduction in the recipient’s
general revenue due to the public health
emergency, calculated according to this
paragraph (d). A recipient must make a
one-time election to calculate the
amount of the reduction in the
recipient’s general revenue due to the
public health emergency according to
either paragraph (d)(1) or (d)(2) of this
section:
(1) Standard allowance. The
reduction in the recipient’s general
revenue due to the public health
emergency over the period of
performance will be deemed to be ten
million dollars; or
(2) Formula. The reduction in the
recipient’s general revenue due to the
public health emergency over the period
of performance equals the sum of the
reduction in revenue, calculated as of
each date identified in paragraph
(d)(2)(i) of this section and according to
the formula in paragraph (d)(2)(ii) of
this section:
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(i) A recipient must make a one-time
election to calculate the reduction in its
general revenue using information as of
either:
(A) December 31, 2020, December 31,
2021, December 31, 2022, and December
31, 2023; or
(B) The last day of each of the
recipient’s fiscal years ending in 2020,
2021, 2022, and 2023.
(ii) A reduction in a recipient’s
general revenue for each date identified
in paragraph (d)(2)(i) of this section
equals:
Max {[Base Year Revenue * (1 + Growth
Adjustment)∧(nt/12)]¥Actual
General Revenue; 0}
Where:
(A) Base Year Revenue is the
recipient’s general revenue for the most
recent full fiscal year prior to the
COVID–19 public health emergency;
(B) Growth Adjustment is equal to the
greater of 5.2 percent (or 0.052) and the
recipient’s average annual revenue
growth over the three full fiscal years
prior to the COVID–19 public health
emergency;
(C) n equals the number of months
elapsed from the end of the base year to
the calculation date;
(D) Subscript t denotes the specific
calculation date; and
(E) Actual General Revenue is a
recipient’s actual general revenue
collected during the 12-month period
ending on each calculation date
identified in paragraph (d)(2)(i) of this
section, except:
(1) For purposes of all calculation
dates on or after April 1, 2022, in the
case of any change made after January
6, 2022 to any law, regulation, or
administrative interpretation that
reduces any tax (by providing for a
reduction in a rate, a rebate, a
deduction, a credit, or otherwise) or
delays the imposition of any tax or tax
increase and that the recipient assesses
has had the effect of decreasing the
amount of tax revenue collected during
the 12-month period ending on the
calculation date relative to the amount
of tax revenue that would have been
collected in the absence of such change,
the recipient must add to actual general
revenue the amount of such decrease in
tax revenue;
(2) For purposes of any calculation
date on or after April 1, 2022, in the
case of any change made after January
6, 2022 to any law, regulation, or
administrative interpretation that
increases any tax (by providing for an
increase in a rate, the reduction of a
rebate, a deduction, or a credit, or
otherwise) or accelerates the imposition
of any tax or tax increase and that the
recipient assesses has had the effect of
increasing the amount of tax revenue
collected during the 12-month period
ending on the calculation date relative
to the amount of tax revenue that would
have been collected in the absence of
such change, the recipient must subtract
from actual general revenue the amount
of such increase in tax revenue;
(3) If the recipient makes a one-time
election to adjust general revenue to
reflect tax changes made during the
period beginning on January 27, 2020
and ending on January 6, 2022, for
purposes of each calculation date
identified in paragraph (d)(2)(i) of this
section:
(i) In the case of any change made
during such prior period to any law,
regulation, or administrative
interpretation that reduces any tax (by
providing for a reduction in a rate, a
rebate, a deduction, a credit, or
otherwise) or delays the imposition of
any tax or tax increase and that the
recipient assesses has had the effect of
decreasing the amount of tax revenue
collected during the 12-month period
ending on the calculation date relative
to the amount of tax revenue that would
have been collected in the absence of
such change, the recipient must add to
actual general revenue the amount of
such decrease in tax revenue; and
(ii) In the case of any change made
during such prior period to any law,
regulation, or administrative
interpretation that increases any tax (by
providing for an increase in a rate, the
reduction of a rebate, a deduction, or a
credit, or otherwise) or accelerates the
imposition of any tax or tax increase
and that the recipient assesses has had
the effect of increasing the amount of
tax revenue collected during the 12-
month period ending on the calculation
date relative to the amount of tax
revenue that would have been collected
in the absence of such change, the
recipient must subtract from actual
general revenue the amount of such
increase in tax revenue; and
(4) With respect to any calculation
date during the period beginning on
January 6, 2022 and ending on March
31, 2022, if the recipient makes the
election in paragraph (d)(3) of this
section, the recipient must also make
the adjustments referenced in paragraph
(d)(3) of this section with respect to any
such changes in law, regulation, or
administrative interpretation during the
period beginning on January 6, 2022 and
ending on such calculation date.
(e) Making necessary investments in
water, sewer, and broadband
infrastructure. A recipient may use
funds to make the following
investments in water, sewer, and
broadband infrastructure.
(1) Water and sewer investments—(i)
Clean Water State Revolving Fund
projects. Projects or activities of the type
that meet the eligibility requirements of
section 603(c) of the Federal Water
Pollution Control Act (33 U.S.C.
1383(c));
(ii) Additional stormwater projects.
Projects to manage, reduce, treat, or
recapture stormwater or subsurface
drainage water regardless of whether
such projects would improve water
quality if such projects would otherwise
meet the eligibility requirements of
section 603(c)(5) of the Federal Water
Pollution Control Act (33 U.S.C.
1383(c)(5));
(iii) Drinking Water State Revolving
Fund projects. Projects or activities of
the type that meet the eligibility
requirements of section 1452 of the Safe
Drinking Water Act (42 U.S.C. 300j–12)
as implemented by the regulations
adopted by the Environmental
Protection Agency (EPA) under 40 CFR
35.3520, provided that:
(A) The recipient is not required to
comply with the limitation under 40
CFR 35.3520(c)(2) to acquisitions of
land from willing sellers or the
prohibition under 40 CFR 35.3520(e)(6)
on uses of funds for certain Tribal
projects; and
(B) In the case of lead service line
replacement projects, the recipient must
replace the full length of the service line
and may not replace only a partial
portion of the service line.
(iv) Additional lead remediation and
household water quality testing. Projects
or activities to address lead in drinking
water or provide household water
quality testing that are within the scope
of the programs the EPA is authorized
to establish under sections 1459A(b)(2),
1459B(b)(1), 1464(d)(2), and 1465 of the
Safe Drinking Water Act (42 U.S.C.
300j–19a(b)(2), 300j–19b(b)(1), 300j–
24(d)(2), and 300j–25), provided that:
(A) In the case of lead service line
replacement projects, the recipient must
replace the full length of the service line
and may not replace only a partial
portion of the service line; and
(B) In the case of projects within the
scope of the program the EPA is
authorized to establish under section
1459B(b)(1) of the Safe Drinking Water
Act, the recipient may determine the
income eligibility of homeowners
served by lead service line replacement
projects in its discretion.
(v) Drinking water projects to support
increased population. Projects of the
type that meet the eligibility
requirements of 40 CFR 35.3520 other
than the requirement of subparagraph
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(b)(1) of such regulation to address
present or prevent future violations of
health-based drinking water standards,
if the following conditions are met:
(A) The project is needed to support
increased population, with need
assessed as of the time the project is
undertaken;
(B) The project is designed to support
no more than a reasonable level of
projected increased need, whether due
to population growth or otherwise;
(C) The project is a cost-effective
means for achieving the desired level of
service; and
(D) The project is projected to
continue to provide an adequate level of
drinking water over its estimated useful
life.
(vi) Dams and reservoirs.
Rehabilitation of dams and reservoirs if
the following conditions are met:
(A) The project meets the
requirements of 40 CFR 35.3520 other
than the following requirements:
(1) The prohibition on the
rehabilitation of dams and reservoirs in
40 CFR 35.3520(e)(1) and (3); and
(2) The requirement in 40 CFR
35.3520(b)(1) that the project is needed
to address present or prevent future
violations of health-based drinking
water standards, provided that if the
dam or reservoir project does not meet
this requirement, the project must be
needed to support increased population,
with need assessed as of the time the
project is undertaken, and the project
must be projected to continue to provide
an adequate level of drinking water over
its estimated useful life;
(B) The primary purpose of the dam
or reservoir is for drinking water supply;
(C) The project is needed for the
provision of drinking water supply,
with need assessed as of the time the
project is initiated;
(D) The project is designed to support
no more than a reasonable level of
projected increased need, whether due
to population growth or otherwise; and
(E) The project is a cost-effective
means for achieving the desired level of
service.
(vii) Private wells. Rehabilitation of
private wells, testing initiatives to
identify contaminants in private wells,
and treatment activities and remediation
projects that address contamination in
private wells, if the project meets the
requirements of 40 CFR 35.3520 other
than the limitation to certain eligible
systems under 40 CFR 35.3520(a).
(2) Broadband investments—(i)
General. Broadband infrastructure if the
following conditions are met:
(A) The broadband infrastructure is
designed to provide service to
households and businesses with an
identified need, as determined by the
recipient, for such infrastructure;
(B) The broadband infrastructure is
designed to, upon completion:
(1) Reliably meet or exceed
symmetrical 100 Mbps download speed
and upload speeds; or
(2) In cases where it is not practicable,
because of the excessive cost of the
project or geography or topography of
the area to be served by the project, to
provide service reliably meeting or
exceeding symmetrical 100 Mbps
download speed and upload speeds:
(i) Reliably meet or exceed 100 Mbps
download speed and between at least 20
Mbps and 100 Mbps upload speed; and
(ii) Be scalable to a minimum of 100
Mbps download speed and 100 Mbps
upload speed; and
(C) The service provider for a
completed broadband infrastructure
investment project that provides service
to households is required, for as long as
the SLFRF-funded broadband
infrastructure is in use, by the recipient
to:
(1) Participate in the Federal
Communications Commission’s
Affordable Connectivity Program (ACP)
through the lifetime of the ACP; or
(2) Otherwise provide access to a
broad-based affordability program to
low-income consumers in the proposed
service area of the broadband
infrastructure that provides benefits to
households commensurate with those
provided under the ACP through the
lifetime of the ACP.
(ii) Cybersecurity infrastructure
investments. Cybersecurity
infrastructure investments that are
designed to improve the reliability and
resiliency of new and existing
broadband infrastructure. Such
investments may include the addition or
modernization of network security
hardware and software tools designed to
strengthen cybersecurity for the end-
users of these networks.
(f) Meeting the non-federal matching
requirements for Bureau of Reclamation
projects. A recipient may use funds to
meet the non-federal matching
requirements of any authorized Bureau
of Reclamation project.
§35.7 Pensions.
A recipient (other than a Tribal
government) may not use funds for
deposit into any pension fund.
§35.8 Tax.
(a) Restriction. A State or Territory
shall not use funds to either directly or
indirectly offset a reduction in the net
tax revenue of the State or Territory
resulting from a covered change during
the covered period.
(b) Violation. Treasury will consider a
State or Territory to have used funds to
offset a reduction in net tax revenue if,
during a reporting year:
(1) Covered change. The State or
Territory has made a covered change
that, either based on a reasonable
statistical methodology to isolate the
impact of the covered change in actual
revenue or based on projections that use
reasonable assumptions and do not
incorporate the effects of
macroeconomic growth to reduce or
increase the projected impact of the
covered change, the State or Territory
assesses has had or predicts to have the
effect of reducing tax revenue relative to
current law;
(2) Exceeds the de minimis threshold.
The aggregate amount of the measured
or predicted reductions in tax revenue
caused by covered changes identified
under paragraph (b)(1) of this section, in
the aggregate, exceeds 1 percent of the
State’s or Territory’s baseline;
(3) Reduction in net tax revenue. The
State or Territory reports a reduction in
net tax revenue, measured as the
difference between actual tax revenue
and the State’s or Territory’s baseline,
each measured as of the end of the
reporting year; and
(4) Consideration of other changes.
The aggregate amount of measured or
predicted reductions in tax revenue
caused by covered changes is greater
than the sum of the following, in each
case, as calculated for the reporting
year:
(i) The aggregate amount of the
expected increases in tax revenue
caused by one or more covered changes
that, either based on a reasonable
statistical methodology to isolate the
impact of the covered change in actual
revenue or based on projections that use
reasonable assumptions and do not
incorporate the effects of
macroeconomic growth to reduce or
increase the projected impact of the
covered change, the State or Territory
assesses has had or predicts to have the
effect of increasing tax revenue; and
(ii) Reductions in spending, up to the
amount of the State’s or Territory’s net
reduction in total spending, that are in:
(A) Departments, agencies, or
authorities in which the State or
Territory is not using funds; and
(B) Departments, agencies, or
authorities in which the State or
Territory is using funds, in an amount
equal to the value of the spending cuts
in those departments, agencies, or
authorities, minus funds used.
(c) Amount and revenue reduction
cap. If a State or Territory is considered
to be in violation pursuant to paragraph
(b) of this section, the amount used in
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violation of paragraph (a) of this section
is equal to the lesser of:
(1) The reduction in net tax revenue
of the State or Territory for the reporting
year, measured as the difference
between the State’s or Territory’s
baseline and its actual tax revenue, each
measured as of the end of the reporting
year; and,
(2) The aggregate amount of the
reductions in tax revenues caused by
covered changes identified in paragraph
(b)(1) of this section, minus the sum of
the amounts in identified in paragraphs
(b)(4)(i) and (ii) of this section.
§35.9 Compliance with applicable laws.
A recipient must comply with all
other applicable Federal statutes,
regulations, and executive orders, and a
recipient shall provide for compliance
with the American Rescue Plan Act, this
subpart, and any interpretive guidance
by other parties in any agreements it
enters into with other parties relating to
these funds.
§35.10 Recoupment.
(a) Identification of violations—(1) In
general. Any amount used in violation
of §35.5, 35.6, or 35.7 may be identified
at any time prior to December 31, 2026.
(2) Annual reporting of amounts of
violations. On an annual basis, a
recipient that is a State or territory must
calculate and report any amounts used
in violation of §35.8.
(b) Calculation of amounts subject to
recoupment—(1) In general. Except as
provided in paragraph (b)(2) of this
section, the Secretary will calculate any
amounts subject to recoupment
resulting from a violation of §35.5, 35.6
or 35.7 as the amounts used in violation
of such restrictions.
(2) Violations of §35.8. The Secretary
will calculate any amounts subject to
recoupment resulting from a violation of
§35.8, equal to the lesser of:
(i) The amount set forth in §35.8(c);
and,
(ii) The amount of funds received by
such recipient.
(c) Initial notice. If the Secretary
calculates an amount subject to
recoupment under paragraph (b) of this
section, Treasury will provide the
recipient an initial written notice of the
amount subject to recoupment along
with an explanation of such amounts.
(d) Request for reconsideration.
Unless the Secretary extends or
accelerates the time period, within 60
calendar days of receipt of an initial
notice of recoupment provided under
paragraph (c) of this section, a recipient
may submit a written request to the
Secretary requesting reconsideration of
any amounts subject to recoupment
under paragraph (b) of this section. To
request reconsideration of any amounts
subject to recoupment, a recipient must
submit to the Secretary a written request
that includes:
(1) An explanation of why the
recipient believes all or some of the
amount should not be subject to
recoupment; and
(2) A discussion of supporting
reasons, along with any additional
information.
(e) Final amount subject to
recoupment. Unless the Secretary
extends or accelerates the time period,
within 60 calendar days of receipt of the
recipient’s request for reconsideration
provided pursuant to paragraph (d) of
this section or the expiration of the
period for requesting reconsideration
provided under paragraph (d), the
recipient will be notified of the
Secretary’s decision to affirm, withdraw,
or modify the notice of recoupment.
Such notification will include an
explanation of the decision, including
responses to the recipient’s supporting
reasons and consideration of additional
information provided. A recipient must
invoke and exhaust the procedures
available under this subpart prior to
seeking judicial review of a decision
under §35.10.
(f) Repayment of funds. Unless the
Secretary extends or accelerates the time
period, a recipient shall repay to the
Secretary any amounts subject to
recoupment in accordance with
instructions provided by the Secretary:
(1) Within 120 calendar days of
receipt of the notice of recoupment
provided under paragraph (c) of this
section, in the case of a recipient that
does not submit a request for
reconsideration in accordance with the
requirements of paragraph (d) of this
section; or
(2) Within 120 calendar days of
receipt of the Secretary’s decision under
paragraph (e) of this section, in the case
of a recipient that submits a request for
reconsideration in accordance with the
requirements of paragraph (d) of this
section.
(g) Other remedial actions. Prior to
seeking recoupment or taking other
appropriate action pursuant to
paragraph (c), (d), (e), or (f) of this
section, the Secretary may notify the
recipient of potential violations and
provide the recipient an opportunity for
informal consultation and remediation.
§35.11 Payments to States.
(a) In general. With respect to any
State or Territory that has an
unemployment rate as of the date that
it submits an initial certification for
payment of funds pursuant to section
602(d)(1) of the Social Security Act that
is less than two percentage points above
its unemployment rate in February
2020, the Secretary will withhold 50
percent of the amount of funds allocated
under section 602(b) of the Social
Security Act to such State or territory
until at least May 10, 2022 and not more
than twelve months from the date such
initial certification is provided to the
Secretary.
(b) Payment of withheld amount. In
order to receive the amount withheld
under paragraph (a) of this section, the
State or Territory must submit to the
Secretary the following information:
(1) A certification, in the form
provided by the Secretary, that such
State or Territory requires the payment
to carry out the activities specified in
section 602(c) of the Social Security Act
and will use the payment in compliance
with section 602(c) of the Social
Security Act; and
(2) Any reports required to be filed by
that date pursuant to this part that have
not yet been filed.
§35.12 Distributions to nonentitlement
units of local government and units of
general local government.
(a) Nonentitlement units of local
government. Each State or Territory that
receives a payment from the Secretary
pursuant to section 603(b)(2)(B) of the
Social Security Act shall distribute the
amount of the payment to
nonentitlement units of local
government in such State or Territory in
accordance with the requirements set
forth in section 603(b)(2)(C) of the
Social Security Act and without
offsetting any debt owed by such
nonentitlement units of local
governments against such payments.
(b) Budget cap. A State or Territory
may not make a payment to a
nonentitlement unit of local government
pursuant to section 603(b)(2)(C) of the
Social Security Act and paragraph (a) of
this section in excess of the amount
equal to 75 percent of the most recent
budget for the nonentitlement unit of
local government as of January 27, 2020.
For purposes of this section 35.12, a
nonentitlement unit of local
government’s most recent budget shall
mean the nonentitlement unit of local
government’s total annual budget,
including both operating and capital
expenditure budgets, in effect as of
January 27, 2020. A State or Territory
shall permit a nonentitlement unit of
local government without a formal
budget as of January 27, 2020, to
provide a certification from an
authorized officer of the nonentitlement
unit of local government of its most
recent annual expenditures as of
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4454 Federal Register /Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
January 27, 2020, and a State or
Territory may rely on such certification
for purposes of complying with this
section 35.12.
(c) Units of general local government.
Each State or Territory that receives a
payment from the Secretary pursuant to
section 603(b)(3)(B)(ii) of the Social
Security Act, in the case of an amount
to be paid to a county that is not a unit
of general local government, shall
distribute the amount of the payment to
units of general local government within
such county in accordance with the
requirements set forth in section
603(b)(3)(B)(ii) of the Social Security
Act and without offsetting any debt
owed by such units of general local
government against such payments.
(d) Additional conditions. A State or
Territory may not place additional
conditions or requirements on
distributions to nonentitlement units of
local government or units of general
local government beyond those required
by section 603 of the Social Security Act
or this subpart.
Jacob Leibenluft,
Chief Recovery Officer.
[FR Doc. 2022–00292 Filed 1–26–22; 8:45 am]
BILLING CODE P
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12
Attachment C – Uniform Administrative Requirements, Cost Principles, Federal Provisions and
Audit Requirements for Federal Awards -2 CFR Part 200 et seq
2 CFR Part 200 attached hereto
81
PART 200—UNIFORM ADMINISTRA-
TIVE REQUIREMENTS, COST PRIN-
CIPLES, AND AUDIT REQUIRE-
MENTS FOR FEDERAL AWARDS
Subpart A—Acronyms and Definitions
ACRONYMS
Sec.
200.0 Acronyms.
200.1 Definitions.
200.2 Acquisition cost.
200.3 Advance payment.
200.4 Allocation.
200.5 Audit finding.
200.6 Auditee.
200.7 Auditor.
200.8 Budget.
200.9 Central service cost allocation plan.
200.10 Catalog of Federal Domestic Assist-
ance (CFDA) number.
200.11 CFDA program title.
200.12 Capital assets.
200.13 Capital expenditures.
200.14 Claim.
200.15 Class of Federal awards.
200.16 Closeout.
200.17 Cluster of programs.
200.18 Cognizant agency for audit.
200.19 Cognizant agency for indirect costs.
200.20 Computing devices.
200.21 Compliance supplement.
200.22 Contract.
200.23 Contractor.
200.24 Cooperative agreement.
200.25 Cooperative audit resolution.
200.26 Corrective action.
200.27 Cost allocation plan.
200.28 Cost objective.
200.29 Cost sharing or matching.
200.30 Cross-cutting audit finding.
200.31 [Reserved]
200.32 Data Universal Numbering System
(DUNS) number.
200.33 Equipment.
200.34 Expenditures.
200.35 Federal agency.
200.36 Federal Audit Clearinghouse (FAC).
200.37 Federal awarding agency.
200.38 Federal award.
200.39 Federal award date.
200.40 Federal financial assistance.
200.41 Federal interest.
200.42 Federal program.
200.43 Federal share.
200.44 Final cost objective.
200.45 Fixed amount awards.
200.46 Foreign public entity.
200.47 Foreign organization.
200.48 General purpose equipment.
200.49 Generally Accepted Accounting Prin-
ciples (GAAP).
200.50 Generally Accepted Government Au-
diting Standards (GAGAS).
200.51 Grant agreement.
200.52 Hospital.
200.53 Improper payment.
200.54 Indian tribe (or ‘‘federally recognized
Indian tribe’’).
200.55 Institutions of Higher Education
(IHEs).
200.56 Indirect (facilities & administrative
(F&A)) costs.
200.57 Indirect cost rate proposal.
200.58 Information technology systems.
200.59 Intangible property.
200.60 Intermediate cost objective.
200.61 Internal controls.
200.62 Internal control over compliance re-
quirements for Federal awards.
200.63 Loan.
200.64 Local government.
200.65 Major program.
200.66 Management decision.
200.67 Micro-purchase.
200.68 Modified Total Direct Cost (MTDC).
200.69 Non-Federal entity.
200.70 Nonprofit organization.
200.71 Obligations.
200.72 Office of Management and Budget
(OMB).
200.73 Oversight agency for audit.
200.74 Pass-through entity.
200.75 Participant support costs.
200.76 Performance goal.
200.77 Period of performance.
200.78 Personal property.
200.79 Personally Identifiable Information
(PII).
200.80 Program income.
200.81 Property.
200.82 Protected Personally Identifiable In-
formation (Protected PII).
200.83 Project cost.
200.84 Questioned cost.
200.85 Real property.
200.86 Recipient.
200.87 Research and Development (R&D).
200.88 Simplified acquisition threshold.
200.89 Special purpose equipment.
200.90 State.
200.91 Student Financial Aid (SFA).
200.92 Subaward.
200.93 Subrecipient.
200.94 Supplies.
200.95 Termination.
200.96 Third-party in-kind contributions.
200.97 Unliquidated obligations.
200.98 Unobligated balance.
200.99 Voluntary committed cost sharing.
Subpart B—General Provisions
200.100 Purpose.
200.101 Applicability.
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82
2 CFR Ch. II (1–1–21 Edition) Pt. 200
200.102 Exceptions.
200.103 Authorities.
200.104 Supersession.
200.105 Effect on other issuances.
200.106 Agency implementation.
200.107 OMB responsibilities.
200.108 Inquiries.
200.109 Review date.
200.110 Effective/applicability date.
200.111 English language.
200.112 Conflict of interest.
200.113 Mandatory disclosures.
Subpart C—Pre-Federal Award Require-
ments and Contents of Federal Awards
200.200 Purpose.
200.201 Use of grant agreements (including
fixed amount awards), cooperative agree-
ments, and contracts.
200.202 Program planning and design.
200.203 Requirement to provide public no-
tice of Federal financial assistance pro-
grams.
200.204 Notices of funding opportunities.
200.205 Federal awarding agency review of
merit of proposals.
200.206 Federal awarding agency review of
risk posed by applicants.
200.207 Standard application requirements.
200.208 Specific conditions.
200.209 Certifications and representations.
200.210 Pre-award costs.
200.211 Information contained in a Federal
award.
200.212 Public access to Federal award infor-
mation.
200.213 Reporting a determination that a
non-Federal entity is not qualified for a
Federal award.
200.214 Suspension and debarment.
200.215 Never contract with the enemy.
200.216 Prohibition on certain telecommuni-
cations and video surveillance services or
equipment.
Subpart D—Post Federal Award
Requirements
200.300 Statutory and national policy re-
quirements.
200.301 Performance measurement.
200.302 Financial management.
200.303 Internal controls.
200.304 Bonds.
200.305 Federal payment.
200.306 Cost sharing or matching.
200.307 Program income.
200.308 Revision of budget and program
plans.
200.309 Modifications to period of perform-
ance.
PROPERTY STANDARDS
200.310 Insurance coverage.
200.311 Real property.
200.312 Federally-owned and exempt prop-
erty.
200.313 Equipment.
200.314 Supplies.
200.315 Intangible property.
200.316 Property trust relationship.
PROCUREMENT STANDARDS
200.317 Procurements by states.
200.318 General procurement standards.
200.319 Competition.
200.320 Methods of procurement to be fol-
lowed.
200.321 Contracting with small and minority
businesses, women’s business enterprises,
and labor surplus area firms.
200.322 Domestic preferences for procure-
ments.
200.323 Procurement of recovered materials.
200.324 Contract cost and price.
200.325 Federal awarding agency or pass-
through entity review.
200.326 Bonding requirements.
200.327 Contract provisions.
PERFORMANCE AND FINANCIAL MONITORING
AND REPORTING
200.328 Financial reporting.
200.329 Monitoring and reporting program
performance.
200.330 Reporting on real property.
SUBRECIPIENT MONITORING AND MANAGEMENT
200.331 Subrecipient and contractor deter-
minations.
200.332 Requirements for pass-through enti-
ties.
200.333 Fixed amount subawards.
RECORD RETENTION AND ACCESS
200.334 Retention requirements for records.
200.335 Requests for transfer of records.
200.336 Methods for collection, trans-
mission, and storage of information.
200.337 Access to records.
200.338 Restrictions on public access to
records.
REMEDIES FOR NONCOMPLIANCE
200.339 Remedies for noncompliance.
200.340 Termination.
200.341 Notification of termination require-
ment.
200.342 Opportunities to object, hearings,
and appeals.
200.343 Effects of suspension and termi-
nation.
CLOSEOUT
200.344 Closeout.
POST-CLOSEOUT ADJUSTMENTS AND
CONTINUING RESPONSIBILITIES
200.345 Post-closeout adjustments and con-
tinuing responsibilities.
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83
OMB Guidance Pt. 200
COLLECTION OF AMOUNTS DUE
200.346 Collection of amounts due.
Subpart E—Cost Principles
GENERAL PROVISIONS
200.400 Policy guide.
200.401 Application.
BASIC CONSIDERATIONS
200.402 Composition of costs.
200.403 Factors affecting allowability of
costs.
200.404 Reasonable costs.
200.405 Allocable costs.
200.406 Applicable credits.
200.407 Prior written approval (prior ap-
proval).
200.408 Limitation on allowance of costs.
200.409 Special considerations.
200.410 Collection of unallowable costs.
200.411 Adjustment of previously negotiated
indirect (F&A) cost rates containing un-
allowable costs.
DIRECT AND INDIRECT (F&A) COSTS
200.412 Classification of costs.
200.413 Direct costs.
200.414 Indirect (F&A) costs.
200.415 Required certifications.
SPECIAL CONSIDERATIONS FOR STATES, LOCAL
GOVERNMENTS AND INDIAN TRIBES
200.416 Cost allocation plans and indirect
cost proposals.
200.417 Interagency service.
SPECIAL CONSIDERATIONS FOR INSTITUTIONS OF
HIGHER EDUCATION
200.418 Costs incurred by states and local
governments.
200.419 Cost accounting standards and dis-
closure statement.
GENERAL PROVISIONS FOR SELECTED ITEMS OF
COST
200.420 Considerations for selected items of
cost.
200.421 Advertising and public relations.
200.422 Advisory councils.
200.423 Alcoholic beverages.
200.424 Alumni/ae activities.
200.425 Audit services.
200.426 Bad debts.
200.427 Bonding costs.
200.428 Collections of improper payments.
200.429 Commencement and convocation
costs.
200.430 Compensation—personal services.
200.431 Compensation—fringe benefits.
200.432 Conferences.
200.433 Contingency provisions.
200.434 Contributions and donations.
200.435 Defense and prosecution of criminal
and civil proceedings, claims, appeals
and patent infringements.
200.436 Depreciation.
200.437 Employee health and welfare costs.
200.438 Entertainment costs.
200.439 Equipment and other capital expend-
itures.
200.440 Exchange rates.
200.441 Fines, penalties, damages and other
settlements.
200.442 Fund raising and investment man-
agement costs.
200.443 Gains and losses on disposition of de-
preciable assets.
200.444 General costs of government.
200.445 Goods or services for personal use.
200.446 Idle facilities and idle capacity.
200.447 Insurance and indemnification.
200.448 Intellectual property.
200.449 Interest.
200.450 Lobbying.
200.451 Losses on other awards or contracts.
200.452 Maintenance and repair costs.
200.453 Materials and supplies costs, includ-
ing costs of computing devices.
200.454 Memberships, subscriptions, and pro-
fessional activity costs.
200.455 Organization costs.
200.456 Participant support costs.
200.457 Plant and security costs.
200.458 Pre-award costs.
200.459 Professional service costs.
200.460 Proposal costs.
200.461 Publication and printing costs.
200.462 Rearrangement and reconversion
costs.
200.463 Recruiting costs.
200.464 Relocation costs of employees.
200.465 Rental costs of real property and
equipment.
200.466 Scholarships and student aid costs.
200.467 Selling and marketing costs.
200.468 Specialized service facilities.
200.469 Student activity costs.
200.470 Taxes (including Value Added Tax).
200.471 Telecommunication costs and video
surveillance costs.
200.472 Termination costs.
200.473 Training and education costs.
200.474 Transportation costs.
200.475 Travel costs.
200.476 Trustees.
Subpart F—Audit Requirements
GENERAL
200.500 Purpose.
AUDITS
200.501 Audit requirements.
200.502 Basis for determining Federal
awards expended.
200.503 Relation to other audit require-
ments.
200.504 Frequency of audits.
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84
2 CFR Ch. II (1–1–21 Edition) §200.0
200.505 Sanctions.
200.506 Audit costs.
200.507 Program-specific audits.
AUDITEES
200.508 Auditee responsibilities.
200.509 Auditor selection.
200.510 Financial statements.
200.511 Audit findings follow-up.
200.512 Report submission.
FEDERAL AGENCIES
200.513 Responsibilities.
AUDITORS
200.514 Scope of audit.
200.515 Audit reporting.
200.516 Audit findings.
200.517 Audit documentation.
200.518 Major program determination.
200.519 Criteria for Federal program risk.
200.520 Criteria for a low-risk auditee.
MANAGEMENT DECISIONS
200.521 Management decision.
APPENDIX I TO PART 200—FULL TEXT OF NO-
TICE OF FUNDING OPPORTUNITY
APPENDIX II TO PART 200—CONTRACT PROVI-
SIONS FOR NON-FEDERAL ENTITY CON-
TRACTS UNDER FEDERAL AWARDS
APPENDIX III TO PART 200—INDIRECT (F&A)
COSTS IDENTIFICATION AND ASSIGNMENT,
AND RATE DETERMINATION FOR INSTITU-
TIONS OF HIGHER EDUCATION (IHES)
APPENDIX IV TO PART 200—INDIRECT (F&A)
COSTS IDENTIFICATION AND ASSIGNMENT,
AND RATE DETERMINATION FOR NONPROFIT
ORGANIZATIONS
APPENDIX V TO PART 200— STATE/LOCAL GOV-
ERNMENTWIDE CENTRAL SERVICE COST AL-
LOCATION PLANS
APPENDIX VI TO PART 200—PUBLIC ASSIST-
ANCE COST ALLOCATION PLANS
APPENDIX VII TO PART 220—STATES AND
LOCAL GOVERNMENT AND INDIAN TRIBE IN-
DIRECT COST PROPOSALS
APPENDIX VIII TO PART 200—NONPROFIT OR-
GANIZATIONS EXEMPTED FROM SUBPART E
OF PART 200
APPENDIX IX TO PART 200—HOSPITAL COST
PRINCIPLES
APPENDIX X TO PART 200—DATA COLLECTION
FORM (FORM SF–SAC)
APPENDIX XI TO PART 200—COMPLIANCE SUP-
PLEMENT
APPENDIX XII TO PART 200—AWARD TERM AND
CONDITION FOR RECIPIENT INTEGRITY AND
PERFORMANCE MATTERS
AUTHORITY: 31 U.S.C. 503
SOURCE: 78 FR 78608, Dec. 26, 2013, unless
otherwise noted.
Subpart A—Acronyms and
Definitions
ACRONYMS
§200.0 Acronyms.
ACRONYM TERM
CAS Cost Accounting Standards
CFR Code of Federal Regulations
CMIA Cash Management Improve-
ment Act
COG Councils Of Governments
COSO Committee of Sponsoring Orga-
nizations of the Treadway Commis-
sion
EPA Environmental Protection Agen
cy
ERISA Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1301–
1461)
EUI Energy Usage Index
F&A Facilities and Administration
FAC Federal Audit Clearinghouse
FAIN Federal Award Identification
Number
FAPIIS Federal Awardee Perform-
ance and Integrity Information Sys-
tem
FAR Federal Acquisition Regulation
FFATA Federal Funding Account-
ability and Transparency Act of 2006
or Transparency Act—Public Law
109–282, as amended by section 6202(a)
of Public Law 110–252 (31 U.S.C. 6101)
FICA Federal Insurance Contribu-
tions Act
FOIA Freedom of Information Act
FR Federal Register
FTE Full-time equivalent
GAAP Generally Accepted Account-
ing Principles
GAGAS Generally Accepted Govern-
ment Auditing Standards
GAO Government Accountability Of-
fice
GOCO Government owned, contractor
operated
GSA General Services Administration
IBS Institutional Base Salary
IHE Institutions of Higher Education
IRC Internal Revenue Code
ISDEAA Indian Self-Determination
and Education and Assistance Act
MTC Modified Total Cost
MTDC Modified Total Direct Cost
NFE Non-Federal Entity
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85
OMB Guidance §200.1
OMB Office of Management and Budg-
et
PII Personally Identifiable Informa-
tion
PMS Payment Management System
PRHP Post-retirement Health Plans
PTE Pass-through Entity
REUI Relative Energy Usage Index
SAM System for Award Management
SFA Student Financial Aid
SNAP Supplemental Nutrition Assist-
ance Program
SPOC Single Point of Contact
TANF Temporary Assistance for
Needy Families
TFM Treasury Financial Manual
U.S.C. United States Code
VAT Value Added Tax
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014; 80 FR 43308, July 22,
2015; 85 FR 49529, Aug. 13, 2020]
§200.1 Definitions.
These are the definitions for terms
used in this part. Different definitions
may be found in Federal statutes or
regulations that apply more specifi-
cally to particular programs or activi-
ties. These definitions could be supple-
mented by additional instructional in-
formation provided in governmentwide
standard information collections. For
purposes of this part, the following
definitions apply:
Acquisition cost means the cost of the
asset including the cost to ready the
asset for its intended use. Acquisition
cost for equipment, for example, means
the net invoice price of the equipment,
including the cost of any modifica-
tions, attachments, accessories, or aux-
iliary apparatus necessary to make it
usable for the purpose for which it is
acquired. Acquisition costs for soft-
ware includes those development costs
capitalized in accordance with gen-
erally accepted accounting principles
(GAAP). Ancillary charges, such as
taxes, duty, protective in transit insur-
ance, freight, and installation may be
included in or excluded from the acqui-
sition cost in accordance with the non-
Federal entity’s regular accounting
practices.
Advance payment means a payment
that a Federal awarding agency or
pass-through entity makes by any ap-
propriate payment mechanism, includ-
ing a predetermined payment schedule,
before the non-Federal entity disburses
the funds for program purposes.
Allocation means the process of as-
signing a cost, or a group of costs, to
one or more cost objective(s), in rea-
sonable proportion to the benefit pro-
vided or other equitable relationship.
The process may entail assigning a
cost(s) directly to a final cost objective
or through one or more intermediate
cost objectives.
Assistance listings refers to the pub-
licly available listing of Federal assist-
ance programs managed and adminis-
tered by the General Services Adminis-
tration, formerly known as the Catalog
of Federal Domestic Assistance
(CFDA).
Assistance listing number means a
unique number assigned to identify a
Federal Assistance Listings, formerly
known as the CFDA Number.
Assistance listing program title means
the title that corresponds to the Fed-
eral Assistance Listings Number, for-
merly known as the CFDA program
title.
Audit finding means deficiencies
which the auditor is required by
§200.516(a) to report in the schedule of
findings and questioned costs.
Auditee means any non-Federal enti-
ty that expends Federal awards which
must be audited under subpart F of
this part.
Auditor means an auditor who is a
public accountant or a Federal, State,
local government, or Indian tribe audit
organization, which meets the general
standards specified for external audi-
tors in generally accepted government
auditing standards (GAGAS). The term
auditor does not include internal audi-
tors of nonprofit organizations.
Budget means the financial plan for
the Federal award that the Federal
awarding agency or pass-through enti-
ty approves during the Federal award
process or in subsequent amendments
to the Federal award. It may include
the Federal and non-Federal share or
only the Federal share, as determined
by the Federal awarding agency or
pass-through entity.
Budget period means the time inter-
val from the start date of a funded por-
tion of an award to the end date of that
funded portion during which recipients
are authorized to expend the funds
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86
2 CFR Ch. II (1–1–21 Edition) §200.1
awarded, including any funds carried
forward or other revisions pursuant to
§200.308.
Capital assets means:
(1) Tangible or intangible assets used
in operations having a useful life of
more than one year which are capital-
ized in accordance with GAAP. Capital
assets include:
(i) Land, buildings (facilities), equip-
ment, and intellectual property (in-
cluding software) whether acquired by
purchase, construction, manufacture,
exchange, or through a lease accounted
for as financed purchase under Govern-
ment Accounting Standards Board
(GASB) standards or a finance lease
under Financial Accounting Standards
Board (FASB) standards; and
(ii) Additions, improvements, modi-
fications, replacements, rearrange-
ments, reinstallations, renovations or
alterations to capital assets that mate-
rially increase their value or useful life
(not ordinary repairs and mainte-
nance).
(2) For purpose of this part, capital
assets do not include intangible right-
to-use assets (per GASB) and right-to-
use operating lease assets (per FASB).
For example, assets capitalized that
recognize a lessee’s right to control the
use of property and/or equipment for a
period of time under a lease contract.
See also §200.465.
Capital expenditures means expendi-
tures to acquire capital assets or ex-
penditures to make additions, improve-
ments, modifications, replacements,
rearrangements, reinstallations, ren-
ovations, or alterations to capital as-
sets that materially increase their
value or useful life.
Central service cost allocation plan
means the documentation identifying,
accumulating, and allocating or devel-
oping billing rates based on the allow-
able costs of services provided by a
State or local government or Indian
tribe on a centralized basis to its de-
partments and agencies. The costs of
these services may be allocated or
billed to users.
Claim means, depending on the con-
text, either:
(1) A written demand or written as-
sertion by one of the parties to a Fed-
eral award seeking as a matter of
right:
(i) The payment of money in a sum
certain;
(ii) The adjustment or interpretation
of the terms and conditions of the Fed-
eral award; or
(iii) Other relief arising under or re-
lating to a Federal award.
(2) A request for payment that is not
in dispute when submitted.
Class of Federal awards means a group
of Federal awards either awarded under
a specific program or group of pro-
grams or to a specific type of non-Fed-
eral entity or group of non-Federal en-
tities to which specific provisions or
exceptions may apply.
Closeout means the process by which
the Federal awarding agency or pass-
through entity determines that all ap-
plicable administrative actions and all
required work of the Federal award
have been completed and takes actions
as described in §200.344.
Cluster of programs means a grouping
of closely related programs that share
common compliance requirements. The
types of clusters of programs are re-
search and development (R&D), student
financial aid (SFA), and other clusters.
‘‘Other clusters’’ are as defined by OMB
in the compliance supplement or as
designated by a State for Federal
awards the State provides to its sub-
recipients that meet the definition of a
cluster of programs. When designating
an ‘‘other cluster,’’ a State must iden-
tify the Federal awards included in the
cluster and advise the subrecipients of
compliance requirements applicable to
the cluster, consistent with §200.332(a).
A cluster of programs must be consid-
ered as one program for determining
major programs, as described in
§200.518, and, with the exception of
R&D as described in §200.501(c), wheth-
er a program-specific audit may be
elected.
Cognizant agency for audit means the
Federal agency designated to carry out
the responsibilities described in
§200.513(a). The cognizant agency for
audit is not necessarily the same as the
cognizant agency for indirect costs. A
list of cognizant agencies for audit can
be found on the Federal Audit Clear-
inghouse (FAC) website.
Cognizant agency for indirect costs
means the Federal agency responsible
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OMB Guidance §200.1
for reviewing, negotiating, and approv-
ing cost allocation plans or indirect
cost proposals developed under this
part on behalf of all Federal agencies.
The cognizant agency for indirect cost
is not necessarily the same as the cog-
nizant agency for audit. For assign-
ments of cognizant agencies see the
following:
(1) For Institutions of Higher Edu-
cation (IHEs): Appendix III to this
part, paragraph C.11.
(2) For nonprofit organizations: Ap-
pendix IV to this part, paragraph C.2.a.
(3) For State and local governments:
Appendix V to this part, paragraph F.1.
(4) For Indian tribes: Appendix VII to
this part, paragraph D.1.
Compliance supplement means an an-
nually updated authoritative source for
auditors that serves to identify exist-
ing important compliance require-
ments that the Federal Government
expects to be considered as part of an
audit. Auditors use it to understand
the Federal program’s objectives, pro-
cedures, and compliance requirements,
as well as audit objectives and sug-
gested audit procedures for deter-
mining compliance with the relevant
Federal program.
Computing devices means machines
used to acquire, store, analyze, process,
and publish data and other information
electronically, including accessories
(or ‘‘peripherals’’) for printing, trans-
mitting and receiving, or storing elec-
tronic information. See also the defini-
tions of supplies and information tech-
nology systems in this section.
Contract means, for the purpose of
Federal financial assistance, a legal in-
strument by which a recipient or sub-
recipient purchases property or serv-
ices needed to carry out the project or
program under a Federal award. For
additional information on subrecipient
and contractor determinations, see
§200.331. See also the definition of
subaward in this section.
Contractor means an entity that re-
ceives a contract as defined in this sec-
tion.
Cooperative agreement means a legal
instrument of financial assistance be-
tween a Federal awarding agency and a
recipient or a pass-through entity and
a subrecipient that, consistent with 31
U.S.C. 6302–6305:
(1) Is used to enter into a relation-
ship the principal purpose of which is
to transfer anything of value to carry
out a public purpose authorized by a
law of the United States (see 31 U.S.C.
6101(3)); and not to acquire property or
services for the Federal Government or
pass-through entity’s direct benefit or
use;
(2) Is distinguished from a grant in
that it provides for substantial involve-
ment of the Federal awarding agency
in carrying out the activity con-
templated by the Federal award.
(3) The term does not include:
(i) A cooperative research and devel-
opment agreement as defined in 15
U.S.C. 3710a; or
(ii) An agreement that provides only:
(A) Direct United States Government
cash assistance to an individual;
(B) A subsidy;
(C) A loan;
(D) A loan guarantee; or
(E) Insurance.
Cooperative audit resolution means the
use of audit follow-up techniques which
promote prompt corrective action by
improving communication, fostering
collaboration, promoting trust, and de-
veloping an understanding between the
Federal agency and the non-Federal en-
tity. This approach is based upon:
(1) A strong commitment by Federal
agency and non-Federal entity leader-
ship to program integrity;
(2) Federal agencies strengthening
partnerships and working coopera-
tively with non-Federal entities and
their auditors; and non-Federal enti-
ties and their auditors working coop-
eratively with Federal agencies;
(3) A focus on current conditions and
corrective action going forward;
(4) Federal agencies offering appro-
priate relief for past noncompliance
when audits show prompt corrective
action has occurred; and
(5) Federal agency leadership sending
a clear message that continued failure
to correct conditions identified by au-
dits which are likely to cause improper
payments, fraud, waste, or abuse is un-
acceptable and will result in sanctions.
Corrective action means action taken
by the auditee that:
(1) Corrects identified deficiencies;
(2) Produces recommended improve-
ments; or
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2 CFR Ch. II (1–1–21 Edition) §200.1
(3) Demonstrates that audit findings
are either invalid or do not warrant
auditee action.
Cost allocation plan means central
service cost allocation plan or public
assistance cost allocation plan.
Cost objective means a program, func-
tion, activity, award, organizational
subdivision, contract, or work unit for
which cost data are desired and for
which provision is made to accumulate
and measure the cost of processes,
products, jobs, capital projects, etc. A
cost objective may be a major function
of the non-Federal entity, a particular
service or project, a Federal award, or
an indirect (Facilities & Administra-
tive (F&A)) cost activity, as described
in subpart E of this part. See also the
definitions of final cost objective and in-
termediate cost objective in this section.
Cost sharing or matching means the
portion of project costs not paid by
Federal funds or contributions (unless
otherwise authorized by Federal stat-
ute). See also §200.306.
Cross-cutting audit finding means an
audit finding where the same under-
lying condition or issue affects all Fed-
eral awards (including Federal awards
of more than one Federal awarding
agency or pass-through entity).
Disallowed costs means those charges
to a Federal award that the Federal
awarding agency or pass-through enti-
ty determines to be unallowable, in ac-
cordance with the applicable Federal
statutes, regulations, or the terms and
conditions of the Federal award.
Discretionary award means an award
in which the Federal awarding agency,
in keeping with specific statutory au-
thority that enables the agency to ex-
ercise judgment (‘‘discretion’’), selects
the recipient and/or the amount of Fed-
eral funding awarded through a com-
petitive process or based on merit of
proposals. A discretionary award may
be selected on a non-competitive basis,
as appropriate.
Equipment means tangible personal
property (including information tech-
nology systems) having a useful life of
more than one year and a per-unit ac-
quisition cost which equals or exceeds
the lesser of the capitalization level es-
tablished by the non-Federal entity for
financial statement purposes, or $5,000.
See also the definitions of capital as-
sets, computing devices, general purpose
equipment, information technology sys-
tems, special purpose equipment, and sup-
plies in this section.
Expenditures means charges made by
a non-Federal entity to a project or
program for which a Federal award was
received.
(1) The charges may be reported on a
cash or accrual basis, as long as the
methodology is disclosed and is con-
sistently applied.
(2) For reports prepared on a cash
basis, expenditures are the sum of:
(i) Cash disbursements for direct
charges for property and services;
(ii) The amount of indirect expense
charged;
(iii) The value of third-party in-kind
contributions applied; and
(iv) The amount of cash advance pay-
ments and payments made to sub-
recipients.
(3) For reports prepared on an ac-
crual basis, expenditures are the sum
of:
(i) Cash disbursements for direct
charges for property and services;
(ii) The amount of indirect expense
incurred;
(iii) The value of third-party in-kind
contributions applied; and
(iv) The net increase or decrease in
the amounts owed by the non-Federal
entity for:
(A) Goods and other property re-
ceived;
(B) Services performed by employees,
contractors, subrecipients, and other
payees; and
(C) Programs for which no current
services or performance are required
such as annuities, insurance claims, or
other benefit payments.
Federal agency means an ‘‘agency’’ as
defined at 5 U.S.C. 551(1) and further
clarified by 5 U.S.C. 552(f).
Federal Audit Clearinghouse (FAC)
means the clearinghouse designated by
OMB as the repository of record where
non-Federal entities are required to
transmit the information required by
subpart F of this part.
Federal award has the meaning, de-
pending on the context, in either para-
graph (1) or (2) of this definition:
(1)(i) The Federal financial assistance
that a recipient receives directly from
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OMB Guidance §200.1
a Federal awarding agency or indi-
rectly from a pass-through entity, as
described in §200.101; or
(ii) The cost-reimbursement contract
under the Federal Acquisition Regula-
tions that a non-Federal entity re-
ceives directly from a Federal award-
ing agency or indirectly from a pass-
through entity, as described in §200.101.
(2) The instrument setting forth the
terms and conditions. The instrument
is the grant agreement, cooperative
agreement, other agreement for assist-
ance covered in paragraph (2) of the
definition of Federal financial assistance
in this section, or the cost-reimburse-
ment contract awarded under the Fed-
eral Acquisition Regulations.
(3) Federal award does not include
other contracts that a Federal agency
uses to buy goods or services from a
contractor or a contract to operate
Federal Government owned, contractor
operated facilities (GOCOs).
(4) See also definitions of Federal fi-
nancial assistance, grant agreement,
and cooperative agreement.
Federal award date means the date
when the Federal award is signed by
the authorized official of the Federal
awarding agency.
Federal financial assistance means
(1) Assistance that non-Federal enti-
ties receive or administer in the form
of:
(i) Grants;
(ii) Cooperative agreements;
(iii) Non-cash contributions or dona-
tions of property (including donated
surplus property);
(iv) Direct appropriations;
(v) Food commodities; and
(vi) Other financial assistance (ex-
cept assistance listed in paragraph (2)
of this definition).
(2) For §200.203 and subpart F of this
part, Federal financial assistance also in-
cludes assistance that non-Federal en-
tities receive or administer in the form
of:
(i) Loans;
(ii) Loan Guarantees;
(iii) Interest subsidies; and
(iv) Insurance.
(3) For §200.216, Federal financial as-
sistance includes assistance that non-
Federal entities receive or administer
in the form of:
(i) Grants;
(ii) Cooperative agreements;
(iii) Loans; and
(iv) Loan Guarantees.
(4) Federal financial assistance does
not include amounts received as reim-
bursement for services rendered to in-
dividuals as described in §200.502(h) and
(i).
Federal interest means, for purposes of
§200.330 or when used in connection
with the acquisition or improvement of
real property, equipment, or supplies
under a Federal award, the dollar
amount that is the product of the:
(1) The percentage of Federal partici-
pation in the total cost of the real
property, equipment, or supplies; and
(2) Current fair market value of the
property, improvements, or both, to
the extent the costs of acquiring or im-
proving the property were included as
project costs.
Federal program means:
(1) All Federal awards which are as-
signed a single Assistance Listings
Number.
(2) When no Assistance Listings
Number is assigned, all Federal awards
from the same agency made for the
same purpose must be combined and
considered one program.
(3) Notwithstanding paragraphs (1)
and (2) of this definition, a cluster of
programs. The types of clusters of pro-
grams are:
(i) Research and development (R&D);
(ii) Student financial aid (SFA); and
(iii) ‘‘Other clusters,’’ as described in
the definition of cluster of programs in
this section.
Federal share means the portion of
the Federal award costs that are paid
using Federal funds.
Final cost objective means a cost ob-
jective which has allocated to it both
direct and indirect costs and, in the
non-Federal entity’s accumulation sys-
tem, is one of the final accumulation
points, such as a particular award, in-
ternal project, or other direct activity
of a non-Federal entity. See also the
definitions of cost objective and inter-
mediate cost objective in this section.
Financial obligations, when ref-
erencing a recipient’s or subrecipient’s
use of funds under a Federal award,
means orders placed for property and
services, contracts and subawards
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2 CFR Ch. II (1–1–21 Edition) §200.1
made, and similar transactions that re-
quire payment.
Fixed amount awards means a type of
grant or cooperative agreement under
which the Federal awarding agency or
pass-through entity provides a specific
level of support without regard to ac-
tual costs incurred under the Federal
award. This type of Federal award re-
duces some of the administrative bur-
den and record-keeping requirements
for both the non-Federal entity and
Federal awarding agency or pass-
through entity. Accountability is based
primarily on performance and results.
See §§200.102(c), 200.201(b), and 200.333.
Foreign organization means an entity
that is:
(1) A public or private organization
located in a country other than the
United States and its territories that is
subject to the laws of the country in
which it is located, irrespective of the
citizenship of project staff or place of
performance;
(2) A private nongovernmental orga-
nization located in a country other
than the United States that solicits
and receives cash contributions from
the general public;
(3) A charitable organization located
in a country other than the United
States that is nonprofit and tax ex-
empt under the laws of its country of
domicile and operation, and is not a
university, college, accredited degree-
granting institution of education, pri-
vate foundation, hospital, organization
engaged exclusively in research or sci-
entific activities, church, synagogue,
mosque or other similar entities orga-
nized primarily for religious purposes;
or
(4) An organization located in a coun-
try other than the United States not
recognized as a foreign public entity.
Foreign public entity means:
(1) A foreign government or foreign
governmental entity;
(2) A public international organiza-
tion, which is an organization entitled
to enjoy privileges, exemptions, and
immunities as an international organi-
zation under the International Organi-
zations Immunities Act (22 U.S.C. 288–
288f);
(3) An entity owned (in whole or in
part) or controlled by a foreign govern-
ment; or
(4) Any other entity consisting whol-
ly or partially of one or more foreign
governments or foreign governmental
entities.
General purpose equipment means
equipment which is not limited to re-
search, medical, scientific or other
technical activities. Examples include
office equipment and furnishings, mod-
ular offices, telephone networks, infor-
mation technology equipment and sys-
tems, air conditioning equipment, re-
production and printing equipment,
and motor vehicles. See also the defini-
tions of equipment and special purpose
equipment in this section.
Generally accepted accounting prin-
ciples (GAAP) has the meaning specified
in accounting standards issued by the
GASB and the FASB.
Generally accepted government auditing
standards (GAGAS), also known as the
Yellow Book, means generally accepted
government auditing standards issued
by the Comptroller General of the
United States, which are applicable to
financial audits.
Grant agreement means a legal instru-
ment of financial assistance between a
Federal awarding agency or pass-
through entity and a non-Federal enti-
ty that, consistent with 31 U.S.C. 6302,
6304:
(1) Is used to enter into a relation-
ship the principal purpose of which is
to transfer anything of value to carry
out a public purpose authorized by a
law of the United States (see 31 U.S.C.
6101(3)); and not to acquire property or
services for the Federal awarding agen-
cy or pass-through entity’s direct ben-
efit or use;
(2) Is distinguished from a coopera-
tive agreement in that it does not pro-
vide for substantial involvement of the
Federal awarding agency in carrying
out the activity contemplated by the
Federal award.
(3) Does not include an agreement
that provides only:
(i) Direct United States Government
cash assistance to an individual;
(ii) A subsidy;
(iii) A loan;
(vi) A loan guarantee; or
(v) Insurance.
Highest level owner means the entity
that owns or controls an immediate
owner of the offeror, or that owns or
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OMB Guidance §200.1
controls one or more entities that con-
trol an immediate owner of the offeror.
No entity owns or exercises control of
the highest-level owner as defined in
the Federal Acquisition Regulations
(FAR) (48 CFR 52.204–17).
Hospital means a facility licensed as
a hospital under the law of any state or
a facility operated as a hospital by the
United States, a state, or a subdivision
of a state.
Improper payment means:
(1) Any payment that should not
have been made or that was made in an
incorrect amount under statutory, con-
tractual, administrative, or other le-
gally applicable requirements.
(i) Incorrect amounts are overpay-
ments or underpayments that are made
to eligible recipients (including inap-
propriate denials of payment or serv-
ice, any payment that does not account
for credit for applicable discounts, pay-
ments that are for an incorrect
amount, and duplicate payments). An
improper payment also includes any
payment that was made to an ineli-
gible recipient or for an ineligible good
or service, or payments for goods or
services not received (except for such
payments authorized by law).
Note 1 to paragraph (1)(i) of this defini-
tion. Applicable discounts are only
those discounts where it is both advan-
tageous and within the agency’s con-
trol to claim them.
(ii) When an agency’s review is un-
able to discern whether a payment was
proper as a result of insufficient or
lack of documentation, this payment
should also be considered an improper
payment. When establishing docu-
mentation requirements for payments,
agencies should ensure that all docu-
mentation requirements are necessary
and should refrain from imposing addi-
tional burdensome documentation re-
quirements.
(iii) Interest or other fees that may
result from an underpayment by an
agency are not considered an improper
payment if the interest was paid cor-
rectly. These payments are generally
separate transactions and may be nec-
essary under certain statutory, con-
tractual, administrative, or other le-
gally applicable requirements.
(iv) A ‘‘questioned cost’’ (as defined
in this section) should not be consid-
ered an improper payment until the
transaction has been completely re-
viewed and is confirmed to be im-
proper.
(v) The term ‘‘payment’’ in this defi-
nition means any disbursement or
transfer of Federal funds (including a
commitment for future payment, such
as cash, securities, loans, loan guaran-
tees, and insurance subsidies) to any
non-Federal person, non-Federal enti-
ty, or Federal employee, that is made
by a Federal agency, a Federal con-
tractor, a Federal grantee, or a govern-
mental or other organization admin-
istering a Federal program or activity.
(vi) The term ‘‘payment’’ includes
disbursements made pursuant to prime
contracts awarded under the Federal
Acquisition Regulation and Federal
awards subject to this part that are ex-
pended by recipients.
(2) See definition of improper pay-
ment in OMB Circular A–123 appendix
C, part I A (1) ‘‘What is an improper
payment?’’ Questioned costs, including
those identified in audits, are not an
improper payment until reviewed and
confirmed to be improper as defined in
OMB Circular A–123 appendix C.
Indian tribe means any Indian tribe,
band, nation, or other organized group
or community, including any Alaska
Native village or regional or village
corporation as defined in or established
pursuant to the Alaska Native Claims
Settlement Act (43 U.S.C. Chapter 33),
which is recognized as eligible for the
special programs and services provided
by the United States to Indians be-
cause of their status as Indians (25
U.S.C. 450b(e)). See annually published
Bureau of Indian Affairs list of Indian
Entities Recognized and Eligible to Re-
ceive Services.
Institutions of Higher Education (IHEs)
is defined at 20 U.S.C. 1001.
Indirect (facilities & administrative
(F&A)) costs means those costs incurred
for a common or joint purpose benefit-
ting more than one cost objective, and
not readily assignable to the cost ob-
jectives specifically benefitted, with-
out effort disproportionate to the re-
sults achieved. To facilitate equitable
distribution of indirect expenses to the
cost objectives served, it may be nec-
essary to establish a number of pools of
indirect (F&A) costs. Indirect (F&A)
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2 CFR Ch. II (1–1–21 Edition) §200.1
cost pools must be distributed to bene-
fitted cost objectives on bases that will
produce an equitable result in consider-
ation of relative benefits derived.
Indirect cost rate proposal means the
documentation prepared by a non-Fed-
eral entity to substantiate its request
for the establishment of an indirect
cost rate as described in appendices III
through VII and appendix IX to this
part.
Information technology systems means
computing devices, ancillary equip-
ment, software, firmware, and similar
procedures, services (including support
services), and related resources. See
also the definitions of computing devices
and equipment in this section.
Intangible property means property
having no physical existence, such as
trademarks, copyrights, patents and
patent applications and property, such
as loans, notes and other debt instru-
ments, lease agreements, stock and
other instruments of property owner-
ship (whether the property is tangible
or intangible).
Intermediate cost objective means a
cost objective that is used to accumu-
late indirect costs or service center
costs that are subsequently allocated
to one or more indirect cost pools or
final cost objectives. See also the defi-
nitions of cost objective and final cost ob-
jective in this section.
Internal controls for non-Federal enti-
ties means:
(1) Processes designed and imple-
mented by non-Federal entities to pro-
vide reasonable assurance regarding
the achievement of objectives in the
following categories:
(i) Effectiveness and efficiency of op-
erations;
(ii) Reliability of reporting for inter-
nal and external use; and
(iii) Compliance with applicable laws
and regulations.
(2) Federal awarding agencies are re-
quired to follow internal control com-
pliance requirements in OMB Circular
No. A–123, Management’s Responsi-
bility for Enterprise Risk Management
and Internal Control.
Loan means a Federal loan or loan
guarantee received or administered by
a non-Federal entity, except as used in
the definition of program income in this
section.
(1) The term ‘‘direct loan’’ means a
disbursement of funds by the Federal
Government to a non-Federal borrower
under a contract that requires the re-
payment of such funds with or without
interest. The term includes the pur-
chase of, or participation in, a loan
made by another lender and financing
arrangements that defer payment for
more than 90 days, including the sale of
a Federal Government asset on credit
terms. The term does not include the
acquisition of a federally guaranteed
loan in satisfaction of default claims or
the price support loans of the Com-
modity Credit Corporation.
(2) The term ‘‘direct loan obligation’’
means a binding agreement by a Fed-
eral awarding agency to make a direct
loan when specified conditions are ful-
filled by the borrower.
(3) The term ‘‘loan guarantee’’ means
any Federal Government guarantee, in-
surance, or other pledge with respect
to the payment of all or a part of the
principal or interest on any debt obli-
gation of a non-Federal borrower to a
non-Federal lender, but does not in-
clude the insurance of deposits, shares,
or other withdrawable accounts in fi-
nancial institutions.
(4) The term ‘‘loan guarantee com-
mitment’’ means a binding agreement
by a Federal awarding agency to make
a loan guarantee when specified condi-
tions are fulfilled by the borrower, the
lender, or any other party to the guar-
antee agreement.
Local government means any unit of
government within a state, including a:
(1) County;
(2) Borough;
(3) Municipality;
(4) City;
(5) Town;
(6) Township;
(7) Parish;
(8) Local public authority, including
any public housing agency under the
United States Housing Act of 1937;
(9) Special district;
(10) School district;
(11) Intrastate district;
(12) Council of governments, whether
or not incorporated as a nonprofit cor-
poration under State law; and
(13) Any other agency or instrumen-
tality of a multi-, regional, or intra-
State or local government.
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OMB Guidance §200.1
Major program means a Federal pro-
gram determined by the auditor to be a
major program in accordance with
§200.518 or a program identified as a
major program by a Federal awarding
agency or pass-through entity in ac-
cordance with §200.503(e).
Management decision means the Fed-
eral awarding agency’s or pass-through
entity’s written determination, pro-
vided to the auditee, of the adequacy of
the auditee’s proposed corrective ac-
tions to address the findings, based on
its evaluation of the audit findings and
proposed corrective actions.
Micro-purchase means a purchase of
supplies or services, the aggregate
amount of which does not exceed the
micro-purchase threshold. Micro-pur-
chases comprise a subset of a non-Fed-
eral entity’s small purchases as defined
in §200.320.
Micro-purchase threshold means the
dollar amount at or below which a non-
Federal entity may purchase property
or services using micro-purchase proce-
dures (see §200.320). Generally, the
micro-purchase threshold for procure-
ment activities administered under
Federal awards is not to exceed the
amount set by the FAR at 48 CFR part
2, subpart 2.1, unless a higher threshold
is requested by the non-Federal entity
and approved by the cognizant agency
for indirect costs.
Modified Total Direct Cost (MTDC)
means all direct salaries and wages, ap-
plicable fringe benefits, materials and
supplies, services, travel, and up to the
first $25,000 of each subaward (regard-
less of the period of performance of the
subawards under the award). MTDC ex-
cludes equipment, capital expendi-
tures, charges for patient care, rental
costs, tuition remission, scholarships
and fellowships, participant support
costs and the portion of each subaward
in excess of $25,000. Other items may
only be excluded when necessary to
avoid a serious inequity in the dis-
tribution of indirect costs, and with
the approval of the cognizant agency
for indirect costs.
Non-discretionary award means an
award made by the Federal awarding
agency to specific recipients in accord-
ance with statutory, eligibility and
compliance requirements, such that in
keeping with specific statutory author-
ity the agency has no ability to exer-
cise judgement (‘‘discretion’’). A non-
discretionary award amount could be
determined specifically or by formula.
Non-Federal entity (NFE) means a
State, local government, Indian tribe,
Institution of Higher Education (IHE),
or nonprofit organization that carries
out a Federal award as a recipient or
subrecipient.
Nonprofit organization means any cor-
poration, trust, association, coopera-
tive, or other organization, not includ-
ing IHEs, that:
(1) Is operated primarily for sci-
entific, educational, service, chari-
table, or similar purposes in the public
interest;
(2) Is not organized primarily for
profit; and
(3) Uses net proceeds to maintain,
improve, or expand the operations of
the organization.
Notice of funding opportunity means a
formal announcement of the avail-
ability of Federal funding through a fi-
nancial assistance program from a Fed-
eral awarding agency. The notice of
funding opportunity provides informa-
tion on the award, who is eligible to
apply, the evaluation criteria for selec-
tion of an awardee, required compo-
nents of an application, and how to
submit the application. The notice of
funding opportunity is any paper or
electronic issuance that an agency uses
to announce a funding opportunity,
whether it is called a ‘‘program an-
nouncement,’’ ‘‘notice of funding avail-
ability,’’ ‘‘broad agency announce-
ment,’’ ‘‘research announcement,’’
‘‘solicitation,’’ or some other term.
Office of Management and Budget
(OMB) means the Executive Office of
the President, Office of Management
and Budget.
Oversight agency for audit means the
Federal awarding agency that provides
the predominant amount of funding di-
rectly (direct funding) (as listed on the
schedule of expenditures of Federal
awards, see §200.510(b)) to a non-Fed-
eral entity unless OMB designates a
specific cognizant agency for audit.
When the direct funding represents less
than 25 percent of the total Federal ex-
penditures (as direct and sub-awards)
by the non-Federal entity, then the
Federal agency with the predominant
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2 CFR Ch. II (1–1–21 Edition) §200.1
amount of total funding is the des-
ignated cognizant agency for audit.
When there is no direct funding, the
Federal awarding agency which is the
predominant source of pass-through
funding must assume the oversight re-
sponsibilities. The duties of the over-
sight agency for audit and the process
for any reassignments are described in
§200.513(b).
Participant support costs means direct
costs for items such as stipends or sub-
sistence allowances, travel allowances,
and registration fees paid to or on be-
half of participants or trainees (but not
employees) in connection with con-
ferences, or training projects.
Pass-through entity (PTE) means a
non-Federal entity that provides a
subaward to a subrecipient to carry out
part of a Federal program.
Performance goal means a target level
of performance expressed as a tangible,
measurable objective, against which
actual achievement can be compared,
including a goal expressed as a quan-
titative standard, value, or rate. In
some instances (e.g., discretionary re-
search awards), this may be limited to
the requirement to submit technical
performance reports (to be evaluated in
accordance with agency policy).
Period of performance means the total
estimated time interval between the
start of an initial Federal award and
the planned end date, which may in-
clude one or more funded portions, or
budget periods. Identification of the
period of performance in the Federal
award per §200.211(b)(5) does not com-
mit the awarding agency to fund the
award beyond the currently approved
budget period.
Personal property means property
other than real property. It may be
tangible, having physical existence, or
intangible.
Personally Identifiable Information
(PII) means information that can be
used to distinguish or trace an individ-
ual’s identity, either alone or when
combined with other personal or iden-
tifying information that is linked or
linkable to a specific individual. Some
information that is considered to be
PII is available in public sources such
as telephone books, public websites,
and university listings. This type of in-
formation is considered to be Public
PII and includes, for example, first and
last name, address, work telephone
number, email address, home telephone
number, and general educational cre-
dentials. The definition of PII is not
anchored to any single category of in-
formation or technology. Rather, it re-
quires a case-by-case assessment of the
specific risk that an individual can be
identified. Non-PII can become PII
whenever additional information is
made publicly available, in any me-
dium and from any source, that, when
combined with other available infor-
mation, could be used to identify an in-
dividual.
Program income means gross income
earned by the non-Federal entity that
is directly generated by a supported ac-
tivity or earned as a result of the Fed-
eral award during the period of per-
formance except as provided in
§200.307(f). (See the definition of period
of performance in this section.) Program
income includes but is not limited to
income from fees for services per-
formed, the use or rental or real or per-
sonal property acquired under Federal
awards, the sale of commodities or
items fabricated under a Federal
award, license fees and royalties on
patents and copyrights, and principal
and interest on loans made with Fed-
eral award funds. Interest earned on
advances of Federal funds is not pro-
gram income. Except as otherwise pro-
vided in Federal statutes, regulations,
or the terms and conditions of the Fed-
eral award, program income does not
include rebates, credits, discounts, and
interest earned on any of them. See
also §200.407. See also 35 U.S.C. 200–212
‘‘Disposition of Rights in Educational
Awards’’ applies to inventions made
under Federal awards.
Project cost means total allowable
costs incurred under a Federal award
and all required cost sharing and vol-
untary committed cost sharing, includ-
ing third-party contributions.
Property means real property or per-
sonal property. See also the definitions
of real property and personal property in
this section.
Protected Personally Identifiable Infor-
mation (Protected PII) means an individ-
ual’s first name or first initial and last
name in combination with any one or
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95
OMB Guidance §200.1
more of types of information, includ-
ing, but not limited to, social security
number, passport number, credit card
numbers, clearances, bank numbers,
biometrics, date and place of birth,
mother’s maiden name, criminal, med-
ical and financial records, educational
transcripts. This does not include PII
that is required by law to be disclosed.
See also the definition of Personally
Identifiable Information (PII) in this sec-
tion.
Questioned cost means a cost that is
questioned by the auditor because of an
audit finding:
(1) Which resulted from a violation or
possible violation of a statute, regula-
tion, or the terms and conditions of a
Federal award, including for funds used
to match Federal funds;
(2) Where the costs, at the time of
the audit, are not supported by ade-
quate documentation; or
(3) Where the costs incurred appear
unreasonable and do not reflect the ac-
tions a prudent person would take in
the circumstances.
(4) Questioned costs are not an im-
proper payment until reviewed and
confirmed to be improper as defined in
OMB Circular A–123 appendix C. (See
also the definition of Improper payment
in this section).
Real property means land, including
land improvements, structures and ap-
purtenances thereto, but excludes
moveable machinery and equipment.
Recipient means an entity, usually
but not limited to non-Federal entities
that receives a Federal award directly
from a Federal awarding agency. The
term recipient does not include sub-
recipients or individuals that are bene-
ficiaries of the award.
Renewal award means an award made
subsequent to an expiring Federal
award for which the start date is con-
tiguous with, or closely follows, the
end of the expiring Federal award. A
renewal award’s start date will begin a
distinct period of performance.
Research and Development (R&D)
means all research activities, both
basic and applied, and all development
activities that are performed by non-
Federal entities. The term research
also includes activities involving the
training of individuals in research
techniques where such activities utilize
the same facilities as other research
and development activities and where
such activities are not included in the
instruction function. ‘‘Research’’ is de-
fined as a systematic study directed to-
ward fuller scientific knowledge or un-
derstanding of the subject studied.
‘‘Development’’ is the systematic use
of knowledge and understanding gained
from research directed toward the pro-
duction of useful materials, devices,
systems, or methods, including design
and development of prototypes and
processes.
Simplified acquisition threshold means
the dollar amount below which a non-
Federal entity may purchase property
or services using small purchase meth-
ods (see §200.320). Non-Federal entities
adopt small purchase procedures in
order to expedite the purchase of items
at or below the simplified acquisition
threshold. The simplified acquisition
threshold for procurement activities
administered under Federal awards is
set by the FAR at 48 CFR part 2, sub-
part 2.1. The non-Federal entity is re-
sponsible for determining an appro-
priate simplified acquisition threshold
based on internal controls, an evalua-
tion of risk, and its documented pro-
curement procedures. However, in no
circumstances can this threshold ex-
ceed the dollar value established in the
FAR (48 CFR part 2, subpart 2.1) for the
simplified acquisition threshold. Re-
cipients should determine if local gov-
ernment laws on purchasing apply.
Special purpose equipment means
equipment which is used only for re-
search, medical, scientific, or other
technical activities. Examples of spe-
cial purpose equipment include micro-
scopes, x-ray machines, surgical instru-
ments, and spectrometers. See also the
definitions of equipment and general
purpose equipment in this section.
State means any state of the United
States, the District of Columbia, the
Commonwealth of Puerto Rico, U.S.
Virgin Islands, Guam, American
Samoa, the Commonwealth of the
Northern Mariana Islands, and any
agency or instrumentality thereof ex-
clusive of local governments.
Student Financial Aid (SFA) means
Federal awards under those programs
of general student assistance, such as
those authorized by Title IV of the
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2 CFR Ch. II (1–1–21 Edition) §200.2
Higher Education Act of 1965, as
amended, (20 U.S.C. 1070–1099d), which
are administered by the U.S. Depart-
ment of Education, and similar pro-
grams provided by other Federal agen-
cies. It does not include Federal awards
under programs that provide fellow-
ships or similar Federal awards to stu-
dents on a competitive basis, or for
specified studies or research.
Subaward means an award provided
by a pass-through entity to a sub-
recipient for the subrecipient to carry
out part of a Federal award received by
the pass-through entity. It does not in-
clude payments to a contractor or pay-
ments to an individual that is a bene-
ficiary of a Federal program. A
subaward may be provided through any
form of legal agreement, including an
agreement that the pass-through enti-
ty considers a contract.
Subrecipient means an entity, usually
but not limited to non-Federal entities,
that receives a subaward from a pass-
through entity to carry out part of a
Federal award; but does not include an
individual that is a beneficiary of such
award. A subrecipient may also be a re-
cipient of other Federal awards di-
rectly from a Federal awarding agency.
Subsidiary means an entity in which
more than 50 percent of the entity is
owned or controlled directly by a par-
ent corporation or through another
subsidiary of a parent corporation.
Supplies means all tangible personal
property other than those described in
the definition of equipment in this sec-
tion. A computing device is a supply if
the acquisition cost is less than the
lesser of the capitalization level estab-
lished by the non-Federal entity for fi-
nancial statement purposes or $5,000,
regardless of the length of its useful
life. See also the definitions of com-
puting devices and equipment in this sec-
tion.
Telecommunications cost means the
cost of using communication and te-
lephony technologies such as mobile
phones, land lines, and internet.
Termination means the ending of a
Federal award, in whole or in part at
any time prior to the planned end of
period of performance. A lack of avail-
able funds is not a termination.
Third-party in-kind contributions
means the value of non-cash contribu-
tions (i.e., property or services) that—
(1) Benefit a federally-assisted
project or program; and
(2) Are contributed by non-Federal
third parties, without charge, to a non-
Federal entity under a Federal award.
Unliquidated financial obligations
means, for financial reports prepared
on a cash basis, financial obligations
incurred by the non-Federal entity
that have not been paid (liquidated).
For reports prepared on an accrual ex-
penditure basis, these are financial ob-
ligations incurred by the non-Federal
entity for which an expenditure has
not been recorded.
Unobligated balance means the
amount of funds under a Federal award
that the non-Federal entity has not ob-
ligated. The amount is computed by
subtracting the cumulative amount of
the non-Federal entity’s unliquidated
financial obligations and expenditures
of funds under the Federal award from
the cumulative amount of the funds
that the Federal awarding agency or
pass-through entity authorized the
non-Federal entity to obligate.
Voluntary committed cost sharing
means cost sharing specifically pledged
on a voluntary basis in the proposal’s
budget on the part of the non-Federal
entity and that becomes a binding re-
quirement of Federal award. See also
§200.306.
[85 FR 49529, Aug. 13, 2020]
§200.2 Acquisition cost.
Acquisition cost means the cost of the
asset including the cost to ready the
asset for its intended use. Acquisition
cost for equipment, for example, means
the net invoice price of the equipment,
including the cost of any modifica-
tions, attachments, accessories, or aux-
iliary apparatus necessary to make it
usable for the purpose for which it is
acquired. Acquisition costs for soft-
ware includes those development costs
capitalized in accordance with gen-
erally accepted accounting principles
(GAAP). Ancillary charges, such as
taxes, duty, protective in transit insur-
ance, freight, and installation may be
included in or excluded from the acqui-
sition cost in accordance with the non-
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97
OMB Guidance §200.13
Federal entity’s regular accounting
practices.
§200.3 Advance payment.
Advance payment means a payment
that a Federal awarding agency or
pass-through entity makes by any ap-
propriate payment mechanism, includ-
ing a predetermined payment schedule,
before the non-Federal entity disburses
the funds for program purposes.
§200.4 Allocation.
Allocation means the process of as-
signing a cost, or a group of costs, to
one or more cost objective(s), in rea-
sonable proportion to the benefit pro-
vided or other equitable relationship.
The process may entail assigning a
cost(s) directly to a final cost objective
or through one or more intermediate
cost objectives.
§200.5 Audit finding.
Audit finding means deficiencies
which the auditor is required by
§200.516 Audit findings, paragraph (a)
to report in the schedule of findings
and questioned costs.
§200.6 Auditee.
Auditee means any non-Federal enti-
ty that expends Federal awards which
must be audited under Subpart F—
Audit Requirements of this part.
§200.7 Auditor.
Auditor means an auditor who is a
public accountant or a Federal, state,
local government, or Indian tribe audit
organization, which meets the general
standards specified for external audi-
tors in generally accepted government
auditing standards (GAGAS). The term
auditor does not include internal audi-
tors of nonprofit organizations.
[79 FR 75880, Dec. 19, 2014]
§200.8 Budget.
Budget means the financial plan for
the project or program that the Fed-
eral awarding agency or pass-through
entity approves during the Federal
award process or in subsequent amend-
ments to the Federal award. It may in-
clude the Federal and non-Federal
share or only the Federal share, as de-
termined by the Federal awarding
agency or pass-through entity.
§200.9 Central service cost allocation
plan.
Central service cost allocation plan
means the documentation identifying,
accumulating, and allocating or devel-
oping billing rates based on the allow-
able costs of services provided by a
state, local government, or Indian tribe
on a centralized basis to its depart-
ments and agencies. The costs of these
services may be allocated or billed to
users.
§200.10 Catalog of Federal Domestic
Assistance (CFDA) number.
CFDA number means the number as-
signed to a Federal program in the
CFDA.
§200.11 CFDA program title.
CFDA program title means the title of
the program under which the Federal
award was funded in the CFDA.
§200.12 Capital assets.
Capital assets means tangible or in-
tangible assets used in operations hav-
ing a useful life of more than one year
which are capitalized in accordance
with GAAP. Capital assets include:
(a) Land, buildings (facilities), equip-
ment, and intellectual property (in-
cluding software) whether acquired by
purchase, construction, manufacture,
lease-purchase, exchange, or through
capital leases; and
(b) Additions, improvements, modi-
fications, replacements, rearrange-
ments, reinstallations, renovations or
alterations to capital assets that mate-
rially increase their value or useful life
(not ordinary repairs and mainte-
nance).
§200.13 Capital expenditures.
Capital expenditures means expendi-
tures to acquire capital assets or ex-
penditures to make additions, improve-
ments, modifications, replacements,
rearrangements, reinstallations, ren-
ovations, or alterations to capital as-
sets that materially increase their
value or useful life.
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2 CFR Ch. II (1–1–21 Edition) §200.14
§200.14 Claim.
Claim means, depending on the con-
text, either:
(a) A written demand or written as-
sertion by one of the parties to a Fed-
eral award seeking as a matter of
right:
(1) The payment of money in a sum
certain;
(2) The adjustment or interpretation
of the terms and conditions of the Fed-
eral award; or
(3) Other relief arising under or relat-
ing to a Federal award.
(b) A request for payment that is not
in dispute when submitted.
§200.15 Class of Federal awards.
Class of Federal awards means a group
of Federal awards either awarded under
a specific program or group of pro-
grams or to a specific type of non-Fed-
eral entity or group of non-Federal en-
tities to which specific provisions or
exceptions may apply.
§200.16 Closeout.
Closeout means the process by which
the Federal awarding agency or pass-
through entity determines that all ap-
plicable administrative actions and all
required work of the Federal award
have been completed and takes actions
as described in §200.343 Closeout.
§200.17 Cluster of programs.
Cluster of programs means a grouping
of closely related programs that share
common compliance requirements. The
types of clusters of programs are re-
search and development (R&D), student
financial aid (SFA), and other clusters.
‘‘Other clusters’’ are as defined by OMB
in the compliance supplement or as
designated by a state for Federal
awards the state provides to its sub-
recipients that meet the definition of a
cluster of programs. When designating
an ‘‘other cluster,’’ a state must iden-
tify the Federal awards included in the
cluster and advise the subrecipients of
compliance requirements applicable to
the cluster, consistent with §200.331
Requirements for pass-through enti-
ties, paragraph (a). A cluster of pro-
grams must be considered as one pro-
gram for determining major programs,
as described in §200.518 Major program
determination, and, with the exception
of R&D as described in §200.501 Audit
requirements, paragraph (c), whether a
program-specific audit may be elected.
§200.18 Cognizant agency for audit.
Cognizant agency for audit means the
Federal agency designated to carry out
the responsibilities described in
§200.513 Responsibilities, paragraph (a).
The cognizant agency for audit is not
necessarily the same as the cognizant
agency for indirect costs. A list of cog-
nizant agencies for audit may be found
at the FAC Web site.
§200.19 Cognizant agency for indirect
costs.
Cognizant agency for indirect costs
means the Federal agency responsible
for reviewing, negotiating, and approv-
ing cost allocation plans or indirect
cost proposals developed under this
part on behalf of all Federal agencies.
The cognizant agency for indirect cost
is not necessarily the same as the cog-
nizant agency for audit. For assign-
ments of cognizant agencies see the
following:
(a) For IHEs: Appendix III to Part
200—Indirect (F&A) Costs Identifica-
tion and Assignment, and Rate Deter-
mination for Institutions of Higher
Education (IHEs), paragraph C.11.
(b) For nonprofit organizations: Ap-
pendix IV to Part 200—Indirect (F&A)
Costs Identification and Assignment,
and Rate Determination for Nonprofit
Organizations, paragraph C.2.a.
(c) For state and local governments:
Appendix V to Part 200—State/Local
Governmentwide Central Service Cost
Allocation Plans, paragraph F.1.
(d) For Indian tribes: Appendix VII to
Part 200—States and Local Govern-
ment and Indian Tribe Indirect Cost
Proposal, paragraph D.1.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014; 80 FR 54407, Sept. 10,
2015]
§200.20 Computing devices.
Computing devices means machines
used to acquire, store, analyze, process,
and publish data and other information
electronically, including accessories
(or ‘‘peripherals’’) for printing, trans-
mitting and receiving, or storing elec-
tronic information. See also §§200.94
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99
OMB Guidance §200.28
Supplies and 200.58 Information tech-
nology systems.
§200.21 Compliance supplement.
Compliance supplement means Appen-
dix XI to Part 200—Compliance Supple-
ment (previously known as the Cir-
cular A–133 Compliance Supplement).
§200.22 Contract.
Contract means a legal instrument by
which a non-Federal entity purchases
property or services needed to carry
out the project or program under a
Federal award. The term as used in
this part does not include a legal in-
strument, even if the non-Federal enti-
ty considers it a contract, when the
substance of the transaction meets the
definition of a Federal award or
subaward (see §200.92 Subaward).
§200.23 Contractor.
Contractor means an entity that re-
ceives a contract as defined in §200.22
Contract.
§200.24 Cooperative agreement.
Cooperative agreement means a legal
instrument of financial assistance be-
tween a Federal awarding agency or
pass-through entity and a non-Federal
entity that, consistent with 31 U.S.C.
6302–6305:
(a) Is used to enter into a relation-
ship the principal purpose of which is
to transfer anything of value from the
Federal awarding agency or pass-
through entity to the non-Federal enti-
ty to carry out a public purpose au-
thorized by a law of the United States
(see 31 U.S.C. 6101(3)); and not to ac-
quire property or services for the Fed-
eral Government or pass-through enti-
ty’s direct benefit or use;
(b) Is distinguished from a grant in
that it provides for substantial involve-
ment between the Federal awarding
agency or pass-through entity and the
non-Federal entity in carrying out the
activity contemplated by the Federal
award.
(c) The term does not include:
(1) A cooperative research and devel-
opment agreement as defined in 15
U.S.C. 3710a; or
(2) An agreement that provides only:
(i) Direct United States Government
cash assistance to an individual;
(ii) A subsidy;
(iii) A loan;
(iv) A loan guarantee; or
(v) Insurance.
§200.25 Cooperative audit resolution.
Cooperative audit resolution means the
use of audit follow-up techniques which
promote prompt corrective action by
improving communication, fostering
collaboration, promoting trust, and de-
veloping an understanding between the
Federal agency and the non-Federal en-
tity. This approach is based upon:
(a) A strong commitment by Federal
agency and non-Federal entity leader-
ship to program integrity;
(b) Federal agencies strengthening
partnerships and working coopera-
tively with non-Federal entities and
their auditors; and non-Federal enti-
ties and their auditors working coop-
eratively with Federal agencies;
(c) A focus on current conditions and
corrective action going forward;
(d) Federal agencies offering appro-
priate relief for past noncompliance
when audits show prompt corrective
action has occurred; and
(e) Federal agency leadership sending
a clear message that continued failure
to correct conditions identified by au-
dits which are likely to cause improper
payments, fraud, waste, or abuse is un-
acceptable and will result in sanctions.
§200.26 Corrective action.
Corrective action means action taken
by the auditee that:
(a) Corrects identified deficiencies;
(b) Produces recommended improve-
ments; or
(c) Demonstrates that audit findings
are either invalid or do not warrant
auditee action.
§200.27 Cost allocation plan.
Cost allocation plan means central
service cost allocation plan or public
assistance cost allocation plan.
§200.28 Cost objective.
Cost objective means a program, func-
tion, activity, award, organizational
subdivision, contract, or work unit for
which cost data are desired and for
which provision is made to accumulate
and measure the cost of processes,
products, jobs, capital projects, etc. A
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100
2 CFR Ch. II (1–1–21 Edition) §200.29
cost objective may be a major function
of the non-Federal entity, a particular
service or project, a Federal award, or
an indirect (Facilities & Administra-
tive (F&A)) cost activity, as described
in Subpart E—Cost Principles of this
Part. See also §§200.44 Final cost objec-
tive and 200.60 Intermediate cost objec-
tive.
§200.29 Cost sharing or matching.
Cost sharing or matching means the
portion of project costs not paid by
Federal funds (unless otherwise author-
ized by Federal statute). See also
§200.306 Cost sharing or matching.
§200.30 Cross-cutting audit finding.
Cross-cutting audit finding means an
audit finding where the same under-
lying condition or issue affects Federal
awards of more than one Federal
awarding agency or pass-through enti-
ty.
§200.31 Disallowed costs.
Disallowed costs means those charges
to a Federal award that the Federal
awarding agency or pass-through enti-
ty determines to be unallowable, in ac-
cordance with the applicable Federal
statutes, regulations, or the terms and
conditions of the Federal award.
§200.32 [Reserved]
§200.33 Equipment.
Equipment means tangible personal
property (including information tech-
nology systems) having a useful life of
more than one year and a per-unit ac-
quisition cost which equals or exceeds
the lesser of the capitalization level es-
tablished by the non-Federal entity for
financial statement purposes, or $5,000.
See also §§200.12 Capital assets, 200.20
Computing devices, 200.48 General pur-
pose equipment, 200.58 Information
technology systems, 200.89 Special pur-
pose equipment, and 200.94 Supplies.
§200.34 Expenditures.
Expenditures means charges made by
a non-Federal entity to a project or
program for which a Federal award was
received.
(a) The charges may be reported on a
cash or accrual basis, as long as the
methodology is disclosed and is con-
sistently applied.
(b) For reports prepared on a cash
basis, expenditures are the sum of:
(1) Cash disbursements for direct
charges for property and services;
(2) The amount of indirect expense
charged;
(3) The value of third-party in-kind
contributions applied; and
(4) The amount of cash advance pay-
ments and payments made to sub-
recipients.
(c) For reports prepared on an ac-
crual basis, expenditures are the sum
of:
(1) Cash disbursements for direct
charges for property and services;
(2) The amount of indirect expense
incurred;
(3) The value of third-party in-kind
contributions applied; and
(4) The net increase or decrease in
the amounts owed by the non-Federal
entity for:
(i) Goods and other property re-
ceived;
(ii) Services performed by employees,
contractors, subrecipients, and other
payees; and
(iii) Programs for which no current
services or performance are required
such as annuities, insurance claims, or
other benefit payments.
§200.35 Federal agency.
Federal agency means an ‘‘agency’’ as
defined at 5 U.S.C. 551(1) and further
clarified by 5 U.S.C. 552(f).
§200.36 Federal Audit Clearinghouse
(FAC).
FAC means the clearinghouse des-
ignated by OMB as the repository of
record where non-Federal entities are
required to transmit the reporting
packages required by Subpart F—Audit
Requirements of this part. The mailing
address of the FAC is Federal Audit
Clearinghouse, Bureau of the Census,
1201 E. 10th Street, Jeffersonville, IN
47132 and the web address is: http://har-
vester.census.gov/sac/. Any future up-
dates to the location of the FAC may
be found at the OMB Web site.
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101
OMB Guidance §200.42
§200.37 Federal awarding agency.
Federal awarding agency means the
Federal agency that provides a Federal
award directly to a non-Federal entity.
§200.38 Federal award.
Federal award has the meaning, de-
pending on the context, in either para-
graph (a) or (b) of this section:
(a)(1) The Federal financial assist-
ance that a non-Federal entity receives
directly from a Federal awarding agen-
cy or indirectly from a pass-through
entity, as described in §200.101 Applica-
bility; or
(2) The cost-reimbursement contract
under the Federal Acquisition Regula-
tions that a non-Federal entity re-
ceives directly from a Federal award-
ing agency or indirectly from a pass-
through entity, as described in §200.101
Applicability.
(b) The instrument setting forth the
terms and conditions. The instrument
is the grant agreement, cooperative
agreement, other agreement for assist-
ance covered in paragraph (b) of §200.40
Federal financial assistance, or the
cost-reimbursement contract awarded
under the Federal Acquisition Regula-
tions.
(c) Federal award does not include
other contracts that a Federal agency
uses to buy goods or services from a
contractor or a contract to operate
Federal Government owned, contractor
operated facilities (GOCOs).
(d) See also definitions of Federal fi-
nancial assistance, grant agreement,
and cooperative agreement.
§200.39 Federal award date.
Federal award date means the date
when the Federal award is signed by
the authorized official of the Federal
awarding agency.
§200.40 Federal financial assistance.
(a) Federal financial assistance means
assistance that non-Federal entities re-
ceive or administer in the form of:
(1) Grants;
(2) Cooperative agreements;
(3) Non-cash contributions or dona-
tions of property (including donated
surplus property);
(4) Direct appropriations;
(5) Food commodities; and
(6) Other financial assistance (except
assistance listed in paragraph (b) of
this section).
(b) For §200.202 Requirement to pro-
vide public notice of Federal financial
assistance programs and Subpart F—
Audit Requirements of this part, Fed-
eral financial assistance also includes as-
sistance that non-Federal entities re-
ceive or administer in the form of:
(1) Loans;
(2) Loan Guarantees;
(3) Interest subsidies; and
(4) Insurance.
(c) Federal financial assistance does
not include amounts received as reim-
bursement for services rendered to in-
dividuals as described in §200.502 Basis
for determining Federal awards ex-
pended, paragraph (h) and (i) of this
part.
[78 FR 78608, Dec. 26, 2013, as amended at 80
FR 54407, Sept. 10, 2015]
§200.41 Federal interest.
Federal interest means, for purposes of
§200.329 Reporting on real property or
when used in connection with the ac-
quisition or improvement of real prop-
erty, equipment, or supplies under a
Federal award, the dollar amount that
is the product of the:
(a) Federal share of total project
costs; and
(b) Current fair market value of the
property, improvements, or both, to
the extent the costs of acquiring or im-
proving the property were included as
project costs.
§200.42 Federal program.
Federal program means:
(a) All Federal awards which are as-
signed a single number in the CFDA.
(b) When no CFDA number is as-
signed, all Federal awards to non-Fed-
eral entities from the same agency
made for the same purpose must be
combined and considered one program.
(c) Notwithstanding paragraphs (a)
and (b) of this definition, a cluster of
programs. The types of clusters of pro-
grams are:
(1) Research and development (R&D);
(2) Student financial aid (SFA); and
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102
2 CFR Ch. II (1–1–21 Edition) §200.43
(3) ‘‘Other clusters,’’ as described in
the definition of Cluster of Programs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§200.43 Federal share.
Federal share means the portion of
the total project costs that are paid by
Federal funds.
§200.44 Final cost objective.
Final cost objective means a cost ob-
jective which has allocated to it both
direct and indirect costs and, in the
non-Federal entity’s accumulation sys-
tem, is one of the final accumulation
points, such as a particular award, in-
ternal project, or other direct activity
of a non-Federal entity. See also
§§200.28 Cost objective and 200.60 Inter-
mediate cost objective.
§200.45 Fixed amount awards.
Fixed amount awards means a type of
grant agreement under which the Fed-
eral awarding agency or pass-through
entity provides a specific level of sup-
port without regard to actual costs in-
curred under the Federal award. This
type of Federal award reduces some of
the administrative burden and record-
keeping requirements for both the non-
Federal entity and Federal awarding
agency or pass-through entity. Ac-
countability is based primarily on per-
formance and results. See §§200.201 Use
of grant agreements (including fixed
amount awards), cooperative agree-
ments, and contracts, paragraph (b)
and 200.332 Fixed amount subawards.
§200.46 Foreign public entity.
Foreign public entity means:
(a) A foreign government or foreign
governmental entity;
(b) A public international organiza-
tion, which is an organization entitled
to enjoy privileges, exemptions, and
immunities as an international organi-
zation under the International Organi-
zations Immunities Act (22 U.S.C. 288–
288f);
(c) An entity owned (in whole or in
part) or controlled by a foreign govern-
ment; or
(d) Any other entity consisting whol-
ly or partially of one or more foreign
governments or foreign governmental
entities.
§200.47 Foreign organization.
Foreign organization means an entity
that is:
(a) A public or private organization
located in a country other than the
United States and its territories that is
subject to the laws of the country in
which it is located, irrespective of the
citizenship of project staff or place of
performance;
(b) A private nongovernmental orga-
nization located in a country other
than the United States that solicits
and receives cash contributions from
the general public;
(c) A charitable organization located
in a country other than the United
States that is nonprofit and tax ex-
empt under the laws of its country of
domicile and operation, and is not a
university, college, accredited degree-
granting institution of education, pri-
vate foundation, hospital, organization
engaged exclusively in research or sci-
entific activities, church, synagogue,
mosque or other similar entities orga-
nized primarily for religious purposes;
or
(d) An organization located in a
country other than the United States
not recognized as a Foreign Public En-
tity.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§200.48 General purpose equipment.
General purpose equipment means
equipment which is not limited to re-
search, medical, scientific or other
technical activities. Examples include
office equipment and furnishings, mod-
ular offices, telephone networks, infor-
mation technology equipment and sys-
tems, air conditioning equipment, re-
production and printing equipment,
and motor vehicles. See also Equip-
ment and Special Purpose Equipment.
§200.49 Generally Accepted Account-
ing Principles (GAAP).
GAAP has the meaning specified in
accounting standards issued by the
Government Accounting Standards
Board (GASB) and the Financial Ac-
counting Standards Board (FASB).
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103
OMB Guidance §200.56
§200.50 Generally Accepted Govern-
ment Auditing Standards (GAGAS).
GAGAS, also known as the Yellow
Book, means generally accepted gov-
ernment auditing standards issued by
the Comptroller General of the United
States, which are applicable to finan-
cial audits.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§200.51 Grant agreement.
Grant agreement means a legal instru-
ment of financial assistance between a
Federal awarding agency or pass-
through entity and a non-Federal enti-
ty that, consistent with 31 U.S.C. 6302,
6304:
(a) Is used to enter into a relation-
ship the principal purpose of which is
to transfer anything of value from the
Federal awarding agency or pass-
through entity to the non-Federal enti-
ty to carry out a public purpose au-
thorized by a law of the United States
(see 31 U.S.C. 6101(3)); and not to ac-
quire property or services for the Fed-
eral awarding agency or pass-through
entity’s direct benefit or use;
(b) Is distinguished from a coopera-
tive agreement in that it does not pro-
vide for substantial involvement be-
tween the Federal awarding agency or
pass-through entity and the non-Fed-
eral entity in carrying out the activity
contemplated by the Federal award.
(c) Does not include an agreement
that provides only:
(1) Direct United States Government
cash assistance to an individual;
(2) A subsidy;
(3) A loan;
(4) A loan guarantee; or
(5) Insurance.
§200.52 Hospital.
Hospital means a facility licensed as
a hospital under the law of any state or
a facility operated as a hospital by the
United States, a state, or a subdivision
of a state.
§200.53 Improper payment.
(a) Improper payment means any pay-
ment that should not have been made
or that was made in an incorrect
amount (including overpayments and
underpayments) under statutory, con-
tractual, administrative, or other le-
gally applicable requirements; and
(b) Improper payment includes any
payment to an ineligible party, any
payment for an ineligible good or serv-
ice, any duplicate payment, any pay-
ment for a good or service not received
(except for such payments where au-
thorized by law), any payment that
does not account for credit for applica-
ble discounts, and any payment where
insufficient or lack of documentation
prevents a reviewer from discerning
whether a payment was proper.
§200.54 Indian tribe (or ‘‘federally rec-
ognized Indian tribe’’).
Indian tribe means any Indian tribe,
band, nation, or other organized group
or community, including any Alaska
Native village or regional or village
corporation as defined in or established
pursuant to the Alaska Native Claims
Settlement Act (43 U.S.C. Chapter 33),
which is recognized as eligible for the
special programs and services provided
by the United States to Indians be-
cause of their status as Indians (25
U.S.C. 450b(e)). See annually published
Bureau of Indian Affairs list of Indian
Entities Recognized and Eligible to Re-
ceive Services.
§200.55 Institutions of Higher Edu-
cation (IHEs).
IHE is defined at 20 U.S.C. 1001.
§200.56 Indirect (facilities & adminis-
trative (F&A)) costs.
Indirect (F&A) costs means those costs
incurred for a common or joint purpose
benefitting more than one cost objec-
tive, and not readily assignable to the
cost objectives specifically benefitted,
without effort disproportionate to the
results achieved. To facilitate equi-
table distribution of indirect expenses
to the cost objectives served, it may be
necessary to establish a number of
pools of indirect (F&A) costs. Indirect
(F&A) cost pools must be distributed to
benefitted cost objectives on bases that
will produce an equitable result in con-
sideration of relative benefits derived.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
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104
2 CFR Ch. II (1–1–21 Edition) §200.57
§200.57 Indirect cost rate proposal.
Indirect cost rate proposal means the
documentation prepared by a non-Fed-
eral entity to substantiate its request
for the establishment of an indirect
cost rate as described in Appendix III
to Part 200—Indirect (F&A) Costs Iden-
tification and Assignment, and Rate
Determination for Institutions of High-
er Education (IHEs) through Appendix
VII to Part 200—States and Local Gov-
ernment and Indian Tribe Indirect Cost
Proposals of this part, and Appendix IX
to Part 200—Hospital Cost Principles.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§200.58 Information technology sys-
tems.
Information technology systems means
computing devices, ancillary equip-
ment, software, firmware, and similar
procedures, services (including support
services), and related resources. See
also §§200.20 Computing devices and
200.33 Equipment.
§200.59 Intangible property.
Intangible property means property
having no physical existence, such as
trademarks, copyrights, patents and
patent applications and property, such
as loans, notes and other debt instru-
ments, lease agreements, stock and
other instruments of property owner-
ship (whether the property is tangible
or intangible).
§200.60 Intermediate cost objective.
Intermediate cost objective means a
cost objective that is used to accumu-
late indirect costs or service center
costs that are subsequently allocated
to one or more indirect cost pools or
final cost objectives. See also §200.28
Cost objective and §200.44 Final cost
objective.
§200.61 Internal controls.
Internal controls means a process, im-
plemented by a non-Federal entity, de-
signed to provide reasonable assurance
regarding the achievement of objec-
tives in the following categories:
(a) Effectiveness and efficiency of op-
erations;
(b) Reliability of reporting for inter-
nal and external use; and
(c) Compliance with applicable laws
and regulations.
§200.62 Internal control over compli-
ance requirements for Federal
awards.
Internal control over compliance re-
quirements for Federal awards means a
process implemented by a non-Federal
entity designed to provide reasonable
assurance regarding the achievement
of the following objectives for Federal
awards:
(a) Transactions are properly re-
corded and accounted for, in order to:
(1) Permit the preparation of reliable
financial statements and Federal re-
ports;
(2) Maintain accountability over as-
sets; and
(3) Demonstrate compliance with
Federal statutes, regulations, and the
terms and conditions of the Federal
award;
(b) Transactions are executed in com-
pliance with:
(1) Federal statutes, regulations, and
the terms and conditions of the Federal
award that could have a direct and ma-
terial effect on a Federal program; and
(2) Any other Federal statutes and
regulations that are identified in the
Compliance Supplement; and
(c) Funds, property, and other assets
are safeguarded against loss from un-
authorized use or disposition.
§200.63 Loan.
Loan means a Federal loan or loan
guarantee received or administered by
a non-Federal entity, except as used in
the definition of §200.80 Program in-
come.
(a) The term ‘‘direct loan’’ means a
disbursement of funds by the Federal
Government to a non-Federal borrower
under a contract that requires the re-
payment of such funds with or without
interest. The term includes the pur-
chase of, or participation in, a loan
made by another lender and financing
arrangements that defer payment for
more than 90 days, including the sale of
a Federal Government asset on credit
terms. The term does not include the
acquisition of a federally guaranteed
loan in satisfaction of default claims or
the price support loans of the Com-
modity Credit Corporation.
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105
OMB Guidance §200.69
(b) The term ‘‘direct loan obligation’’
means a binding agreement by a Fed-
eral awarding agency to make a direct
loan when specified conditions are ful-
filled by the borrower.
(c) The term ‘‘loan guarantee’’ means
any Federal Government guarantee, in-
surance, or other pledge with respect
to the payment of all or a part of the
principal or interest on any debt obli-
gation of a non-Federal borrower to a
non-Federal lender, but does not in-
clude the insurance of deposits, shares,
or other withdrawable accounts in fi-
nancial institutions.
(d) The term ‘‘loan guarantee com-
mitment’’ means a binding agreement
by a Federal awarding agency to make
a loan guarantee when specified condi-
tions are fulfilled by the borrower, the
lender, or any other party to the guar-
antee agreement.
§200.64 Local government.
Local government means any unit of
government within a state, including a:
(a) County;
(b) Borough;
(c) Municipality;
(d) City;
(e) Town;
(f) Township;
(g) Parish;
(h) Local public authority, including
any public housing agency under the
United States Housing Act of 1937;
(i) Special district;
(j) School district;
(k) Intrastate district;
(l) Council of governments, whether
or not incorporated as a nonprofit cor-
poration under state law; and
(m) Any other agency or instrumen-
tality of a multi-, regional, or intra-
state or local government.
§200.65 Major program.
Major program means a Federal pro-
gram determined by the auditor to be a
major program in accordance with
§200.518 Major program determination
or a program identified as a major pro-
gram by a Federal awarding agency or
pass-through entity in accordance with
§200.503 Relation to other audit re-
quirements, paragraph (e).
§200.66 Management decision.
Management decision means the eval-
uation by the Federal awarding agency
or pass-through entity of the audit
findings and corrective action plan and
the issuance of a written decision to
the auditee as to what corrective ac-
tion is necessary.
§200.67 Micro-purchase.
Micro-purchase means a purchase of
supplies or services using simplified ac-
quisition procedures, the aggregate
amount of which does not exceed the
micro-purchase threshold. Micro-pur-
chase procedures comprise a subset of a
non-Federal entity’s small purchase
procedures. The non-Federal entity
uses such procedures in order to expe-
dite the completion of its lowest-dollar
small purchase transactions and mini-
mize the associated administrative
burden and cost. The micro-purchase
threshold is set by the Federal Acquisi-
tion Regulation at 48 CFR Subpart 2.1
(Definitions). It is $3,000 except as oth-
erwise discussed in Subpart 2.1 of that
regulation, but this threshold is peri-
odically adjusted for inflation.
§200.68 Modified Total Direct Cost
(MTDC).
MTDC means all direct salaries and
wages, applicable fringe benefits, mate-
rials and supplies, services, travel, and
up to the first $25,000 of each subaward
(regardless of the period of perform-
ance of the subawards under the
award). MTDC excludes equipment,
capital expenditures, charges for pa-
tient care, rental costs, tuition remis-
sion, scholarships and fellowships, par-
ticipant support costs and the portion
of each subaward in excess of $25,000.
Other items may only be excluded
when necessary to avoid a serious in-
equity in the distribution of indirect
costs, and with the approval of the cog-
nizant agency for indirect costs.
[79 FR 75880, Dec. 19, 2014]
§200.69 Non-Federal entity.
Non-Federal entity means a state,
local government, Indian tribe, institu-
tion of higher education (IHE), or non-
profit organization that carries out a
Federal award as a recipient or sub-
recipient.
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106
2 CFR Ch. II (1–1–21 Edition) §200.70
§200.70 Nonprofit organization.
Nonprofit organization means any cor-
poration, trust, association, coopera-
tive, or other organization, not includ-
ing IHEs, that:
(a) Is operated primarily for sci-
entific, educational, service, chari-
table, or similar purposes in the public
interest;
(b) Is not organized primarily for
profit; and
(c) Uses net proceeds to maintain,
improve, or expand the operations of
the organization.
§200.71 Obligations.
When used in connection with a non-
Federal entity’s utilization of funds
under a Federal award, obligations
means orders placed for property and
services, contracts and subawards
made, and similar transactions during
a given period that require payment by
the non-Federal entity during the same
or a future period.
§200.72 Office of Management and
Budget (OMB).
OMB means the Executive Office of
the President, Office of Management
and Budget.
§200.73 Oversight agency for audit.
Oversight agency for audit means the
Federal awarding agency that provides
the predominant amount of funding di-
rectly to a non-Federal entity not as-
signed a cognizant agency for audit.
When there is no direct funding, the
Federal awarding agency which is the
predominant source of pass-through
funding must assume the oversight re-
sponsibilities. The duties of the over-
sight agency for audit and the process
for any reassignments are described in
§200.513 Responsibilities, paragraph (b).
§200.74 Pass-through entity.
Pass-through entity means a non-Fed-
eral entity that provides a subaward to
a subrecipient to carry out part of a
Federal program.
§200.75 Participant support costs.
Participant support costs means direct
costs for items such as stipends or sub-
sistence allowances, travel allowances,
and registration fees paid to or on be-
half of participants or trainees (but not
employees) in connection with con-
ferences, or training projects.
§200.76 Performance goal.
Performance goal means a target level
of performance expressed as a tangible,
measurable objective, against which
actual achievement can be compared,
including a goal expressed as a quan-
titative standard, value, or rate. In
some instances (e.g., discretionary re-
search awards), this may be limited to
the requirement to submit technical
performance reports (to be evaluated in
accordance with agency policy).
§200.77 Period of performance.
Period of performance means the time
during which the non-Federal entity
may incur new obligations to carry out
the work authorized under the Federal
award. The Federal awarding agency or
pass-through entity must include start
and end dates of the period of perform-
ance in the Federal award (see §§200.210
Information contained in a Federal
award paragraph (a)(5) and 200.331 Re-
quirements for pass-through entities,
paragraph (a)(1)(iv)).
§200.78 Personal property.
Personal property means property
other than real property. It may be
tangible, having physical existence, or
intangible.
§200.79 Personally Identifiable Infor-
mation (PII).
PII means information that can be
used to distinguish or trace an individ-
ual’s identity, either alone or when
combined with other personal or iden-
tifying information that is linked or
linkable to a specific individual. Some
information that is considered to be
PII is available in public sources such
as telephone books, public Web sites,
and university listings. This type of in-
formation is considered to be Public
PII and includes, for example, first and
last name, address, work telephone
number, email address, home telephone
number, and general educational cre-
dentials. The definition of PII is not
anchored to any single category of in-
formation or technology. Rather, it re-
quires a case-by-case assessment of the
specific risk that an individual can be
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107
OMB Guidance §200.87
identified. Non-PII can become PII
whenever additional information is
made publicly available, in any me-
dium and from any source, that, when
combined with other available infor-
mation, could be used to identify an in-
dividual.
§200.80 Program income.
Program income means gross income
earned by the non-Federal entity that
is directly generated by a supported ac-
tivity or earned as a result of the Fed-
eral award during the period of per-
formance except as provided in §200.307
paragraph (f). (See §200.77 Period of
performance.) Program income in-
cludes but is not limited to income
from fees for services performed, the
use or rental or real or personal prop-
erty acquired under Federal awards,
the sale of commodities or items fab-
ricated under a Federal award, license
fees and royalties on patents and copy-
rights, and principal and interest on
loans made with Federal award funds.
Interest earned on advances of Federal
funds is not program income. Except as
otherwise provided in Federal statutes,
regulations, or the terms and condi-
tions of the Federal award, program in-
come does not include rebates, credits,
discounts, and interest earned on any
of them. See also §200.407 Prior written
approval (prior approval). See also 35
U.S.C. 200–212 ‘‘Disposition of Rights in
Educational Awards’’ applies to inven-
tions made under Federal awards.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§200.81 Property.
Property means real property or per-
sonal property.
§200.82 Protected Personally Identifi-
able Information (Protected PII).
Protected PII means an individual’s
first name or first initial and last name
in combination with any one or more
of types of information, including, but
not limited to, social security number,
passport number, credit card numbers,
clearances, bank numbers, biometrics,
date and place of birth, mother’s maid-
en name, criminal, medical and finan-
cial records, educational transcripts.
This does not include PII that is re-
quired by law to be disclosed. (See also
§200.79 Personally Identifiable Informa-
tion (PII)).
§200.83 Project cost.
Project cost means total allowable
costs incurred under a Federal award
and all required cost sharing and vol-
untary committed cost sharing, includ-
ing third-party contributions.
§200.84 Questioned cost.
Questioned cost means a cost that is
questioned by the auditor because of an
audit finding:
(a) Which resulted from a violation
or possible violation of a statute, regu-
lation, or the terms and conditions of a
Federal award, including for funds used
to match Federal funds;
(b) Where the costs, at the time of
the audit, are not supported by ade-
quate documentation; or
(c) Where the costs incurred appear
unreasonable and do not reflect the ac-
tions a prudent person would take in
the circumstances.
§200.85 Real property.
Real property means land, including
land improvements, structures and ap-
purtenances thereto, but excludes
moveable machinery and equipment.
§200.86 Recipient.
Recipient means a non-Federal entity
that receives a Federal award directly
from a Federal awarding agency to
carry out an activity under a Federal
program. The term recipient does not
include subrecipients. See also §200.69
Non-Federal entity.
§200.87 Research and Development
(R&D).
R&D means all research activities,
both basic and applied, and all develop-
ment activities that are performed by
non-Federal entities. The term re-
search also includes activities involv-
ing the training of individuals in re-
search techniques where such activities
utilize the same facilities as other re-
search and development activities and
where such activities are not included
in the instruction function.
‘‘Research’’ is defined as a system-
atic study directed toward fuller sci-
entific knowledge or understanding of
the subject studied. ‘‘Development’’ is
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108
2 CFR Ch. II (1–1–21 Edition) §200.88
the systematic use of knowledge and
understanding gained from research di-
rected toward the production of useful
materials, devices, systems, or meth-
ods, including design and development
of prototypes and processes.
§200.88 Simplified acquisition thresh-
old.
Simplified acquisition threshold means
the dollar amount below which a non-
Federal entity may purchase property
or services using small purchase meth-
ods. Non-Federal entities adopt small
purchase procedures in order to expe-
dite the purchase of items costing less
than the simplified acquisition thresh-
old. The simplified acquisition thresh-
old is set by the Federal Acquisition
Regulation at 48 CFR Subpart 2.1 (Defi-
nitions) and in accordance with 41
U.S.C. 1908. As of the publication of
this part, the simplified acquisition
threshold is $150,000, but this threshold
is periodically adjusted for inflation.
(Also see definition of §200.67 Micro-
purchase.)
§200.89 Special purpose equipment.
Special purpose equipment means
equipment which is used only for re-
search, medical, scientific, or other
technical activities. Examples of spe-
cial purpose equipment include micro-
scopes, x-ray machines, surgical instru-
ments, and spectrometers. See also
§§200.33 Equipment and 200.48 General
purpose equipment.
§200.90 State.
State means any state of the United
States, the District of Columbia, the
Commonwealth of Puerto Rico, U.S.
Virgin Islands, Guam, American
Samoa, the Commonwealth of the
Northern Mariana Islands, and any
agency or instrumentality thereof ex-
clusive of local governments.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§200.91 Student Financial Aid (SFA).
SFA means Federal awards under
those programs of general student as-
sistance, such as those authorized by
Title IV of the Higher Education Act of
1965, as amended, (20 U.S.C. 1070–1099d),
which are administered by the U.S. De-
partment of Education, and similar
programs provided by other Federal
agencies. It does not include Federal
awards under programs that provide
fellowships or similar Federal awards
to students on a competitive basis, or
for specified studies or research.
§200.92 Subaward.
Subaward means an award provided
by a pass-through entity to a sub-
recipient for the subrecipient to carry
out part of a Federal award received by
the pass-through entity. It does not in-
clude payments to a contractor or pay-
ments to an individual that is a bene-
ficiary of a Federal program. A
subaward may be provided through any
form of legal agreement, including an
agreement that the pass-through enti-
ty considers a contract.
§200.93 Subrecipient.
Subrecipient means a non-Federal en-
tity that receives a subaward from a
pass-through entity to carry out part
of a Federal program; but does not in-
clude an individual that is a bene-
ficiary of such program. A subrecipient
may also be a recipient of other Fed-
eral awards directly from a Federal
awarding agency.
§200.94 Supplies.
Supplies means all tangible personal
property other than those described in
§200.33 Equipment. A computing device
is a supply if the acquisition cost is
less than the lesser of the capitaliza-
tion level established by the non-Fed-
eral entity for financial statement pur-
poses or $5,000, regardless of the length
of its useful life. See also §§200.20 Com-
puting devices and 200.33 Equipment.
§200.95 Termination.
Termination means the ending of a
Federal award, in whole or in part at
any time prior to the planned end of
period of performance.
§200.96 Third-party in-kind contribu-
tions.
Third-party in-kind contributions
means the value of non-cash contribu-
tions (i.e., property or services) that—
(a) Benefit a federally assisted
project or program; and
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109
OMB Guidance §200.100
(b) Are contributed by non-Federal
third parties, without charge, to a non-
Federal entity under a Federal award.
§200.97 Unliquidated obligations.
Unliquidated obligations means, for fi-
nancial reports prepared on a cash
basis, obligations incurred by the non-
Federal entity that have not been paid
(liquidated). For reports prepared on an
accrual expenditure basis, these are ob-
ligations incurred by the non-Federal
entity for which an expenditure has
not been recorded.
§200.98 Unobligated balance.
Unobligated balance means the
amount of funds under a Federal award
that the non-Federal entity has not ob-
ligated. The amount is computed by
subtracting the cumulative amount of
the non-Federal entity’s unliquidated
obligations and expenditures of funds
under the Federal award from the cu-
mulative amount of the funds that the
Federal awarding agency or pass-
through entity authorized the non-Fed-
eral entity to obligate.
§200.99 Voluntary committed cost
sharing.
Voluntary committed cost sharing
means cost sharing specifically pledged
on a voluntary basis in the proposal’s
budget or the Federal award on the
part of the non-Federal entity and that
becomes a binding requirement of Fed-
eral award.
Subpart B—General Provisions
§200.100 Purpose.
(a) Purpose. (1) This part establishes
uniform administrative requirements,
cost principles, and audit requirements
for Federal awards to non-Federal enti-
ties, as described in §200.101. Federal
awarding agencies must not impose ad-
ditional or inconsistent requirements,
except as provided in §§200.102 and
200.211, or unless specifically required
by Federal statute, regulation, or Ex-
ecutive order.
(2) This part provides the basis for a
systematic and periodic collection and
uniform submission by Federal agen-
cies of information on all Federal fi-
nancial assistance programs to the Of-
fice of Management and Budget (OMB).
It also establishes Federal policies re-
lated to the delivery of this informa-
tion to the public, including through
the use of electronic media. It pre-
scribes the manner in which General
Services Administration (GSA), OMB,
and Federal agencies that administer
Federal financial assistance programs
are to carry out their statutory respon-
sibilities under the Federal Program
Information Act (31 U.S.C. 6101–6106).
(b) Administrative requirements. Sub-
parts B through D of this part set forth
the uniform administrative require-
ments for grant and cooperative agree-
ments, including the requirements for
Federal awarding agency management
of Federal grant programs before the
Federal award has been made, and the
requirements Federal awarding agen-
cies may impose on non-Federal enti-
ties in the Federal award.
(c) Cost principles. Subpart E of this
part establishes principles for deter-
mining the allowable costs incurred by
non-Federal entities under Federal
awards. The principles are for the pur-
pose of cost determination and are not
intended to identify the circumstances
or dictate the extent of Federal Gov-
ernment participation in the financing
of a particular program or project. The
principles are designed to provide that
Federal awards bear their fair share of
cost recognized under these principles
except where restricted or prohibited
by statute.
(d) Single Audit Requirements and
Audit Follow-up. Subpart F of this part
is issued pursuant to the Single Audit
Act Amendments of 1996, (31 U.S.C.
7501–7507). It sets forth standards for
obtaining consistency and uniformity
among Federal agencies for the audit
of non-Federal entities expending Fed-
eral awards. These provisions also pro-
vide the policies and procedures for
Federal awarding agencies and pass-
through entities when using the results
of these audits.
(e) Guidance on challenges and prizes.
For OMB guidance to Federal awarding
agencies on challenges and prizes,
please see memo M–10–11 Guidance on
the Use of Challenges and Prizes to
Promote Open Government, issued
March 8, 2010, or its successor.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49536, Aug. 13, 2020]
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110
2 CFR Ch. II (1–1–21 Edition) §200.101
§200.101 Applicability.
(a) General applicability to Federal
agencies. (1) The requirements estab-
lished in this part apply to Federal
agencies that make Federal awards to
non-Federal entities. These require-
ments are applicable to all costs re-
lated to Federal awards.
(2) Federal awarding agencies may
apply subparts A through E of this part
to Federal agencies, for-profit entities,
foreign public entities, or foreign orga-
nizations, except where the Federal
awarding agency determines that the
application of these subparts would be
inconsistent with the international re-
sponsibilities of the United States or
the statutes or regulations of a foreign
government.
(b) Applicability to different types of
Federal awards. (1) Throughout this
part when the word ‘‘must’’ is used it
indicates a requirement. Whereas, use
of the word ‘‘should’’ or ‘‘may’’ indi-
cates a best practice or recommended
approach rather than a requirement
and permits discretion.
(2) The following table describes what
portions of this part apply to which
types of Federal awards. The terms and
conditions of Federal awards (including
this part) flow down to subawards to
subrecipients unless a particular sec-
tion of this part or the terms and con-
ditions of the Federal award specifi-
cally indicate otherwise. This means
that non-Federal entities must comply
with requirements in this part regard-
less of whether the non-Federal entity
is a recipient or subrecipient of a Fed-
eral award. Pass-through entities must
comply with the requirements de-
scribed in subpart D of this part,
§§200.331 through 200.333, but not any
requirements in this part directed to-
wards Federal awarding agencies un-
less the requirements of this part or
the terms and conditions of the Federal
award indicate otherwise.
TABLE 1 TO PARAGRAPH (b)
The following portions of this Part
Are applicable to the following types of
Federal Awards and Fixed-Price Con-
tracts and Subcontracts (except as
noted in paragraphs (d) and (e) of this
section):
Are NOT applicable to the following
types of Federal Awards and Fixed-Price
Contracts and Subcontracts:
Subpart A—Acronyms and Definitions ...... —All.
Subpart B—General Provisions, except
for §§200.111 English Language,
200.112 Conflict of Interest, 200.113
Mandatory Disclosures.
—All.
§§200.111 English Language, 200.112
Conflict of Interest, 200.113 Mandatory
Disclosures.
—Grant Agreements and cooperative
agreements.
—Agreements for loans, loan guaran-
tees, interest subsidies and insurance.
—Procurement contracts awarded by
Federal Agencies under the Federal
Acquisition Regulation and sub-
contracts under those contracts.
Subparts C–D, except for §§200.203 Re-
quirement to provide public notice of
Federal financial assistance programs,
200.303 Internal controls, 200.331–333
Subrecipient Monitoring and Manage-
ment.
—Grant Agreements and cooperative
agreements.
—Agreements for loans, loan guaran-
tees, interest subsidies and insurance.
—Procurement contracts awarded by
Federal Agencies under the Federal
Acquisition Regulation and sub-
contracts under those contracts.
§200.203 Requirement to provide public
notice of Federal financial assistance
programs.
—Grant Agreements and cooperative
agreements.
—Agreements for loans, loan guaran-
tees, interest subsidies and insurance.
—Procurement contracts awarded by
Federal Agencies under the Federal
Acquisition Regulation and sub-
contracts under those contracts.
§§200.303 Internal controls, 200.331–333
Subrecipient Monitoring and Manage-
ment.
—All.
Subpart E—Cost Principles ....................... —Grant Agreements and cooperative
agreements, except those providing
food commodities.
—All procurement contracts under the
Federal Acquisition Regulations ex-
cept those that are not negotiated.
—Grant agreements and cooperative
agreements providing foods commod-
ities.
—Fixed amount awards.
—Agreements for loans, loans guaran-
tees, interest subsidies and insurance.
—Federal awards to hospitals (see Ap-
pendix IX Hospital Cost Principles).
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111
OMB Guidance §200.101
TABLE 1 TO PARAGRAPH (b)—Continued
The following portions of this Part
Are applicable to the following types of
Federal Awards and Fixed-Price Con-
tracts and Subcontracts (except as
noted in paragraphs (d) and (e) of this
section):
Are NOT applicable to the following
types of Federal Awards and Fixed-Price
Contracts and Subcontracts:
Subpart F—Audit Requirements ............... —Grant Agreements and cooperative
agreements.
—Contracts and subcontracts, except for
fixed price contacts and subcontracts,
awarded under the Federal Acquisition
Regulation.
—Agreements for loans, loans guaran-
tees, interest subsidies and insurance
and other forms of Federal Financial
Assistance as defined by the Single
Audit Act Amendment of 1996.
—Fixed-price contracts and subcontracts
awarded under the Federal Acquisition
Regulation.
(c) Federal award of cost-reimbursement
contract under the FAR to a non-Federal
entity. When a non-Federal entity is
awarded a cost-reimbursement con-
tract, only subpart D, §§200.331 through
200.333, and subparts E and F of this
part are incorporated by reference into
the contract, but the requirements of
subparts D, E, and F are supplementary
to the FAR and the contract. When the
Cost Accounting Standards (CAS) are
applicable to the contract, they take
precedence over the requirements of
this part, including subpart F of this
part, which are supplementary to the
CAS requirements. In addition, costs
that are made unallowable under 10
U.S.C. 2324(e) and 41 U.S.C. 4304(a) as
described in the FAR 48 CFR part 31,
subpart 31.2, and 48 CFR 31.603 are al-
ways unallowable. For requirements
other than those covered in subpart D,
§§200.331 through 200.333, and subparts
E and F of this part, the terms of the
contract and the FAR apply. Note that
when a non-Federal entity is awarded a
FAR contract, the FAR applies, and
the terms and conditions of the con-
tract shall prevail over the require-
ments of this part.
(d) Governing provisions. With the ex-
ception of subpart F of this part, which
is required by the Single Audit Act, in
any circumstances where the provi-
sions of Federal statutes or regulations
differ from the provisions of this part,
the provision of the Federal statutes or
regulations govern. This includes, for
agreements with Indian tribes, the pro-
visions of the Indian Self-Determina-
tion and Education and Assistance Act
(ISDEAA), as amended, 25 U.S.C 450–
458ddd–2.
(e) Program applicability. Except for
§§200.203 and 200.331 through 200.333, the
requirements in subparts C, D, and E of
this part do not apply to the following
programs:
(1) The block grant awards author-
ized by the Omnibus Budget Reconcili-
ation Act of 1981 (including Community
Services), except to the extent that
subpart E of this part apply to sub-
recipients of Community Services
Block Grant funds pursuant to 42
U.S.C. 9916(a)(1)(B);
(2) Federal awards to local education
agencies under 20 U.S.C. 7702–7703b,
(portions of the Impact Aid program);
(3) Payments under the Department
of Veterans Affairs’ State Home Per
Diem Program (38 U.S.C. 1741); and
(4) Federal awards authorized under
the Child Care and Development Block
Grant Act of 1990, as amended:
(i) Child Care and Development Block
Grant (42 U.S.C. 9858).
(ii) Child Care Mandatory and Match-
ing Funds of the Child Care and Devel-
opment Fund (42 U.S.C. 9858).
(f) Additional program applicability.
Except for §200.203, the guidance in
subpart C of this part does not apply to
the following programs:
(1) Entitlement Federal awards to
carry out the following programs of the
Social Security Act:
(i) Temporary Assistance for Needy
Families (title IV–A of the Social Secu-
rity Act, 42 U.S.C. 601–619);
(ii) Child Support Enforcement and
Establishment of Paternity (title IV–D
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112
2 CFR Ch. II (1–1–21 Edition) §200.102
of the Social Security Act, 42 U.S.C.
651–669b);
(iii) Foster Care and Adoption Assist-
ance (title IV–E of the Act, 42 U.S.C.
670–679c);
(iv) Aid to the Aged, Blind, and Dis-
abled (titles I, X, XIV, and XVI–AABD
of the Act, as amended);
(v) Medical Assistance (Medicaid)
(title XIX of the Act, 42 U.S.C. 1396–
1396w–5) not including the State Med-
icaid Fraud Control program author-
ized by section 1903(a)(6)(B) of the So-
cial Security Act (42 U.S.C.
1396b(a)(6)(B)); and
(vi) Children’s Health Insurance Pro-
gram (title XXI of the Act, 42 U.S.C.
1397aa–1397mm).
(2) A Federal award for an experi-
mental, pilot, or demonstration project
that is also supported by a Federal
award listed in paragraph (f)(1) of this
section.
(3) Federal awards under subsection
412(e) of the Immigration and Nation-
ality Act and subsection 501(a) of the
Refugee Education Assistance Act of
1980 (Pub. L. 96–422, 94 Stat. 1809), for
cash assistance, medical assistance,
and supplemental security income ben-
efits to refugees and entrants and the
administrative costs of providing the
assistance and benefits (8 U.S.C.
1522(e)).
(4) Entitlement awards under the fol-
lowing programs of The National
School Lunch Act:
(i) National School Lunch Program
(section 4 of the Act, 42 U.S.C. 1753);
(ii) Commodity Assistance (section 6
of the Act, 42 U.S.C. 1755);
(iii) Special Meal Assistance (section
11 of the Act, 42 U.S.C. 1759a);
(iv) Summer Food Service Program
for Children (section 13 of the Act, 42
U.S.C. 1761); and
(v) Child and Adult Care Food Pro-
gram (section 17 of the Act, 42 U.S.C.
1766).
(5) Entitlement awards under the fol-
lowing programs of The Child Nutri-
tion Act of 1966:
(i) Special Milk Program (section 3 of
the Act, 42 U.S.C. 1772);
(ii) School Breakfast Program (sec-
tion 4 of the Act, 42 U.S.C. 1773); and
(iii) State Administrative Expenses
(section 7 of the Act, 42 U.S.C. 1776).
(6) Entitlement awards for State Ad-
ministrative Expenses under The Food
and Nutrition Act of 2008 (section 16 of
the Act, 7 U.S.C. 2025).
(7) Non-discretionary Federal awards
under the following non-entitlement
programs:
(i) Special Supplemental Nutrition
Program for Women, Infants and Chil-
dren (section 17 of the Child Nutrition
Act of 1966) 42 U.S.C. 1786;
(ii) The Emergency Food Assistance
Programs (Emergency Food Assistance
Act of 1983) 7 U.S.C. 7501 note; and
(iii) Commodity Supplemental Food
Program (section 5 of the Agriculture
and Consumer Protection Act of 1973) 7
U.S.C. 612c note.
[85 FR 49536, Aug. 13, 2020]
§200.102 Exceptions.
(a) With the exception of subpart F of
this part, OMB may allow exceptions
for classes of Federal awards or non-
Federal entities subject to the require-
ments of this part when exceptions are
not prohibited by statute. In the inter-
est of maximum uniformity, exceptions
from the requirements of this part will
be permitted as described in this sec-
tion.
(b) Exceptions on a case-by-case basis
for individual non-Federal entities may
be authorized by the Federal awarding
agency or cognizant agency for indirect
costs, except where otherwise required
by law or where OMB or other approval
is expressly required by this part.
(c) The Federal awarding agency may
apply adjust requirements to a class of
Federal awards or non-Federal entities
when approved by OMB, or when re-
quired by Federal statutes or regula-
tions, except for the requirements in
subpart F of this part. A Federal
awarding agency may apply less re-
strictive requirements when making
fixed amount awards as defined in sub-
part A of this part, except for those re-
quirements imposed by statute or in
subpart F of this part.
(d) Federal awarding agencies may
request exceptions in support of inno-
vative program designs that apply a
risk-based, data-driven framework to
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113
OMB Guidance §200.106
alleviate select compliance require-
ments and hold recipients accountable
for good performance. See also §200.206.
[85 FR 49538, Aug. 13, 2020]
§200.103 Authorities.
This part is issued under the fol-
lowing authorities.
(a) Subparts B through D of this part
are authorized under 31 U.S.C. 503 (the
Chief Financial Officers Act, Functions
of the Deputy Director for Manage-
ment), 41 U.S.C. 1101–1131 (the Office of
Federal Procurement Policy Act), Re-
organization Plan No. 2 of 1970, and Ex-
ecutive Order 11541 (‘‘Prescribing the
Duties of the Office of Management
and Budget and the Domestic Policy
Council in the Executive Office of the
President’’), the Single Audit Act
Amendments of 1996, (31 U.S.C. 7501–
7507), as well as The Federal Program
Information Act (Pub. L. 95–220 and
Pub. L. 98–169, as amended, codified at
31 U.S.C. 6101–6106).
(b) Subpart E of this part is author-
ized under the Budget and Accounting
Act of 1921, as amended; the Budget
and Accounting Procedures Act of 1950,
as amended (31 U.S.C. 1101–1125); the
Chief Financial Officers Act of 1990 (31
U.S.C. 503–504); Reorganization Plan
No. 2 of 1970; and Executive Order 11541,
‘‘Prescribing the Duties of the Office of
Management and Budget and the Do-
mestic Policy Council in the Executive
Office of the President.’’
(c) Subpart F of this part is author-
ized under the Single Audit Act
Amendments of 1996, (31 U.S.C. 7501–
7507).
[85 FR 49538, Aug. 13, 2020]
§200.104 Supersession.
As described in §200.110, this part su-
persedes the following OMB guidance
documents and regulations under title
2 of the Code of Federal Regulations:
(a) A–21, ‘‘Cost Principles for Edu-
cational Institutions’’ (2 CFR part 220);
(b) A–87, ‘‘Cost Principles for State,
Local and Indian Tribal Governments’’
(2 CFR part 225) and also FEDERAL REG-
ISTER notice 51 FR 552 (January 6, 1986);
(c) A–89, ‘‘Federal Domestic Assist-
ance Program Information’’;
(d) A–102, ‘‘Grant Awards and Cooper-
ative Agreements with State and Local
Governments’’;
(e) A–110, ‘‘Uniform Administrative
Requirements for Awards and Other
Agreements with Institutions of Higher
Education, Hospitals, and Other Non-
profit Organizations’’ (codified at 2
CFR 215);
(f) A–122, ‘‘Cost Principles for Non-
Profit Organizations’’ (2 CFR part 230);
(g) A–133, ‘‘Audits of States, Local
Governments and Non-Profit Organiza-
tions’’; and
(h) Those sections of A–50 related to
audits performed under subpart F of
this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75882, Dec. 19, 2014; 85 FR 49538, Aug. 13,
2020]
§200.105 Effect on other issuances.
(a) Superseding inconsistent require-
ments. For Federal awards subject to
this part, all administrative require-
ments, program manuals, handbooks
and other non-regulatory materials
that are inconsistent with the require-
ments of this part must be superseded
upon implementation of this part by
the Federal agency, except to the ex-
tent they are required by statute or au-
thorized in accordance with the provi-
sions in §200.102.
(b) Imposition of requirements on recipi-
ents. Agencies may impose legally
binding requirements on recipients
only through the notice and public
comment process through an approved
agency process, including as authorized
by this part, other statutes or regula-
tions, or as incorporated into the terms
of a Federal award.
[85 FR 49538, Aug. 13, 2020]
§200.106 Agency implementation.
The specific requirements and re-
sponsibilities of Federal agencies and
non-Federal entities are set forth in
this part. Federal agencies making
Federal awards to non-Federal entities
must implement the language in sub-
parts C through F of this part in codi-
fied regulations unless different provi-
sions are required by Federal statute
or are approved by OMB.
[85 FR 49538, Aug. 13, 2020]
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114
2 CFR Ch. II (1–1–21 Edition) §200.107
§200.107 OMB responsibilities.
OMB will review Federal agency reg-
ulations and implementation of this
part, and will provide interpretations
of policy requirements and assistance
to ensure effective and efficient imple-
mentation. Any exceptions will be sub-
ject to approval by OMB. Exceptions
will only be made in particular cases
where adequate justification is pre-
sented.
§200.108 Inquiries.
Inquiries concerning this part may be
directed to the Office of Federal Finan-
cial Management Office of Manage-
ment and Budget, in Washington, DC.
Non-Federal entities’ inquiries should
be addressed to the Federal awarding
agency, cognizant agency for indirect
costs, cognizant or oversight agency
for audit, or pass-through entity as ap-
propriate.
§200.109 Review date.
OMB will review this part at least
every five years after December 26,
2013.
§200.110 Effective/applicability date.
(a) The standards set forth in this
part that affect the administration of
Federal awards issued by Federal
awarding agencies become effective
once implemented by Federal awarding
agencies or when any future amend-
ment to this part becomes final.
(b) Existing negotiated indirect cost
rates (as of the publication date of the
revisions to the guidance) will remain
in place until they expire. The effective
date of changes to indirect cost rates
must be based upon the date that a
newly re-negotiated rate goes into ef-
fect for a specific non-Federal entity’s
fiscal year. Therefore, for indirect cost
rates and cost allocation plans, the re-
vised Uniform Guidance (as of the pub-
lication date for revisions to the guid-
ance) become effective in generating
proposals and negotiating a new rate
(when the rate is re-negotiated).
[85 FR 49538, Aug. 13, 2020]
§200.111 English language.
(a) All Federal financial assistance
announcements and Federal award in-
formation must be in the English lan-
guage. Applications must be submitted
in the English language and must be in
the terms of U.S. dollars. If the Federal
awarding agency receives applications
in another currency, the Federal
awarding agency will evaluate the ap-
plication by converting the foreign cur-
rency to United States currency using
the date specified for receipt of the ap-
plication.
(b) Non-Federal entities may trans-
late the Federal award and other docu-
ments into another language. In the
event of inconsistency between any
terms and conditions of the Federal
award and any translation into another
language, the English language mean-
ing will control. Where a significant
portion of the non-Federal entity’s em-
ployees who are working on the Fed-
eral award are not fluent in English,
the non-Federal entity must provide
the Federal award in English and the
language(s) with which employees are
more familiar.
§200.112 Conflict of interest.
The Federal awarding agency must
establish conflict of interest policies
for Federal awards. The non-Federal
entity must disclose in writing any po-
tential conflict of interest to the Fed-
eral awarding agency or pass-through
entity in accordance with applicable
Federal awarding agency policy.
§200.113 Mandatory disclosures.
The non-Federal entity or applicant
for a Federal award must disclose, in a
timely manner, in writing to the Fed-
eral awarding agency or pass-through
entity all violations of Federal crimi-
nal law involving fraud, bribery, or
gratuity violations potentially affect-
ing the Federal award. Non-Federal en-
tities that have received a Federal
award including the term and condi-
tion outlined in appendix XII to this
part are required to report certain
civil, criminal, or administrative pro-
ceedings to SAM (currently FAPIIS).
Failure to make required disclosures
can result in any of the remedies de-
scribed in §200.339. (See also 2 CFR part
180, 31 U.S.C. 3321, and 41 U.S.C. 2313.)
[85 FR 49539, Aug. 13, 2020]
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115
OMB Guidance §200.202
Subpart C—Pre-Federal Award
Requirements and Contents of
Federal Awards
SOURCE: 85 FR 49539, Aug. 13, 2020, unless
otherwise noted.
§200.200 Purpose.
Sections 200.201 through 200.216 pre-
scribe instructions and other pre-award
matters to be used by Federal awarding
agencies in the program planning, an-
nouncement, application and award
processes.
§200.201 Use of grant agreements (in-
cluding fixed amount awards), co-
operative agreements, and con-
tracts.
(a) Federal award instrument. The Fed-
eral awarding agency or pass-through
entity must decide on the appropriate
instrument for the Federal award (i.e.,
grant agreement, cooperative agree-
ment, or contract) in accordance with
the Federal Grant and Cooperative
Agreement Act (31 U.S.C. 6301–08).
(b) Fixed amount awards. In addition
to the options described in paragraph
(a) of this section, Federal awarding
agencies, or pass-through entities as
permitted in §200.333, may use fixed
amount awards (see Fixed amount
awards in §200.1) to which the following
conditions apply:
(1) The Federal award amount is ne-
gotiated using the cost principles (or
other pricing information) as a guide.
The Federal awarding agency or pass-
through entity may use fixed amount
awards if the project scope has measur-
able goals and objectives and if ade-
quate cost, historical, or unit pricing
data is available to establish a fixed
amount award based on a reasonable
estimate of actual cost. Payments are
based on meeting specific requirements
of the Federal award. Accountability is
based on performance and results. Ex-
cept in the case of termination before
completion of the Federal award, there
is no governmental review of the ac-
tual costs incurred by the non-Federal
entity in performance of the award.
Some of the ways in which the Federal
award may be paid include, but are not
limited to:
(i) In several partial payments, the
amount of each agreed upon in ad-
vance, and the ‘‘milestone’’ or event
triggering the payment also agreed
upon in advance, and set forth in the
Federal award;
(ii) On a unit price basis, for a de-
fined unit or units, at a defined price or
prices, agreed to in advance of perform-
ance of the Federal award and set forth
in the Federal award; or,
(iii) In one payment at Federal award
completion.
(2) A fixed amount award cannot be
used in programs which require manda-
tory cost sharing or match.
(3) The non-Federal entity must cer-
tify in writing to the Federal awarding
agency or pass-through entity at the
end of the Federal award that the
project or activity was completed or
the level of effort was expended. If the
required level of activity or effort was
not carried out, the amount of the Fed-
eral award must be adjusted.
(4) Periodic reports may be estab-
lished for each Federal award.
(5) Changes in principal investigator,
project leader, project partner, or scope
of effort must receive the prior written
approval of the Federal awarding agen-
cy or pass-through entity.
§200.202 Program planning and de-
sign.
The Federal awarding agency must
design a program and create an Assist-
ance Listing before announcing the No-
tice of Funding Opportunity. The pro-
gram must be designed with clear goals
and objectives that facilitate the deliv-
ery of meaningful results consistent
with the Federal authorizing legisla-
tion of the program. Program perform-
ance shall be measured based on the
goals and objectives developed during
program planning and design. See
§200.301 for more information on per-
formance measurement. Performance
measures may differ depending on the
type of program. The program must
align with the strategic goals and ob-
jectives within the Federal awarding
agency’s performance plan and should
support the Federal awarding agency’s
performance measurement, manage-
ment, and reporting as required by
Part 6 of OMB Circular A–11 (Prepara-
tion, Submission, and Execution of the
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116
2 CFR Ch. II (1–1–21 Edition) §200.203
Budget). The program must also be de-
signed to align with the Program Man-
agement Improvement Accountability
Act (Pub. L. 114–264).
§200.203 Requirement to provide pub-
lic notice of Federal financial as-
sistance programs.
(a) The Federal awarding agency
must notify the public of Federal pro-
grams in the Federal Assistance List-
ings maintained by the General Serv-
ices Administration (GSA).
(1) The Federal Assistance Listings is
the single, authoritative, government-
wide comprehensive source of Federal
financial assistance program informa-
tion produced by the executive branch
of the Federal Government.
(2) The information that the Federal
awarding agency must submit to GSA
for approval by OMB is listed in para-
graph (b) of this section. GSA must
prescribe the format for the submission
in coordination with OMB.
(3) The Federal awarding agency may
not award Federal financial assistance
without assigning it to a program that
has been included in the Federal As-
sistance Listings as required in this
section unless there are exigent cir-
cumstances requiring otherwise, such
as timing requirements imposed by
statute.
(b) For each program that awards
discretionary Federal awards, non-dis-
cretionary Federal awards, loans, in-
surance, or any other type of Federal
financial assistance, the Federal
awarding agency must, to the extent
practicable, create, update, and man-
age Assistance Listings entries based
on the authorizing statute for the pro-
gram and comply with additional guid-
ance provided by GSA in consultation
with OMB to ensure consistent, accu-
rate information is available to pro-
spective applicants. Accordingly, Fed-
eral awarding agencies must submit
the following information to GSA:
(1) Program Description, Purpose,
Goals, and Measurement. A brief sum-
mary of the statutory or regulatory re-
quirements of the program and its in-
tended outcome. Where appropriate,
the Program Description, Purpose,
Goals, and Measurement should align
with the strategic goals and objectives
within the Federal awarding agency’s
performance plan and should support
the Federal awarding agency’s per-
formance measurement, management,
and reporting as required by Part 6 of
OMB Circular A–11;
(2) Identification. Identification of
whether the program makes Federal
awards on a discretionary basis or the
Federal awards are prescribed by Fed-
eral statute, such as in the case of for-
mula grants.
(3) Projected total amount of funds
available for the program. Estimates
based on previous year funding are ac-
ceptable if current appropriations are
not available at the time of the sub-
mission;
(4) Anticipated source of available
funds. The statutory authority for
funding the program and, to the extent
possible, agency, sub-agency, or, if
known, the specific program unit that
will issue the Federal awards, and asso-
ciated funding identifier (e.g., Treasury
Account Symbol(s));
(5) General eligibility requirements. The
statutory, regulatory or other eligi-
bility factors or considerations that de-
termine the applicant’s qualification
for Federal awards under the program
(e.g., type of non-Federal entity); and
(6) Applicability of Single Audit Re-
quirements. Applicability of Single
Audit Requirements as required by
subpart F of this part.
§200.204 Notices of funding opportuni-
ties.
For discretionary grants and cooper-
ative agreements that are competed,
the Federal awarding agency must an-
nounce specific funding opportunities
by providing the following information
in a public notice:
(a) Summary information in notices of
funding opportunities. The Federal
awarding agency must display the fol-
lowing information posted on the OMB-
designated governmentwide website for
funding and applying for Federal finan-
cial assistance, in a location preceding
the full text of the announcement:
(1) Federal Awarding Agency Name;
(2) Funding Opportunity Title;
(3) Announcement Type (whether the
funding opportunity is the initial an-
nouncement of this funding oppor-
tunity or a modification of a pre-
viously announced opportunity);
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117
OMB Guidance §200.206
(4) Funding Opportunity Number (re-
quired, if applicable). If the Federal
awarding agency has assigned or will
assign a number to the funding oppor-
tunity announcement, this number
must be provided;
(5) Assistance Listings Number(s);
(6) Key Dates. Key dates include due
dates for applications or Executive
Order 12372 submissions, as well as for
any letters of intent or pre-applica-
tions. For any announcement issued
before a program’s application mate-
rials are available, key dates also in-
clude the date on which those mate-
rials will be released; and any other ad-
ditional information, as deemed appli-
cable by the relevant Federal awarding
agency.
(b) Availability period. The Federal
awarding agency must generally make
all funding opportunities available for
application for at least 60 calendar
days. The Federal awarding agency
may make a determination to have a
less than 60 calendar day availability
period but no funding opportunity
should be available for less than 30 cal-
endar days unless exigent cir-
cumstances require as determined by
the Federal awarding agency head or
delegate.
(c) Full text of funding opportunities.
The Federal awarding agency must in-
clude the following information in the
full text of each funding opportunity.
For specific instructions on the con-
tent required in this section, refer to
appendix I to this part.
(1) Full programmatic description of
the funding opportunity.
(2) Federal award information, in-
cluding sufficient information to help
an applicant make an informed deci-
sion about whether to submit an appli-
cation. (See also §200.414(c)(4)).
(3) Specific eligibility information,
including any factors or priorities that
affect an applicant’s or its applica-
tion’s eligibility for selection.
(4) Application Preparation and Sub-
mission Information, including the ap-
plicable submission dates and time.
(5) Application Review Information
including the criteria and process to be
used to evaluate applications. See also
§§200.205 and 200.206.
(6) Federal Award Administration In-
formation. See also §200.211.
(7) Applicable terms and conditions
for resulting awards, including any ex-
ceptions from these standard terms.
§200.205 Federal awarding agency re-
view of merit of proposals.
For discretionary Federal awards,
unless prohibited by Federal statute,
the Federal awarding agency must de-
sign and execute a merit review process
for applications, with the objective of
selecting recipients most likely to be
successful in delivering results based
on the program objectives outlined in
section §200.202. A merit review is an
objective process of evaluating Federal
award applications in accordance with
written standards set forth by the Fed-
eral awarding agency. This process
must be described or incorporated by
reference in the applicable funding op-
portunity (see appendix I to this part.).
See also §200.204. The Federal awarding
agency must also periodically review
its merit review process.
§200.206 Federal awarding agency re-
view of risk posed by applicants.
(a) Review of OMB-designated reposi-
tories of governmentwide data. (1) Prior
to making a Federal award, the Fed-
eral awarding agency is required by the
Improper Payments Elimination and
Recovery Improvement Act of 2012, 31
U.S.C. 3321 note, and 41 U.S.C. 2313 to
review information available through
any OMB-designated repositories of
governmentwide eligibility qualifica-
tion or financial integrity information
as appropriate. See also suspension and
debarment requirements at 2 CFR part
180 as well as individual Federal agency
suspension and debarment regulations
in title 2 of the Code of Federal Regula-
tions.
(2) In accordance 41 U.S.C. 2313, the
Federal awarding agency is required to
review the non-public segment of the
OMB-designated integrity and perform-
ance system accessible through SAM
(currently the Federal Awardee Per-
formance and Integrity Information
System (FAPIIS)) prior to making a
Federal award where the Federal share
is expected to exceed the simplified ac-
quisition threshold, defined in 41 U.S.C.
134, over the period of performance. As
required by Public Law 112–239, Na-
tional Defense Authorization Act for
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118
2 CFR Ch. II (1–1–21 Edition) §200.207
Fiscal Year 2013, prior to making a
Federal award, the Federal awarding
agency must consider all of the infor-
mation available through FAPIIS with
regard to the applicant and any imme-
diate highest level owner, predecessor
(i.e.; a non-Federal entity that is re-
placed by a successor), or subsidiary,
identified for that applicant in FAPIIS,
if applicable. At a minimum, the infor-
mation in the system for a prior Fed-
eral award recipient must demonstrate
a satisfactory record of executing pro-
grams or activities under Federal
grants, cooperative agreements, or pro-
curement awards; and integrity and
business ethics. The Federal awarding
agency may make a Federal award to a
recipient who does not fully meet these
standards, if it is determined that the
information is not relevant to the cur-
rent Federal award under consideration
or there are specific conditions that
can appropriately mitigate the effects
of the non-Federal entity’s risk in ac-
cordance with §200.208.
(b) Risk evaluation. (1) The Federal
awarding agency must have in place a
framework for evaluating the risks
posed by applicants before they receive
Federal awards. This evaluation may
incorporate results of the evaluation of
the applicant’s eligibility or the qual-
ity of its application. If the Federal
awarding agency determines that a
Federal award will be made, special
conditions that correspond to the de-
gree of risk assessed may be applied to
the Federal award. Criteria to be evalu-
ated must be described in the an-
nouncement of funding opportunity de-
scribed in §200.204.
(2) In evaluating risks posed by appli-
cants, the Federal awarding agency
may use a risk-based approach and
may consider any items such as the fol-
lowing:
(i) Financial stability. Financial sta-
bility;
(ii) Management systems and stand-
ards. Quality of management systems
and ability to meet the management
standards prescribed in this part;
(iii) History of performance. The appli-
cant’s record in managing Federal
awards, if it is a prior recipient of Fed-
eral awards, including timeliness of
compliance with applicable reporting
requirements, conformance to the
terms and conditions of previous Fed-
eral awards, and if applicable, the ex-
tent to which any previously awarded
amounts will be expended prior to fu-
ture awards;
(iv) Audit reports and findings. Re-
ports and findings from audits per-
formed under subpart F of this part or
the reports and findings of any other
available audits; and
(v) Ability to effectively implement re-
quirements. The applicant’s ability to
effectively implement statutory, regu-
latory, or other requirements imposed
on non-Federal entities.
(c) Risk-based requirements adjustment.
The Federal awarding agency may ad-
just requirements when a risk-evalua-
tion indicates that it may be merited
either pre-award or post-award.
(d) Suspension and debarment compli-
ance. (1) The Federal awarding agency
must comply with the guidelines on
governmentwide suspension and debar-
ment in 2 CFR part 180, and must re-
quire non-Federal entities to comply
with these provisions. These provisions
restrict Federal awards, subawards and
contracts with certain parties that are
debarred, suspended or otherwise ex-
cluded from or ineligible for participa-
tion in Federal programs or activities.
§200.207 Standard application re-
quirements.
(a) Paperwork clearances. The Federal
awarding agency may only use applica-
tion information collections approved
by OMB under the Paperwork Reduc-
tion Act of 1995 and OMB’s imple-
menting regulations in 5 CFR part 1320
and in alignment with OMB-approved,
governmentwide data elements avail-
able from the OMB-designated stand-
ards lead. Consistent with these re-
quirements, OMB will authorize addi-
tional information collections only on
a limited basis.
(b) Information collection. If applica-
ble, the Federal awarding agency may
inform applicants and recipients that
they do not need to provide certain in-
formation otherwise required by the
relevant information collection.
§200.208 Specific conditions.
(a) Federal awarding agencies are re-
sponsible for ensuring that specific
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119
OMB Guidance §200.211
Federal award conditions are con-
sistent with the program design re-
flected in §200.202 and include clear
performance expectations of recipients
as required in §200.301.
(b) The Federal awarding agency or
pass-through entity may adjust spe-
cific Federal award conditions as need-
ed, in accordance with this section,
based on an analysis of the following
factors:
(1) Based on the criteria set forth in
§200.206;
(2) The applicant or recipient’s his-
tory of compliance with the general or
specific terms and conditions of a Fed-
eral award;
(3) The applicant or recipient’s abil-
ity to meet expected performance goals
as described in §200.211; or
(4) A responsibility determination of
an applicant or recipient.
(c) Additional Federal award condi-
tions may include items such as the
following:
(1) Requiring payments as reimburse-
ments rather than advance payments;
(2) Withholding authority to proceed
to the next phase until receipt of evi-
dence of acceptable performance within
a given performance period;
(3) Requiring additional, more de-
tailed financial reports;
(4) Requiring additional project mon-
itoring;
(5) Requiring the non-Federal entity
to obtain technical or management as-
sistance; or
(6) Establishing additional prior ap-
provals.
(d) If the Federal awarding agency or
pass-through entity is imposing addi-
tional requirements, they must notify
the applicant or non-Federal entity as
to:
(1) The nature of the additional re-
quirements;
(2) The reason why the additional re-
quirements are being imposed;
(3) The nature of the action needed to
remove the additional requirement, if
applicable;
(4) The time allowed for completing
the actions if applicable; and
(5) The method for requesting recon-
sideration of the additional require-
ments imposed.
(e) Any additional requirements must
be promptly removed once the condi-
tions that prompted them have been
satisfied.
§200.209 Certifications and represen-
tations.
Unless prohibited by the U.S. Con-
stitution, Federal statutes or regula-
tions, each Federal awarding agency or
pass-through entity is authorized to re-
quire the non-Federal entity to submit
certifications and representations re-
quired by Federal statutes, or regula-
tions on an annual basis. Submission
may be required more frequently if the
non-Federal entity fails to meet a re-
quirement of a Federal award.
§200.210 Pre-award costs.
For requirements on costs incurred
by the applicant prior to the start date
of the period of performance of the
Federal award, see §200.458.
§200.211 Information contained in a
Federal award.
A Federal award must include the
following information:
(a) Federal award performance goals.
Performance goals, indicators, targets,
and baseline data must be included in
the Federal award, where applicable.
The Federal awarding agency must
also specify how performance will be
assessed in the terms and conditions of
the Federal award, including the tim-
ing and scope of expected performance.
See §§200.202 and 200.301 for more infor-
mation on Federal award performance
goals.
(b) General Federal award information.
The Federal awarding agency must in-
clude the following general Federal
award information in each Federal
award:
(1) Recipient name (which must
match the name associated with its
unique entity identifier as defined at 2
CFR 25.315);
(2) Recipient’s unique entity identi-
fier;
(3) Unique Federal Award Identifica-
tion Number (FAIN);
(4) Federal Award Date (see Federal
award date in §200.201);
(5) Period of Performance Start and
End Date;
(6) Budget Period Start and End
Date;
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2 CFR Ch. II (1–1–21 Edition) §200.212
(7) Amount of Federal Funds Obli-
gated by this action;
(8) Total Amount of Federal Funds
Obligated;
(9) Total Approved Cost Sharing or
Matching, where applicable;
(10) Total Amount of the Federal
Award including approved Cost Sharing
or Matching;
(11) Budget Approved by the Federal
Awarding Agency;
(11) Federal award description, (to
comply with statutory requirements
(e.g., FFATA));
(12) Name of Federal awarding agen-
cy and contact information for award-
ing official,
(13) Assistance Listings Number and
Title;
(14) Identification of whether the
award is R&D; and
(15) Indirect cost rate for the Federal
award (including if the de minimis rate
is charged per §200.414).
(c) General terms and conditions. (1)
Federal awarding agencies must incor-
porate the following general terms and
conditions either in the Federal award
or by reference, as applicable:
(i) Administrative requirements. Admin-
istrative requirements implemented by
the Federal awarding agency as speci-
fied in this part.
(ii) National policy requirements. These
include statutory, executive order,
other Presidential directive, or regu-
latory requirements that apply by spe-
cific reference and are not program-
specific. See §200.300 Statutory and na-
tional policy requirements.
(iii) Recipient integrity and perform-
ance matters. If the total Federal share
of the Federal award may include more
than $500,000 over the period of per-
formance, the Federal awarding agency
must include the term and condition
available in appendix XII of this part.
See also §200.113.
(iv) Future budget periods. If it is an-
ticipated that the period of perform-
ance will include multiple budget peri-
ods, the Federal awarding agency must
indicate that subsequent budget peri-
ods are subject to the availability of
funds, program authority, satisfactory
performance, and compliance with the
terms and conditions of the Federal
award.
(v) Termination provisions. Federal
awarding agencies must make recipi-
ents aware, in a clear and unambiguous
manner, of the termination provisions
in §200.340, including the applicable
termination provisions in the Federal
awarding agency’s regulations or in
each Federal award.
(2) The Federal award must incor-
porate, by reference, all general terms
and conditions of the award, which
must be maintained on the agency’s
website.
(3) If a non-Federal entity requests a
copy of the full text of the general
terms and conditions, the Federal
awarding agency must provide it.
(4) Wherever the general terms and
conditions are publicly available, the
Federal awarding agency must main-
tain an archive of previous versions of
the general terms and conditions, with
effective dates, for use by the non-Fed-
eral entity, auditors, or others.
(d) Federal awarding agency, program,
or Federal award specific terms and con-
ditions. The Federal awarding agency
must include with each Federal award
any terms and conditions necessary to
communicate requirements that are in
addition to the requirements outlined
in the Federal awarding agency’s gen-
eral terms and conditions. See also
§200.208. Whenever practicable, these
specific terms and conditions also
should be shared on the agency’s
website and in notices of funding op-
portunities (as outlined in §200.204) in
addition to being included in a Federal
award. See also §200.207.
(e) Federal awarding agency require-
ments. Any other information required
by the Federal awarding agency.
§200.212 Public access to Federal
award information.
(a) In accordance with statutory re-
quirements for Federal spending trans-
parency (e.g., FFATA), except as noted
in this section, for applicable Federal
awards the Federal awarding agency
must announce all Federal awards pub-
licly and publish the required informa-
tion on a publicly available OMB-des-
ignated governmentwide website.
(b) All information posted in the des-
ignated integrity and performance sys-
tem accessible through SAM (currently
FAPIIS) on or after April 15, 2011 will
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121
OMB Guidance §200.213
be publicly available after a waiting
period of 14 calendar days, except for:
(1) Past performance reviews required
by Federal Government contractors in
accordance with the Federal Acquisi-
tion Regulation (FAR) 48 CFR part 42,
subpart 42.15;
(2) Information that was entered
prior to April 15, 2011; or
(3) Information that is withdrawn
during the 14-calendar day waiting pe-
riod by the Federal Government offi-
cial.
(c) Nothing in this section may be
construed as requiring the publication
of information otherwise exempt under
the Freedom of Information Act (5
U.S.C 552), or controlled unclassified
information pursuant to Executive
Order 13556.
§200.213 Reporting a determination
that a non-Federal entity is not
qualified for a Federal award.
(a) If a Federal awarding agency does
not make a Federal award to a non-
Federal entity because the official de-
termines that the non-Federal entity
does not meet either or both of the
minimum qualification standards as
described in §200.206(a)(2), the Federal
awarding agency must report that de-
termination to the designated integ-
rity and performance system accessible
through SAM (currently FAPIIS), only
if all of the following apply:
(1) The only basis for the determina-
tion described in this paragraph (a) is
the non-Federal entity’s prior record of
executing programs or activities under
Federal awards or its record of integ-
rity and business ethics, as described in
§200.206(a)(2) (i.e., the entity was deter-
mined to be qualified based on all fac-
tors other than those two standards);
and
(2) The total Federal share of the
Federal award that otherwise would be
made to the non-Federal entity is ex-
pected to exceed the simplified acquisi-
tion threshold over the period of per-
formance.
(b) The Federal awarding agency is
not required to report a determination
that a non-Federal entity is not quali-
fied for a Federal award if they make
the Federal award to the non-Federal
entity and include specific award terms
and conditions, as described in §200.208.
(c) If a Federal awarding agency re-
ports a determination that a non-Fed-
eral entity is not qualified for a Fed-
eral award, as described in paragraph
(a) of this section, the Federal award-
ing agency also must notify the non-
Federal entity that—
(1) The determination was made and
reported to the designated integrity
and performance system accessible
through SAM, and include with the no-
tification an explanation of the basis
for the determination;
(2) The information will be kept in
the system for a period of five years
from the date of the determination, as
required by section 872 of Public Law
110–417, as amended (41 U.S.C. 2313),
then archived;
(3) Each Federal awarding agency
that considers making a Federal award
to the non-Federal entity during that
five year period must consider that in-
formation in judging whether the non-
Federal entity is qualified to receive
the Federal award when the total Fed-
eral share of the Federal award is ex-
pected to include an amount of Federal
funding in excess of the simplified ac-
quisition threshold over the period of
performance;
(4) The non-Federal entity may go to
the awardee integrity and performance
portal accessible through SAM (cur-
rently the Contractor Performance As-
sessment Reporting System (CPARS))
and comment on any information the
system contains about the non-Federal
entity itself; and
(5) Federal awarding agencies will
consider that non-Federal entity’s
comments in determining whether the
non-Federal entity is qualified for a fu-
ture Federal award.
(d) If a Federal awarding agency en-
ters information into the designated
integrity and performance system ac-
cessible through SAM about a deter-
mination that a non-Federal entity is
not qualified for a Federal award and
subsequently:
(1) Learns that any of that informa-
tion is erroneous, the Federal awarding
agency must correct the information in
the system within three business days;
and
(2) Obtains an update to that infor-
mation that could be helpful to other
Federal awarding agencies, the Federal
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2 CFR Ch. II (1–1–21 Edition) §200.214
awarding agency is strongly encour-
aged to amend the information in the
system to incorporate the update in a
timely way.
(e) Federal awarding agencies must
not post any information that will be
made publicly available in the non-
public segment of designated integrity
and performance system that is cov-
ered by a disclosure exemption under
the Freedom of Information Act. If the
recipient asserts within seven calendar
days to the Federal awarding agency
that posted the information that some
or all of the information made publicly
available is covered by a disclosure ex-
emption under the Freedom of Infor-
mation Act, the Federal awarding
agency that posted the information
must remove the posting within seven
calendar days of receiving the asser-
tion. Prior to reposting the releasable
information, the Federal awarding
agency must resolve the issue in ac-
cordance with the agency’s Freedom of
Information Act procedures.
§200.214 Suspension and debarment.
Non-Federal entities are subject to
the non-procurement debarment and
suspension regulations implementing
Executive Orders 12549 and 12689, 2 CFR
part 180. The regulations in 2 CFR part
180 restrict awards, subawards, and
contracts with certain parties that are
debarred, suspended, or otherwise ex-
cluded from or ineligible for participa-
tion in Federal assistance programs or
activities.
§200.215 Never contract with the
enemy.
Federal awarding agencies and re-
cipients are subject to the regulations
implementing Never Contract with the
Enemy in 2 CFR part 183. The regula-
tions in 2 CFR part 183 affect covered
contracts, grants and cooperative
agreements that are expected to exceed
$50,000 within the period of perform-
ance, are performed outside the United
States and its territories, and are in
support of a contingency operation in
which members of the Armed Forces
are actively engaged in hostilities.
§200.216 Prohibition on certain tele-
communications and video surveil-
lance services or equipment.
(a) Recipients and subrecipients are
prohibited from obligating or expend-
ing loan or grant funds to:
(1) Procure or obtain;
(2) Extend or renew a contract to pro-
cure or obtain; or
(3) Enter into a contract (or extend
or renew a contract) to procure or ob-
tain equipment, services, or systems
that uses covered telecommunications
equipment or services as a substantial
or essential component of any system,
or as critical technology as part of any
system. As described in Public Law
115–232, section 889, covered tele-
communications equipment is tele-
communications equipment produced
by Huawei Technologies Company or
ZTE Corporation (or any subsidiary or
affiliate of such entities).
(i) For the purpose of public safety,
security of government facilities, phys-
ical security surveillance of critical in-
frastructure, and other national secu-
rity purposes, video surveillance and
telecommunications equipment pro-
duced by Hytera Communications Cor-
poration, Hangzhou Hikvision Digital
Technology Company, or Dahua Tech-
nology Company (or any subsidiary or
affiliate of such entities).
(ii) Telecommunications or video sur-
veillance services provided by such en-
tities or using such equipment.
(iii) Telecommunications or video
surveillance equipment or services pro-
duced or provided by an entity that the
Secretary of Defense, in consultation
with the Director of the National Intel-
ligence or the Director of the Federal
Bureau of Investigation, reasonably be-
lieves to be an entity owned or con-
trolled by, or otherwise connected to,
the government of a covered foreign
country.
(b) In implementing the prohibition
under Public Law 115–232, section 889,
subsection (f), paragraph (1), heads of
executive agencies administering loan,
grant, or subsidy programs shall
prioritize available funding and tech-
nical support to assist affected busi-
nesses, institutions and organizations
as is reasonably necessary for those af-
fected entities to transition from cov-
ered communications equipment and
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123
OMB Guidance §200.301
services, to procure replacement equip-
ment and services, and to ensure that
communications service to users and
customers is sustained.
(c) See Public Law 115–232, section 889
for additional information.
(d) See also §200.471.
Subpart D—Post Federal Award
Requirements
SOURCE: 85 FR 49543, Aug. 13, 2020, unless
otherwise noted.
§200.300 Statutory and national policy
requirements.
(a) The Federal awarding agency
must manage and administer the Fed-
eral award in a manner so as to ensure
that Federal funding is expended and
associated programs are implemented
in full accordance with the U.S. Con-
stitution, Federal Law, and public pol-
icy requirements: Including, but not
limited to, those protecting free
speech, religious liberty, public wel-
fare, the environment, and prohibiting
discrimination. The Federal awarding
agency must communicate to the non-
Federal entity all relevant public pol-
icy requirements, including those in
general appropriations provisions, and
incorporate them either directly or by
reference in the terms and conditions
of the Federal award.
(b) The non-Federal entity is respon-
sible for complying with all require-
ments of the Federal award. For all
Federal awards, this includes the provi-
sions of FFATA, which includes re-
quirements on executive compensation,
and also requirements implementing
the Act for the non-Federal entity at 2
CFR parts 25 and 170. See also statu-
tory requirements for whistleblower
protections at 10 U.S.C. 2409, 41 U.S.C.
4712, and 10 U.S.C. 2324, 41 U.S.C. 4304
and 4310.
§200.301 Performance measurement.
(a) The Federal awarding agency
must measure the recipient’s perform-
ance to show achievement of program
goals and objectives, share lessons
learned, improve program outcomes,
and foster adoption of promising prac-
tices. Program goals and objectives
should be derived from program plan-
ning and design. See §200.202 for more
information. Where appropriate, the
Federal award may include specific
program goals, indicators, targets,
baseline data, data collection, or ex-
pected outcomes (such as outputs, or
services performance or public impacts
of any of these) with an expected
timeline for accomplishment. Where
applicable, this should also include any
performance measures or independent
sources of data that may be used to
measure progress. The Federal award-
ing agency will determine how per-
formance progress is measured, which
may differ by program. Performance
measurement progress must be both
measured and reported. See §200.329 for
more information on monitoring pro-
gram performance. The Federal award-
ing agency may include program-spe-
cific requirements, as applicable. These
requirements must be aligned, to the
extent permitted by law, with the Fed-
eral awarding agency strategic goals,
strategic objectives or performance
goals that are relevant to the program.
See also OMB Circular A–11, Prepara-
tion, Submission, and Execution of the
Budget Part 6.
(b) The Federal awarding agency
should provide recipients with clear
performance goals, indicators, targets,
and baseline data as described in
§200.211. Performance reporting fre-
quency and content should be estab-
lished to not only allow the Federal
awarding agency to understand the re-
cipient progress but also to facilitate
identification of promising practices
among recipients and build the evi-
dence upon which the Federal awarding
agency’s program and performance de-
cisions are made. See §200.328 for more
information on reporting program per-
formance.
(c) This provision is designed to oper-
ate in tandem with evidence-related
statutes (e.g.; The Foundations for Evi-
dence-Based Policymaking Act of 2018,
which emphasizes collaboration and co-
ordination to advance data and evi-
dence-building functions in the Federal
government). The Federal awarding
agency should also specify any require-
ments of award recipients’ participa-
tion in a federally funded evaluation,
and any evaluation activities required
to be conducted by the Federal award.
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2 CFR Ch. II (1–1–21 Edition) §200.302
§200.302 Financial management.
(a) Each state must expend and ac-
count for the Federal award in accord-
ance with state laws and procedures for
expending and accounting for the
state’s own funds. In addition, the
state’s and the other non-Federal enti-
ty’s financial management systems, in-
cluding records documenting compli-
ance with Federal statutes, regula-
tions, and the terms and conditions of
the Federal award, must be sufficient
to permit the preparation of reports re-
quired by general and program-specific
terms and conditions; and the tracing
of funds to a level of expenditures ade-
quate to establish that such funds have
been used according to the Federal
statutes, regulations, and the terms
and conditions of the Federal award.
See also §200.450.
(b) The financial management sys-
tem of each non-Federal entity must
provide for the following (see also
§§200.334, 200.335, 200.336, and 200.337):
(1) Identification, in its accounts, of
all Federal awards received and ex-
pended and the Federal programs under
which they were received. Federal pro-
gram and Federal award identification
must include, as applicable, the Assist-
ance Listings title and number, Fed-
eral award identification number and
year, name of the Federal agency, and
name of the pass-through entity, if
any.
(2) Accurate, current, and complete
disclosure of the financial results of
each Federal award or program in ac-
cordance with the reporting require-
ments set forth in §§200.328 and 200.329.
If a Federal awarding agency requires
reporting on an accrual basis from a re-
cipient that maintains its records on
other than an accrual basis, the recipi-
ent must not be required to establish
an accrual accounting system. This re-
cipient may develop accrual data for
its reports on the basis of an analysis
of the documentation on hand. Simi-
larly, a pass-through entity must not
require a subrecipient to establish an
accrual accounting system and must
allow the subrecipient to develop ac-
crual data for its reports on the basis
of an analysis of the documentation on
hand.
(3) Records that identify adequately
the source and application of funds for
federally-funded activities. These
records must contain information per-
taining to Federal awards, authoriza-
tions, financial obligations, unobli-
gated balances, assets, expenditures,
income and interest and be supported
by source documentation.
(4) Effective control over, and ac-
countability for, all funds, property,
and other assets. The non-Federal enti-
ty must adequately safeguard all assets
and assure that they are used solely for
authorized purposes. See §200.303.
(5) Comparison of expenditures with
budget amounts for each Federal
award.
(6) Written procedures to implement
the requirements of §200.305.
(7) Written procedures for deter-
mining the allowability of costs in ac-
cordance with subpart E of this part
and the terms and conditions of the
Federal award.
§200.303 Internal controls.
The non-Federal entity must:
(a) Establish and maintain effective
internal control over the Federal
award that provides reasonable assur-
ance that the non-Federal entity is
managing the Federal award in compli-
ance with Federal statutes, regula-
tions, and the terms and conditions of
the Federal award. These internal con-
trols should be in compliance with
guidance in ‘‘Standards for Internal
Control in the Federal Government’’
issued by the Comptroller General of
the United States or the ‘‘Internal Con-
trol Integrated Framework’’, issued by
the Committee of Sponsoring Organiza-
tions of the Treadway Commission
(COSO).
(b) Comply with the U.S. Constitu-
tion, Federal statutes, regulations, and
the terms and conditions of the Federal
awards.
(c) Evaluate and monitor the non-
Federal entity’s compliance with stat-
utes, regulations and the terms and
conditions of Federal awards.
(d) Take prompt action when in-
stances of noncompliance are identified
including noncompliance identified in
audit findings.
(e) Take reasonable measures to safe-
guard protected personally identifiable
information and other information the
Federal awarding agency or pass-
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125
OMB Guidance §200.305
through entity designates as sensitive
or the non-Federal entity considers
sensitive consistent with applicable
Federal, State, local, and tribal laws
regarding privacy and responsibility
over confidentiality.
§200.304 Bonds.
The Federal awarding agency may in-
clude a provision on bonding, insur-
ance, or both in the following cir-
cumstances:
(a) Where the Federal Government
guarantees or insures the repayment of
money borrowed by the recipient, the
Federal awarding agency, at its discre-
tion, may require adequate bonding
and insurance if the bonding and insur-
ance requirements of the non-Federal
entity are not deemed adequate to pro-
tect the interest of the Federal Govern-
ment.
(b) The Federal awarding agency may
require adequate fidelity bond coverage
where the non-Federal entity lacks suf-
ficient coverage to protect the Federal
Government’s interest.
(c) Where bonds are required in the
situations described above, the bonds
must be obtained from companies hold-
ing certificates of authority as accept-
able sureties, as prescribed in 31 CFR
part 223.
§200.305 Federal payment.
(a) For states, payments are gov-
erned by Treasury-State Cash Manage-
ment Improvement Act (CMIA) agree-
ments and default procedures codified
at 31 CFR part 205 and Treasury Finan-
cial Manual (TFM) 4A–2000, ‘‘Overall
Disbursing Rules for All Federal Agen-
cies’’.
(b) For non-Federal entities other
than states, payments methods must
minimize the time elapsing between
the transfer of funds from the United
States Treasury or the pass-through
entity and the disbursement by the
non-Federal entity whether the pay-
ment is made by electronic funds
transfer, or issuance or redemption of
checks, warrants, or payment by other
means. See also §200.302(b)(6). Except
as noted elsewhere in this part, Federal
agencies must require recipients to use
only OMB-approved, governmentwide
information collection requests to re-
quest payment.
(1) The non-Federal entity must be
paid in advance, provided it maintains
or demonstrates the willingness to
maintain both written procedures that
minimize the time elapsing between
the transfer of funds and disbursement
by the non-Federal entity, and finan-
cial management systems that meet
the standards for fund control and ac-
countability as established in this part.
Advance payments to a non-Federal en-
tity must be limited to the minimum
amounts needed and be timed to be in
accordance with the actual, immediate
cash requirements of the non-Federal
entity in carrying out the purpose of
the approved program or project. The
timing and amount of advance pay-
ments must be as close as is adminis-
tratively feasible to the actual dis-
bursements by the non-Federal entity
for direct program or project costs and
the proportionate share of any allow-
able indirect costs. The non-Federal
entity must make timely payment to
contractors in accordance with the
contract provisions.
(2) Whenever possible, advance pay-
ments must be consolidated to cover
anticipated cash needs for all Federal
awards made by the Federal awarding
agency to the recipient.
(i) Advance payment mechanisms in-
clude, but are not limited to, Treasury
check and electronic funds transfer and
must comply with applicable guidance
in 31 CFR part 208.
(ii) Non-Federal entities must be au-
thorized to submit requests for advance
payments and reimbursements at least
monthly when electronic fund transfers
are not used, and as often as they like
when electronic transfers are used, in
accordance with the provisions of the
Electronic Fund Transfer Act (15
U.S.C. 1693–1693r).
(3) Reimbursement is the preferred
method when the requirements in this
paragraph (b) cannot be met, when the
Federal awarding agency sets a specific
condition per §200.208, or when the non-
Federal entity requests payment by re-
imbursement. This method may be
used on any Federal award for con-
struction, or if the major portion of the
construction project is accomplished
through private market financing or
Federal loans, and the Federal award
constitutes a minor portion of the
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2 CFR Ch. II (1–1–21 Edition) §200.305
project. When the reimbursement
method is used, the Federal awarding
agency or pass-through entity must
make payment within 30 calendar days
after receipt of the billing, unless the
Federal awarding agency or pass-
through entity reasonably believes the
request to be improper.
(4) If the non-Federal entity cannot
meet the criteria for advance payments
and the Federal awarding agency or
pass-through entity has determined
that reimbursement is not feasible be-
cause the non-Federal entity lacks suf-
ficient working capital, the Federal
awarding agency or pass-through enti-
ty may provide cash on a working cap-
ital advance basis. Under this proce-
dure, the Federal awarding agency or
pass-through entity must advance cash
payments to the non-Federal entity to
cover its estimated disbursement needs
for an initial period generally geared
to the non-Federal entity’s disbursing
cycle. Thereafter, the Federal award-
ing agency or pass-through entity must
reimburse the non-Federal entity for
its actual cash disbursements. Use of
the working capital advance method of
payment requires that the pass-
through entity provide timely advance
payments to any subrecipients in order
to meet the subrecipient’s actual cash
disbursements. The working capital ad-
vance method of payment must not be
used by the pass-through entity if the
reason for using this method is the un-
willingness or inability of the pass-
through entity to provide timely ad-
vance payments to the subrecipient to
meet the subrecipient’s actual cash dis-
bursements.
(5) To the extent available, the non-
Federal entity must disburse funds
available from program income (in-
cluding repayments to a revolving
fund), rebates, refunds, contract settle-
ments, audit recoveries, and interest
earned on such funds before requesting
additional cash payments.
(6) Unless otherwise required by Fed-
eral statutes, payments for allowable
costs by non-Federal entities must not
be withheld at any time during the pe-
riod of performance unless the condi-
tions of §200.208, subpart D of this part,
including §200.339, or one or more of
the following applies:
(i) The non-Federal entity has failed
to comply with the project objectives,
Federal statutes, regulations, or the
terms and conditions of the Federal
award.
(ii) The non-Federal entity is delin-
quent in a debt to the United States as
defined in OMB Circular A–129, ‘‘Poli-
cies for Federal Credit Programs and
Non-Tax Receivables.’’ Under such con-
ditions, the Federal awarding agency
or pass-through entity may, upon rea-
sonable notice, inform the non-Federal
entity that payments must not be
made for financial obligations incurred
after a specified date until the condi-
tions are corrected or the indebtedness
to the Federal Government is liq-
uidated.
(iii) A payment withheld for failure
to comply with Federal award condi-
tions, but without suspension of the
Federal award, must be released to the
non-Federal entity upon subsequent
compliance. When a Federal award is
suspended, payment adjustments will
be made in accordance with §200.343.
(iv) A payment must not be made to
a non-Federal entity for amounts that
are withheld by the non-Federal entity
from payment to contractors to assure
satisfactory completion of work. A
payment must be made when the non-
Federal entity actually disburses the
withheld funds to the contractors or to
escrow accounts established to assure
satisfactory completion of work.
(7) Standards governing the use of
banks and other institutions as deposi-
tories of advance payments under Fed-
eral awards are as follows.
(i) The Federal awarding agency and
pass-through entity must not require
separate depository accounts for funds
provided to a non-Federal entity or es-
tablish any eligibility requirements for
depositories for funds provided to the
non-Federal entity. However, the non-
Federal entity must be able to account
for funds received, obligated, and ex-
pended.
(ii) Advance payments of Federal
funds must be deposited and main-
tained in insured accounts whenever
possible.
(8) The non-Federal entity must
maintain advance payments of Federal
awards in interest-bearing accounts,
unless the following apply:
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127
OMB Guidance §200.305
(i) The non-Federal entity receives
less than $250,000 in Federal awards per
year.
(ii) The best reasonably available in-
terest-bearing account would not be ex-
pected to earn interest in excess of $500
per year on Federal cash balances.
(iii) The depository would require an
average or minimum balance so high
that it would not be feasible within the
expected Federal and non-Federal cash
resources.
(iv) A foreign government or banking
system prohibits or precludes interest-
bearing accounts.
(9) Interest earned amounts up to $500
per year may be retained by the non-
Federal entity for administrative ex-
pense. Any additional interest earned
on Federal advance payments deposited
in interest-bearing accounts must be
remitted annually to the Department
of Health and Human Services Pay-
ment Management System (PMS)
through an electronic medium using ei-
ther Automated Clearing House (ACH)
network or a Fedwire Funds Service
payment.
(i) For returning interest on Federal
awards paid through PMS, the refund
should:
(A) Provide an explanation stating
that the refund is for interest;
(B) List the PMS Payee Account
Number(s) (PANs);
(C) List the Federal award number(s)
for which the interest was earned; and
(D) Make returns payable to: Depart-
ment of Health and Human Services.
(ii) For returning interest on Federal
awards not paid through PMS, the re-
fund should:
(A) Provide an explanation stating
that the refund is for interest;
(B) Include the name of the awarding
agency;
(C) List the Federal award number(s)
for which the interest was earned; and
(D) Make returns payable to: Depart-
ment of Health and Human Services.
(10) Funds, principal, and excess cash
returns must be directed to the origi-
nal Federal agency payment system.
The non-Federal entity should review
instructions from the original Federal
agency payment system. Returns
should include the following informa-
tion:
(i) Payee Account Number (PAN), if
the payment originated from PMS, or
Agency information to indicate whom
to credit the funding if the payment
originated from ASAP, NSF, or an-
other Federal agency payment system.
(ii) PMS document number and sub-
account(s), if the payment originated
from PMS, or relevant account num-
bers if the payment originated from an-
other Federal agency payment system.
(iii) The reason for the return (e.g.,
excess cash, funds not spent, interest,
part interest part other, etc.)
(11) When returning funds or interest
to PMS you must include the following
as applicable:
(i) For ACH Returns:
Routing Number: 051036706
Account number: 303000
Bank Name and Location: Credit Gate-
way—ACH Receiver St. Paul, MN
(ii) For Fedwire Returns 1:
Routing Number: 021030004
Account number: 75010501
Bank Name and Location: Federal Re-
serve Bank Treas NYC/Funds Trans-
fer Division New York, NY
1 Please note that the organization
initiating payment is likely to incur a
charge from their Financial Institution
for this type of payment.
(iii) For International ACH Returns:
Beneficiary Account: Federal Reserve
Bank of New York/ITS (FRBNY/ITS)
Bank: Citibank N.A. (New York)
Swift Code: CITIUS33
Account Number: 36838868
Bank Address: 388 Greenwich Street,
New York, NY 10013 USA
Payment Details (Line 70): Agency Lo-
cator Code (ALC): 75010501
Name (abbreviated when possible) and
ALC Agency POC
(iv) For recipients that do not have
electronic remittance capability,
please make check 2 payable to: ‘‘The
Department of Health and Human
Services.’’
Mail Check to Treasury approved
lockbox:
HHS Program Support Center, P.O.
Box 530231, Atlanta, GA 30353–0231
2 Please allow 4–6 weeks for proc-
essing of a payment by check to be ap-
plied to the appropriate PMS account.
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128
2 CFR Ch. II (1–1–21 Edition) §200.306
(v) Questions can be directed to PMS
at 877–614–5533 or
PMSSupport@psc.hhs.gov.
§200.306 Cost sharing or matching.
(a) Under Federal research proposals,
voluntary committed cost sharing is
not expected. It cannot be used as a
factor during the merit review of appli-
cations or proposals, but may be con-
sidered if it is both in accordance with
Federal awarding agency regulations
and specified in a notice of funding op-
portunity. Criteria for considering vol-
untary committed cost sharing and
any other program policy factors that
may be used to determine who may re-
ceive a Federal award must be explic-
itly described in the notice of funding
opportunity. See also §§200.414 and
200.204 and appendix I to this part.
(b) For all Federal awards, any
shared costs or matching funds and all
contributions, including cash and
third-party in-kind contributions,
must be accepted as part of the non-
Federal entity’s cost sharing or match-
ing when such contributions meet all
of the following criteria:
(1) Are verifiable from the non-Fed-
eral entity’s records;
(2) Are not included as contributions
for any other Federal award;
(3) Are necessary and reasonable for
accomplishment of project or program
objectives;
(4) Are allowable under subpart E of
this part;
(5) Are not paid by the Federal Gov-
ernment under another Federal award,
except where the Federal statute au-
thorizing a program specifically pro-
vides that Federal funds made avail-
able for such program can be applied to
matching or cost sharing requirements
of other Federal programs;
(6) Are provided for in the approved
budget when required by the Federal
awarding agency; and
(7) Conform to other provisions of
this part, as applicable.
(c) Unrecovered indirect costs, in-
cluding indirect costs on cost sharing
or matching may be included as part of
cost sharing or matching only with the
prior approval of the Federal awarding
agency. Unrecovered indirect cost
means the difference between the
amount charged to the Federal award
and the amount which could have been
charged to the Federal award under the
non-Federal entity’s approved nego-
tiated indirect cost rate.
(d) Values for non-Federal entity
contributions of services and property
must be established in accordance with
the cost principles in subpart E of this
part. If a Federal awarding agency au-
thorizes the non-Federal entity to do-
nate buildings or land for construction/
facilities acquisition projects or long-
term use, the value of the donated
property for cost sharing or matching
must be the lesser of paragraph (d)(1)
or (2) of this section.
(1) The value of the remaining life of
the property recorded in the non-Fed-
eral entity’s accounting records at the
time of donation.
(2) The current fair market value.
However, when there is sufficient jus-
tification, the Federal awarding agen-
cy may approve the use of the current
fair market value of the donated prop-
erty, even if it exceeds the value de-
scribed in paragraph (d)(1) of this sec-
tion at the time of donation.
(e) Volunteer services furnished by
third-party professional and technical
personnel, consultants, and other
skilled and unskilled labor may be
counted as cost sharing or matching if
the service is an integral and necessary
part of an approved project or program.
Rates for third-party volunteer serv-
ices must be consistent with those paid
for similar work by the non-Federal en-
tity. In those instances in which the
required skills are not found in the
non-Federal entity, rates must be con-
sistent with those paid for similar
work in the labor market in which the
non-Federal entity competes for the
kind of services involved. In either
case, paid fringe benefits that are rea-
sonable, necessary, allocable, and oth-
erwise allowable may be included in
the valuation.
(f) When a third-party organization
furnishes the services of an employee,
these services must be valued at the
employee’s regular rate of pay plus an
amount of fringe benefits that is rea-
sonable, necessary, allocable, and oth-
erwise allowable, and indirect costs at
either the third-party organization’s
approved federally-negotiated indirect
cost rate or, a rate in accordance with
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129
OMB Guidance §200.307
§200.414(d) provided these services em-
ploy the same skill(s) for which the
employee is normally paid. Where do-
nated services are treated as indirect
costs, indirect cost rates will separate
the value of the donated services so
that reimbursement for the donated
services will not be made.
(g) Donated property from third par-
ties may include such items as equip-
ment, office supplies, laboratory sup-
plies, or workshop and classroom sup-
plies. Value assessed to donated prop-
erty included in the cost sharing or
matching share must not exceed the
fair market value of the property at
the time of the donation.
(h) The method used for determining
cost sharing or matching for third-
party-donated equipment, buildings
and land for which title passes to the
non-Federal entity may differ accord-
ing to the purpose of the Federal
award, if paragraph (h)(1) or (2) of this
section applies.
(1) If the purpose of the Federal
award is to assist the non-Federal enti-
ty in the acquisition of equipment,
buildings or land, the aggregate value
of the donated property may be
claimed as cost sharing or matching.
(2) If the purpose of the Federal
award is to support activities that re-
quire the use of equipment, buildings
or land, normally only depreciation
charges for equipment and buildings
may be made. However, the fair market
value of equipment or other capital as-
sets and fair rental charges for land
may be allowed, provided that the Fed-
eral awarding agency has approved the
charges. See also §200.420.
(i) The value of donated property
must be determined in accordance with
the usual accounting policies of the
non-Federal entity, with the following
qualifications:
(1) The value of donated land and
buildings must not exceed its fair mar-
ket value at the time of donation to
the non-Federal entity as established
by an independent appraiser (e.g., cer-
tified real property appraiser or Gen-
eral Services Administration rep-
resentative) and certified by a respon-
sible official of the non-Federal entity
as required by the Uniform Relocation
Assistance and Real Property Acquisi-
tion Policies Act of 1970, as amended,
(42 U.S.C. 4601–4655) (Uniform Act) ex-
cept as provided in the implementing
regulations at 49 CFR part 24, ‘‘Uni-
form Relocation Assistance And Real
Property Acquisition For Federal And
Federally-Assisted Programs’’.
(2) The value of donated equipment
must not exceed the fair market value
of equipment of the same age and con-
dition at the time of donation.
(3) The value of donated space must
not exceed the fair rental value of com-
parable space as established by an inde-
pendent appraisal of comparable space
and facilities in a privately-owned
building in the same locality.
(4) The value of loaned equipment
must not exceed its fair rental value.
(j) For third-party in-kind contribu-
tions, the fair market value of goods
and services must be documented and
to the extent feasible supported by the
same methods used internally by the
non-Federal entity.
(k) For IHEs, see also OMB memo-
randum M–01–06, dated January 5, 2001,
Clarification of OMB A–21 Treatment
of Voluntary Uncommitted Cost Shar-
ing and Tuition Remission Costs.
§200.307 Program income.
(a) General. Non-Federal entities are
encouraged to earn income to defray
program costs where appropriate.
(b) Cost of generating program income.
If authorized by Federal regulations or
the Federal award, costs incidental to
the generation of program income may
be deducted from gross income to de-
termine program income, provided
these costs have not been charged to
the Federal award.
(c) Governmental revenues. Taxes, spe-
cial assessments, levies, fines, and
other such revenues raised by a non-
Federal entity are not program income
unless the revenues are specifically
identified in the Federal award or Fed-
eral awarding agency regulations as
program income.
(d) Property. Proceeds from the sale
of real property, equipment, or supplies
are not program income; such proceeds
will be handled in accordance with the
requirements of the Property Stand-
ards §§200.311, 200.313, and 200.314, or as
specifically identified in Federal stat-
utes, regulations, or the terms and con-
ditions of the Federal award.
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130
2 CFR Ch. II (1–1–21 Edition) §200.308
(e) Use of program income. If the Fed-
eral awarding agency does not specify
in its regulations or the terms and con-
ditions of the Federal award, or give
prior approval for how program income
is to be used, paragraph (e)(1) of this
section must apply. For Federal awards
made to IHEs and nonprofit research
institutions, if the Federal awarding
agency does not specify in its regula-
tions or the terms and conditions of
the Federal award how program income
is to be used, paragraph (e)(2) of this
section must apply. In specifying alter-
natives to paragraphs (e)(1) and (2) of
this section, the Federal awarding
agency may distinguish between in-
come earned by the recipient and in-
come earned by subrecipients and be-
tween the sources, kinds, or amounts
of income. When the Federal awarding
agency authorizes the approaches in
paragraphs (e)(2) and (3) of this section,
program income in excess of any
amounts specified must also be de-
ducted from expenditures.
(1) Deduction. Ordinarily program in-
come must be deducted from total al-
lowable costs to determine the net al-
lowable costs. Program income must be
used for current costs unless the Fed-
eral awarding agency authorizes other-
wise. Program income that the non-
Federal entity did not anticipate at the
time of the Federal award must be used
to reduce the Federal award and non-
Federal entity contributions rather
than to increase the funds committed
to the project.
(2) Addition. With prior approval of
the Federal awarding agency (except
for IHEs and nonprofit research insti-
tutions, as described in this paragraph
(e)) program income may be added to
the Federal award by the Federal agen-
cy and the non-Federal entity. The pro-
gram income must be used for the pur-
poses and under the conditions of the
Federal award.
(3) Cost sharing or matching. With
prior approval of the Federal awarding
agency, program income may be used
to meet the cost sharing or matching
requirement of the Federal award. The
amount of the Federal award remains
the same.
(f) Income after the period of perform-
ance. There are no Federal require-
ments governing the disposition of in-
come earned after the end of the period
of performance for the Federal award,
unless the Federal awarding agency
regulations or the terms and condi-
tions of the Federal award provide oth-
erwise. The Federal awarding agency
may negotiate agreements with recipi-
ents regarding appropriate uses of in-
come earned after the period of per-
formance as part of the grant closeout
process. See also §200.344.
(g) License fees and royalties. Unless
the Federal statute, regulations, or
terms and conditions for the Federal
award provide otherwise, the non-Fed-
eral entity is not accountable to the
Federal awarding agency with respect
to program income earned from license
fees and royalties for copyrighted ma-
terial, patents, patent applications,
trademarks, and inventions made
under a Federal award to which 37 CFR
part 401 is applicable.
§200.308 Revision of budget and pro-
gram plans.
(a) The approved budget for the Fed-
eral award summarizes the financial
aspects of the project or program as ap-
proved during the Federal award proc-
ess. It may include either the Federal
and non-Federal share (see definition
for Federal share in §200.1) or only the
Federal share, depending upon Federal
awarding agency requirements. The
budget and program plans include con-
siderations for performance and pro-
gram evaluation purposes whenever re-
quired in accordance with the terms
and conditions of the award.
(b) Recipients are required to report
deviations from budget or project scope
or objective, and request prior approv-
als from Federal awarding agencies for
budget and program plan revisions, in
accordance with this section.
(c) For non-construction Federal
awards, recipients must request prior
approvals from Federal awarding agen-
cies for the following program or budg-
et-related reasons:
(1) Change in the scope or the objec-
tive of the project or program (even if
there is no associated budget revision
requiring prior written approval).
(2) Change in a key person specified
in the application or the Federal
award.
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131
OMB Guidance §200.308
(3) The disengagement from the
project for more than three months, or
a 25 percent reduction in time devoted
to the project, by the approved project
director or principal investigator.
(4) The inclusion, unless waived by
the Federal awarding agency, of costs
that require prior approval in accord-
ance with subpart E of this part as ap-
plicable.
(5) The transfer of funds budgeted for
participant support costs to other cat-
egories of expense.
(6) Unless described in the applica-
tion and funded in the approved Fed-
eral awards, the subawarding, transfer-
ring or contracting out of any work
under a Federal award, including fixed
amount subawards as described in
§200.333. This provision does not apply
to the acquisition of supplies, material,
equipment or general support services.
(7) Changes in the approved cost-
sharing or matching provided by the
non-Federal entity.
(8) The need arises for additional
Federal funds to complete the project.
(d) No other prior approval require-
ments for specific items may be im-
posed unless an exception has been ap-
proved by OMB. See also §§200.102 and
200.407.
(e) Except for requirements listed in
paragraphs (c)(1) through (8) of this
section, the Federal awarding agency is
authorized, at its option, to waive
other cost-related and administrative
prior written approvals contained in
subparts D and E of this part. Such
waivers may include authorizing re-
cipients to do any one or more of the
following:
(1) Incur project costs 90 calendar
days before the Federal awarding agen-
cy makes the Federal award. Expenses
more than 90 calendar days pre-award
require prior approval of the Federal
awarding agency. All costs incurred be-
fore the Federal awarding agency
makes the Federal award are at the re-
cipient’s risk (i.e., the Federal award-
ing agency is not required to reimburse
such costs if for any reason the recipi-
ent does not receive a Federal award or
if the Federal award is less than antici-
pated and inadequate to cover such
costs). See also §200.458.
(2) Initiate a one-time extension of
the period of performance by up to 12
months unless one or more of the con-
ditions outlined in paragraphs (e)(2)(i)
through (iii) of this section apply. For
one-time extensions, the recipient
must notify the Federal awarding
agency in writing with the supporting
reasons and revised period of perform-
ance at least 10 calendar days before
the end of the period of performance
specified in the Federal award. This
one-time extension must not be exer-
cised merely for the purpose of using
unobligated balances. Extensions re-
quire explicit prior Federal awarding
agency approval when:
(i) The terms and conditions of the
Federal award prohibit the extension.
(ii) The extension requires additional
Federal funds.
(iii) The extension involves any
change in the approved objectives or
scope of the project.
(3) Carry forward unobligated bal-
ances to subsequent budget periods.
(4) For Federal awards that support
research, unless the Federal awarding
agency provides otherwise in the Fed-
eral award or in the Federal awarding
agency’s regulations, the prior ap-
proval requirements described in this
paragraph (e) are automatically waived
(i.e., recipients need not obtain such
prior approvals) unless one of the con-
ditions included in paragraph (e)(2) of
this section applies.
(f) The Federal awarding agency
may, at its option, restrict the transfer
of funds among direct cost categories
or programs, functions and activities
for Federal awards in which the Fed-
eral share of the project exceeds the
simplified acquisition threshold and
the cumulative amount of such trans-
fers exceeds or is expected to exceed 10
percent of the total budget as last ap-
proved by the Federal awarding agen-
cy. The Federal awarding agency can-
not permit a transfer that would cause
any Federal appropriation to be used
for purposes other than those con-
sistent with the appropriation.
(g) All other changes to non-con-
struction budgets, except for the
changes described in paragraph (c) of
this section, do not require prior ap-
proval (see also §200.407).
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132
2 CFR Ch. II (1–1–21 Edition) §200.309
(h) For construction Federal awards,
the recipient must request prior writ-
ten approval promptly from the Fed-
eral awarding agency for budget revi-
sions whenever paragraph (h)(1), (2), or
(3) of this section applies:
(1) The revision results from changes
in the scope or the objective of the
project or program.
(2) The need arises for additional
Federal funds to complete the project.
(3) A revision is desired which in-
volves specific costs for which prior
written approval requirements may be
imposed consistent with applicable
OMB cost principles listed in subpart
E.
(4) No other prior approval require-
ments for budget revisions may be im-
posed unless an exception has been ap-
proved by OMB.
(5) When a Federal awarding agency
makes a Federal award that provides
support for construction and non-con-
struction work, the Federal awarding
agency may require the recipient to ob-
tain prior approval from the Federal
awarding agency before making any
fund or budget transfers between the
two types of work supported.
(i) When requesting approval for
budget revisions, the recipient must
use the same format for budget infor-
mation that was used in the applica-
tion, unless the Federal awarding agen-
cy indicates a letter of request suffices.
(j) Within 30 calendar days from the
date of receipt of the request for budg-
et revisions, the Federal awarding
agency must review the request and
notify the recipient whether the budget
revisions have been approved. If the re-
vision is still under consideration at
the end of 30 calendar days, the Federal
awarding agency must inform the re-
cipient in writing of the date when the
recipient may expect the decision.
§200.309 Modifications to Period of
Performance.
If a Federal awarding agency or pass-
through entity approves an extension,
or if a recipient extends under
§200.308(e)(2), the Period of Perform-
ance will be amended to end at the
completion of the extension. If a termi-
nation occurs, the Period of Perform-
ance will be amended to end upon the
effective date of termination. If a re-
newal award is issued, a distinct Period
of Performance will begin.
PROPERTY STANDARDS
§200.310 Insurance coverage.
The non-Federal entity must, at a
minimum, provide the equivalent in-
surance coverage for real property and
equipment acquired or improved with
Federal funds as provided to property
owned by the non-Federal entity. Fed-
erally-owned property need not be in-
sured unless required by the terms and
conditions of the Federal award.
§200.311 Real property.
(a) Title. Subject to the requirements
and conditions set forth in this section,
title to real property acquired or im-
proved under a Federal award will vest
upon acquisition in the non-Federal en-
tity.
(b) Use. Except as otherwise provided
by Federal statutes or by the Federal
awarding agency, real property will be
used for the originally authorized pur-
pose as long as needed for that purpose,
during which time the non-Federal en-
tity must not dispose of or encumber
its title or other interests.
(c) Disposition. When real property is
no longer needed for the originally au-
thorized purpose, the non-Federal enti-
ty must obtain disposition instructions
from the Federal awarding agency or
pass-through entity. The instructions
must provide for one of the following
alternatives:
(1) Retain title after compensating
the Federal awarding agency. The
amount paid to the Federal awarding
agency will be computed by applying
the Federal awarding agency’s percent-
age of participation in the cost of the
original purchase (and costs of any im-
provements) to the fair market value
of the property. However, in those situ-
ations where the non-Federal entity is
disposing of real property acquired or
improved with a Federal award and ac-
quiring replacement real property
under the same Federal award, the net
proceeds from the disposition may be
used as an offset to the cost of the re-
placement property.
(2) Sell the property and compensate
the Federal awarding agency. The
amount due to the Federal awarding
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133
OMB Guidance §200.313
agency will be calculated by applying
the Federal awarding agency’s percent-
age of participation in the cost of the
original purchase (and cost of any im-
provements) to the proceeds of the sale
after deduction of any actual and rea-
sonable selling and fixing-up expenses.
If the Federal award has not been
closed out, the net proceeds from sale
may be offset against the original cost
of the property. When the non-Federal
entity is directed to sell property, sales
procedures must be followed that pro-
vide for competition to the extent
practicable and result in the highest
possible return.
(3) Transfer title to the Federal
awarding agency or to a third party
designated/approved by the Federal
awarding agency. The non-Federal en-
tity is entitled to be paid an amount
calculated by applying the non-Federal
entity’s percentage of participation in
the purchase of the real property (and
cost of any improvements) to the cur-
rent fair market value of the property.
§200.312 Federally-owned and exempt
property.
(a) Title to federally-owned property
remains vested in the Federal Govern-
ment. The non-Federal entity must
submit annually an inventory listing of
federally-owned property in its custody
to the Federal awarding agency. Upon
completion of the Federal award or
when the property is no longer needed,
the non-Federal entity must report the
property to the Federal awarding agen-
cy for further Federal agency utiliza-
tion.
(b) If the Federal awarding agency
has no further need for the property, it
must declare the property excess and
report it for disposal to the appropriate
Federal disposal authority, unless the
Federal awarding agency has statutory
authority to dispose of the property by
alternative methods (e.g., the author-
ity provided by the Federal Technology
Transfer Act (15 U.S.C. 3710 (i)) to do-
nate research equipment to edu-
cational and nonprofit organizations in
accordance with Executive Order 12999,
‘‘Educational Technology: Ensuring
Opportunity for All Children in the
Next Century.’’). The Federal awarding
agency must issue appropriate instruc-
tions to the non-Federal entity.
(c) Exempt property means property
acquired under a Federal award where
the Federal awarding agency has cho-
sen to vest title to the property to the
non-Federal entity without further re-
sponsibility to the Federal Govern-
ment, based upon the explicit terms
and conditions of the Federal award.
The Federal awarding agency may ex-
ercise this option when statutory au-
thority exists. Absent statutory au-
thority and specific terms and condi-
tions of the Federal award, title to ex-
empt property acquired under the Fed-
eral award remains with the Federal
Government.
§200.313 Equipment.
See also §200.439.
(a) Title. Subject to the requirements
and conditions set forth in this section,
title to equipment acquired under a
Federal award will vest upon acquisi-
tion in the non-Federal entity. Unless
a statute specifically authorizes the
Federal agency to vest title in the non-
Federal entity without further respon-
sibility to the Federal Government,
and the Federal agency elects to do so,
the title must be a conditional title.
Title must vest in the non-Federal en-
tity subject to the following condi-
tions:
(1) Use the equipment for the author-
ized purposes of the project during the
period of performance, or until the
property is no longer needed for the
purposes of the project.
(2) Not encumber the property with-
out approval of the Federal awarding
agency or pass-through entity.
(3) Use and dispose of the property in
accordance with paragraphs (b), (c),
and (e) of this section.
(b) General. A state must use, manage
and dispose of equipment acquired
under a Federal award by the state in
accordance with state laws and proce-
dures. Other non-Federal entities must
follow paragraphs (c) through (e) of
this section.
(c) Use. (1) Equipment must be used
by the non-Federal entity in the pro-
gram or project for which it was ac-
quired as long as needed, whether or
not the project or program continues
to be supported by the Federal award,
and the non-Federal entity must not
encumber the property without prior
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2 CFR Ch. II (1–1–21 Edition) §200.313
approval of the Federal awarding agen-
cy. The Federal awarding agency may
require the submission of the applica-
ble common form for equipment. When
no longer needed for the original pro-
gram or project, the equipment may be
used in other activities supported by
the Federal awarding agency, in the
following order of priority:
(i) Activities under a Federal award
from the Federal awarding agency
which funded the original program or
project, then
(ii) Activities under Federal awards
from other Federal awarding agencies.
This includes consolidated equipment
for information technology systems.
(2) During the time that equipment is
used on the project or program for
which it was acquired, the non-Federal
entity must also make equipment
available for use on other projects or
programs currently or previously sup-
ported by the Federal Government,
provided that such use will not inter-
fere with the work on the projects or
program for which it was originally ac-
quired. First preference for other use
must be given to other programs or
projects supported by Federal awarding
agency that financed the equipment
and second preference must be given to
programs or projects under Federal
awards from other Federal awarding
agencies. Use for non-federally-funded
programs or projects is also permis-
sible. User fees should be considered if
appropriate.
(3) Notwithstanding the encourage-
ment in §200.307 to earn program in-
come, the non-Federal entity must not
use equipment acquired with the Fed-
eral award to provide services for a fee
that is less than private companies
charge for equivalent services unless
specifically authorized by Federal stat-
ute for as long as the Federal Govern-
ment retains an interest in the equip-
ment.
(4) When acquiring replacement
equipment, the non-Federal entity may
use the equipment to be replaced as a
trade-in or sell the property and use
the proceeds to offset the cost of the
replacement property.
(d) Management requirements. Proce-
dures for managing equipment (includ-
ing replacement equipment), whether
acquired in whole or in part under a
Federal award, until disposition takes
place will, as a minimum, meet the fol-
lowing requirements:
(1) Property records must be main-
tained that include a description of the
property, a serial number or other
identification number, the source of
funding for the property (including the
FAIN), who holds title, the acquisition
date, and cost of the property, percent-
age of Federal participation in the
project costs for the Federal award
under which the property was acquired,
the location, use and condition of the
property, and any ultimate disposition
data including the date of disposal and
sale price of the property.
(2) A physical inventory of the prop-
erty must be taken and the results rec-
onciled with the property records at
least once every two years.
(3) A control system must be devel-
oped to ensure adequate safeguards to
prevent loss, damage, or theft of the
property. Any loss, damage, or theft
must be investigated.
(4) Adequate maintenance procedures
must be developed to keep the property
in good condition.
(5) If the non-Federal entity is au-
thorized or required to sell the prop-
erty, proper sales procedures must be
established to ensure the highest pos-
sible return.
(e) Disposition. When original or re-
placement equipment acquired under a
Federal award is no longer needed for
the original project or program or for
other activities currently or previously
supported by a Federal awarding agen-
cy, except as otherwise provided in
Federal statutes, regulations, or Fed-
eral awarding agency disposition in-
structions, the non-Federal entity
must request disposition instructions
from the Federal awarding agency if
required by the terms and conditions of
the Federal award. Disposition of the
equipment will be made as follows, in
accordance with Federal awarding
agency disposition instructions:
(1) Items of equipment with a current
per unit fair market value of $5,000 or
less may be retained, sold or otherwise
disposed of with no further responsi-
bility to the Federal awarding agency.
(2) Except as provided in §200.312(b),
or if the Federal awarding agency fails
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135
OMB Guidance §200.315
to provide requested disposition in-
structions within 120 days, items of
equipment with a current per-unit fair
market value in excess of $5,000 may be
retained by the non-Federal entity or
sold. The Federal awarding agency is
entitled to an amount calculated by
multiplying the current market value
or proceeds from sale by the Federal
awarding agency’s percentage of par-
ticipation in the cost of the original
purchase. If the equipment is sold, the
Federal awarding agency may permit
the non-Federal entity to deduct and
retain from the Federal share $500 or
ten percent of the proceeds, whichever
is less, for its selling and handling ex-
penses.
(3) The non-Federal entity may
transfer title to the property to the
Federal Government or to an eligible
third party provided that, in such
cases, the non-Federal entity must be
entitled to compensation for its attrib-
utable percentage of the current fair
market value of the property.
(4) In cases where a non-Federal enti-
ty fails to take appropriate disposition
actions, the Federal awarding agency
may direct the non-Federal entity to
take disposition actions.
§200.314 Supplies.
See also §200.453.
(a) Title to supplies will vest in the
non-Federal entity upon acquisition. If
there is a residual inventory of unused
supplies exceeding $5,000 in total aggre-
gate value upon termination or com-
pletion of the project or program and
the supplies are not needed for any
other Federal award, the non-Federal
entity must retain the supplies for use
on other activities or sell them, but
must, in either case, compensate the
Federal Government for its share. The
amount of compensation must be com-
puted in the same manner as for equip-
ment. See §200.313 (e)(2) for the calcula-
tion methodology.
(b) As long as the Federal Govern-
ment retains an interest in the sup-
plies, the non-Federal entity must not
use supplies acquired under a Federal
award to provide services to other or-
ganizations for a fee that is less than
private companies charge for equiva-
lent services, unless specifically au-
thorized by Federal statute.
§200.315 Intangible property.
(a) Title to intangible property (see
definition for Intangible property in
§200.1) acquired under a Federal award
vests upon acquisition in the non-Fed-
eral entity. The non-Federal entity
must use that property for the origi-
nally-authorized purpose, and must not
encumber the property without ap-
proval of the Federal awarding agency.
When no longer needed for the origi-
nally authorized purpose, disposition of
the intangible property must occur in
accordance with the provisions in
§200.313(e).
(b) The non-Federal entity may copy-
right any work that is subject to copy-
right and was developed, or for which
ownership was acquired, under a Fed-
eral award. The Federal awarding agen-
cy reserves a royalty-free, nonexclu-
sive and irrevocable right to reproduce,
publish, or otherwise use the work for
Federal purposes, and to authorize oth-
ers to do so.
(c) The non-Federal entity is subject
to applicable regulations governing
patents and inventions, including gov-
ernmentwide regulations issued by the
Department of Commerce at 37 CFR
part 401, ‘‘Rights to Inventions Made
by Nonprofit Organizations and Small
Business Firms Under Government
Awards, Contracts and Cooperative
Agreements.’’
(d) The Federal Government has the
right to:
(1) Obtain, reproduce, publish, or oth-
erwise use the data produced under a
Federal award; and
(2) Authorize others to receive, repro-
duce, publish, or otherwise use such
data for Federal purposes.
(e)(1) In response to a Freedom of In-
formation Act (FOIA) request for re-
search data relating to published re-
search findings produced under a Fed-
eral award that were used by the Fed-
eral Government in developing an
agency action that has the force and
effect of law, the Federal awarding
agency must request, and the non-Fed-
eral entity must provide, within a rea-
sonable time, the research data so that
they can be made available to the pub-
lic through the procedures established
under the FOIA. If the Federal award-
ing agency obtains the research data
solely in response to a FOIA request,
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2 CFR Ch. II (1–1–21 Edition) §200.316
the Federal awarding agency may
charge the requester a reasonable fee
equaling the full incremental cost of
obtaining the research data. This fee
should reflect costs incurred by the
Federal agency and the non-Federal en-
tity. This fee is in addition to any fees
the Federal awarding agency may as-
sess under the FOIA (5 U.S.C.
552(a)(4)(A)).
(2) Published research findings means
when:
(i) Research findings are published in
a peer-reviewed scientific or technical
journal; or
(ii) A Federal agency publicly and of-
ficially cites the research findings in
support of an agency action that has
the force and effect of law. ‘‘Used by
the Federal Government in developing
an agency action that has the force and
effect of law’’ is defined as when an
agency publicly and officially cites the
research findings in support of an agen-
cy action that has the force and effect
of law.
(3) Research data means the recorded
factual material commonly accepted in
the scientific community as necessary
to validate research findings, but not
any of the following: Preliminary anal-
yses, drafts of scientific papers, plans
for future research, peer reviews, or
communications with colleagues. This
‘‘recorded’’ material excludes physical
objects (e.g., laboratory samples). Re-
search data also do not include:
(i) Trade secrets, commercial infor-
mation, materials necessary to be held
confidential by a researcher until they
are published, or similar information
which is protected under law; and
(ii) Personnel and medical informa-
tion and similar information the dis-
closure of which would constitute a
clearly unwarranted invasion of per-
sonal privacy, such as information that
could be used to identify a particular
person in a research study.
§200.316 Property trust relationship.
Real property, equipment, and intan-
gible property, that are acquired or im-
proved with a Federal award must be
held in trust by the non-Federal entity
as trustee for the beneficiaries of the
project or program under which the
property was acquired or improved.
The Federal awarding agency may re-
quire the non-Federal entity to record
liens or other appropriate notices of
record to indicate that personal or real
property has been acquired or improved
with a Federal award and that use and
disposition conditions apply to the
property.
Procurement Standards
§200.317 Procurements by states.
When procuring property and serv-
ices under a Federal award, a State
must follow the same policies and pro-
cedures it uses for procurements from
its non-Federal funds. The State will
comply with §§200.321, 200.322, and
200.323 and ensure that every purchase
order or other contract includes any
clauses required by §200.327. All other
non-Federal entities, including sub-
recipients of a State, must follow the
procurement standards in §§200.318
through 200.327.
§200.318 General procurement stand-
ards.
(a) The non-Federal entity must have
and use documented procurement pro-
cedures, consistent with State, local,
and tribal laws and regulations and the
standards of this section, for the acqui-
sition of property or services required
under a Federal award or subaward.
The non-Federal entity’s documented
procurement procedures must conform
to the procurement standards identi-
fied in §§200.317 through 200.327.
(b) Non-Federal entities must main-
tain oversight to ensure that contrac-
tors perform in accordance with the
terms, conditions, and specifications of
their contracts or purchase orders.
(c)(1) The non-Federal entity must
maintain written standards of conduct
covering conflicts of interest and gov-
erning the actions of its employees en-
gaged in the selection, award and ad-
ministration of contracts. No em-
ployee, officer, or agent may partici-
pate in the selection, award, or admin-
istration of a contract supported by a
Federal award if he or she has a real or
apparent conflict of interest. Such a
conflict of interest would arise when
the employee, officer, or agent, any
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137
OMB Guidance §200.318
member of his or her immediate fam-
ily, his or her partner, or an organiza-
tion which employs or is about to em-
ploy any of the parties indicated here-
in, has a financial or other interest in
or a tangible personal benefit from a
firm considered for a contract. The of-
ficers, employees, and agents of the
non-Federal entity may neither solicit
nor accept gratuities, favors, or any-
thing of monetary value from contrac-
tors or parties to subcontracts. How-
ever, non-Federal entities may set
standards for situations in which the
financial interest is not substantial or
the gift is an unsolicited item of nomi-
nal value. The standards of conduct
must provide for disciplinary actions
to be applied for violations of such
standards by officers, employees, or
agents of the non-Federal entity.
(2) If the non-Federal entity has a
parent, affiliate, or subsidiary organi-
zation that is not a State, local govern-
ment, or Indian tribe, the non-Federal
entity must also maintain written
standards of conduct covering organi-
zational conflicts of interest. Organiza-
tional conflicts of interest means that
because of relationships with a parent
company, affiliate, or subsidiary orga-
nization, the non-Federal entity is un-
able or appears to be unable to be im-
partial in conducting a procurement
action involving a related organiza-
tion.
(d) The non-Federal entity’s proce-
dures must avoid acquisition of unnec-
essary or duplicative items. Consider-
ation should be given to consolidating
or breaking out procurements to ob-
tain a more economical purchase.
Where appropriate, an analysis will be
made of lease versus purchase alter-
natives, and any other appropriate
analysis to determine the most eco-
nomical approach.
(e) To foster greater economy and ef-
ficiency, and in accordance with efforts
to promote cost-effective use of shared
services across the Federal Govern-
ment, the non-Federal entity is encour-
aged to enter into state and local inter-
governmental agreements or inter-en-
tity agreements where appropriate for
procurement or use of common or
shared goods and services. Competition
requirements will be met with applied
to documented procurement actions
using strategic sourcing, shared serv-
ices, and other similar procurement ar-
rangements.
(f) The non-Federal entity is encour-
aged to use Federal excess and surplus
property in lieu of purchasing new
equipment and property whenever such
use is feasible and reduces project
costs.
(g) The non-Federal entity is encour-
aged to use value engineering clauses
in contracts for construction projects
of sufficient size to offer reasonable op-
portunities for cost reductions. Value
engineering is a systematic and cre-
ative analysis of each contract item or
task to ensure that its essential func-
tion is provided at the overall lower
cost.
(h) The non-Federal entity must
award contracts only to responsible
contractors possessing the ability to
perform successfully under the terms
and conditions of a proposed procure-
ment. Consideration will be given to
such matters as contractor integrity,
compliance with public policy, record
of past performance, and financial and
technical resources. See also §200.214.
(i) The non-Federal entity must
maintain records sufficient to detail
the history of procurement. These
records will include, but are not nec-
essarily limited to, the following: Ra-
tionale for the method of procurement,
selection of contract type, contractor
selection or rejection, and the basis for
the contract price.
(j)(1) The non-Federal entity may use
a time-and-materials type contract
only after a determination that no
other contract is suitable and if the
contract includes a ceiling price that
the contractor exceeds at its own risk.
Time-and-materials type contract
means a contract whose cost to a non-
Federal entity is the sum of:
(i) The actual cost of materials; and
(ii) Direct labor hours charged at
fixed hourly rates that reflect wages,
general and administrative expenses,
and profit.
(2) Since this formula generates an
open-ended contract price, a time-and-
materials contract provides no positive
profit incentive to the contractor for
cost control or labor efficiency. There-
fore, each contract must set a ceiling
price that the contractor exceeds at its
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138
2 CFR Ch. II (1–1–21 Edition) §200.319
own risk. Further, the non-Federal en-
tity awarding such a contract must as-
sert a high degree of oversight in order
to obtain reasonable assurance that
the contractor is using efficient meth-
ods and effective cost controls.
(k) The non-Federal entity alone
must be responsible, in accordance
with good administrative practice and
sound business judgment, for the set-
tlement of all contractual and adminis-
trative issues arising out of procure-
ments. These issues include, but are
not limited to, source evaluation, pro-
tests, disputes, and claims. These
standards do not relieve the non-Fed-
eral entity of any contractual respon-
sibilities under its contracts. The Fed-
eral awarding agency will not sub-
stitute its judgment for that of the
non-Federal entity unless the matter is
primarily a Federal concern. Viola-
tions of law will be referred to the
local, state, or Federal authority hav-
ing proper jurisdiction.
§200.319 Competition.
(a) All procurement transactions for
the acquisition of property or services
required under a Federal award must
be conducted in a manner providing
full and open competition consistent
with the standards of this section and
§200.320.
(b) In order to ensure objective con-
tractor performance and eliminate un-
fair competitive advantage, contrac-
tors that develop or draft specifica-
tions, requirements, statements of
work, or invitations for bids or re-
quests for proposals must be excluded
from competing for such procurements.
Some of the situations considered to be
restrictive of competition include but
are not limited to:
(1) Placing unreasonable require-
ments on firms in order for them to
qualify to do business;
(2) Requiring unnecessary experience
and excessive bonding;
(3) Noncompetitive pricing practices
between firms or between affiliated
companies;
(4) Noncompetitive contracts to con-
sultants that are on retainer contracts;
(5) Organizational conflicts of inter-
est;
(6) Specifying only a ‘‘brand name’’
product instead of allowing ‘‘an equal’’
product to be offered and describing
the performance or other relevant re-
quirements of the procurement; and
(7) Any arbitrary action in the pro-
curement process.
(c) The non-Federal entity must con-
duct procurements in a manner that
prohibits the use of statutorily or ad-
ministratively imposed state, local, or
tribal geographical preferences in the
evaluation of bids or proposals, except
in those cases where applicable Federal
statutes expressly mandate or encour-
age geographic preference. Nothing in
this section preempts state licensing
laws. When contracting for architec-
tural and engineering (A/E) services,
geographic location may be a selection
criterion provided its application
leaves an appropriate number of quali-
fied firms, given the nature and size of
the project, to compete for the con-
tract.
(d) The non-Federal entity must have
written procedures for procurement
transactions. These procedures must
ensure that all solicitations:
(1) Incorporate a clear and accurate
description of the technical require-
ments for the material, product, or
service to be procured. Such descrip-
tion must not, in competitive procure-
ments, contain features which unduly
restrict competition. The description
may include a statement of the quali-
tative nature of the material, product
or service to be procured and, when
necessary, must set forth those min-
imum essential characteristics and
standards to which it must conform if
it is to satisfy its intended use. De-
tailed product specifications should be
avoided if at all possible. When it is
impractical or uneconomical to make a
clear and accurate description of the
technical requirements, a ‘‘brand name
or equivalent’’ description may be used
as a means to define the performance
or other salient requirements of pro-
curement. The specific features of the
named brand which must be met by of-
fers must be clearly stated; and
(2) Identify all requirements which
the offerors must fulfill and all other
factors to be used in evaluating bids or
proposals.
(e) The non-Federal entity must en-
sure that all prequalified lists of per-
sons, firms, or products which are used
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OMB Guidance §200.320
in acquiring goods and services are cur-
rent and include enough qualified
sources to ensure maximum open and
free competition. Also, the non-Federal
entity must not preclude potential bid-
ders from qualifying during the solici-
tation period.
(f) Noncompetitive procurements can
only be awarded in accordance with
§200.320(c).
§200.320 Methods of procurement to
be followed.
The non-Federal entity must have
and use documented procurement pro-
cedures, consistent with the standards
of this section and §§200.317, 200.318,
and 200.319 for any of the following
methods of procurement used for the
acquisition of property or services re-
quired under a Federal award or sub-
award.
(a) Informal procurement methods.
When the value of the procurement for
property or services under a Federal
award does not exceed the simplified ac-
quisition threshold (SAT), as defined in
§200.1, or a lower threshold established
by a non-Federal entity, formal pro-
curement methods are not required.
The non-Federal entity may use infor-
mal procurement methods to expedite
the completion of its transactions and
minimize the associated administra-
tive burden and cost. The informal
methods used for procurement of prop-
erty or services at or below the SAT in-
clude:
(1) Micro-purchases—(i) Distribution.
The acquisition of supplies or services,
the aggregate dollar amount of which
does not exceed the micro-purchase
threshold (See the definition of micro-
purchase in §200.1). To the maximum
extent practicable, the non-Federal en-
tity should distribute micro-purchases
equitably among qualified suppliers.
(ii) Micro-purchase awards. Micro-pur-
chases may be awarded without solic-
iting competitive price or rate
quotations if the non-Federal entity
considers the price to be reasonable
based on research, experience, purchase
history or other information and docu-
ments it files accordingly. Purchase
cards can be used for micro-purchases
if procedures are documented and ap-
proved by the non-Federal entity.
(iii) Micro-purchase thresholds. The
non-Federal entity is responsible for
determining and documenting an ap-
propriate micro-purchase threshold
based on internal controls, an evalua-
tion of risk, and its documented pro-
curement procedures. The micro-pur-
chase threshold used by the non-Fed-
eral entity must be authorized or not
prohibited under State, local, or tribal
laws or regulations. Non-Federal enti-
ties may establish a threshold higher
than the Federal threshold established
in the Federal Acquisition Regulations
(FAR) in accordance with paragraphs
(a)(1)(iv) and (v) of this section.
(iv) Non-Federal entity increase to the
micro-purchase threshold up to $50,000.
Non-Federal entities may establish a
threshold higher than the micro-pur-
chase threshold identified in the FAR
in accordance with the requirements of
this section. The non-Federal entity
may self-certify a threshold up to
$50,000 on an annual basis and must
maintain documentation to be made
available to the Federal awarding
agency and auditors in accordance with
§200.334. The self-certification must in-
clude a justification, clear identifica-
tion of the threshold, and supporting
documentation of any of the following:
(A) A qualification as a low-risk
auditee, in accordance with the criteria
in §200.520 for the most recent audit;
(B) An annual internal institutional
risk assessment to identify, mitigate,
and manage financial risks; or,
(C) For public institutions, a higher
threshold consistent with State law.
(v) Non-Federal entity increase to the
micro-purchase threshold over $50,000.
Micro-purchase thresholds higher than
$50,000 must be approved by the cog-
nizant agency for indirect costs. The
non-federal entity must submit a re-
quest with the requirements included
in paragraph (a)(1)(iv) of this section.
The increased threshold is valid until
there is a change in status in which the
justification was approved.
(2) Small purchases—(i) Small purchase
procedures. The acquisition of property
or services, the aggregate dollar
amount of which is higher than the
micro-purchase threshold but does not
exceed the simplified acquisition
threshold. If small purchase procedures
are used, price or rate quotations must
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2 CFR Ch. II (1–1–21 Edition) §200.320
be obtained from an adequate number
of qualified sources as determined ap-
propriate by the non-Federal entity.
(ii) Simplified acquisition thresholds.
The non-Federal entity is responsible
for determining an appropriate sim-
plified acquisition threshold based on
internal controls, an evaluation of risk
and its documented procurement proce-
dures which must not exceed the
threshold established in the FAR.
When applicable, a lower simplified ac-
quisition threshold used by the non-
Federal entity must be authorized or
not prohibited under State, local, or
tribal laws or regulations.
(b) Formal procurement methods. When
the value of the procurement for prop-
erty or services under a Federal finan-
cial assistance award exceeds the SAT,
or a lower threshold established by a
non-Federal entity, formal procure-
ment methods are required. Formal
procurement methods require following
documented procedures. Formal pro-
curement methods also require public
advertising unless a non-competitive
procurement can be used in accordance
with §200.319 or paragraph (c) of this
section. The following formal methods
of procurement are used for procure-
ment of property or services above the
simplified acquisition threshold or a
value below the simplified acquisition
threshold the non-Federal entity deter-
mines to be appropriate:
(1) Sealed bids. A procurement method
in which bids are publicly solicited and
a firm fixed-price contract (lump sum
or unit price) is awarded to the respon-
sible bidder whose bid, conforming with
all the material terms and conditions
of the invitation for bids, is the lowest
in price. The sealed bids method is the
preferred method for procuring con-
struction, if the conditions.
(i) In order for sealed bidding to be
feasible, the following conditions
should be present:
(A) A complete, adequate, and real-
istic specification or purchase descrip-
tion is available;
(B) Two or more responsible bidders
are willing and able to compete effec-
tively for the business; and
(C) The procurement lends itself to a
firm fixed price contract and the selec-
tion of the successful bidder can be
made principally on the basis of price.
(ii) If sealed bids are used, the fol-
lowing requirements apply:
(A) Bids must be solicited from an
adequate number of qualified sources,
providing them sufficient response
time prior to the date set for opening
the bids, for local, and tribal govern-
ments, the invitation for bids must be
publicly advertised;
(B) The invitation for bids, which
will include any specifications and per-
tinent attachments, must define the
items or services in order for the bidder
to properly respond;
(C) All bids will be opened at the
time and place prescribed in the invita-
tion for bids, and for local and tribal
governments, the bids must be opened
publicly;
(D) A firm fixed price contract award
will be made in writing to the lowest
responsive and responsible bidder.
Where specified in bidding documents,
factors such as discounts, transpor-
tation cost, and life cycle costs must
be considered in determining which bid
is lowest. Payment discounts will only
be used to determine the low bid when
prior experience indicates that such
discounts are usually taken advantage
of; and
(E) Any or all bids may be rejected if
there is a sound documented reason.
(2) Proposals. A procurement method
in which either a fixed price or cost-re-
imbursement type contract is awarded.
Proposals are generally used when con-
ditions are not appropriate for the use
of sealed bids. They are awarded in ac-
cordance with the following require-
ments:
(i) Requests for proposals must be
publicized and identify all evaluation
factors and their relative importance.
Proposals must be solicited from an
adequate number of qualified offerors.
Any response to publicized requests for
proposals must be considered to the
maximum extent practical;
(ii) The non-Federal entity must
have a written method for conducting
technical evaluations of the proposals
received and making selections;
(iii) Contracts must be awarded to
the responsible offeror whose proposal
is most advantageous to the non-Fed-
eral entity, with price and other fac-
tors considered; and
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OMB Guidance §200.323
(iv) The non-Federal entity may use
competitive proposal procedures for
qualifications-based procurement of ar-
chitectural/engineering (A/E) profes-
sional services whereby offeror’s quali-
fications are evaluated and the most
qualified offeror is selected, subject to
negotiation of fair and reasonable com-
pensation. The method, where price is
not used as a selection factor, can only
be used in procurement of A/E profes-
sional services. It cannot be used to
purchase other types of services though
A/E firms that are a potential source to
perform the proposed effort.
(c) Noncompetitive procurement. There
are specific circumstances in which
noncompetitive procurement can be
used. Noncompetitive procurement can
only be awarded if one or more of the
following circumstances apply:
(1) The acquisition of property or
services, the aggregate dollar amount
of which does not exceed the micro-
purchase threshold (see paragraph
(a)(1) of this section);
(2) The item is available only from a
single source;
(3) The public exigency or emergency
for the requirement will not permit a
delay resulting from publicizing a com-
petitive solicitation;
(4) The Federal awarding agency or
pass-through entity expressly author-
izes a noncompetitive procurement in
response to a written request from the
non-Federal entity; or
(5) After solicitation of a number of
sources, competition is determined in-
adequate.
§200.321 Contracting with small and
minority businesses, women’s busi-
ness enterprises, and labor surplus
area firms.
(a) The non-Federal entity must take
all necessary affirmative steps to as-
sure that minority businesses, women’s
business enterprises, and labor surplus
area firms are used when possible.
(b) Affirmative steps must include:
(1) Placing qualified small and mi-
nority businesses and women’s business
enterprises on solicitation lists;
(2) Assuring that small and minority
businesses, and women’s business en-
terprises are solicited whenever they
are potential sources;
(3) Dividing total requirements, when
economically feasible, into smaller
tasks or quantities to permit max-
imum participation by small and mi-
nority businesses, and women’s busi-
ness enterprises;
(4) Establishing delivery schedules,
where the requirement permits, which
encourage participation by small and
minority businesses, and women’s busi-
ness enterprises;
(5) Using the services and assistance,
as appropriate, of such organizations as
the Small Business Administration and
the Minority Business Development
Agency of the Department of Com-
merce; and
(6) Requiring the prime contractor, if
subcontracts are to be let, to take the
affirmative steps listed in paragraphs
(b)(1) through (5) of this section.
§200.322 Domestic preferences for pro-
curements.
(a) As appropriate and to the extent
consistent with law, the non-Federal
entity should, to the greatest extent
practicable under a Federal award, pro-
vide a preference for the purchase, ac-
quisition, or use of goods, products, or
materials produced in the United
States (including but not limited to
iron, aluminum, steel, cement, and
other manufactured products). The re-
quirements of this section must be in-
cluded in all subawards including all
contracts and purchase orders for work
or products under this award.
(b) For purposes of this section:
(1) ‘‘Produced in the United States’’
means, for iron and steel products, that
all manufacturing processes, from the
initial melting stage through the appli-
cation of coatings, occurred in the
United States.
(2) ‘‘Manufactured products’’ means
items and construction materials com-
posed in whole or in part of non-ferrous
metals such as aluminum; plastics and
polymer-based products such as poly-
vinyl chloride pipe; aggregates such as
concrete; glass, including optical fiber;
and lumber.
§200.323 Procurement of recovered
materials.
A non-Federal entity that is a state
agency or agency of a political subdivi-
sion of a state and its contractors must
comply with section 6002 of the Solid
Waste Disposal Act, as amended by the
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2 CFR Ch. II (1–1–21 Edition) §200.324
Resource Conservation and Recovery
Act. The requirements of Section 6002
include procuring only items des-
ignated in guidelines of the Environ-
mental Protection Agency (EPA) at 40
CFR part 247 that contain the highest
percentage of recovered materials prac-
ticable, consistent with maintaining a
satisfactory level of competition,
where the purchase price of the item
exceeds $10,000 or the value of the
quantity acquired during the preceding
fiscal year exceeded $10,000; procuring
solid waste management services in a
manner that maximizes energy and re-
source recovery; and establishing an af-
firmative procurement program for
procurement of recovered materials
identified in the EPA guidelines.
§200.324 Contract cost and price.
(a) The non-Federal entity must per-
form a cost or price analysis in connec-
tion with every procurement action in
excess of the Simplified Acquisition
Threshold including contract modifica-
tions. The method and degree of anal-
ysis is dependent on the facts sur-
rounding the particular procurement
situation, but as a starting point, the
non-Federal entity must make inde-
pendent estimates before receiving bids
or proposals.
(b) The non-Federal entity must ne-
gotiate profit as a separate element of
the price for each contract in which
there is no price competition and in all
cases where cost analysis is performed.
To establish a fair and reasonable prof-
it, consideration must be given to the
complexity of the work to be per-
formed, the risk borne by the con-
tractor, the contractor’s investment,
the amount of subcontracting, the
quality of its record of past perform-
ance, and industry profit rates in the
surrounding geographical area for
similar work.
(c) Costs or prices based on estimated
costs for contracts under the Federal
award are allowable only to the extent
that costs incurred or cost estimates
included in negotiated prices would be
allowable for the non-Federal entity
under subpart E of this part. The non-
Federal entity may reference its own
cost principles that comply with the
Federal cost principles.
(d) The cost plus a percentage of cost
and percentage of construction cost
methods of contracting must not be
used.
§200.325 Federal awarding agency or
pass-through entity review.
(a) The non-Federal entity must
make available, upon request of the
Federal awarding agency or pass-
through entity, technical specifica-
tions on proposed procurements where
the Federal awarding agency or pass-
through entity believes such review is
needed to ensure that the item or serv-
ice specified is the one being proposed
for acquisition. This review generally
will take place prior to the time the
specification is incorporated into a so-
licitation document. However, if the
non-Federal entity desires to have the
review accomplished after a solicita-
tion has been developed, the Federal
awarding agency or pass-through enti-
ty may still review the specifications,
with such review usually limited to the
technical aspects of the proposed pur-
chase.
(b) The non-Federal entity must
make available upon request, for the
Federal awarding agency or pass-
through entity pre-procurement re-
view, procurement documents, such as
requests for proposals or invitations
for bids, or independent cost estimates,
when:
(1) The non-Federal entity’s procure-
ment procedures or operation fails to
comply with the procurement stand-
ards in this part;
(2) The procurement is expected to
exceed the Simplified Acquisition
Threshold and is to be awarded without
competition or only one bid or offer is
received in response to a solicitation;
(3) The procurement, which is ex-
pected to exceed the Simplified Acqui-
sition Threshold, specifies a ‘‘brand
name’’ product;
(4) The proposed contract is more
than the Simplified Acquisition
Threshold and is to be awarded to
other than the apparent low bidder
under a sealed bid procurement; or
(5) A proposed contract modification
changes the scope of a contract or in-
creases the contract amount by more
than the Simplified Acquisition
Threshold.
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OMB Guidance §200.329
(c) The non-Federal entity is exempt
from the pre-procurement review in
paragraph (b) of this section if the Fed-
eral awarding agency or pass-through
entity determines that its procurement
systems comply with the standards of
this part.
(1) The non-Federal entity may re-
quest that its procurement system be
reviewed by the Federal awarding
agency or pass-through entity to deter-
mine whether its system meets these
standards in order for its system to be
certified. Generally, these reviews
must occur where there is continuous
high-dollar funding, and third-party
contracts are awarded on a regular
basis;
(2) The non-Federal entity may self-
certify its procurement system. Such
self-certification must not limit the
Federal awarding agency’s right to sur-
vey the system. Under a self-certifi-
cation procedure, the Federal awarding
agency may rely on written assurances
from the non-Federal entity that it is
complying with these standards. The
non-Federal entity must cite specific
policies, procedures, regulations, or
standards as being in compliance with
these requirements and have its system
available for review.
§200.326 Bonding requirements.
For construction or facility improve-
ment contracts or subcontracts exceed-
ing the Simplified Acquisition Thresh-
old, the Federal awarding agency or
pass-through entity may accept the
bonding policy and requirements of the
non-Federal entity provided that the
Federal awarding agency or pass-
through entity has made a determina-
tion that the Federal interest is ade-
quately protected. If such a determina-
tion has not been made, the minimum
requirements must be as follows:
(a) A bid guarantee from each bidder
equivalent to five percent of the bid
price. The ‘‘bid guarantee’’ must con-
sist of a firm commitment such as a
bid bond, certified check, or other ne-
gotiable instrument accompanying a
bid as assurance that the bidder will,
upon acceptance of the bid, execute
such contractual documents as may be
required within the time specified.
(b) A performance bond on the part of
the contractor for 100 percent of the
contract price. A ‘‘performance bond’’
is one executed in connection with a
contract to secure fulfillment of all the
contractor’s requirements under such
contract.
(c) A payment bond on the part of the
contractor for 100 percent of the con-
tract price. A ‘‘payment bond’’ is one
executed in connection with a contract
to assure payment as required by law
of all persons supplying labor and ma-
terial in the execution of the work pro-
vided for in the contract.
§200.327 Contract provisions.
The non-Federal entity’s contracts
must contain the applicable provisions
described in appendix II to this part.
PERFORMANCE AND FINANCIAL
MONITORING AND REPORTING
§200.328 Financial reporting.
Unless otherwise approved by OMB,
the Federal awarding agency must so-
licit only the OMB-approved govern-
mentwide data elements for collection
of financial information (at time of
publication the Federal Financial Re-
port or such future, OMB-approved,
governmentwide data elements avail-
able from the OMB-designated stand-
ards lead. This information must be
collected with the frequency required
by the terms and conditions of the Fed-
eral award, but no less frequently than
annually nor more frequently than
quarterly except in unusual cir-
cumstances, for example where more
frequent reporting is necessary for the
effective monitoring of the Federal
award or could significantly affect pro-
gram outcomes, and preferably in co-
ordination with performance reporting.
The Federal awarding agency must use
OMB-approved common information
collections, as applicable, when pro-
viding financial and performance re-
porting information.
§200.329 Monitoring and reporting
program performance.
(a) Monitoring by the non-Federal enti-
ty. The non-Federal entity is respon-
sible for oversight of the operations of
the Federal award supported activities.
The non-Federal entity must monitor
its activities under Federal awards to
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2 CFR Ch. II (1–1–21 Edition) §200.329
assure compliance with applicable Fed-
eral requirements and performance ex-
pectations are being achieved. Moni-
toring by the non-Federal entity must
cover each program, function or activ-
ity. See also §200.332.
(b) Reporting program performance.
The Federal awarding agency must use
OMB-approved common information
collections, as applicable, when pro-
viding financial and performance re-
porting information. As appropriate
and in accordance with above men-
tioned information collections, the
Federal awarding agency must require
the recipient to relate financial data
and accomplishments to performance
goals and objectives of the Federal
award. Also, in accordance with above
mentioned common information collec-
tions, and when required by the terms
and conditions of the Federal award,
recipients must provide cost informa-
tion to demonstrate cost effective
practices (e.g., through unit cost data).
In some instances (e.g., discretionary
research awards), this will be limited
to the requirement to submit technical
performance reports (to be evaluated in
accordance with Federal awarding
agency policy). Reporting require-
ments must be clearly articulated such
that, where appropriate, performance
during the execution of the Federal
award has a standard against which
non-Federal entity performance can be
measured.
(c) Non-construction performance re-
ports. The Federal awarding agency
must use standard, governmentwide
OMB-approved data elements for col-
lection of performance information in-
cluding performance progress reports,
Research Performance Progress Re-
ports.
(1) The non-Federal entity must sub-
mit performance reports at the inter-
val required by the Federal awarding
agency or pass-through entity to best
inform improvements in program out-
comes and productivity. Intervals must
be no less frequent than annually nor
more frequent than quarterly except in
unusual circumstances, for example
where more frequent reporting is nec-
essary for the effective monitoring of
the Federal award or could signifi-
cantly affect program outcomes. Re-
ports submitted annually by the non-
Federal entity and/or pass-through en-
tity must be due no later than 90 cal-
endar days after the reporting period.
Reports submitted quarterly or semi-
annually must be due no later than 30
calendar days after the reporting pe-
riod. Alternatively, the Federal award-
ing agency or pass-through entity may
require annual reports before the anni-
versary dates of multiple year Federal
awards. The final performance report
submitted by the non-Federal entity
and/or pass-through entity must be due
no later than 120 calendar days after
the period of performance end date. A
subrecipient must submit to the pass-
through entity, no later than 90 cal-
endar days after the period of perform-
ance end date, all final performance re-
ports as required by the terms and con-
ditions of the Federal award. See also
§200.344. If a justified request is sub-
mitted by a non-Federal entity, the
Federal agency may extend the due
date for any performance report.
(2) As appropriate in accordance with
above mentioned performance report-
ing, these reports will contain, for each
Federal award, brief information on
the following unless other data ele-
ments are approved by OMB in the
agency information collection request:
(i) A comparison of actual accom-
plishments to the objectives of the
Federal award established for the pe-
riod. Where the accomplishments of
the Federal award can be quantified, a
computation of the cost (for example,
related to units of accomplishment)
may be required if that information
will be useful. Where performance
trend data and analysis would be in-
formative to the Federal awarding
agency program, the Federal awarding
agency should include this as a per-
formance reporting requirement.
(ii) The reasons why established
goals were not met, if appropriate.
(iii) Additional pertinent information
including, when appropriate, analysis
and explanation of cost overruns or
high unit costs.
(d) Construction performance reports.
For the most part, onsite technical in-
spections and certified percentage of
completion data are relied on heavily
by Federal awarding agencies and pass-
through entities to monitor progress
under Federal awards and subawards
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OMB Guidance §200.331
for construction. The Federal awarding
agency may require additional per-
formance reports only when considered
necessary.
(e) Significant developments. Events
may occur between the scheduled per-
formance reporting dates that have sig-
nificant impact upon the supported ac-
tivity. In such cases, the non-Federal
entity must inform the Federal award-
ing agency or pass-through entity as
soon as the following types of condi-
tions become known:
(1) Problems, delays, or adverse con-
ditions which will materially impair
the ability to meet the objective of the
Federal award. This disclosure must in-
clude a statement of the action taken,
or contemplated, and any assistance
needed to resolve the situation.
(2) Favorable developments which en-
able meeting time schedules and objec-
tives sooner or at less cost than antici-
pated or producing more or different
beneficial results than originally
planned.
(f) Site visits. The Federal awarding
agency may make site visits as war-
ranted by program needs.
(g) Performance report requirement
waiver. The Federal awarding agency
may waive any performance report re-
quired by this part if not needed.
§200.330 Reporting on real property.
The Federal awarding agency or pass-
through entity must require a non-Fed-
eral entity to submit reports at least
annually on the status of real property
in which the Federal Government re-
tains an interest, unless the Federal in-
terest in the real property extends 15
years or longer. In those instances
where the Federal interest attached is
for a period of 15 years or more, the
Federal awarding agency or pass-
through entity, at its option, may re-
quire the non-Federal entity to report
at various multi-year frequencies (e.g.,
every two years or every three years,
not to exceed a five-year reporting pe-
riod; or a Federal awarding agency or
pass-through entity may require an-
nual reporting for the first three years
of a Federal award and thereafter re-
quire reporting every five years).
SUBRECIPIENT MONITORING AND
MANAGEMENT
§200.331 Subrecipient and contractor
determinations.
The non-Federal entity may concur-
rently receive Federal awards as a re-
cipient, a subrecipient, and a con-
tractor, depending on the substance of
its agreements with Federal awarding
agencies and pass-through entities.
Therefore, a pass-through entity must
make case-by-case determinations
whether each agreement it makes for
the disbursement of Federal program
funds casts the party receiving the
funds in the role of a subrecipient or a
contractor. The Federal awarding
agency may supply and require recipi-
ents to comply with additional guid-
ance to support these determinations
provided such guidance does not con-
flict with this section.
(a) Subrecipients. A subaward is for
the purpose of carrying out a portion of
a Federal award and creates a Federal
assistance relationship with the sub-
recipient. See definition for Subaward
in §200.1 of this part. Characteristics
which support the classification of the
non-Federal entity as a subrecipient
include when the non-Federal entity:
(1) Determines who is eligible to re-
ceive what Federal assistance;
(2) Has its performance measured in
relation to whether objectives of a Fed-
eral program were met;
(3) Has responsibility for pro-
grammatic decision-making;
(4) Is responsible for adherence to ap-
plicable Federal program requirements
specified in the Federal award; and
(5) In accordance with its agreement,
uses the Federal funds to carry out a
program for a public purpose specified
in authorizing statute, as opposed to
providing goods or services for the ben-
efit of the pass-through entity.
(b) Contractors. A contract is for the
purpose of obtaining goods and services
for the non-Federal entity’s own use
and creates a procurement relationship
with the contractor. See the definition
of contract in §200.1 of this part. Char-
acteristics indicative of a procurement
relationship between the non-Federal
entity and a contractor are when the
contractor:
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2 CFR Ch. II (1–1–21 Edition) §200.332
(1) Provides the goods and services
within normal business operations;
(2) Provides similar goods or services
to many different purchasers;
(3) Normally operates in a competi-
tive environment;
(4) Provides goods or services that
are ancillary to the operation of the
Federal program; and
(5) Is not subject to compliance re-
quirements of the Federal program as a
result of the agreement, though similar
requirements may apply for other rea-
sons.
(c) Use of judgment in making deter-
mination. In determining whether an
agreement between a pass-through en-
tity and another non-Federal entity
casts the latter as a subrecipient or a
contractor, the substance of the rela-
tionship is more important than the
form of the agreement. All of the char-
acteristics listed above may not be
present in all cases, and the pass-
through entity must use judgment in
classifying each agreement as a
subaward or a procurement contract.
§200.332 Requirements for pass-
through entities.
All pass-through entities must:
(a) Ensure that every subaward is
clearly identified to the subrecipient as
a subaward and includes the following
information at the time of the
subaward and if any of these data ele-
ments change, include the changes in
subsequent subaward modification.
When some of this information is not
available, the pass-through entity
must provide the best information
available to describe the Federal award
and subaward. Required information
includes:
(1) Federal award identification.
(i) Subrecipient name (which must
match the name associated with its
unique entity identifier);
(ii) Subrecipient’s unique entity
identifier;
(iii) Federal Award Identification
Number (FAIN);
(iv) Federal Award Date (see the defi-
nition of Federal award date in §200.1 of
this part) of award to the recipient by
the Federal agency;
(v) Subaward Period of Performance
Start and End Date;
(vi) Subaward Budget Period Start
and End Date;
(vii) Amount of Federal Funds Obli-
gated by this action by the pass-
through entity to the subrecipient;
(viii) Total Amount of Federal Funds
Obligated to the subrecipient by the
pass-through entity including the cur-
rent financial obligation;
(ix) Total Amount of the Federal
Award committed to the subrecipient
by the pass-through entity;
(x) Federal award project description,
as required to be responsive to the Fed-
eral Funding Accountability and
Transparency Act (FFATA);
(xi) Name of Federal awarding agen-
cy, pass-through entity, and contact
information for awarding official of the
Pass-through entity;
(xii) Assistance Listings number and
Title; the pass-through entity must
identify the dollar amount made avail-
able under each Federal award and the
Assistance Listings Number at time of
disbursement;
(xiii) Identification of whether the
award is R&D; and
(xiv) Indirect cost rate for the Fed-
eral award (including if the de minimis
rate is charged) per §200.414.
(2) All requirements imposed by the
pass-through entity on the sub-
recipient so that the Federal award is
used in accordance with Federal stat-
utes, regulations and the terms and
conditions of the Federal award;
(3) Any additional requirements that
the pass-through entity imposes on the
subrecipient in order for the pass-
through entity to meet its own respon-
sibility to the Federal awarding agency
including identification of any required
financial and performance reports;
(4)(i) An approved federally recog-
nized indirect cost rate negotiated be-
tween the subrecipient and the Federal
Government. If no approved rate exists,
the pass-through entity must deter-
mine the appropriate rate in collabora-
tion with the subrecipient, which is ei-
ther:
(A) The negotiated indirect cost rate
between the pass-through entity and
the subrecipient; which can be based on
a prior negotiated rate between a dif-
ferent PTE and the same subrecipient.
If basing the rate on a previously nego-
tiated rate, the pass-through entity is
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OMB Guidance §200.332
not required to collect information jus-
tifying this rate, but may elect to do
so;
(B) The de minimis indirect cost
rate.
(ii) The pass-through entity must not
require use of a de minimis indirect
cost rate if the subrecipient has a Fed-
erally approved rate. Subrecipients can
elect to use the cost allocation method
to account for indirect costs in accord-
ance with §200.405(d).
(5) A requirement that the sub-
recipient permit the pass-through enti-
ty and auditors to have access to the
subrecipient’s records and financial
statements as necessary for the pass-
through entity to meet the require-
ments of this part; and
(6) Appropriate terms and conditions
concerning closeout of the subaward.
(b) Evaluate each subrecipient’s risk
of noncompliance with Federal stat-
utes, regulations, and the terms and
conditions of the subaward for purposes
of determining the appropriate sub-
recipient monitoring described in para-
graphs (d) and (e) of this section, which
may include consideration of such fac-
tors as:
(1) The subrecipient’s prior experi-
ence with the same or similar sub-
awards;
(2) The results of previous audits in-
cluding whether or not the sub-
recipient receives a Single Audit in ac-
cordance with Subpart F of this part,
and the extent to which the same or
similar subaward has been audited as a
major program;
(3) Whether the subrecipient has new
personnel or new or substantially
changed systems; and
(4) The extent and results of Federal
awarding agency monitoring (e.g., if
the subrecipient also receives Federal
awards directly from a Federal award-
ing agency).
(c) Consider imposing specific
subaward conditions upon a sub-
recipient if appropriate as described in
§200.208.
(d) Monitor the activities of the sub-
recipient as necessary to ensure that
the subaward is used for authorized
purposes, in compliance with Federal
statutes, regulations, and the terms
and conditions of the subaward; and
that subaward performance goals are
achieved. Pass-through entity moni-
toring of the subrecipient must in-
clude:
(1) Reviewing financial and perform-
ance reports required by the pass-
through entity.
(2) Following-up and ensuring that
the subrecipient takes timely and ap-
propriate action on all deficiencies per-
taining to the Federal award provided
to the subrecipient from the pass-
through entity detected through au-
dits, on-site reviews, and written con-
firmation from the subrecipient, high-
lighting the status of actions planned
or taken to address Single Audit find-
ings related to the particular
subaward.
(3) Issuing a management decision for
applicable audit findings pertaining
only to the Federal award provided to
the subrecipient from the pass-through
entity as required by §200.521.
(4) The pass-through entity is respon-
sible for resolving audit findings spe-
cifically related to the subaward and
not responsible for resolving cross-cut-
ting findings. If a subrecipient has a
current Single Audit report posted in
the Federal Audit Clearinghouse and
has not otherwise been excluded from
receipt of Federal funding (e.g., has
been debarred or suspended), the pass-
through entity may rely on the sub-
recipient’s cognizant audit agency or
cognizant oversight agency to perform
audit follow-up and make management
decisions related to cross-cutting find-
ings in accordance with section
§300.513(a)(3)(vii). Such reliance does
not eliminate the responsibility of the
pass-through entity to issue subawards
that conform to agency and award-spe-
cific requirements, to manage risk
through ongoing subaward monitoring,
and to monitor the status of the find-
ings that are specifically related to the
subaward.
(e) Depending upon the pass-through
entity’s assessment of risk posed by
the subrecipient (as described in para-
graph (b) of this section), the following
monitoring tools may be useful for the
pass-through entity to ensure proper
accountability and compliance with
program requirements and achieve-
ment of performance goals:
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148
2 CFR Ch. II (1–1–21 Edition) §200.333
(1) Providing subrecipients with
training and technical assistance on
program-related matters; and
(2) Performing on-site reviews of the
subrecipient’s program operations;
(3) Arranging for agreed-upon-proce-
dures engagements as described in
§200.425.
(f) Verify that every subrecipient is
audited as required by Subpart F of
this part when it is expected that the
subrecipient’s Federal awards expended
during the respective fiscal year
equaled or exceeded the threshold set
forth in §200.501.
(g) Consider whether the results of
the subrecipient’s audits, on-site re-
views, or other monitoring indicate
conditions that necessitate adjust-
ments to the pass-through entity’s own
records.
(h) Consider taking enforcement ac-
tion against noncompliant subrecipi-
ents as described in §200.339 of this part
and in program regulations.
§200.333 Fixed amount subawards.
With prior written approval from the
Federal awarding agency, a pass-
through entity may provide subawards
based on fixed amounts up to the Sim-
plified Acquisition Threshold, provided
that the subawards meet the require-
ments for fixed amount awards in
§200.201.
RECORD RETENTION AND ACCESS
§200.334 Retention requirements for
records.
Financial records, supporting docu-
ments, statistical records, and all
other non-Federal entity records perti-
nent to a Federal award must be re-
tained for a period of three years from
the date of submission of the final ex-
penditure report or, for Federal awards
that are renewed quarterly or annu-
ally, from the date of the submission of
the quarterly or annual financial re-
port, respectively, as reported to the
Federal awarding agency or pass-
through entity in the case of a sub-
recipient. Federal awarding agencies
and pass-through entities must not im-
pose any other record retention re-
quirements upon non-Federal entities.
The only exceptions are the following:
(a) If any litigation, claim, or audit
is started before the expiration of the
3-year period, the records must be re-
tained until all litigation, claims, or
audit findings involving the records
have been resolved and final action
taken.
(b) When the non-Federal entity is
notified in writing by the Federal
awarding agency, cognizant agency for
audit, oversight agency for audit, cog-
nizant agency for indirect costs, or
pass-through entity to extend the re-
tention period.
(c) Records for real property and
equipment acquired with Federal funds
must be retained for 3 years after final
disposition.
(d) When records are transferred to or
maintained by the Federal awarding
agency or pass-through entity, the 3-
year retention requirement is not ap-
plicable to the non-Federal entity.
(e) Records for program income
transactions after the period of per-
formance. In some cases recipients
must report program income after the
period of performance. Where there is
such a requirement, the retention pe-
riod for the records pertaining to the
earning of the program income starts
from the end of the non-Federal enti-
ty’s fiscal year in which the program
income is earned.
(f) Indirect cost rate proposals and
cost allocations plans. This paragraph
applies to the following types of docu-
ments and their supporting records: In-
direct cost rate computations or pro-
posals, cost allocation plans, and any
similar accounting computations of
the rate at which a particular group of
costs is chargeable (such as computer
usage chargeback rates or composite
fringe benefit rates).
(1) If submitted for negotiation. If the
proposal, plan, or other computation is
required to be submitted to the Federal
Government (or to the pass-through
entity) to form the basis for negotia-
tion of the rate, then the 3-year reten-
tion period for its supporting records
starts from the date of such submis-
sion.
(2) If not submitted for negotiation. If
the proposal, plan, or other computa-
tion is not required to be submitted to
the Federal Government (or to the
pass-through entity) for negotiation
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149
OMB Guidance §200.338
purposes, then the 3-year retention pe-
riod for the proposal, plan, or computa-
tion and its supporting records starts
from the end of the fiscal year (or
other accounting period) covered by
the proposal, plan, or other computa-
tion.
§200.335 Requests for transfer of
records.
The Federal awarding agency must
request transfer of certain records to
its custody from the non-Federal enti-
ty when it determines that the records
possess long-term retention value.
However, in order to avoid duplicate
recordkeeping, the Federal awarding
agency may make arrangements for
the non-Federal entity to retain any
records that are continuously needed
for joint use.
§200.336 Methods for collection, trans-
mission, and storage of information.
The Federal awarding agency and the
non-Federal entity should, whenever
practicable, collect, transmit, and
store Federal award-related informa-
tion in open and machine-readable for-
mats rather than in closed formats or
on paper in accordance with applicable
legislative requirements. A machine-
readable format is a format in a stand-
ard computer language (not English
text) that can be read automatically by
a web browser or computer system. The
Federal awarding agency or pass-
through entity must always provide or
accept paper versions of Federal award-
related information to and from the
non-Federal entity upon request. If
paper copies are submitted, the Federal
awarding agency or pass-through enti-
ty must not require more than an
original and two copies. When original
records are electronic and cannot be al-
tered, there is no need to create and re-
tain paper copies. When original
records are paper, electronic versions
may be substituted through the use of
duplication or other forms of elec-
tronic media provided that they are
subject to periodic quality control re-
views, provide reasonable safeguards
against alteration, and remain read-
able.
§200.337 Access to records.
(a) Records of non-Federal entities. The
Federal awarding agency, Inspectors
General, the Comptroller General of
the United States, and the pass-
through entity, or any of their author-
ized representatives, must have the
right of access to any documents, pa-
pers, or other records of the non-Fed-
eral entity which are pertinent to the
Federal award, in order to make au-
dits, examinations, excerpts, and tran-
scripts. The right also includes timely
and reasonable access to the non-Fed-
eral entity’s personnel for the purpose
of interview and discussion related to
such documents.
(b) Extraordinary and rare cir-
cumstances. Only under extraordinary
and rare circumstances would such ac-
cess include review of the true name of
victims of a crime. Routine monitoring
cannot be considered extraordinary and
rare circumstances that would neces-
sitate access to this information. When
access to the true name of victims of a
crime is necessary, appropriate steps to
protect this sensitive information must
be taken by both the non-Federal enti-
ty and the Federal awarding agency.
Any such access, other than under a
court order or subpoena pursuant to a
bona fide confidential investigation,
must be approved by the head of the
Federal awarding agency or delegate.
(c) Expiration of right of access. The
rights of access in this section are not
limited to the required retention pe-
riod but last as long as the records are
retained. Federal awarding agencies
and pass-through entities must not im-
pose any other access requirements
upon non-Federal entities.
§200.338 Restrictions on public access
to records.
No Federal awarding agency may
place restrictions on the non-Federal
entity that limit public access to the
records of the non-Federal entity perti-
nent to a Federal award, except for
protected personally identifiable infor-
mation (PII) or when the Federal
awarding agency can demonstrate that
such records will be kept confidential
and would have been exempted from
disclosure pursuant to the Freedom of
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150
2 CFR Ch. II (1–1–21 Edition) §200.339
Information Act (5 U.S.C. 552) or con-
trolled unclassified information pursu-
ant to Executive Order 13556 if the
records had belonged to the Federal
awarding agency. The Freedom of In-
formation Act (5 U.S.C. 552) (FOIA)
does not apply to those records that re-
main under a non-Federal entity’s con-
trol except as required under §200.315.
Unless required by Federal, state,
local, and tribal statute, non-Federal
entities are not required to permit pub-
lic access to their records. The non-
Federal entity’s records provided to a
Federal agency generally will be sub-
ject to FOIA and applicable exemp-
tions.
REMEDIES FOR NONCOMPLIANCE
§200.339 Remedies for noncompliance.
If a non-Federal entity fails to com-
ply with the U.S. Constitution, Federal
statutes, regulations or the terms and
conditions of a Federal award, the Fed-
eral awarding agency or pass-through
entity may impose additional condi-
tions, as described in §200.208. If the
Federal awarding agency or pass-
through entity determines that non-
compliance cannot be remedied by im-
posing additional conditions, the Fed-
eral awarding agency or pass-through
entity may take one or more of the fol-
lowing actions, as appropriate in the
circumstances:
(a) Temporarily withhold cash pay-
ments pending correction of the defi-
ciency by the non-Federal entity or
more severe enforcement action by the
Federal awarding agency or pass-
through entity.
(b) Disallow (that is, deny both use of
funds and any applicable matching
credit for) all or part of the cost of the
activity or action not in compliance.
(c) Wholly or partly suspend or ter-
minate the Federal award.
(d) Initiate suspension or debarment
proceedings as authorized under 2 CFR
part 180 and Federal awarding agency
regulations (or in the case of a pass-
through entity, recommend such a pro-
ceeding be initiated by a Federal
awarding agency).
(e) Withhold further Federal awards
for the project or program.
(f) Take other remedies that may be
legally available.
§200.340 Termination.
(a) The Federal award may be termi-
nated in whole or in part as follows:
(1) By the Federal awarding agency
or pass-through entity, if a non-Fed-
eral entity fails to comply with the
terms and conditions of a Federal
award;
(2) By the Federal awarding agency
or pass-through entity, to the greatest
extent authorized by law, if an award
no longer effectuates the program
goals or agency priorities;
(3) By the Federal awarding agency
or pass-through entity with the con-
sent of the non-Federal entity, in
which case the two parties must agree
upon the termination conditions, in-
cluding the effective date and, in the
case of partial termination, the portion
to be terminated;
(4) By the non-Federal entity upon
sending to the Federal awarding agen-
cy or pass-through entity written noti-
fication setting forth the reasons for
such termination, the effective date,
and, in the case of partial termination,
the portion to be terminated. However,
if the Federal awarding agency or pass-
through entity determines in the case
of partial termination that the reduced
or modified portion of the Federal
award or subaward will not accomplish
the purposes for which the Federal
award was made, the Federal awarding
agency or pass-through entity may ter-
minate the Federal award in its en-
tirety; or
(5) By the Federal awarding agency
or pass-through entity pursuant to ter-
mination provisions included in the
Federal award.
(b) A Federal awarding agency should
clearly and unambiguously specify ter-
mination provisions applicable to each
Federal award, in applicable regula-
tions or in the award, consistent with
this section.
(c) When a Federal awarding agency
terminates a Federal award prior to
the end of the period of performance
due to the non-Federal entity’s mate-
rial failure to comply with the Federal
award terms and conditions, the Fed-
eral awarding agency must report the
termination to the OMB-designated in-
tegrity and performance system acces-
sible through SAM (currently FAPIIS).
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OMB Guidance §200.341
(1) The information required under
paragraph (c) of this section is not to
be reported to designated integrity and
performance system until the non-Fed-
eral entity either—
(i) Has exhausted its opportunities to
object or challenge the decision, see
§200.342; or
(ii) Has not, within 30 calendar days
after being notified of the termination,
informed the Federal awarding agency
that it intends to appeal the Federal
awarding agency’s decision to termi-
nate.
(2) If a Federal awarding agency,
after entering information into the
designated integrity and performance
system about a termination, subse-
quently:
(i) Learns that any of that informa-
tion is erroneous, the Federal awarding
agency must correct the information in
the system within three business days;
(ii) Obtains an update to that infor-
mation that could be helpful to other
Federal awarding agencies, the Federal
awarding agency is strongly encour-
aged to amend the information in the
system to incorporate the update in a
timely way.
(3) Federal awarding agencies, must
not post any information that will be
made publicly available in the non-
public segment of designated integrity
and performance system that is cov-
ered by a disclosure exemption under
the Freedom of Information Act. If the
non-Federal entity asserts within
seven calendar days to the Federal
awarding agency who posted the infor-
mation, that some of the information
made publicly available is covered by a
disclosure exemption under the Free-
dom of Information Act, the Federal
awarding agency who posted the infor-
mation must remove the posting with-
in seven calendar days of receiving the
assertion. Prior to reposting the releas-
able information, the Federal agency
must resolve the issue in accordance
with the agency’s Freedom of Informa-
tion Act procedures.
(d) When a Federal award is termi-
nated or partially terminated, both the
Federal awarding agency or pass-
through entity and the non-Federal en-
tity remain responsible for compliance
with the requirements in §§200.344 and
200.345.
§200.341 Notification of termination
requirement.
(a) The Federal agency or pass-
through entity must provide to the
non-Federal entity a notice of termi-
nation.
(b) If the Federal award is terminated
for the non-Federal entity’s material
failure to comply with the U.S. Con-
stitution, Federal statutes, regula-
tions, or terms and conditions of the
Federal award, the notification must
state that—
(1) The termination decision will be
reported to the OMB-designated integ-
rity and performance system accessible
through SAM (currently FAPIIS);
(2) The information will be available
in the OMB-designated integrity and
performance system for a period of five
years from the date of the termination,
then archived;
(3) Federal awarding agencies that
consider making a Federal award to
the non-Federal entity during that five
year period must consider that infor-
mation in judging whether the non-
Federal entity is qualified to receive
the Federal award, when the Federal
share of the Federal award is expected
to exceed the simplified acquisition
threshold over the period of perform-
ance;
(4) The non-Federal entity may com-
ment on any information the OMB-des-
ignated integrity and performance sys-
tem contains about the non-Federal en-
tity for future consideration by Fed-
eral awarding agencies. The non-Fed-
eral entity may submit comments to
the awardee integrity and performance
portal accessible through SAM (cur-
rently (CPARS).
(5) Federal awarding agencies will
consider non-Federal entity comments
when determining whether the non-
Federal entity is qualified for a future
Federal award.
(c) Upon termination of a Federal
award, the Federal awarding agency
must provide the information required
under FFATA to the Federal website
established to fulfill the requirements
of FFATA, and update or notify any
other relevant governmentwide sys-
tems or entities of any indications of
poor performance as required by 41
U.S.C. 417b and 31 U.S.C. 3321 and im-
plementing guidance at 2 CFR part 77
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152
2 CFR Ch. II (1–1–21 Edition) §200.342
(forthcoming at time of publication).
See also the requirements for Suspen-
sion and Debarment at 2 CFR part 180.
§200.342 Opportunities to object, hear-
ings, and appeals.
Upon taking any remedy for non-
compliance, the Federal awarding
agency must provide the non-Federal
entity an opportunity to object and
provide information and documenta-
tion challenging the suspension or ter-
mination action, in accordance with
written processes and procedures pub-
lished by the Federal awarding agency.
The Federal awarding agency or pass-
through entity must comply with any
requirements for hearings, appeals or
other administrative proceedings to
which the non-Federal entity is enti-
tled under any statute or regulation
applicable to the action involved.
§200.343 Effects of suspension and ter-
mination.
Costs to the non-Federal entity re-
sulting from financial obligations in-
curred by the non-Federal entity dur-
ing a suspension or after termination
of a Federal award or subaward are not
allowable unless the Federal awarding
agency or pass-through entity ex-
pressly authorizes them in the notice
of suspension or termination or subse-
quently. However, costs during suspen-
sion or after termination are allowable
if:
(a) The costs result from financial
obligations which were properly in-
curred by the non-Federal entity before
the effective date of suspension or ter-
mination, are not in anticipation of it;
and
(b) The costs would be allowable if
the Federal award was not suspended
or expired normally at the end of the
period of performance in which the ter-
mination takes effect.
CLOSEOUT
§200.344 Closeout.
The Federal awarding agency or pass-
through entity will close out the Fed-
eral award when it determines that all
applicable administrative actions and
all required work of the Federal award
have been completed by the non-Fed-
eral entity. If the non-Federal entity
fails to complete the requirements, the
Federal awarding agency or pass-
through entity will proceed to close
out the Federal award with the infor-
mation available. This section specifies
the actions the non-Federal entity and
Federal awarding agency or pass-
through entity must take to complete
this process at the end of the period of
performance.
(a) The recipient must submit, no
later than 120 calendar days after the
end date of the period of performance,
all financial, performance, and other
reports as required by the terms and
conditions of the Federal award. A sub-
recipient must submit to the pass-
through entity, no later than 90 cal-
endar days (or an earlier date as agreed
upon by the pass-through entity and
subrecipient) after the end date of the
period of performance, all financial,
performance, and other reports as re-
quired by the terms and conditions of
the Federal award. The Federal award-
ing agency or pass-through entity may
approve extensions when requested and
justified by the non-Federal entity, as
applicable.
(b) Unless the Federal awarding agen-
cy or pass-through entity authorizes an
extension, a non-Federal entity must
liquidate all financial obligations in-
curred under the Federal award no
later than 120 calendar days after the
end date of the period of performance
as specified in the terms and conditions
of the Federal award.
(c) The Federal awarding agency or
pass-through entity must make prompt
payments to the non-Federal entity for
costs meeting the requirements in Sub-
part E of this part under the Federal
award being closed out.
(d) The non-Federal entity must
promptly refund any balances of unob-
ligated cash that the Federal awarding
agency or pass-through entity paid in
advance or paid and that are not au-
thorized to be retained by the non-Fed-
eral entity for use in other projects.
See OMB Circular A–129 and see
§200.346, for requirements regarding
unreturned amounts that become de-
linquent debts.
(e) Consistent with the terms and
conditions of the Federal award, the
Federal awarding agency or pass-
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153
OMB Guidance §200.346
through entity must make a settle-
ment for any upward or downward ad-
justments to the Federal share of costs
after closeout reports are received.
(f) The non-Federal entity must ac-
count for any real and personal prop-
erty acquired with Federal funds or re-
ceived from the Federal Government in
accordance with §§200.310 through
200.316 and 200.330.
(g) When a recipient or subrecipient
completes all closeout requirements,
the Federal awarding agency or pass-
through entity must promptly com-
plete all closeout actions for Federal
awards. The Federal awarding agency
must make every effort to complete
closeout actions no later than one year
after the end of the period of perform-
ance unless otherwise directed by au-
thorizing statutes. Closeout actions in-
clude Federal awarding agency actions
in the grants management and pay-
ment systems.
(h) If the non-Federal entity does not
submit all reports in accordance with
this section and the terms and condi-
tions of the Federal Award, the Federal
awarding agency must proceed to close
out with the information available
within one year of the period of per-
formance end date.
(i) If the non-Federal entity does not
submit all reports in accordance with
this section within one year of the pe-
riod of performance end date, the Fed-
eral awarding agency must report the
non-Federal entity’s material failure
to comply with the terms and condi-
tions of the award with the OMB-des-
ignated integrity and performance sys-
tem (currently FAPIIS). Federal
awarding agencies may also pursue
other enforcement actions per §200.339.
POST-CLOSEOUT ADJUSTMENTS AND
CONTINUING RESPONSIBILITIES
§200.345 Post-closeout adjustments
and continuing responsibilities.
(a) The closeout of a Federal award
does not affect any of the following:
(1) The right of the Federal awarding
agency or pass-through entity to dis-
allow costs and recover funds on the
basis of a later audit or other review.
The Federal awarding agency or pass-
through entity must make any cost
disallowance determination and notify
the non-Federal entity within the
record retention period.
(2) The requirement for the non-Fed-
eral entity to return any funds due as
a result of later refunds, corrections, or
other transactions including final indi-
rect cost rate adjustments.
(3) The ability of the Federal award-
ing agency to make financial adjust-
ments to a previously closed award
such as resolving indirect cost pay-
ments and making final payments.
(4) Audit requirements in subpart F
of this part.
(5) Property management and dis-
position requirements in §§200.310
through 200.316 of this subpart.
(6) Records retention as required in
§§200.334 through 200.337 of this sub-
part.
(b) After closeout of the Federal
award, a relationship created under the
Federal award may be modified or
ended in whole or in part with the con-
sent of the Federal awarding agency or
pass-through entity and the non-Fed-
eral entity, provided the responsibil-
ities of the non-Federal entity referred
to in paragraph (a) of this section, in-
cluding those for property management
as applicable, are considered and provi-
sions made for continuing responsibil-
ities of the non-Federal entity, as ap-
propriate.
COLLECTION OF AMOUNTS DUE
§200.346 Collection of amounts due.
(a) Any funds paid to the non-Federal
entity in excess of the amount to
which the non-Federal entity is finally
determined to be entitled under the
terms of the Federal award constitute
a debt to the Federal Government. If
not paid within 90 calendar days after
demand, the Federal awarding agency
may reduce the debt by:
(1) Making an administrative offset
against other requests for reimburse-
ments;
(2) Withholding advance payments
otherwise due to the non-Federal enti-
ty; or
(3) Other action permitted by Federal
statute.
(b) Except where otherwise provided
by statutes or regulations, the Federal
awarding agency will charge interest
on an overdue debt in accordance with
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154
2 CFR Ch. II (1–1–21 Edition) §200.400
the Federal Claims Collection Stand-
ards (31 CFR parts 900 through 999). The
date from which interest is computed
is not extended by litigation or the fil-
ing of any form of appeal.
Subpart E—Cost Principles
GENERAL PROVISIONS
§200.400 Policy guide.
The application of these cost prin-
ciples is based on the fundamental
premises that:
(a) The non-Federal entity is respon-
sible for the efficient and effective ad-
ministration of the Federal award
through the application of sound man-
agement practices.
(b) The non-Federal entity assumes
responsibility for administering Fed-
eral funds in a manner consistent with
underlying agreements, program objec-
tives, and the terms and conditions of
the Federal award.
(c) The non-Federal entity, in rec-
ognition of its own unique combination
of staff, facilities, and experience, has
the primary responsibility for employ-
ing whatever form of sound organiza-
tion and management techniques may
be necessary in order to assure proper
and efficient administration of the
Federal award.
(d) The application of these cost prin-
ciples should require no significant
changes in the internal accounting
policies and practices of the non-Fed-
eral entity. However, the accounting
practices of the non-Federal entity
must be consistent with these cost
principles and support the accumula-
tion of costs as required by the prin-
ciples, and must provide for adequate
documentation to support costs
charged to the Federal award.
(e) In reviewing, negotiating and ap-
proving cost allocation plans or indi-
rect cost proposals, the cognizant agen-
cy for indirect costs should generally
assure that the non-Federal entity is
applying these cost accounting prin-
ciples on a consistent basis during
their review and negotiation of indirect
cost proposals. Where wide variations
exist in the treatment of a given cost
item by the non-Federal entity, the
reasonableness and equity of such
treatments should be fully considered.
See the definition of indirect (facilities &
administrative (F&A)) costs in §200.1 of
this part.
(f) For non-Federal entities that edu-
cate and engage students in research,
the dual role of students as both train-
ees and employees (including pre- and
post-doctoral staff) contributing to the
completion of Federal awards for re-
search must be recognized in the appli-
cation of these principles.
(g) The non-Federal entity may not
earn or keep any profit resulting from
Federal financial assistance, unless ex-
plicitly authorized by the terms and
conditions of the Federal award. See
also §200.307.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49561, Aug. 13,
2020]
§200.401 Application.
(a) General. These principles must be
used in determining the allowable costs
of work performed by the non-Federal
entity under Federal awards. These
principles also must be used by the
non-Federal entity as a guide in the
pricing of fixed-price contracts and
subcontracts where costs are used in
determining the appropriate price. The
principles do not apply to:
(1) Arrangements under which Fed-
eral financing is in the form of loans,
scholarships, fellowships, traineeships,
or other fixed amounts based on such
items as education allowance or pub-
lished tuition rates and fees.
(2) For IHEs, capitation awards,
which are awards based on case counts
or number of beneficiaries according to
the terms and conditions of the Federal
award.
(3) Fixed amount awards. See also
§200.1 Definitions and 200.201.
(4) Federal awards to hospitals (see
appendix IX to this part).
(5) Other awards under which the
non-Federal entity is not required to
account to the Federal Government for
actual costs incurred.
(b) Federal contract. Where a Federal
contract awarded to a non-Federal en-
tity is subject to the Cost Accounting
Standards (CAS), it incorporates the
applicable CAS clauses, Standards, and
CAS administration requirements per
the 48 CFR Chapter 99 and 48 CFR part
30 (FAR Part 30). CAS applies directly
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155
OMB Guidance §200.404
to the CAS-covered contract and the
Cost Accounting Standards at 48 CFR
parts 9904 or 9905 takes precedence over
the cost principles in this subpart E
with respect to the allocation of costs.
When a contract with a non-Federal
entity is subject to full CAS coverage,
the allowability of certain costs under
the cost principles will be affected by
the allocation provisions of the Cost
Accounting Standards (e.g., CAS 414—
48 CFR 9904.414, Cost of Money as an
Element of the Cost of Facilities Cap-
ital, and CAS 417—48 CFR 9904.417, Cost
of Money as an Element of the Cost of
Capital Assets Under Construction),
apply rather the allowability provi-
sions of §200.449. In complying with
those requirements, the non-Federal
entity’s application of cost accounting
practices for estimating, accumu-
lating, and reporting costs for other
Federal awards and other cost objec-
tives under the CAS-covered contract
still must be consistent with its cost
accounting practices for the CAS-cov-
ered contracts. In all cases, only one
set of accounting records needs to be
maintained for the allocation of costs
by the non-Federal entity.
(c) Exemptions. Some nonprofit orga-
nizations, because of their size and na-
ture of operations, can be considered to
be similar to for-profit entities for pur-
pose of applicability of cost principles.
Such nonprofit organizations must op-
erate under Federal cost principles ap-
plicable to for-profit entities located at
48 CFR 31.2. A listing of these organiza-
tions is contained in appendix VIII to
this part. Other organizations, as ap-
proved by the cognizant agency for in-
direct costs, may be added from time
to time.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49562, Aug. 13, 2020]
BASIC CONSIDERATIONS
§200.402 Composition of costs.
Total cost. The total cost of a Federal
award is the sum of the allowable di-
rect and allocable indirect costs less
any applicable credits.
§200.403 Factors affecting allowability
of costs.
Except where otherwise authorized
by statute, costs must meet the fol-
lowing general criteria in order to be
allowable under Federal awards:
(a) Be necessary and reasonable for
the performance of the Federal award
and be allocable thereto under these
principles.
(b) Conform to any limitations or ex-
clusions set forth in these principles or
in the Federal award as to types or
amount of cost items.
(c) Be consistent with policies and
procedures that apply uniformly to
both federally-financed and other ac-
tivities of the non-Federal entity.
(d) Be accorded consistent treatment.
A cost may not be assigned to a Fed-
eral award as a direct cost if any other
cost incurred for the same purpose in
like circumstances has been allocated
to the Federal award as an indirect
cost.
(e) Be determined in accordance with
generally accepted accounting prin-
ciples (GAAP), except, for state and
local governments and Indian tribes
only, as otherwise provided for in this
part.
(f) Not be included as a cost or used
to meet cost sharing or matching re-
quirements of any other federally-fi-
nanced program in either the current
or a prior period. See also §200.306(b).
(g) Be adequately documented. See
also §§200.300 through 200.309 of this
part.
(h) Cost must be incurred during the
approved budget period. The Federal
awarding agency is authorized, at its
discretion, to waive prior written ap-
provals to carry forward unobligated
balances to subsequent budget periods
pursuant to §200.308(e)(3).
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49562, Aug. 13, 2020]
§200.404 Reasonable costs.
A cost is reasonable if, in its nature
and amount, it does not exceed that
which would be incurred by a prudent
person under the circumstances pre-
vailing at the time the decision was
made to incur the cost. The question of
reasonableness is particularly impor-
tant when the non-Federal entity is
predominantly federally-funded. In de-
termining reasonableness of a given
cost, consideration must be given to:
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156
2 CFR Ch. II (1–1–21 Edition) §200.405
(a) Whether the cost is of a type gen-
erally recognized as ordinary and nec-
essary for the operation of the non-
Federal entity or the proper and effi-
cient performance of the Federal
award.
(b) The restraints or requirements
imposed by such factors as: sound busi-
ness practices; arm’s-length bar-
gaining; Federal, state, local, tribal,
and other laws and regulations; and
terms and conditions of the Federal
award.
(c) Market prices for comparable
goods or services for the geographic
area.
(d) Whether the individuals con-
cerned acted with prudence in the cir-
cumstances considering their respon-
sibilities to the non-Federal entity, its
employees, where applicable its stu-
dents or membership, the public at
large, and the Federal Government.
(e) Whether the non-Federal entity
significantly deviates from its estab-
lished practices and policies regarding
the incurrence of costs, which may
unjustifiably increase the Federal
award’s cost.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§200.405 Allocable costs.
(a) A cost is allocable to a particular
Federal award or other cost objective if
the goods or services involved are
chargeable or assignable to that Fed-
eral award or cost objective in accord-
ance with relative benefits received.
This standard is met if the cost:
(1) Is incurred specifically for the
Federal award;
(2) Benefits both the Federal award
and other work of the non-Federal en-
tity and can be distributed in propor-
tions that may be approximated using
reasonable methods; and
(3) Is necessary to the overall oper-
ation of the non-Federal entity and is
assignable in part to the Federal award
in accordance with the principles in
this subpart.
(b) All activities which benefit from
the non-Federal entity’s indirect (F&A)
cost, including unallowable activities
and donated services by the non-Fed-
eral entity or third parties, will receive
an appropriate allocation of indirect
costs.
(c) Any cost allocable to a particular
Federal award under the principles pro-
vided for in this part may not be
charged to other Federal awards to
overcome fund deficiencies, to avoid re-
strictions imposed by Federal statutes,
regulations, or terms and conditions of
the Federal awards, or for other rea-
sons. However, this prohibition would
not preclude the non-Federal entity
from shifting costs that are allowable
under two or more Federal awards in
accordance with existing Federal stat-
utes, regulations, or the terms and con-
ditions of the Federal awards.
(d) Direct cost allocation principles:
If a cost benefits two or more projects
or activities in proportions that can be
determined without undue effort or
cost, the cost must be allocated to the
projects based on the proportional ben-
efit. If a cost benefits two or more
projects or activities in proportions
that cannot be determined because of
the interrelationship of the work in-
volved, then, notwithstanding para-
graph (c) of this section, the costs may
be allocated or transferred to bene-
fitted projects on any reasonable docu-
mented basis. Where the purchase of
equipment or other capital asset is spe-
cifically authorized under a Federal
award, the costs are assignable to the
Federal award regardless of the use
that may be made of the equipment or
other capital asset involved when no
longer needed for the purpose for which
it was originally required. See also
§§200.310 through 200.316 and 200.439.
(e) If the contract is subject to CAS,
costs must be allocated to the contract
pursuant to the Cost Accounting
Standards. To the extent that CAS is
applicable, the allocation of costs in
accordance with CAS takes precedence
over the allocation provisions in this
part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13,
2020]
§200.406 Applicable credits.
(a) Applicable credits refer to those
receipts or reduction-of-expenditure-
type transactions that offset or reduce
expense items allocable to the Federal
award as direct or indirect (F&A) costs.
Examples of such transactions are: pur-
chase discounts, rebates or allowances,
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157
OMB Guidance §200.409
recoveries or indemnities on losses, in-
surance refunds or rebates, and adjust-
ments of overpayments or erroneous
charges. To the extent that such cred-
its accruing to or received by the non-
Federal entity relate to allowable
costs, they must be credited to the
Federal award either as a cost reduc-
tion or cash refund, as appropriate.
(b) In some instances, the amounts
received from the Federal Government
to finance activities or service oper-
ations of the non-Federal entity should
be treated as applicable credits. Spe-
cifically, the concept of netting such
credit items (including any amounts
used to meet cost sharing or matching
requirements) must be recognized in
determining the rates or amounts to be
charged to the Federal award. (See
§§200.436 and 200.468, for areas of poten-
tial application in the matter of Fed-
eral financing of activities.)
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13,
2020]
§200.407 Prior written approval (prior
approval).
Under any given Federal award, the
reasonableness and allocability of cer-
tain items of costs may be difficult to
determine. In order to avoid subse-
quent disallowance or dispute based on
unreasonableness or nonallocability,
the non-Federal entity may seek the
prior written approval of the cognizant
agency for indirect costs or the Federal
awarding agency in advance of the in-
currence of special or unusual costs.
Prior written approval should include
the timeframe or scope of the agree-
ment. The absence of prior written ap-
proval on any element of cost will not,
in itself, affect the reasonableness or
allocability of that element, unless
prior approval is specifically required
for allowability as described under cer-
tain circumstances in the following
sections of this part:
(a) §200.201 Use of grant agreements
(including fixed amount awards), coop-
erative agreements, and contracts,
paragraph (b)(5);
(b) §200.306 Cost sharing or matching;
(c) §200.307 Program income;
(d) §200.308 Revision of budget and
program plans;
(e) §200.311 Real property;
(f) §200.313 Equipment;
(g) §200.333 Fixed amount subawards;
(h) §200.413 Direct costs, paragraph
(c);
(i) §200.430 Compensation—personal
services, paragraph (h);
(j) §200.431 Compensation—fringe ben-
efits;
(k) §200.438 Entertainment costs;
(l) §200.439 Equipment and other cap-
ital expenditures;
(m) §200.440 Exchange rates;
(n) §200.441 Fines, penalties, damages
and other settlements;
(o) §200.442 Fund raising and invest-
ment management costs;
(p) §200.445 Goods or services for per-
sonal use;
(q) §200.447 Insurance and indem-
nification;
(r) §200.454 Memberships, subscrip-
tions, and professional activity costs,
paragraph (c);
(s) §200.455 Organization costs;
(t) §200.456 Participant support costs;
(u) §200.458 Pre-award costs;
(v) §200.462 Rearrangement and re-
conversion costs;
(w) §200.467 Selling and marketing
costs;
(x) §200.470 Taxes (including Value
Added Tax); and
(y) §200.475 Travel costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13,
2020]
§200.408 Limitation on allowance of
costs.
The Federal award may be subject to
statutory requirements that limit the
allowability of costs. When the max-
imum amount allowable under a limi-
tation is less than the total amount de-
termined in accordance with the prin-
ciples in this part, the amount not re-
coverable under the Federal award may
not be charged to the Federal award.
§200.409 Special considerations.
In addition to the basic consider-
ations regarding the allowability of
costs highlighted in this subtitle, other
subtitles in this part describe special
considerations and requirements appli-
cable to states, local governments, In-
dian tribes, and IHEs. In addition, cer-
tain provisions among the items of cost
in this subpart are only applicable to
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158
2 CFR Ch. II (1–1–21 Edition) §200.410
certain types of non-Federal entities,
as specified in the following sections:
(a) Direct and Indirect (F&A) Costs
(§§200.412–200.415) of this subpart;
(b) Special Considerations for States,
Local Governments and Indian Tribes
(§§200.416 and 200.417) of this subpart;
and
(c) Special Considerations for Insti-
tutions of Higher Education (§§200.418
and 200.419) of this subpart.
[85 FR 49562, Aug. 13, 2020]
§200.410 Collection of unallowable
costs.
Payments made for costs determined
to be unallowable by either the Federal
awarding agency, cognizant agency for
indirect costs, or pass-through entity,
either as direct or indirect costs, must
be refunded (including interest) to the
Federal Government in accordance
with instructions from the Federal
agency that determined the costs are
unallowable unless Federal statute or
regulation directs otherwise. See also
§§200.300 through 200.309 in subpart D of
this part.
[85 FR 49562, Aug. 13, 2020]
§200.411 Adjustment of previously ne-
gotiated indirect (F&A) cost rates
containing unallowable costs.
(a) Negotiated indirect (F&A) cost
rates based on a proposal later found to
have included costs that:
(1) Are unallowable as specified by
Federal statutes, regulations or the
terms and conditions of a Federal
award; or
(2) Are unallowable because they are
not allocable to the Federal award(s),
must be adjusted, or a refund must be
made, in accordance with the require-
ments of this section. These adjust-
ments or refunds are designed to cor-
rect the proposals used to establish the
rates and do not constitute a reopening
of the rate negotiation. The adjust-
ments or refunds will be made regard-
less of the type of rate negotiated (pre-
determined, final, fixed, or provi-
sional).
(b) For rates covering a future fiscal
year of the non-Federal entity, the un-
allowable costs will be removed from
the indirect (F&A) cost pools and the
rates appropriately adjusted.
(c) For rates covering a past period,
the Federal share of the unallowable
costs will be computed for each year
involved and a cash refund (including
interest chargeable in accordance with
applicable regulations) will be made to
the Federal Government. If cash re-
funds are made for past periods covered
by provisional or fixed rates, appro-
priate adjustments will be made when
the rates are finalized to avoid dupli-
cate recovery of the unallowable costs
by the Federal Government.
(d) For rates covering the current pe-
riod, either a rate adjustment or a re-
fund, as described in paragraphs (b) and
(c) of this section, must be required by
the cognizant agency for indirect costs.
The choice of method must be at the
discretion of the cognizant agency for
indirect costs, based on its judgment as
to which method would be most prac-
tical.
(e) The amount or proportion of unal-
lowable costs included in each year’s
rate will be assumed to be the same as
the amount or proportion of unallow-
able costs included in the base year
proposal used to establish the rate.
DIRECT AND INDIRECT (F&A) COSTS
§200.412 Classification of costs.
There is no universal rule for
classifying certain costs as either di-
rect or indirect (F&A) under every ac-
counting system. A cost may be direct
with respect to some specific service or
function, but indirect with respect to
the Federal award or other final cost
objective. Therefore, it is essential
that each item of cost incurred for the
same purpose be treated consistently
in like circumstances either as a direct
or an indirect (F&A) cost in order to
avoid possible double-charging of Fed-
eral awards. Guidelines for determining
direct and indirect (F&A) costs charged
to Federal awards are provided in this
subpart.
§200.413 Direct costs.
(a) General. Direct costs are those
costs that can be identified specifically
with a particular final cost objective,
such as a Federal award, or other inter-
nally or externally funded activity, or
that can be directly assigned to such
activities relatively easily with a high
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159
OMB Guidance §200.414
degree of accuracy. Costs incurred for
the same purpose in like circumstances
must be treated consistently as either
direct or indirect (F&A) costs. See also
§200.405.
(b) Application to Federal awards.
Identification with the Federal award
rather than the nature of the goods and
services involved is the determining
factor in distinguishing direct from in-
direct (F&A) costs of Federal awards.
Typical costs charged directly to a
Federal award are the compensation of
employees who work on that award,
their related fringe benefit costs, the
costs of materials and other items of
expense incurred for the Federal award.
If directly related to a specific award,
certain costs that otherwise would be
treated as indirect costs may also be
considered direct costs. Examples in-
clude extraordinary utility consump-
tion, the cost of materials supplied
from stock or services rendered by spe-
cialized facilities, program evaluation
costs, or other institutional service op-
erations.
(c) The salaries of administrative and
clerical staff should normally be treat-
ed as indirect (F&A) costs. Direct
charging of these costs may be appro-
priate only if all of the following condi-
tions are met:
(1) Administrative or clerical serv-
ices are integral to a project or activ-
ity;
(2) Individuals involved can be spe-
cifically identified with the project or
activity;
(3) Such costs are explicitly included
in the budget or have the prior written
approval of the Federal awarding agen-
cy; and
(4) The costs are not also recovered
as indirect costs.
(d) Minor items. Any direct cost of
minor amount may be treated as an in-
direct (F&A) cost for reasons of practi-
cality where such accounting treat-
ment for that item of cost is consist-
ently applied to all Federal and non-
Federal cost objectives.
(e) The costs of certain activities are
not allowable as charges to Federal
awards. However, even though these
costs are unallowable for purposes of
computing charges to Federal awards,
they nonetheless must be treated as di-
rect costs for purposes of determining
indirect (F&A) cost rates and be allo-
cated their equitable share of the non-
Federal entity’s indirect costs if they
represent activities which:
(1) Include the salaries of personnel,
(2) Occupy space, and
(3) Benefit from the non-Federal enti-
ty’s indirect (F&A) costs.
(f) For nonprofit organizations, the
costs of activities performed by the
non-Federal entity primarily as a serv-
ice to members, clients, or the general
public when significant and necessary
to the non-Federal entity’s mission
must be treated as direct costs whether
or not allowable, and be allocated an
equitable share of indirect (F&A) costs.
Some examples of these types of activi-
ties include:
(1) Maintenance of membership rolls,
subscriptions, publications, and related
functions. See also §200.454.
(2) Providing services and informa-
tion to members, legislative or admin-
istrative bodies, or the public. See also
§§200.454 and 200.450.
(3) Promotion, lobbying, and other
forms of public relations. See also
§§200.421 and 200.450.
(4) Conferences except those held to
conduct the general administration of
the non-Federal entity. See also
§200.432.
(5) Maintenance, protection, and in-
vestment of special funds not used in
operation of the non-Federal entity.
See also §200.442.
(6) Administration of group benefits
on behalf of members or clients, in-
cluding life and hospital insurance, an-
nuity or retirement plans, and finan-
cial aid. See also §200.431.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13,
2020]
§200.414 Indirect (F&A) costs.
(a) Facilities and administration classi-
fication. For major Institutions of
Higher Education (IHE) and major non-
profit organizations, indirect (F&A)
costs must be classified within two
broad categories: ‘‘Facilities’’ and
‘‘Administration.’’ ‘‘Facilities’’ is de-
fined as depreciation on buildings,
equipment and capital improvement,
interest on debt associated with cer-
tain buildings, equipment and capital
improvements, and operations and
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160
2 CFR Ch. II (1–1–21 Edition) §200.414
maintenance expenses. ‘‘Administra-
tion’’ is defined as general administra-
tion and general expenses such as the
director’s office, accounting, personnel
and all other types of expenditures not
listed specifically under one of the sub-
categories of ‘‘Facilities’’ (including
cross allocations from other pools,
where applicable). For nonprofit orga-
nizations, library expenses are included
in the ‘‘Administration’’ category; for
IHEs, they are included in the ‘‘Facili-
ties’’ category. Major IHEs are defined
as those required to use the Standard
Format for Submission as noted in ap-
pendix III to this part, and Rate Deter-
mination for Institutions of Higher
Education paragraph C. 11. Major non-
profit organizations are those which re-
ceive more than $10 million dollars in
direct Federal funding.
(b) Diversity of nonprofit organizations.
Because of the diverse characteristics
and accounting practices of nonprofit
organizations, it is not possible to
specify the types of cost which may be
classified as indirect (F&A) cost in all
situations. Identification with a Fed-
eral award rather than the nature of
the goods and services involved is the
determining factor in distinguishing
direct from indirect (F&A) costs of
Federal awards. However, typical ex-
amples of indirect (F&A) cost for many
nonprofit organizations may include
depreciation on buildings and equip-
ment, the costs of operating and main-
taining facilities, and general adminis-
tration and general expenses, such as
the salaries and expenses of executive
officers, personnel administration, and
accounting.
(c) Federal Agency Acceptance of Nego-
tiated Indirect Cost Rates. (See also
§200.306.)
(1) The negotiated rates must be ac-
cepted by all Federal awarding agen-
cies. A Federal awarding agency may
use a rate different from the negotiated
rate for a class of Federal awards or a
single Federal award only when re-
quired by Federal statute or regula-
tion, or when approved by a Federal
awarding agency head or delegate
based on documented justification as
described in paragraph (c)(3) of this
section.
(2) The Federal awarding agency head
or delegate must notify OMB of any ap-
proved deviations.
(3) The Federal awarding agency
must implement, and make publicly
available, the policies, procedures and
general decision-making criteria that
their programs will follow to seek and
justify deviations from negotiated
rates.
(4) As required under §200.204, the
Federal awarding agency must include
in the notice of funding opportunity
the policies relating to indirect cost
rate reimbursement, matching, or cost
share as approved under paragraph
(e)(1) of this section. As appropriate,
the Federal agency should incorporate
discussion of these policies into Fed-
eral awarding agency outreach activi-
ties with non-Federal entities prior to
the posting of a notice of funding op-
portunity.
(d) Pass-through entities are subject
to the requirements in §200.332(a)(4).
(e) Requirements for development
and submission of indirect (F&A) cost
rate proposals and cost allocation
plans are contained in Appendices III–
VII and Appendix IX as follows:
(1) Appendix III to Part 200—Indirect
(F&A) Costs Identification and Assign-
ment, and Rate Determination for In-
stitutions of Higher Education (IHEs);
(2) Appendix IV to Part 200—Indirect
(F&A) Costs Identification and Assign-
ment, and Rate Determination for Non-
profit Organizations;
(3) Appendix V to Part 200—State/
Local Governmentwide Central Service
Cost Allocation Plans;
(4) Appendix VI to Part 200—Public
Assistance Cost Allocation Plans;
(5) Appendix VII to Part 200—States
and Local Government and Indian
Tribe Indirect Cost Proposals; and
(6) Appendix IX to Part 200—Hospital
Cost Principles.
(f) In addition to the procedures out-
lined in the appendices in paragraph (e)
of this section, any non-Federal entity
that does not have a current nego-
tiated (including provisional) rate, ex-
cept for those non-Federal entities de-
scribed in appendix VII to this part,
paragraph D.1.b, may elect to charge a
de minimis rate of 10% of modified
total direct costs (MTDC) which may
be used indefinitely. No documentation
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161
OMB Guidance §200.415
is required to justify the 10% de mini-
mis indirect cost rate. As described in
§200.403, costs must be consistently
charged as either indirect or direct
costs, but may not be double charged
or inconsistently charged as both. If
chosen, this methodology once elected
must be used consistently for all Fed-
eral awards until such time as a non-
Federal entity chooses to negotiate for
a rate, which the non-Federal entity
may apply to do at any time.
(g) Any non-Federal entity that has a
current federally-negotiated indirect
cost rate may apply for a one-time ex-
tension of the rates in that agreement
for a period of up to four years. This
extension will be subject to the review
and approval of the cognizant agency
for indirect costs. If an extension is
granted the non-Federal entity may
not request a rate review until the ex-
tension period ends. At the end of the
4-year extension, the non-Federal enti-
ty must re-apply to negotiate a rate.
Subsequent one-time extensions (up to
four years) are permitted if a renegoti-
ation is completed between each exten-
sion request.
(h) The federally negotiated indirect
rate, distribution base, and rate type
for a non-Federal entity (except for the
Indian tribes or tribal organizations, as
defined in the Indian Self Determina-
tion, Education and Assistance Act, 25
U.S.C. 450b(1)) must be available pub-
licly on an OMB-designated Federal
website.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13,
2020]
§200.415 Required certifications.
Required certifications include:
(a) To assure that expenditures are
proper and in accordance with the
terms and conditions of the Federal
award and approved project budgets,
the annual and final fiscal reports or
vouchers requesting payment under the
agreements must include a certifi-
cation, signed by an official who is au-
thorized to legally bind the non-Fed-
eral entity, which reads as follows: ‘‘By
signing this report, I certify to the best
of my knowledge and belief that the re-
port is true, complete, and accurate,
and the expenditures, disbursements
and cash receipts are for the purposes
and objectives set forth in the terms
and conditions of the Federal award. I
am aware that any false, fictitious, or
fraudulent information, or the omis-
sion of any material fact, may subject
me to criminal, civil or administrative
penalties for fraud, false statements,
false claims or otherwise. (U.S. Code
Title 18, Section 1001 and Title 31, Sec-
tions 3729–3730 and 3801–3812).’’
(b) Certification of cost allocation
plan or indirect (F&A) cost rate pro-
posal. Each cost allocation plan or in-
direct (F&A) cost rate proposal must
comply with the following:
(1) A proposal to establish a cost allo-
cation plan or an indirect (F&A) cost
rate, whether submitted to a Federal
cognizant agency for indirect costs or
maintained on file by the non-Federal
entity, must be certified by the non-
Federal entity using the Certificate of
Cost Allocation Plan or Certificate of
Indirect Costs as set forth in appen-
dices III through VII, and IX of this
part. The certificate must be signed on
behalf of the non-Federal entity by an
individual at a level no lower than vice
president or chief financial officer of
the non-Federal entity that submits
the proposal.
(2) Unless the non-Federal entity has
elected the option under §200.414(f), the
Federal Government may either dis-
allow all indirect (F&A) costs or uni-
laterally establish such a plan or rate
when the non-Federal entity fails to
submit a certified proposal for estab-
lishing such a plan or rate in accord-
ance with the requirements. Such a
plan or rate may be based upon audited
historical data or such other data that
have been furnished to the cognizant
agency for indirect costs and for which
it can be demonstrated that all unal-
lowable costs have been excluded.
When a cost allocation plan or indirect
cost rate is unilaterally established by
the Federal Government because the
non-Federal entity failed to submit a
certified proposal, the plan or rate es-
tablished will be set to ensure that po-
tentially unallowable costs will not be
reimbursed.
(c) Certifications by nonprofit orga-
nizations as appropriate that they did
not meet the definition of a major non-
profit organization as defined in
§200.414(a).
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162
2 CFR Ch. II (1–1–21 Edition) §200.416
(d) See also §200.450 for another re-
quired certification.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13,
2020]
SPECIAL CONSIDERATIONS FOR STATES,
LOCAL GOVERNMENTS AND INDIAN
TRIBES
§200.416 Cost allocation plans and in-
direct cost proposals.
(a) For states, local governments and
Indian tribes, certain services, such as
motor pools, computer centers, pur-
chasing, accounting, etc., are provided
to operating agencies on a centralized
basis. Since Federal awards are per-
formed within the individual operating
agencies, there needs to be a process
whereby these central service costs can
be identified and assigned to benefitted
activities on a reasonable and con-
sistent basis. The central service cost
allocation plan provides that process.
(b) Individual operating agencies
(governmental department or agency),
normally charge Federal awards for in-
direct costs through an indirect cost
rate. A separate indirect cost rate(s)
proposal for each operating agency is
usually necessary to claim indirect
costs under Federal awards. Indirect
costs include:
(1) The indirect costs originating in
each department or agency of the gov-
ernmental unit carrying out Federal
awards and
(2) The costs of central governmental
services distributed through the cen-
tral service cost allocation plan and
not otherwise treated as direct costs.
(c) The requirements for development
and submission of cost allocation plans
(for central service costs and public as-
sistance programs) and indirect cost
rate proposals are contained in appen-
dices IV, V and VI to this part.
§200.417 Interagency service.
The cost of services provided by one
agency to another within the govern-
mental unit may include allowable di-
rect costs of the service plus a pro-
rated share of indirect costs. A stand-
ard indirect cost allowance equal to
ten percent of the direct salary and
wage cost of providing the service (ex-
cluding overtime, shift premiums, and
fringe benefits) may be used in lieu of
determining the actual indirect costs
of the service. These services do not in-
clude centralized services included in
central service cost allocation plans as
described in Appendix V to Part 200.
[85 FR 49564, Aug. 13, 2020]
SPECIAL CONSIDERATIONS FOR
INSTITUTIONS OF HIGHER EDUCATION
§200.418 Costs incurred by states and
local governments.
Costs incurred or paid by a state or
local government on behalf of its IHEs
for fringe benefit programs, such as
pension costs and FICA and any other
costs specifically incurred on behalf of,
and in direct benefit to, the IHEs, are
allowable costs of such IHEs whether
or not these costs are recorded in the
accounting records of the institutions,
subject to the following:
(a) The costs meet the requirements
of §200.402–411 of this subpart;
(b) The costs are properly supported
by approved cost allocation plans in ac-
cordance with applicable Federal cost
accounting principles in this part; and
(c) The costs are not otherwise borne
directly or indirectly by the Federal
Government.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49564, Aug. 13, 2020]
§200.419 Cost accounting standards
and disclosure statement.
(a) An IHE that receive an aggregate
total $50 million or more in Federal
awards and instruments subject to this
subpart (as specified in §200.101) in its
most recently completed fiscal year
must comply with the Cost Accounting
Standards Board’s cost accounting
standards located at 48 CFR 9905.501,
9905.502, 9905.505, and 9905.506. CAS-cov-
ered contracts and subcontracts award-
ed to the IHEs are subject to the broad-
er range of CAS requirements at 48
CFR 9900 through 9999 and 48 CFR part
30 (FAR Part 30).
(b) Disclosure statement. An IHE that
receives an aggregate total $50 million
or more in Federal awards and instru-
ments subject to this subpart (as speci-
fied in §200.101) during its most re-
cently completed fiscal year must dis-
close their cost accounting practices
by filing a Disclosure Statement (DS–
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163
OMB Guidance §200.419
2), which is reproduced in Appendix III
to Part 200. With the approval of the
cognizant agency for indirect costs, an
IHE may meet the DS–2 submission by
submitting the DS–2 for each business
unit that received $50 million or more
in Federal awards and instruments.
(1) The DS–2 must be submitted to
the cognizant agency for indirect costs
with a copy to the IHE’s cognizant
agency for audit. The initial DS–2 and
revisions to the DS–2 must be sub-
mitted in coordination with the IHE’s
indirect (F&A) rate proposal, unless an
earlier submission is requested by the
cognizant agency for indirect costs.
IHEs with CAS-covered contracts or
subcontracts meeting the dollar
threshold in 48 CFR 9903.202–1(f) must
submit their initial DS–2 or revisions
no later than prior to the award of a
CAS-covered contract or subcontract.
(2) An IHE must maintain an accu-
rate DS–2 and comply with disclosed
cost accounting practices. An IHE
must file amendments to the DS–2 to
the cognizant agency for indirect costs
in advance of a disclosed practice being
changed to comply with a new or modi-
fied standard, or when a practice is
changed for other reasons. An IHE may
proceed with implementing the change
after it has notified the Federal cog-
nizant agency for indirect costs. If the
change represents a variation from 2
CFR part 200, the change may require
approval by the Federal cognizant
agency for indirect costs, in accordance
with §200.102(b). Amendments of a DS–
2 may be submitted at any time. Re-
submission of a complete, updated DS–
2 is discouraged except when there are
extensive changes to disclosed prac-
tices.
(3) Cost and funding adjustments. Cost
adjustments must be made by the cog-
nizant agency for indirect costs if an
IHE fails to comply with the cost poli-
cies in this part or fails to consistently
follow its established or disclosed cost
accounting practices when estimating,
accumulating or reporting the costs of
Federal awards, and the aggregate cost
impact on Federal awards is material.
The cost adjustment must normally be
made on an aggregate basis for all af-
fected Federal awards through an ad-
justment of the IHE’s future F&A costs
rates or other means considered appro-
priate by the cognizant agency for indi-
rect costs. Under the terms of CAS cov-
ered contracts, adjustments in the
amount of funding provided may also
be required when the estimated pro-
posal costs were not determined in ac-
cordance with established cost ac-
counting practices.
(4) Overpayments. Excess amounts
paid in the aggregate by the Federal
Government under Federal awards due
to a noncompliant cost accounting
practice used to estimate, accumulate,
or report costs must be credited or re-
funded, as deemed appropriate by the
cognizant agency for indirect costs. In-
terest applicable to the excess amounts
paid in the aggregate during the period
of noncompliance must also be deter-
mined and collected in accordance with
applicable Federal agency regulations.
(5) Compliant cost accounting practice
changes. Changes from one compliant
cost accounting practice to another
compliant practice that are approved
by the cognizant agency for indirect
costs may require cost adjustments if
the change has a material effect on
Federal awards and the changes are
deemed appropriate by the cognizant
agency for indirect costs.
(6) Responsibilities. The cognizant
agency for indirect cost must:
(i) Determine cost adjustments for
all Federal awards in the aggregate on
behalf of the Federal Government. Ac-
tions of the cognizant agency for indi-
rect cost in making cost adjustment
determinations must be coordinated
with all affected Federal awarding
agencies to the extent necessary.
(ii) Prescribe guidelines and establish
internal procedures to promptly deter-
mine on behalf of the Federal Govern-
ment that a DS–2 adequately discloses
the IHE’s cost accounting practices
and that the disclosed practices are
compliant with applicable CAS and the
requirements of this part.
(iii) Distribute to all affected Federal
awarding agencies any DS–2 determina-
tion of adequacy or noncompliance.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49564, Aug. 13,
2020]
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164
2 CFR Ch. II (1–1–21 Edition) §200.420
GENERAL PROVISIONS FOR SELECTED
ITEMS OF COST
§200.420 Considerations for selected
items of cost.
This section provides principles to be
applied in establishing the allowability
of certain items involved in deter-
mining cost, in addition to the require-
ments of Subtitle II of this subpart.
These principles apply whether or not a
particular item of cost is properly
treated as direct cost or indirect (F&A)
cost. Failure to mention a particular
item of cost is not intended to imply
that it is either allowable or unallow-
able; rather, determination as to allow-
ability in each case should be based on
the treatment provided for similar or
related items of cost, and based on the
principles described in §§200.402
through 200.411. In case of a discrep-
ancy between the provisions of a spe-
cific Federal award and the provisions
below, the Federal award governs. Cri-
teria outlined in §200.403 must be ap-
plied in determining allowability. See
also §200.102.
[85 FR 49564, Aug. 13, 2020]
§200.421 Advertising and public rela-
tions.
(a) The term advertising costs means
the costs of advertising media and cor-
ollary administrative costs. Adver-
tising media include magazines, news-
papers, radio and television, direct
mail, exhibits, electronic or computer
transmittals, and the like.
(b) The only allowable advertising
costs are those which are solely for:
(1) The recruitment of personnel re-
quired by the non-Federal entity for
performance of a Federal award (See
also §200.463);
(2) The procurement of goods and
services for the performance of a Fed-
eral award;
(3) The disposal of scrap or surplus
materials acquired in the performance
of a Federal award except when non-
Federal entities are reimbursed for dis-
posal costs at a predetermined amount;
or
(4) Program outreach and other spe-
cific purposes necessary to meet the re-
quirements of the Federal award.
(c) The term ‘‘public relations’’ in-
cludes community relations and means
those activities dedicated to maintain-
ing the image of the non-Federal entity
or maintaining or promoting under-
standing and favorable relations with
the community or public at large or
any segment of the public.
(d) The only allowable public rela-
tions costs are:
(1) Costs specifically required by the
Federal award;
(2) Costs of communicating with the
public and press pertaining to specific
activities or accomplishments which
result from performance of the Federal
award (these costs are considered nec-
essary as part of the outreach effort for
the Federal award); or
(3) Costs of conducting general liai-
son with news media and government
public relations officers, to the extent
that such activities are limited to com-
munication and liaison necessary to
keep the public informed on matters of
public concern, such as notices of fund-
ing opportunities, financial matters,
etc.
(e) Unallowable advertising and pub-
lic relations costs include the fol-
lowing:
(1) All advertising and public rela-
tions costs other than as specified in
paragraphs (b) and (d) of this section;
(2) Costs of meetings, conventions,
convocations, or other events related
to other activities of the entity (see
also §200.432), including:
(i) Costs of displays, demonstrations,
and exhibits;
(ii) Costs of meeting rooms, hospi-
tality suites, and other special facili-
ties used in conjunction with shows
and other special events; and
(iii) Salaries and wages of employees
engaged in setting up and displaying
exhibits, making demonstrations, and
providing briefings;
(3) Costs of promotional items and
memorabilia, including models, gifts,
and souvenirs;
(4) Costs of advertising and public re-
lations designed solely to promote the
non-Federal entity.
[78 FR 76808, Dec. 26, 2013, as amended at 85
FR 49564, Aug. 13, 2020]
§200.422 Advisory councils.
Costs incurred by advisory councils
or committees are unallowable unless
authorized by statute, the Federal
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165
OMB Guidance §200.428
awarding agency or as an indirect cost
where allocable to Federal awards. See
§200.444, applicable to States, local gov-
ernments, and Indian tribes.
[85 FR 49564, Aug. 13, 2020]
§200.423 Alcoholic beverages.
Costs of alcoholic beverages are unal-
lowable.
§200.424 Alumni/ae activities.
Costs incurred by IHEs for, or in sup-
port of, alumni/ae activities are unal-
lowable.
§200.425 Audit services.
(a) A reasonably proportionate share
of the costs of audits required by, and
performed in accordance with, the Sin-
gle Audit Act Amendments of 1996 (31
U.S.C. 7501–7507), as implemented by re-
quirements of this part, are allowable.
However, the following audit costs are
unallowable:
(1) Any costs when audits required by
the Single Audit Act and subpart F of
this part have not been conducted or
have been conducted but not in accord-
ance therewith; and
(2) Any costs of auditing a non-Fed-
eral entity that is exempted from hav-
ing an audit conducted under the Sin-
gle Audit Act and subpart F of this
part because its expenditures under
Federal awards are less than $750,000
during the non-Federal entity’s fiscal
year.
(b) The costs of a financial statement
audit of a non-Federal entity that does
not currently have a Federal award
may be included in the indirect cost
pool for a cost allocation plan or indi-
rect cost proposal.
(c) Pass-through entities may charge
Federal awards for the cost of agreed-
upon-procedures engagements to mon-
itor subrecipients (in accordance with
subpart D, §§200.331–333) who are ex-
empted from the requirements of the
Single Audit Act and subpart F of this
part. This cost is allowable only if the
agreed-upon-procedures engagements
are:
(1) Conducted in accordance with
GAGAS attestation standards;
(2) Paid for and arranged by the pass-
through entity; and
(3) Limited in scope to one or more of
the following types of compliance re-
quirements: activities allowed or
unallowed; allowable costs/cost prin-
ciples; eligibility; and reporting.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49564, Aug. 13, 2020]
§200.426 Bad debts.
Bad debts (debts which have been de-
termined to be uncollectable), includ-
ing losses (whether actual or esti-
mated) arising from uncollectable ac-
counts and other claims, are unallow-
able. Related collection costs, and re-
lated legal costs, arising from such
debts after they have been determined
to be uncollectable are also unallow-
able. See also §200.428.
[85 FR 49565, Aug. 13, 2020]
§200.427 Bonding costs.
(a) Bonding costs arise when the Fed-
eral awarding agency requires assur-
ance against financial loss to itself or
others by reason of the act or default
of the non-Federal entity. They arise
also in instances where the non-Fed-
eral entity requires similar assurance,
including: bonds as bid, performance,
payment, advance payment, infringe-
ment, and fidelity bonds for employees
and officials.
(b) Costs of bonding required pursu-
ant to the terms and conditions of the
Federal award are allowable.
(c) Costs of bonding required by the
non-Federal entity in the general con-
duct of its operations are allowable as
an indirect cost to the extent that such
bonding is in accordance with sound
business practice and the rates and pre-
miums are reasonable under the cir-
cumstances.
§200.428 Collections of improper pay-
ments.
The costs incurred by a non-Federal
entity to recover improper payments
are allowable as either direct or indi-
rect costs, as appropriate. Amounts
collected may be used by the non-Fed-
eral entity in accordance with cash
management standards set forth in
§200.305.
[85 FR 49565, Aug. 13, 2020]
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166
2 CFR Ch. II (1–1–21 Edition) §200.429
§200.429 Commencement and convoca-
tion costs.
For IHEs, costs incurred for com-
mencements and convocations are un-
allowable, except as provided for in
(B)(9) Student Administration and
Services, in appendix III to this part,
as activity costs.
[85 FR 49565, Aug. 13, 2020]
§200.430 Compensation—personal
services.
(a) General. Compensation for per-
sonal services includes all remunera-
tion, paid currently or accrued, for
services of employees rendered during
the period of performance under the
Federal award, including but not nec-
essarily limited to wages and salaries.
Compensation for personal services
may also include fringe benefits which
are addressed in §200.431. Costs of com-
pensation are allowable to the extent
that they satisfy the specific require-
ments of this part, and that the total
compensation for individual employ-
ees:
(1) Is reasonable for the services ren-
dered and conforms to the established
written policy of the non-Federal enti-
ty consistently applied to both Federal
and non-Federal activities;
(2) Follows an appointment made in
accordance with a non-Federal entity’s
laws and/or rules or written policies
and meets the requirements of Federal
statute, where applicable; and
(3) Is determined and supported as
provided in paragraph (i) of this sec-
tion, when applicable.
(b) Reasonableness. Compensation for
employees engaged in work on Federal
awards will be considered reasonable to
the extent that it is consistent with
that paid for similar work in other ac-
tivities of the non-Federal entity. In
cases where the kinds of employees re-
quired for Federal awards are not found
in the other activities of the non-Fed-
eral entity, compensation will be con-
sidered reasonable to the extent that it
is comparable to that paid for similar
work in the labor market in which the
non-Federal entity competes for the
kind of employees involved.
(c) Professional activities outside the
non-Federal entity. Unless an arrange-
ment is specifically authorized by a
Federal awarding agency, a non-Fed-
eral entity must follow its written non-
Federal entity-wide policies and prac-
tices concerning the permissible extent
of professional services that can be pro-
vided outside the non-Federal entity
for non-organizational compensation.
Where such non-Federal entity-wide
written policies do not exist or do not
adequately define the permissible ex-
tent of consulting or other non-organi-
zational activities undertaken for
extra outside pay, the Federal Govern-
ment may require that the effort of
professional staff working on Federal
awards be allocated between:
(1) Non-Federal entity activities, and
(2) Non-organizational professional
activities. If the Federal awarding
agency considers the extent of non-or-
ganizational professional effort exces-
sive or inconsistent with the conflicts-
of-interest terms and conditions of the
Federal award, appropriate arrange-
ments governing compensation will be
negotiated on a case-by-case basis.
(d) Unallowable costs. (1) Costs which
are unallowable under other sections of
these principles must not be allowable
under this section solely on the basis
that they constitute personnel com-
pensation.
(2) The allowable compensation for
certain employees is subject to a ceil-
ing in accordance with statute. For the
amount of the ceiling for cost-reim-
bursement contracts, the covered com-
pensation subject to the ceiling, the
covered employees, and other relevant
provisions, see 10 U.S.C. 2324(e)(1)(P),
and 41 U.S.C. 1127 and 4304(a)(16). For
other types of Federal awards, other
statutory ceilings may apply.
(e) Special considerations. Special con-
siderations in determining allowability
of compensation will be given to any
change in a non-Federal entity’s com-
pensation policy resulting in a substan-
tial increase in its employees’ level of
compensation (particularly when the
change was concurrent with an in-
crease in the ratio of Federal awards to
other activities) or any change in the
treatment of allowability of specific
types of compensation due to changes
in Federal policy.
(f) Incentive compensation. Incentive
compensation to employees based on
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167
OMB Guidance §200.430
cost reduction, or efficient perform-
ance, suggestion awards, safety awards,
etc., is allowable to the extent that the
overall compensation is determined to
be reasonable and such costs are paid
or accrued pursuant to an agreement
entered into in good faith between the
non-Federal entity and the employees
before the services were rendered, or
pursuant to an established plan fol-
lowed by the non-Federal entity so
consistently as to imply, in effect, an
agreement to make such payment.
(g) Nonprofit organizations. For com-
pensation to members of nonprofit or-
ganizations, trustees, directors, associ-
ates, officers, or the immediate fami-
lies thereof, determination must be
made that such compensation is rea-
sonable for the actual personal services
rendered rather than a distribution of
earnings in excess of costs. This may
include director’s and executive com-
mittee member’s fees, incentive
awards, allowances for off-site pay, in-
centive pay, location allowances, hard-
ship pay, and cost-of-living differen-
tials.
(h) Institutions of Higher Education
(IHEs). (1) Certain conditions require
special consideration and possible limi-
tations in determining allowable per-
sonnel compensation costs under Fed-
eral awards. Among such conditions
are the following:
(i) Allowable activities. Charges to
Federal awards may include reasonable
amounts for activities contributing
and directly related to work under an
agreement, such as delivering special
lectures about specific aspects of the
ongoing activity, writing reports and
articles, developing and maintaining
protocols (human, animals, etc.), man-
aging substances/chemicals, managing
and securing project-specific data, co-
ordinating research subjects, partici-
pating in appropriate seminars, con-
sulting with colleagues and graduate
students, and attending meetings and
conferences.
(ii) Incidental activities. Incidental
activities for which supplemental com-
pensation is allowable under written
institutional policy (at a rate not to
exceed institutional base salary) need
not be included in the records described
in paragraph (i) of this section to di-
rectly charge payments of incidental
activities, such activities must either
be specifically provided for in the Fed-
eral award budget or receive prior writ-
ten approval by the Federal awarding
agency.
(2) Salary basis. Charges for work per-
formed on Federal awards by faculty
members during the academic year are
allowable at the IBS rate. Except as
noted in paragraph (h)(1)(ii) of this sec-
tion, in no event will charges to Fed-
eral awards, irrespective of the basis of
computation, exceed the proportionate
share of the IBS for that period. This
principle applies to all members of fac-
ulty at an institution. IBS is defined as
the annual compensation paid by an
IHE for an individual’s appointment,
whether that individual’s time is spent
on research, instruction, administra-
tion, or other activities. IBS excludes
any income that an individual earns
outside of duties performed for the
IHE. Unless there is prior approval by
the Federal awarding agency, charges
of a faculty member’s salary to a Fed-
eral award must not exceed the propor-
tionate share of the IBS for the period
during which the faculty member
worked on the award.
(3) Intra-Institution of Higher Edu-
cation (IHE) consulting. Intra-IHE con-
sulting by faculty should be under-
taken as an IHE responsibility requir-
ing no compensation in addition to
IBS. However, in unusual cases where
consultation is across departmental
lines or involves a separate or remote
operation, and the work performed by
the faculty member is in addition to
his or her regular responsibilities, any
charges for such work representing ad-
ditional compensation above IBS are
allowable provided that such con-
sulting arrangements are specifically
provided for in the Federal award or
approved in writing by the Federal
awarding agency.
(4) Extra Service Pay normally rep-
resents overload compensation, subject
to institutional compensation policies
for services above and beyond IBS.
Where extra service pay is a result of
Intra-IHE consulting, it is subject to
the same requirements of paragraph (b)
above. It is allowable if all of the fol-
lowing conditions are met:
(i) The non-Federal entity estab-
lishes consistent written policies which
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2 CFR Ch. II (1–1–21 Edition) §200.430
apply uniformly to all faculty mem-
bers, not just those working on Federal
awards.
(ii) The non-Federal entity estab-
lishes a consistent written definition of
work covered by IBS which is specific
enough to determine conclusively when
work beyond that level has occurred.
This may be described in appointment
letters or other documentations.
(iii) The supplementation amount
paid is commensurate with the IBS
rate of pay and the amount of addi-
tional work performed. See paragraph
(h)(2) of this section.
(iv) The salaries, as supplemented,
fall within the salary structure and
pay ranges established by and docu-
mented in writing or otherwise applica-
ble to the non-Federal entity.
(v) The total salaries charged to Fed-
eral awards including extra service pay
are subject to the Standards of Docu-
mentation as described in paragraph (i)
of this section.
(5) Periods outside the academic year.
(i) Except as specified for teaching ac-
tivity in paragraph (h)(5)(ii) of this sec-
tion, charges for work performed by
faculty members on Federal awards
during periods not included in the base
salary period will be at a rate not in
excess of the IBS.
(ii) Charges for teaching activities
performed by faculty members on Fed-
eral awards during periods not included
in IBS period will be based on the nor-
mal written policy of the IHE gov-
erning compensation to faculty mem-
bers for teaching assignments during
such periods.
(6) Part-time faculty. Charges for work
performed on Federal awards by fac-
ulty members having only part-time
appointments will be determined at a
rate not in excess of that regularly
paid for part-time assignments.
(7) Sabbatical leave costs. Rules for
sabbatical leave are as follow:
(i) Costs of leaves of absence by em-
ployees for performance of graduate
work or sabbatical study, travel, or re-
search are allowable provided the IHE
has a uniform written policy on sab-
batical leave for persons engaged in in-
struction and persons engaged in re-
search. Such costs will be allocated on
an equitable basis among all related
activities of the IHE.
(ii) Where sabbatical leave is in-
cluded in fringe benefits for which a
cost is determined for assessment as a
direct charge, the aggregate amount of
such assessments applicable to all
work of the institution during the base
period must be reasonable in relation
to the IHE’s actual experience under
its sabbatical leave policy.
(8) Salary rates for non-faculty mem-
bers. Non-faculty full-time professional
personnel may also earn ‘‘extra service
pay’’ in accordance with the non-Fed-
eral entity’s written policy and con-
sistent with paragraph (h)(1)(i) of this
section.
(i) Standards for Documentation of Per-
sonnel Expenses (1) Charges to Federal
awards for salaries and wages must be
based on records that accurately re-
flect the work performed. These
records must:
(i) Be supported by a system of inter-
nal control which provides reasonable
assurance that the charges are accu-
rate, allowable, and properly allocated;
(ii) Be incorporated into the official
records of the non-Federal entity;
(iii) Reasonably reflect the total ac-
tivity for which the employee is com-
pensated by the non-Federal entity,
not exceeding 100% of compensated ac-
tivities (for IHE, this per the IHE’s def-
inition of IBS);
(iv) Encompass federally-assisted and
all other activities compensated by the
non-Federal entity on an integrated
basis, but may include the use of sub-
sidiary records as defined in the non-
Federal entity’s written policy;
(v) Comply with the established ac-
counting policies and practices of the
non-Federal entity (See paragraph
(h)(1)(ii) above for treatment of inci-
dental work for IHEs.); and
(vi) [Reserved]
(vii) Support the distribution of the
employee’s salary or wages among spe-
cific activities or cost objectives if the
employee works on more than one Fed-
eral award; a Federal award and non-
Federal award; an indirect cost activ-
ity and a direct cost activity; two or
more indirect activities which are allo-
cated using different allocation bases;
or an unallowable activity and a direct
or indirect cost activity.
(viii) Budget estimates (i.e., esti-
mates determined before the services
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169
OMB Guidance §200.430
are performed) alone do not qualify as
support for charges to Federal awards,
but may be used for interim accounting
purposes, provided that:
(A) The system for establishing the
estimates produces reasonable approxi-
mations of the activity actually per-
formed;
(B) Significant changes in the cor-
responding work activity (as defined by
the non-Federal entity’s written poli-
cies) are identified and entered into the
records in a timely manner. Short term
(such as one or two months) fluctua-
tion between workload categories need
not be considered as long as the dis-
tribution of salaries and wages is rea-
sonable over the longer term; and
(C) The non-Federal entity’s system
of internal controls includes processes
to review after-the-fact interim
charges made to a Federal award based
on budget estimates. All necessary ad-
justment must be made such that the
final amount charged to the Federal
award is accurate, allowable, and prop-
erly allocated.
(ix) Because practices vary as to the
activity constituting a full workload
(for IHEs, IBS), records may reflect
categories of activities expressed as a
percentage distribution of total activi-
ties.
(x) It is recognized that teaching, re-
search, service, and administration are
often inextricably intermingled in an
academic setting. When recording sala-
ries and wages charged to Federal
awards for IHEs, a precise assessment
of factors that contribute to costs is
therefore not always feasible, nor is it
expected.
(2) For records which meet the stand-
ards required in paragraph (i)(1) of this
section, the non-Federal entity will not
be required to provide additional sup-
port or documentation for the work
performed, other than that referenced
in paragraph (i)(3) of this section.
(3) In accordance with Department of
Labor regulations implementing the
Fair Labor Standards Act (FLSA) (29
CFR part 516), charges for the salaries
and wages of nonexempt employees, in
addition to the supporting documenta-
tion described in this section, must
also be supported by records indicating
the total number of hours worked each
day.
(4) Salaries and wages of employees
used in meeting cost sharing or match-
ing requirements on Federal awards
must be supported in the same manner
as salaries and wages claimed for reim-
bursement from Federal awards.
(5) For states, local governments and
Indian tribes, substitute processes or
systems for allocating salaries and
wages to Federal awards may be used
in place of or in addition to the records
described in paragraph (1) if approved
by the cognizant agency for indirect
cost. Such systems may include, but
are not limited to, random moment
sampling, ‘‘rolling’’ time studies, case
counts, or other quantifiable measures
of work performed.
(i) Substitute systems which use
sampling methods (primarily for Tem-
porary Assistance for Needy Families
(TANF), the Supplemental Nutrition
Assistance Program (SNAP), Medicaid,
and other public assistance programs)
must meet acceptable statistical sam-
pling standards including:
(A) The sampling universe must in-
clude all of the employees whose sala-
ries and wages are to be allocated
based on sample results except as pro-
vided in paragraph (i)(5)(iii) of this sec-
tion;
(B) The entire time period involved
must be covered by the sample; and
(C) The results must be statistically
valid and applied to the period being
sampled.
(ii) Allocating charges for the sam-
pled employees’ supervisors, clerical
and support staffs, based on the results
of the sampled employees, will be ac-
ceptable.
(iii) Less than full compliance with
the statistical sampling standards
noted in subsection (5)(i) may be ac-
cepted by the cognizant agency for in-
direct costs if it concludes that the
amounts to be allocated to Federal
awards will be minimal, or if it con-
cludes that the system proposed by the
non-Federal entity will result in lower
costs to Federal awards than a system
which complies with the standards.
(6) Cognizant agencies for indirect
costs are encouraged to approve alter-
native proposals based on outcomes
and milestones for program perform-
ance where these are clearly docu-
mented. Where approved by the Federal
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170
2 CFR Ch. II (1–1–21 Edition) §200.431
cognizant agency for indirect costs,
these plans are acceptable as an alter-
native to the requirements of para-
graph (i)(1) of this section.
(7) For Federal awards of similar pur-
pose activity or instances of approved
blended funding, a non-Federal entity
may submit performance plans that in-
corporate funds from multiple Federal
awards and account for their combined
use based on performance-oriented
metrics, provided that such plans are
approved in advance by all involved
Federal awarding agencies. In these in-
stances, the non-Federal entity must
submit a request for waiver of the re-
quirements based on documentation
that describes the method of charging
costs, relates the charging of costs to
the specific activity that is applicable
to all fund sources, and is based on
quantifiable measures of the activity
in relation to time charged.
(8) For a non-Federal entity where
the records do not meet the standards
described in this section, the Federal
Government may require personnel ac-
tivity reports, including prescribed cer-
tifications, or equivalent documenta-
tion that support the records as re-
quired in this section.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49565, Aug. 13,
2020]
§200.431 Compensation—fringe bene-
fits.
(a) General. Fringe benefits are allow-
ances and services provided by employ-
ers to their employees as compensation
in addition to regular salaries and
wages. Fringe benefits include, but are
not limited to, the costs of leave (vaca-
tion, family-related, sick or military),
employee insurance, pensions, and un-
employment benefit plans. Except as
provided elsewhere in these principles,
the costs of fringe benefits are allow-
able provided that the benefits are rea-
sonable and are required by law, non-
Federal entity-employee agreement, or
an established policy of the non-Fed-
eral entity.
(b) Leave. The cost of fringe benefits
in the form of regular compensation
paid to employees during periods of au-
thorized absences from the job, such as
for annual leave, family-related leave,
sick leave, holidays, court leave, mili-
tary leave, administrative leave, and
other similar benefits, are allowable if
all of the following criteria are met:
(1) They are provided under estab-
lished written leave policies;
(2) The costs are equitably allocated
to all related activities, including Fed-
eral awards; and,
(3) The accounting basis (cash or ac-
crual) selected for costing each type of
leave is consistently followed by the
non-Federal entity or specified group-
ing of employees.
(i) When a non-Federal entity uses
the cash basis of accounting, the cost
of leave is recognized in the period that
the leave is taken and paid for. Pay-
ments for unused leave when an em-
ployee retires or terminates employ-
ment are allowable in the year of pay-
ment.
(ii) The accrual basis may be only
used for those types of leave for which
a liability as defined by GAAP exists
when the leave is earned. When a non-
Federal entity uses the accrual basis of
accounting, allowable leave costs are
the lesser of the amount accrued or
funded.
(c) Fringe benefits. The cost of fringe
benefits in the form of employer con-
tributions or expenses for social secu-
rity; employee life, health, unemploy-
ment, and worker’s compensation in-
surance (except as indicated in
§200.447); pension plan costs (see para-
graph (i) of this section); and other
similar benefits are allowable, provided
such benefits are granted under estab-
lished written policies. Such benefits,
must be allocated to Federal awards
and all other activities in a manner
consistent with the pattern of benefits
attributable to the individuals or
group(s) of employees whose salaries
and wages are chargeable to such Fed-
eral awards and other activities, and
charged as direct or indirect costs in
accordance with the non-Federal enti-
ty’s accounting practices.
(d) Cost objectives. Fringe benefits
may be assigned to cost objectives by
identifying specific benefits to specific
individual employees or by allocating
on the basis of entity-wide salaries and
wages of the employees receiving the
benefits. When the allocation method
is used, separate allocations must be
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171
OMB Guidance §200.431
made to selective groupings of employ-
ees, unless the non-Federal entity dem-
onstrates that costs in relationship to
salaries and wages do not differ signifi-
cantly for different groups of employ-
ees.
(e) Insurance. See also §200.447(d)(1)
and (2).
(1) Provisions for a reserve under a
self-insurance program for unemploy-
ment compensation or workers’ com-
pensation are allowable to the extent
that the provisions represent reason-
able estimates of the liabilities for
such compensation, and the types of
coverage, extent of coverage, and rates
and premiums would have been allow-
able had insurance been purchased to
cover the risks. However, provisions for
self-insured liabilities which do not be-
come payable for more than one year
after the provision is made must not
exceed the present value of the liabil-
ity.
(2) Costs of insurance on the lives of
trustees, officers, or other employees
holding positions of similar responsi-
bility are allowable only to the extent
that the insurance represents addi-
tional compensation. The costs of such
insurance when the non-Federal entity
is named as beneficiary are unallow-
able.
(3) Actual claims paid to or on behalf
of employees or former employees for
workers’ compensation, unemployment
compensation, severance pay, and simi-
lar employee benefits (e.g., post-retire-
ment health benefits), are allowable in
the year of payment provided that the
non-Federal entity follows a consistent
costing policy.
(f) Automobiles. That portion of auto-
mobile costs furnished by the non-Fed-
eral entity that relates to personal use
by employees (including transportation
to and from work) is unallowable as
fringe benefit or indirect (F&A) costs
regardless of whether the cost is re-
ported as taxable income to the em-
ployees.
(g) Pension plan costs. Pension plan
costs which are incurred in accordance
with the established policies of the
non-Federal entity are allowable, pro-
vided that:
(1) Such policies meet the test of rea-
sonableness.
(2) The methods of cost allocation are
not discriminatory.
(3) Except for State and Local Gov-
ernments, the cost assigned to each fis-
cal year should be determined in ac-
cordance with GAAP.
(4) The costs assigned to a given fis-
cal year are funded for all plan partici-
pants within six months after the end
of that year. However, increases to nor-
mal and past service pension costs
caused by a delay in funding the actu-
arial liability beyond 30 calendar days
after each quarter of the year to which
such costs are assignable are unallow-
able. Non-Federal entity may elect to
follow the ‘‘Cost Accounting Standard
for Composition and Measurement of
Pension Costs’’ (48 CFR 9904.412).
(5) Pension plan termination insur-
ance premiums paid pursuant to the
Employee Retirement Income Security
Act (ERISA) of 1974 (29 U.S.C. 1301–1461)
are allowable. Late payment charges
on such premiums are unallowable. Ex-
cise taxes on accumulated funding defi-
ciencies and other penalties imposed
under ERISA are unallowable.
(6) Pension plan costs may be com-
puted using a pay-as-you-go method or
an acceptable actuarial cost method in
accordance with established written
policies of the non-Federal entity.
(i) For pension plans financed on a
pay-as-you-go method, allowable costs
will be limited to those representing
actual payments to retirees or their
beneficiaries.
(ii) Pension costs calculated using an
actuarial cost-based method recognized
by GAAP are allowable for a given fis-
cal year if they are funded for that
year within six months after the end of
that year. Costs funded after the six-
month period (or a later period agreed
to by the cognizant agency for indirect
costs) are allowable in the year funded.
The cognizant agency for indirect costs
may agree to an extension of the six-
month period if an appropriate adjust-
ment is made to compensate for the
timing of the charges to the Federal
Government and related Federal reim-
bursement and the non-Federal enti-
ty’s contribution to the pension fund.
Adjustments may be made by cash re-
fund or other equitable procedures to
compensate the Federal Government
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172
2 CFR Ch. II (1–1–21 Edition) §200.431
for the time value of Federal reim-
bursements in excess of contributions
to the pension fund.
(iii) Amounts funded by the non-Fed-
eral entity in excess of the actuarially
determined amount for a fiscal year
may be used as the non-Federal enti-
ty’s contribution in future periods.
(iv) When a non-Federal entity con-
verts to an acceptable actuarial cost
method, as defined by GAAP, and funds
pension costs in accordance with this
method, the unfunded liability at the
time of conversion is allowable if am-
ortized over a period of years in accord-
ance with GAAP.
(v) The Federal Government must re-
ceive an equitable share of any pre-
viously allowed pension costs (includ-
ing earnings thereon) which revert or
inure to the non-Federal entity in the
form of a refund, withdrawal, or other
credit.
(h) Post-retirement health. Post-retire-
ment health plans (PRHP) refers to
costs of health insurance or health
services not included in a pension plan
covered by paragraph (g) of this section
for retirees and their spouses, depend-
ents, and survivors. PRHP costs may
be computed using a pay-as-you-go
method or an acceptable actuarial cost
method in accordance with established
written policies of the non-Federal en-
tity.
(1) For PRHP financed on a pay-as-
you-go method, allowable costs will be
limited to those representing actual
payments to retirees or their bene-
ficiaries.
(2) PRHP costs calculated using an
actuarial cost method recognized by
GAAP are allowable if they are funded
for that year within six months after
the end of that year. Costs funded after
the six-month period (or a later period
agreed to by the cognizant agency) are
allowable in the year funded. The Fed-
eral cognizant agency for indirect costs
may agree to an extension of the six-
month period if an appropriate adjust-
ment is made to compensate for the
timing of the charges to the Federal
Government and related Federal reim-
bursements and the non-Federal enti-
ty’s contributions to the PRHP fund.
Adjustments may be made by cash re-
fund, reduction in current year’s PRHP
costs, or other equitable procedures to
compensate the Federal Government
for the time value of Federal reim-
bursements in excess of contributions
to the PRHP fund.
(3) Amounts funded in excess of the
actuarially determined amount for a
fiscal year may be used as the non-Fed-
eral entity contribution in a future pe-
riod.
(4) When a non-Federal entity con-
verts to an acceptable actuarial cost
method and funds PRHP costs in ac-
cordance with this method, the initial
unfunded liability attributable to prior
years is allowable if amortized over a
period of years in accordance with
GAAP, or, if no such GAAP period ex-
ists, over a period negotiated with the
cognizant agency for indirect costs.
(5) To be allowable in the current
year, the PRHP costs must be paid ei-
ther to:
(i) An insurer or other benefit pro-
vider as current year costs or pre-
miums, or
(ii) An insurer or trustee to maintain
a trust fund or reserve for the sole pur-
pose of providing post-retirement bene-
fits to retirees and other beneficiaries.
(6) The Federal Government must re-
ceive an equitable share of any
amounts of previously allowed post-re-
tirement benefit costs (including earn-
ings thereon) which revert or inure to
the non-Federal entity in the form of a
refund, withdrawal, or other credit.
(i) Severance pay. (1) Severance pay,
also commonly referred to as dismissal
wages, is a payment in addition to reg-
ular salaries and wages, by non-Federal
entities to workers whose employment
is being terminated. Costs of severance
pay are allowable only to the extent
that in each case, it is required by
(i) Law;
(ii) Employer-employee agreement;
(iii) Established policy that con-
stitutes, in effect, an implied agree-
ment on the non-Federal entity’s part;
or
(iv) Circumstances of the particular
employment.
(2) Costs of severance payments are
divided into two categories as follows:
(i) Actual normal turnover severance
payments must be allocated to all ac-
tivities; or, where the non-Federal en-
tity provides for a reserve for normal
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173
OMB Guidance §200.432
severances, such method will be ac-
ceptable if the charge to current oper-
ations is reasonable in light of pay-
ments actually made for normal
severances over a representative past
period, and if amounts charged are al-
located to all activities of the non-Fed-
eral entity.
(ii) Measurement of costs of abnor-
mal or mass severance pay by means of
an accrual will not achieve equity to
both parties. Thus, accruals for this
purpose are not allowable. However,
the Federal Government recognizes its
responsibility to participate, to the ex-
tent of its fair share, in any specific
payment. Prior approval by the Fed-
eral awarding agency or cognizant
agency for indirect cost, as appro-
priate, is required.
(3) Costs incurred in certain sever-
ance pay packages which are in an
amount in excess of the normal sever-
ance pay paid by the non-Federal enti-
ty to an employee upon termination of
employment and are paid to the em-
ployee contingent upon a change in
management control over, or owner-
ship of, the non-Federal entity’s assets,
are unallowable.
(4) Severance payments to foreign na-
tionals employed by the non-Federal
entity outside the United States, to
the extent that the amount exceeds the
customary or prevailing practices for
the non-Federal entity in the United
States, are unallowable, unless they
are necessary for the performance of
Federal programs and approved by the
Federal awarding agency.
(5) Severance payments to foreign na-
tionals employed by the non-Federal
entity outside the United States due to
the termination of the foreign national
as a result of the closing of, or curtail-
ment of activities by, the non-Federal
entity in that country, are unallow-
able, unless they are necessary for the
performance of Federal programs and
approved by the Federal awarding
agency.
(j) For IHEs only. (1) Fringe benefits
in the form of undergraduate and grad-
uate tuition or remission of tuition for
individual employees are allowable,
provided such benefits are granted in
accordance with established non-Fed-
eral entity policies, and are distributed
to all non-Federal entity activities on
an equitable basis. Tuition benefits for
family members other than the em-
ployee are unallowable.
(2) Fringe benefits in the form of tui-
tion or remission of tuition for indi-
vidual employees not employed by
IHEs are limited to the tax-free
amount allowed per section 127 of the
Internal Revenue Code as amended.
(3) IHEs may offer employees tuition
waivers or tuition reductions, provided
that the benefit does not discriminate
in favor of highly compensated employ-
ees. Employees can exercise these ben-
efits at other institutions according to
institutional policy. See §200.466, for
treatment of tuition remission pro-
vided to students.
(k) Fringe benefit programs and other
benefit costs. For IHEs whose costs are
paid by state or local governments,
fringe benefit programs (such as pen-
sion costs and FICA) and any other
benefits costs specifically incurred on
behalf of, and in direct benefit to, the
non-Federal entity, are allowable costs
of such non-Federal entities whether or
not these costs are recorded in the ac-
counting records of the non-Federal en-
tities, subject to the following:
(1) The costs meet the requirements
of Basic Considerations in §§200.402
through 200.411;
(2) The costs are properly supported
by approved cost allocation plans in ac-
cordance with applicable Federal cost
accounting principles; and
(3) The costs are not otherwise borne
directly or indirectly by the Federal
Government.
[85 FR 49565, Aug. 13, 2020]
§200.432 Conferences.
A conference is defined as a meeting,
retreat, seminar, symposium, work-
shop or event whose primary purpose is
the dissemination of technical infor-
mation beyond the non-Federal entity
and is necessary and reasonable for
successful performance under the Fed-
eral award. Allowable conference costs
paid by the non-Federal entity as a
sponsor or host of the conference may
include rental of facilities, speakers’
fees, costs of meals and refreshments,
local transportation, and other items
incidental to such conferences unless
further restricted by the terms and
conditions of the Federal award. As
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174
2 CFR Ch. II (1–1–21 Edition) §200.433
needed, the costs of identifying, but
not providing, locally available depend-
ent-care resources are allowable. Con-
ference hosts/sponsors must exercise
discretion and judgment in ensuring
that conference costs are appropriate,
necessary and managed in a manner
that minimizes costs to the Federal
award. The Federal awarding agency
may authorize exceptions where appro-
priate for programs including Indian
tribes, children, and the elderly. See
also §§200.438, 200.456, and 200.475.
[85 FR 49567, Aug. 13, 2020]
§200.433 Contingency provisions.
(a) Contingency is that part of a
budget estimate of future costs (typi-
cally of large construction projects, IT
systems, or other items as approved by
the Federal awarding agency) which is
associated with possible events or con-
ditions arising from causes the precise
outcome of which is indeterminable at
the time of estimate, and that experi-
ence shows will likely result, in aggre-
gate, in additional costs for the ap-
proved activity or project. Amounts for
major project scope changes, unfore-
seen risks, or extraordinary events
may not be included.
(b) It is permissible for contingency
amounts other than those excluded in
paragraph (a) of this section to be ex-
plicitly included in budget estimates,
to the extent they are necessary to im-
prove the precision of those estimates.
Amounts must be estimated using
broadly-accepted cost estimating
methodologies, specified in the budget
documentation of the Federal award,
and accepted by the Federal awarding
agency. As such, contingency amounts
are to be included in the Federal
award. In order for actual costs in-
curred to be allowable, they must com-
ply with the cost principles and other
requirements in this part (see also
§§200.300 and 200.403 of this part); be
necessary and reasonable for proper
and efficient accomplishment of
project or program objectives, and be
verifiable from the non-Federal enti-
ty’s records.
(c) Payments made by the Federal
awarding agency to the non-Federal
entity’s ‘‘contingency reserve’’ or any
similar payment made for events the
occurrence of which cannot be foretold
with certainty as to the time or inten-
sity, or with an assurance of their hap-
pening, are unallowable, except as
noted in §§200.431 and 200.447.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13,
2020]
§200.434 Contributions and donations.
(a) Costs of contributions and dona-
tions, including cash, property, and
services, from the non-Federal entity
to other entities, are unallowable.
(b) It is permissible for contingency
amounts other than those excluded in
paragraph (a) of this section to be ex-
plicitly included in budget estimates,
to the extent they are necessary to im-
prove the precision of those estimates.
Amounts must be estimated using
broadly-accepted cost estimating
methodologies, specified in the budget
documentation of the Federal award,
and accepted by the Federal awarding
agency. As such, contingency amounts
are to be included in the Federal
award. In order for actual costs in-
curred to be allowable, they must com-
ply with the cost principles and other
requirements in this part (see also
§§200.300 and 200.403 of this part); be
necessary and reasonable for proper
and efficient accomplishment of
project or program objectives, and be
verifiable from the non-Federal enti-
ty’s records.
(c) Payments made by the Federal
awarding agency to the non-Federal
entity’s ‘‘contingency reserve’’ or any
similar payment made for events the
occurrence of which cannot be foretold
with certainty as to the time or inten-
sity, or with an assurance of their hap-
pening, are unallowable, except as
noted in §§200.431 and 200.447.
(d) To the extent feasible, services
donated to the non-Federal entity will
be supported by the same methods used
to support the allocability of regular
personnel services.
(e) The following provisions apply to
nonprofit organizations. The value of
services donated to the nonprofit orga-
nization utilized in the performance of
a direct cost activity must be consid-
ered in the determination of the non-
Federal entity’s indirect cost rate(s)
and, accordingly, must be allocated a
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175
OMB Guidance §200.435
proportionate share of applicable indi-
rect costs when the following cir-
cumstances exist:
(1) The aggregate value of the serv-
ices is material;
(2) The services are supported by a
significant amount of the indirect
costs incurred by the non-Federal enti-
ty;
(i) In those instances where there is
no basis for determining the fair mar-
ket value of the services rendered, the
non-Federal entity and the cognizant
agency for indirect costs must nego-
tiate an appropriate allocation of indi-
rect cost to the services.
(ii) Where donated services directly
benefit a project supported by the Fed-
eral award, the indirect costs allocated
to the services will be considered as a
part of the total costs of the project.
Such indirect costs may be reimbursed
under the Federal award or used to
meet cost sharing or matching require-
ments.
(f) Fair market value of donated
services must be computed as described
in §200.306.
(g) Personal Property and Use of
Space.
(1) Donated personal property and
use of space may be furnished to a non-
Federal entity. The value of the per-
sonal property and space may not be
charged to the Federal award either as
a direct or indirect cost.
(2) The value of the donations may be
used to meet cost sharing or matching
share requirements under the condi-
tions described in §200.300 of this part.
The value of the donations must be de-
termined in accordance with §200.300.
Where donations are treated as indirect
costs, indirect cost rates will separate
the value of the donations so that re-
imbursement will not be made.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13,
2020]
§200.435 Defense and prosecution of
criminal and civil proceedings,
claims, appeals and patent infringe-
ments.
(a) Definitions for the purposes of this
section. (1) Conviction means a judgment
or conviction of a criminal offense by
any court of competent jurisdiction,
whether entered upon verdict or a plea,
including a conviction due to a plea of
nolo contendere.
(2) Costs include the services of in-
house or private counsel, accountants,
consultants, or others engaged to as-
sist the non-Federal entity before, dur-
ing, and after commencement of a judi-
cial or administrative proceeding, that
bear a direct relationship to the pro-
ceeding.
(3) Fraud means:
(i) Acts of fraud or corruption or at-
tempts to defraud the Federal Govern-
ment or to corrupt its agents,
(ii) Acts that constitute a cause for
debarment or suspension (as specified
in agency regulations), and
(iii) Acts which violate the False
Claims Act (31 U.S.C. 3729–3732) or the
Anti-kickback Act (41 U.S.C. 1320a–
7b(b)).
(4) Penalty does not include restitu-
tion, reimbursement, or compensatory
damages.
(5) Proceeding includes an investiga-
tion.
(b) Costs. (1) Except as otherwise de-
scribed herein, costs incurred in con-
nection with any criminal, civil or ad-
ministrative proceeding (including fil-
ing of a false certification) commenced
by the Federal Government, a state,
local government, or foreign govern-
ment, or joined by the Federal Govern-
ment (including a proceeding under the
False Claims Act), against the non-
Federal entity, (or commenced by third
parties or a current or former em-
ployee of the non-Federal entity who
submits a whistleblower complaint of
reprisal in accordance with 10 U.S.C.
2409 or 41 U.S.C. 4712), are not allowable
if the proceeding:
(i) Relates to a violation of, or failure
to comply with, a Federal, state, local
or foreign statute, regulation or the
terms and conditions of the Federal
award, by the non-Federal entity (in-
cluding its agents and employees); and
(ii) Results in any of the following
dispositions:
(A) In a criminal proceeding, a con-
viction.
(B) In a civil or administrative pro-
ceeding involving an allegation of
fraud or similar misconduct, a deter-
mination of non-Federal entity liabil-
ity.
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176
2 CFR Ch. II (1–1–21 Edition) §200.435
(C) In the case of any civil or admin-
istrative proceeding, the disallowance
of costs or the imposition of a mone-
tary penalty, or an order issued by the
Federal awarding agency head or dele-
gate to the non-Federal entity to take
corrective action under 10 U.S.C. 2409
or 41 U.S.C. 4712.
(D) A final decision by an appropriate
Federal official to debar or suspend the
non-Federal entity, to rescind or void a
Federal award, or to terminate a Fed-
eral award by reason of a violation or
failure to comply with a statute, regu-
lation, or the terms and conditions of
the Federal award.
(E) A disposition by consent or com-
promise, if the action could have re-
sulted in any of the dispositions de-
scribed in paragraphs (b)(1)(ii)(A)
through (D) of this section.
(2) If more than one proceeding in-
volves the same alleged misconduct,
the costs of all such proceedings are
unallowable if any results in one of the
dispositions shown in paragraph (b) of
this section.
(c) If a proceeding referred to in para-
graph (b) of this section is commenced
by the Federal Government and is re-
solved by consent or compromise pur-
suant to an agreement by the non-Fed-
eral entity and the Federal Govern-
ment, then the costs incurred may be
allowed to the extent specifically pro-
vided in such agreement.
(d) If a proceeding referred to in para-
graph (b) of this section is commenced
by a state, local or foreign government,
the authorized Federal official may
allow the costs incurred if such author-
ized official determines that the costs
were incurred as a result of:
(1) A specific term or condition of the
Federal award, or
(2) Specific written direction of an
authorized official of the Federal
awarding agency.
(e) Costs incurred in connection with
proceedings described in paragraph (b)
of this section, which are not made un-
allowable by that subsection, may be
allowed but only to the extent that:
(1) The costs are reasonable and nec-
essary in relation to the administra-
tion of the Federal award and activi-
ties required to deal with the pro-
ceeding and the underlying cause of ac-
tion;
(2) Payment of the reasonable, nec-
essary, allocable and otherwise allow-
able costs incurred is not prohibited by
any other provision(s) of the Federal
award;
(3) The costs are not recovered from
the Federal Government or a third
party, either directly as a result of the
proceeding or otherwise; and,
(4) An authorized Federal official
must determine the percentage of costs
allowed considering the complexity of
litigation, generally accepted prin-
ciples governing the award of legal fees
in civil actions involving the United
States, and such other factors as may
be appropriate. Such percentage must
not exceed 80 percent. However, if an
agreement reached under paragraph (c)
of this section has explicitly consid-
ered this 80 percent limitation and per-
mitted a higher percentage, then the
full amount of costs resulting from
that agreement are allowable.
(f) Costs incurred by the non-Federal
entity in connection with the defense
of suits brought by its employees or ex-
employees under section 2 of the Major
Fraud Act of 1988 (18 U.S.C. 1031), in-
cluding the cost of all relief necessary
to make such employee whole, where
the non-Federal entity was found liable
or settled, are unallowable.
(g) Costs of prosecution of claims
against the Federal Government, in-
cluding appeals of final Federal agency
decisions, are unallowable.
(h) Costs of legal, accounting, and
consultant services, and related costs,
incurred in connection with patent in-
fringement litigation, are unallowable
unless otherwise provided for in the
Federal award.
(i) Costs which may be unallowable
under this section, including directly
associated costs, must be segregated
and accounted for separately. During
the pendency of any proceeding covered
by paragraphs (b) and (f) of this sec-
tion, the Federal Government must
generally withhold payment of such
costs. However, if in its best interests,
the Federal Government may provide
for conditional payment upon provision
of adequate security, or other adequate
assurance, and agreement to repay all
unallowable costs, plus interest, if the
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177
OMB Guidance §200.436
costs are subsequently determined to
be unallowable.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
§200.436 Depreciation.
(a) Depreciation is the method for al-
locating the cost of fixed assets to peri-
ods benefitting from asset use. The
non-Federal entity may be com-
pensated for the use of its buildings,
capital improvements, equipment, and
software projects capitalized in accord-
ance with GAAP, provided that they
are used, needed in the non-Federal en-
tity’s activities, and properly allocated
to Federal awards. Such compensation
must be made by computing deprecia-
tion.
(b) The allocation for depreciation
must be made in accordance with Ap-
pendices III through IX.
(c) Depreciation is computed apply-
ing the following rules. The computa-
tion of depreciation must be based on
the acquisition cost of the assets in-
volved. For an asset donated to the
non-Federal entity by a third party, its
fair market value at the time of the do-
nation must be considered as the acqui-
sition cost. Such assets may be depre-
ciated or claimed as matching but not
both. For the computation of deprecia-
tion, the acquisition cost will exclude:
(1) The cost of land;
(2) Any portion of the cost of build-
ings and equipment borne by or do-
nated by the Federal Government, irre-
spective of where title was originally
vested or where it is presently located;
(3) Any portion of the cost of build-
ings and equipment contributed by or
for the non-Federal entity that are al-
ready claimed as matching or where
law or agreement prohibits recovery;
(4) Any asset acquired solely for the
performance of a non-Federal award;
and
(d) When computing depreciation
charges, the following must be ob-
served:
(1) The period of useful service or
useful life established in each case for
usable capital assets must take into
consideration such factors as type of
construction, nature of the equipment,
technological developments in the par-
ticular area, historical data, and the
renewal and replacement policies fol-
lowed for the individual items or class-
es of assets involved.
(2) The depreciation method used to
charge the cost of an asset (or group of
assets) to accounting periods must re-
flect the pattern of consumption of the
asset during its useful life. In the ab-
sence of clear evidence indicating that
the expected consumption of the asset
will be significantly greater in the
early portions than in the later por-
tions of its useful life, the straight-line
method must be presumed to be the ap-
propriate method. Depreciation meth-
ods once used may not be changed un-
less approved in advance by the cog-
nizant agency. The depreciation meth-
ods used to calculate the depreciation
amounts for indirect (F&A) rate pur-
poses must be the same methods used
by the non-Federal entity for its finan-
cial statements.
(3) The entire building, including the
shell and all components, may be treat-
ed as a single asset and depreciated
over a single useful life. A building
may also be divided into multiple com-
ponents. Each component item may
then be depreciated over its estimated
useful life. The building components
must be grouped into three general
components of a building: building
shell (including construction and de-
sign costs), building services systems
(e.g., elevators, HVAC, plumbing sys-
tem and heating and air-conditioning
system) and fixed equipment (e.g.,
sterilizers, casework, fume hoods, cold
rooms and glassware/washers). In ex-
ceptional cases, a cognizant agency
may authorize a non-Federal entity to
use more than these three groupings.
When a non-Federal entity elects to de-
preciate its buildings by its compo-
nents, the same depreciation methods
must be used for indirect (F&A) pur-
poses and financial statements pur-
poses, as described in paragraphs (d)(1)
and (2) of this section.
(4) No depreciation may be allowed
on any assets that have outlived their
depreciable lives.
(5) Where the depreciation method is
introduced to replace the use allow-
ance method, depreciation must be
computed as if the asset had been de-
preciated over its entire life (i.e., from
the date the asset was acquired and
ready for use to the date of disposal or
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178
2 CFR Ch. II (1–1–21 Edition) §200.437
withdrawal from service). The total
amount of use allowance and deprecia-
tion for an asset (including imputed de-
preciation applicable to periods prior
to the conversion from the use allow-
ance method as well as depreciation
after the conversion) may not exceed
the total acquisition cost of the asset.
(e) Charges for depreciation must be
supported by adequate property
records, and physical inventories must
be taken at least once every two years
to ensure that the assets exist and are
usable, used, and needed. Statistical
sampling techniques may be used in
taking these inventories. In addition,
adequate depreciation records showing
the amount of depreciation must be
maintained.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13,
2020]
§200.437 Employee health and welfare
costs.
(a) Costs incurred in accordance with
the non-Federal entity’s documented
policies for the improvement of work-
ing conditions, employer-employee re-
lations, employee health, and employee
performance are allowable.
(b) Such costs will be equitably ap-
portioned to all activities of the non-
Federal entity. Income generated from
any of these activities will be credited
to the cost thereof unless such income
has been irrevocably sent to employee
welfare organizations.
(c) Losses resulting from operating
food services are allowable only if the
non-Federal entity’s objective is to op-
erate such services on a break-even
basis. Losses sustained because of oper-
ating objectives other than the above
are allowable only:
(1) Where the non-Federal entity can
demonstrate unusual circumstances;
and
(2) With the approval of the cog-
nizant agency for indirect costs.
§200.438 Entertainment costs.
Costs of entertainment, including
amusement, diversion, and social ac-
tivities and any associated costs are
unallowable, except where specific
costs that might otherwise be consid-
ered entertainment have a pro-
grammatic purpose and are authorized
either in the approved budget for the
Federal award or with prior written ap-
proval of the Federal awarding agency.
§200.439 Equipment and other capital
expenditures.
(a) See §200.1 for the definitions of
capital expenditures, equipment, special
purpose equipment, general purpose
equipment, acquisition cost, and capital
assets.
(b) The following rules of allow-
ability must apply to equipment and
other capital expenditures:
(1) Capital expenditures for general
purpose equipment, buildings, and land
are unallowable as direct charges, ex-
cept with the prior written approval of
the Federal awarding agency or pass-
through entity.
(2) Capital expenditures for special
purpose equipment are allowable as di-
rect costs, provided that items with a
unit cost of $5,000 or more have the
prior written approval of the Federal
awarding agency or pass-through enti-
ty.
(3) Capital expenditures for improve-
ments to land, buildings, or equipment
which materially increase their value
or useful life are unallowable as a di-
rect cost except with the prior written
approval of the Federal awarding agen-
cy, or pass-through entity. See §200.436,
for rules on the allowability of depre-
ciation on buildings, capital improve-
ments, and equipment. See also
§200.465.
(4) When approved as a direct charge
pursuant to paragraphs (b)(1) through
(3) of this section, capital expenditures
will be charged in the period in which
the expenditure is incurred, or as oth-
erwise determined appropriate and ne-
gotiated with the Federal awarding
agency.
(5) The unamortized portion of any
equipment written off as a result of a
change in capitalization levels may be
recovered by continuing to claim the
otherwise allowable depreciation on
the equipment, or by amortizing the
amount to be written off over a period
of years negotiated with the Federal
cognizant agency for indirect cost.
(6) Cost of equipment disposal. If the
non-Federal entity is instructed by the
Federal awarding agency to otherwise
dispose of or transfer the equipment
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179
OMB Guidance §200.443
the costs of such disposal or transfer
are allowable.
(7) Equipment and other capital ex-
penditures are unallowable as indirect
costs. See §200.436.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13,
2020]
§200.440 Exchange rates.
(a) Cost increases for fluctuations in
exchange rates are allowable costs sub-
ject to the availability of funding.
Prior approval of exchange rate fluc-
tuations is required only when the
change results in the need for addi-
tional Federal funding, or the in-
creased costs result in the need to sig-
nificantly reduce the scope of the
project. The Federal awarding agency
must however ensure that adequate
funds are available to cover currency
fluctuations in order to avoid a viola-
tion of the Anti-Deficiency Act.
(b) The non-Federal entity is re-
quired to make reviews of local cur-
rency gains to determine the need for
additional federal funding before the
expiration date of the Federal award.
Subsequent adjustments for currency
increases may be allowable only when
the non-Federal entity provides the
Federal awarding agency with ade-
quate source documentation from a
commonly used source in effect at the
time the expense was made, and to the
extent that sufficient Federal funds are
available.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
§200.441 Fines, penalties, damages
and other settlements.
Costs resulting from non-Federal en-
tity violations of, alleged violations of,
or failure to comply with, Federal,
state, tribal, local or foreign laws and
regulations are unallowable, except
when incurred as a result of compli-
ance with specific provisions of the
Federal award, or with prior written
approval of the Federal awarding agen-
cy. See also §200.435.
[85 FR 49568, Aug. 13, 2020]
§200.442 Fund raising and investment
management costs.
(a) Costs of organized fund raising,
including financial campaigns, endow-
ment drives, solicitation of gifts and
bequests, and similar expenses incurred
to raise capital or obtain contributions
are unallowable. Fund raising costs for
the purposes of meeting the Federal
program objectives are allowable with
prior written approval from the Fed-
eral awarding agency. Proposal costs
are covered in §200.460.
(b) Costs of investment counsel and
staff and similar expenses incurred to
enhance income from investments are
unallowable except when associated
with investments covering pension,
self-insurance, or other funds which in-
clude Federal participation allowed by
this part.
(c) Costs related to the physical cus-
tody and control of monies and securi-
ties are allowable.
(d) Both allowable and unallowable
fund-raising and investment activities
must be allocated as an appropriate
share of indirect costs under the condi-
tions described in §200.413.
[85 FR 49568, Aug. 13, 2020]
§200.443 Gains and losses on disposi-
tion of depreciable assets.
(a) Gains and losses on the sale, re-
tirement, or other disposition of depre-
ciable property must be included in the
year in which they occur as credits or
charges to the asset cost grouping(s) in
which the property was included. The
amount of the gain or loss to be in-
cluded as a credit or charge to the ap-
propriate asset cost grouping(s) is the
difference between the amount realized
on the property and the undepreciated
basis of the property.
(b) Gains and losses from the disposi-
tion of depreciable property must not
be recognized as a separate credit or
charge under the following conditions:
(1) The gain or loss is processed
through a depreciation account and is
reflected in the depreciation allowable
under §§200.436 and 200.439.
(2) The property is given in exchange
as part of the purchase price of a simi-
lar item and the gain or loss is taken
into account in determining the depre-
ciation cost basis of the new item.
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180
2 CFR Ch. II (1–1–21 Edition) §200.444
(3) A loss results from the failure to
maintain permissible insurance, except
as otherwise provided in §200.447.
(4) Compensation for the use of the
property was provided through use al-
lowances in lieu of depreciation.
(5) Gains and losses arising from
mass or extraordinary sales, retire-
ments, or other dispositions must be
considered on a case-by-case basis.
(c) Gains or losses of any nature aris-
ing from the sale or exchange of prop-
erty other than the property covered in
paragraph (a) of this section, e.g., land,
must be excluded in computing Federal
award costs.
(d) When assets acquired with Fed-
eral funds, in part or wholly, are dis-
posed of, the distribution of the pro-
ceeds must be made in accordance with
§§200.310 through 200.316 of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13,
2020]
§200.444 General costs of government.
(a) For states, local governments,
and Indian Tribes, the general costs of
government are unallowable (except as
provided in §200.475). Unallowable costs
include:
(1) Salaries and expenses of the Office
of the Governor of a state or the chief
executive of a local government or the
chief executive of an Indian tribe;
(2) Salaries and other expenses of a
state legislature, tribal council, or
similar local governmental body, such
as a county supervisor, city council,
school board, etc., whether incurred for
purposes of legislation or executive di-
rection;
(3) Costs of the judicial branch of a
government;
(4) Costs of prosecutorial activities
unless treated as a direct cost to a spe-
cific program if authorized by statute
or regulation (however, this does not
preclude the allowability of other legal
activities of the Attorney General as
described in §200.435); and
(5) Costs of other general types of
government services normally provided
to the general public, such as fire and
police, unless provided for as a direct
cost under a program statute or regula-
tion.
(b) For Indian tribes and Councils of
Governments (COGs) (see definition for
Local government in §200.1 of this part),
up to 50% of salaries and expenses di-
rectly attributable to managing and
operating Federal programs by the
chief executive and his or her staff can
be included in the indirect cost cal-
culation without documentation.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13,
2020]
§200.445 Goods or services for per-
sonal use.
(a) Costs of goods or services for per-
sonal use of the non-Federal entity’s
employees are unallowable regardless
of whether the cost is reported as tax-
able income to the employees.
(b) Costs of housing (e.g., deprecia-
tion, maintenance, utilities, fur-
nishings, rent), housing allowances and
personal living expenses are only al-
lowable as direct costs regardless of
whether reported as taxable income to
the employees. In addition, to be allow-
able direct costs must be approved in
advance by a Federal awarding agency.
§200.446 Idle facilities and idle capac-
ity.
(a) As used in this section the fol-
lowing terms have the meanings set
forth in this section:
(1) Facilities means land and build-
ings or any portion thereof, equipment
individually or collectively, or any
other tangible capital asset, wherever
located, and whether owned or leased
by the non-Federal entity.
(2) Idle facilities means completely
unused facilities that are excess to the
non-Federal entity’s current needs.
(3) Idle capacity means the unused
capacity of partially used facilities. It
is the difference between:
(i) That which a facility could
achieve under 100 percent operating
time on a one-shift basis less operating
interruptions resulting from time lost
for repairs, setups, unsatisfactory ma-
terials, and other normal delays and;
(ii) The extent to which the facility
was actually used to meet demands
during the accounting period. A multi-
shift basis should be used if it can be
shown that this amount of usage would
normally be expected for the type of fa-
cility involved.
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181
OMB Guidance §200.447
(4) Cost of idle facilities or idle ca-
pacity means costs such as mainte-
nance, repair, housing, rent, and other
related costs, e.g., insurance, interest,
and depreciation. These costs could in-
clude the costs of idle public safety
emergency facilities, telecommuni-
cations, or information technology sys-
tem capacity that is built to withstand
major fluctuations in load, e.g., con-
solidated data centers.
(b) The costs of idle facilities are un-
allowable except to the extent that:
(1) They are necessary to meet work-
load requirements which may fluctuate
and are allocated appropriately to all
benefiting programs; or
(2) Although not necessary to meet
fluctuations in workload, they were
necessary when acquired and are now
idle because of changes in program re-
quirements, efforts to achieve more ec-
onomical operations, reorganization,
termination, or other causes which
could not have been reasonably fore-
seen. Under the exception stated in
this subsection, costs of idle facilities
are allowable for a reasonable period of
time, ordinarily not to exceed one
year, depending on the initiative taken
to use, lease, or dispose of such facili-
ties.
(c) The costs of idle capacity are nor-
mal costs of doing business and are a
factor in the normal fluctuations of
usage or indirect cost rates from period
to period. Such costs are allowable,
provided that the capacity is reason-
ably anticipated to be necessary to
carry out the purpose of the Federal
award or was originally reasonable and
is not subject to reduction or elimi-
nation by use on other Federal awards,
subletting, renting, or sale, in accord-
ance with sound business, economic, or
security practices. Widespread idle ca-
pacity throughout an entire facility or
among a group of assets having sub-
stantially the same function may be
considered idle facilities.
§200.447 Insurance and indemnifica-
tion.
(a) Costs of insurance required or ap-
proved and maintained, pursuant to
the Federal award, are allowable.
(b) Costs of other insurance in con-
nection with the general conduct of ac-
tivities are allowable subject to the
following limitations:
(1) Types and extent and cost of cov-
erage are in accordance with the non-
Federal entity’s policy and sound busi-
ness practice.
(2) Costs of insurance or of contribu-
tions to any reserve covering the risk
of loss of, or damage to, Federal Gov-
ernment property are unallowable ex-
cept to the extent that the Federal
awarding agency has specifically re-
quired or approved such costs.
(3) Costs allowed for business inter-
ruption or other similar insurance
must exclude coverage of management
fees.
(4) Costs of insurance on the lives of
trustees, officers, or other employees
holding positions of similar respon-
sibilities are allowable only to the ex-
tent that the insurance represents ad-
ditional compensation (see §200.431).
The cost of such insurance when the
non-Federal entity is identified as the
beneficiary is unallowable.
(5) Insurance against defects. Costs of
insurance with respect to any costs in-
curred to correct defects in the non-
Federal entity’s materials or work-
manship are unallowable.
(6) Medical liability (malpractice) in-
surance. Medical liability insurance is
an allowable cost of Federal research
programs only to the extent that the
Federal research programs involve
human subjects or training of partici-
pants in research techniques. Medical
liability insurance costs must be treat-
ed as a direct cost and must be as-
signed to individual projects based on
the manner in which the insurer allo-
cates the risk to the population cov-
ered by the insurance.
(c) Actual losses which could have
been covered by permissible insurance
(through a self-insurance program or
otherwise) are unallowable, unless ex-
pressly provided for in the Federal
award. However, costs incurred because
of losses not covered under nominal de-
ductible insurance coverage provided
in keeping with sound management
practice, and minor losses not covered
by insurance, such as spoilage, break-
age, and disappearance of small hand
tools, which occur in the ordinary
course of operations, are allowable.
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182
2 CFR Ch. II (1–1–21 Edition) §200.448
(d) Contributions to a reserve for cer-
tain self-insurance programs including
workers’ compensation, unemployment
compensation, and severance pay are
allowable subject to the following pro-
visions:
(1) The type of coverage and the ex-
tent of coverage and the rates and pre-
miums would have been allowed had in-
surance (including reinsurance) been
purchased to cover the risks. However,
provision for known or reasonably esti-
mated self-insured liabilities, which do
not become payable for more than one
year after the provision is made, must
not exceed the discounted present
value of the liability. The rate used for
discounting the liability must be deter-
mined by giving consideration to such
factors as the non-Federal entity’s set-
tlement rate for those liabilities and
its investment rate of return.
(2) Earnings or investment income on
reserves must be credited to those re-
serves.
(3)(i) Contributions to reserves must
be based on sound actuarial principles
using historical experience and reason-
able assumptions. Reserve levels must
be analyzed and updated at least bien-
nially for each major risk being in-
sured and take into account any rein-
surance, coinsurance, etc. Reserve lev-
els related to employee-related cov-
erages will normally be limited to the
value of claims:
(A) Submitted and adjudicated but
not paid;
(B) Submitted but not adjudicated;
and
(C) Incurred but not submitted.
(ii) Reserve levels in excess of the
amounts based on the above must be
identified and justified in the cost allo-
cation plan or indirect cost rate pro-
posal.
(4) Accounting records, actuarial
studies, and cost allocations (or bil-
lings) must recognize any significant
differences due to types of insured risk
and losses generated by the various in-
sured activities or agencies of the non-
Federal entity. If individual depart-
ments or agencies of the non-Federal
entity experience significantly dif-
ferent levels of claims for a particular
risk, those differences are to be recog-
nized by the use of separate allocations
or other techniques resulting in an eq-
uitable allocation.
(5) Whenever funds are transferred
from a self-insurance reserve to other
accounts (e.g., general fund or unre-
stricted account), refunds must be
made to the Federal Government for
its share of funds transferred, including
earned or imputed interest from the
date of transfer and debt interest, if ap-
plicable, chargeable in accordance with
applicable Federal cognizant agency
for indirect cost, claims collection reg-
ulations.
(e) Insurance refunds must be cred-
ited against insurance costs in the year
the refund is received.
(f) Indemnification includes securing
the non-Federal entity against liabil-
ities to third persons and other losses
not compensated by insurance or oth-
erwise. The Federal Government is ob-
ligated to indemnify the non-Federal
entity only to the extent expressly pro-
vided for in the Federal award, except
as provided in paragraph (c) of this sec-
tion.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49568, Aug. 13, 2020]
§200.448 Intellectual property.
(a) Patent costs. (1) The following
costs related to securing patents and
copyrights are allowable:
(i) Costs of preparing disclosures, re-
ports, and other documents required by
the Federal award, and of searching the
art to the extent necessary to make
such disclosures;
(ii) Costs of preparing documents and
any other patent costs in connection
with the filing and prosecution of a
United States patent application where
title or royalty-free license is required
by the Federal Government to be con-
veyed to the Federal Government; and
(iii) General counseling services re-
lating to patent and copyright matters,
such as advice on patent and copyright
laws, regulations, clauses, and em-
ployee intellectual property agree-
ments (See also §200.459).
(2) The following costs related to se-
curing patents and copyrights are unal-
lowable:
(i) Costs of preparing disclosures, re-
ports, and other documents, and of
searching the art to make disclosures
not required by the Federal award;
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183
OMB Guidance §200.449
(ii) Costs in connection with filing
and prosecuting any foreign patent ap-
plication, or any United States patent
application, where the Federal award
does not require conveying title or a
royalty-free license to the Federal
Government.
(b) Royalties and other costs for use of
patents and copyrights. (1) Royalties on
a patent or copyright or amortization
of the cost of acquiring by purchase a
copyright, patent, or rights thereto,
necessary for the proper performance
of the Federal award are allowable un-
less:
(i) The Federal Government already
has a license or the right to free use of
the patent or copyright.
(ii) The patent or copyright has been
adjudicated to be invalid, or has been
administratively determined to be in-
valid.
(iii) The patent or copyright is con-
sidered to be unenforceable.
(iv) The patent or copyright is ex-
pired.
(2) Special care should be exercised in
determining reasonableness where the
royalties may have been arrived at as a
result of less-than-arm’s-length bar-
gaining, such as:
(i) Royalties paid to persons, includ-
ing corporations, affiliated with the
non-Federal entity.
(ii) Royalties paid to unaffiliated
parties, including corporations, under
an agreement entered into in con-
templation that a Federal award would
be made.
(iii) Royalties paid under an agree-
ment entered into after a Federal
award is made to a non-Federal entity.
(3) In any case involving a patent or
copyright formerly owned by the non-
Federal entity, the amount of royalty
allowed must not exceed the cost which
would have been allowed had the non-
Federal entity retained title thereto.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49569, Aug. 13,
2020]
§200.449 Interest.
(a) General. Costs incurred for inter-
est on borrowed capital, temporary use
of endowment funds, or the use of the
non-Federal entity’s own funds, how-
ever represented, are unallowable. Fi-
nancing costs (including interest) to
acquire, construct, or replace capital
assets are allowable, subject to the
conditions in this section.
(b) Capital assets. (1) Capital assets is
defined as noted in §200.1 of this part.
An asset cost includes (as applicable)
acquisition costs, construction costs,
and other costs capitalized in accord-
ance with GAAP.
(2) For non-Federal entity fiscal
years beginning on or after January 1,
2016, intangible assets include patents
and computer software. For software
development projects, only interest at-
tributable to the portion of the project
costs capitalized in accordance with
GAAP is allowable.
(c) Conditions for all non-Federal enti-
ties. (1) The non-Federal entity uses the
capital assets in support of Federal
awards;
(2) The allowable asset costs to ac-
quire facilities and equipment are lim-
ited to a fair market value available to
the non-Federal entity from an unre-
lated (arm’s length) third party.
(3) The non-Federal entity obtains
the financing via an arm’s-length
transaction (that is, a transaction with
an unrelated third party); or claims re-
imbursement of actual interest cost at
a rate available via such a transaction.
(4) The non-Federal entity limits
claims for Federal reimbursement of
interest costs to the least expensive al-
ternative. For example, a lease con-
tract that transfers ownership by the
end of the contract may be determined
less costly than purchasing through
other types of debt financing, in which
case reimbursement must be limited to
the amount of interest determined if
leasing had been used.
(5) The non-Federal entity expenses
or capitalizes allowable interest cost in
accordance with GAAP.
(6) Earnings generated by the invest-
ment of borrowed funds pending their
disbursement for the asset costs are
used to offset the current period’s al-
lowable interest cost, whether that
cost is expensed or capitalized. Earn-
ings subject to being reported to the
Federal Internal Revenue Service
under arbitrage requirements are ex-
cludable.
(7) The following conditions must
apply to debt arrangements over $1
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184
2 CFR Ch. II (1–1–21 Edition) §200.450
million to purchase or construct facili-
ties, unless the non-Federal entity
makes an initial equity contribution to
the purchase of 25 percent or more. For
this purpose, ‘‘initial equity contribu-
tion’’ means the amount or value of
contributions made by the non-Federal
entity for the acquisition of facilities
prior to occupancy.
(i) The non-Federal entity must re-
duce claims for reimbursement of in-
terest cost by an amount equal to im-
puted interest earnings on excess cash
flow attributable to the portion of the
facility used for Federal awards.
(ii) The non-Federal entity must im-
pute interest on excess cash flow as fol-
lows:
(A) Annually, the non-Federal entity
must prepare a cumulative (from the
inception of the project) report of
monthly cash inflows and outflows, re-
gardless of the funding source. For this
purpose, inflows consist of Federal re-
imbursement for depreciation, amorti-
zation of capitalized construction in-
terest, and annual interest cost. Out-
flows consist of initial equity contribu-
tions, debt principal payments (less the
pro-rata share attributable to the cost
of land), and interest payments.
(B) To compute monthly cash inflows
and outflows, the non-Federal entity
must divide the annual amounts deter-
mined in step (i) by the number of
months in the year (usually 12) that
the building is in service.
(C) For any month in which cumu-
lative cash inflows exceed cumulative
outflows, interest must be calculated
on the excess inflows for that month
and be treated as a reduction to allow-
able interest cost. The rate of interest
to be used must be the three-month
Treasury bill closing rate as of the last
business day of that month.
(8) Interest attributable to a fully de-
preciated asset is unallowable.
(d) Additional conditions for states,
local governments and Indian tribes.
For costs to be allowable, the non-Fed-
eral entity must have incurred the in-
terest costs for buildings after October
1, 1980, or for land and equipment after
September 1, 1995.
(1) The requirement to offset interest
earned on borrowed funds against cur-
rent allowable interest cost (paragraph
(c)(5), above) also applies to earnings
on debt service reserve funds.
(2) The non-Federal entity will nego-
tiate the amount of allowable interest
cost related to the acquisition of facili-
ties with asset costs of $1 million or
more, as outlined in paragraph (c)(7) of
this section. For this purpose, a non-
Federal entity must consider only cash
inflows and outflows attributable to
that portion of the real property used
for Federal awards.
(e) Additional conditions for IHEs.
For costs to be allowable, the IHE
must have incurred the interest costs
after July 1, 1982, in connection with
acquisitions of capital assets that oc-
curred after that date.
(f) Additional condition for nonprofit
organizations. For costs to be allow-
able, the nonprofit organization in-
curred the interest costs after Sep-
tember 29, 1995, in connection with ac-
quisitions of capital assets that oc-
curred after that date.
(g) The interest allowability provi-
sions of this section do not apply to a
nonprofit organization subject to ‘‘full
coverage’’ under the Cost Accounting
Standards (CAS), as defined at 48 CFR
9903.201–2(a). The non-Federal entity’s
Federal awards are instead subject to
CAS 414 (48 CFR 9904.414), ‘‘Cost of
Money as an Element of the Cost of Fa-
cilities Capital’’, and CAS 417 (48 CFR
9904.417), ‘‘Cost of Money as an Element
of the Cost of Capital Assets Under
Construction’’.
[78 FR 78608, Dec. 26, 2013, as amended at 80
FR 54409, Sept. 10, 2015; 85 FR 49569, Aug. 13,
2020]
§200.450 Lobbying.
(a) The cost of certain influencing ac-
tivities associated with obtaining
grants, contracts, or cooperative agree-
ments, or loans is an unallowable cost.
Lobbying with respect to certain
grants, contracts, cooperative agree-
ments, and loans is governed by rel-
evant statutes, including among oth-
ers, the provisions of 31 U.S.C. 1352, as
well as the common rule, ‘‘New Re-
strictions on Lobbying’’ published on
February 26, 1990, including definitions,
and the Office of Management and
Budget ‘‘Governmentwide Guidance for
New Restrictions on Lobbying’’ and no-
tices published on December 20, 1989,
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185
OMB Guidance §200.450
June 15, 1990, January 15, 1992, and Jan-
uary 19, 1996.
(b) Executive lobbying costs. Costs in-
curred in attempting to improperly in-
fluence either directly or indirectly, an
employee or officer of the executive
branch of the Federal Government to
give consideration or to act regarding a
Federal award or a regulatory matter
are unallowable. Improper influence
means any influence that induces or
tends to induce a Federal employee or
officer to give consideration or to act
regarding a Federal award or regu-
latory matter on any basis other than
the merits of the matter.
(c) In addition to the above, the fol-
lowing restrictions are applicable to
nonprofit organizations and IHEs:
(1) Costs associated with the fol-
lowing activities are unallowable:
(i) Attempts to influence the out-
comes of any Federal, state, or local
election, referendum, initiative, or
similar procedure, through in-kind or
cash contributions, endorsements, pub-
licity, or similar activity;
(ii) Establishing, administering, con-
tributing to, or paying the expenses of
a political party, campaign, political
action committee, or other organiza-
tion established for the purpose of in-
fluencing the outcomes of elections in
the United States;
(iii) Any attempt to influence:
(A) The introduction of Federal or
state legislation;
(B) The enactment or modification of
any pending Federal or state legisla-
tion through communication with any
member or employee of the Congress or
state legislature (including efforts to
influence state or local officials to en-
gage in similar lobbying activity);
(C) The enactment or modification of
any pending Federal or state legisla-
tion by preparing, distributing, or
using publicity or propaganda, or by
urging members of the general public,
or any segment thereof, to contribute
to or participate in any mass dem-
onstration, march, rally, fund raising
drive, lobbying campaign or letter
writing or telephone campaign; or
(D) Any government official or em-
ployee in connection with a decision to
sign or veto enrolled legislation;
(iv) Legislative liaison activities, in-
cluding attendance at legislative ses-
sions or committee hearings, gathering
information regarding legislation, and
analyzing the effect of legislation,
when such activities are carried on in
support of or in knowing preparation
for an effort to engage in unallowable
lobbying.
(2) The following activities are ex-
cepted from the coverage of paragraph
(c)(1) of this section:
(i) Technical and factual presen-
tations on topics directly related to
the performance of a grant, contract,
or other agreement (through hearing
testimony, statements, or letters to
the Congress or a state legislature, or
subdivision, member, or cognizant staff
member thereof), in response to a docu-
mented request (including a Congres-
sional Record notice requesting testi-
mony or statements for the record at a
regularly scheduled hearing) made by
the non-Federal entity’s member of
congress, legislative body or a subdivi-
sion, or a cognizant staff member
thereof, provided such information is
readily obtainable and can be readily
put in deliverable form, and further
provided that costs under this section
for travel, lodging or meals are unal-
lowable unless incurred to offer testi-
mony at a regularly scheduled Congres-
sional hearing pursuant to a written
request for such presentation made by
the Chairman or Ranking Minority
Member of the Committee or Sub-
committee conducting such hearings;
(ii) Any lobbying made unallowable
by paragraph (c)(1)(iii) of this section
to influence state legislation in order
to directly reduce the cost, or to avoid
material impairment of the non-Fed-
eral entity’s authority to perform the
grant, contract, or other agreement; or
(iii) Any activity specifically author-
ized by statute to be undertaken with
funds from the Federal award.
(iv) Any activity excepted from the
definitions of ‘‘lobbying’’ or ‘‘influ-
encing legislation’’ by the Internal
Revenue Code provisions that require
nonprofit organizations to limit their
participation in direct and ‘‘grass
roots’’ lobbying activities in order to
retain their charitable deduction sta-
tus and avoid punitive excise taxes,
I.R.C. §§501(c)(3), 501(h), 4911(a), includ-
ing:
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186
2 CFR Ch. II (1–1–21 Edition) §200.451
(A) Nonpartisan analysis, study, or
research reports;
(B) Examinations and discussions of
broad social, economic, and similar
problems; and
(C) Information provided upon re-
quest by a legislator for technical ad-
vice and assistance, as defined by I.R.C.
§4911(d)(2) and 26 CFR 56.4911–2(c)(1)–
(c)(3).
(v) When a non-Federal entity seeks
reimbursement for indirect (F&A)
costs, total lobbying costs must be sep-
arately identified in the indirect (F&A)
cost rate proposal, and thereafter
treated as other unallowable activity
costs in accordance with the proce-
dures of §200.413.
(vi) The non-Federal entity must sub-
mit as part of its annual indirect
(F&A) cost rate proposal a certification
that the requirements and standards of
this section have been complied with.
(See also §200.415.)
(vii)(A) Time logs, calendars, or simi-
lar records are not required to be cre-
ated for purposes of complying with
the record keeping requirements in
§200.302 with respect to lobbying costs
during any particular calendar month
when:
(1) The employee engages in lobbying
(as defined in paragraphs (c)(1) and
(c)(2) of this section) 25 percent or less
of the employee’s compensated hours of
employment during that calendar
month; and
(2) Within the preceding five-year pe-
riod, the non-Federal entity has not
materially misstated allowable or un-
allowable costs of any nature, includ-
ing legislative lobbying costs.
(B) When conditions in paragraph
(c)(2)(vii)(A)(1) and (2) of this section
are met, non-Federal entities are not
required to establish records to support
the allowability of claimed costs in ad-
dition to records already required or
maintained. Also, when conditions in
paragraphs (c)(2)(vii)(A)(1) and (2) of
this section are met, the absence of
time logs, calendars, or similar records
will not serve as a basis for disallowing
costs by contesting estimates of lob-
bying time spent by employees during
a calendar month.
(viii) The Federal awarding agency
must establish procedures for resolving
in advance, in consultation with OMB,
any significant questions or disagree-
ments concerning the interpretation or
application of this section. Any such
advance resolutions must be binding in
any subsequent settlements, audits, or
investigations with respect to that
grant or contract for purposes of inter-
pretation of this part, provided, how-
ever, that this must not be construed
to prevent a contractor or non-Federal
entity from contesting the lawfulness
of such a determination.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49569, Aug. 13, 2020]
§200.451 Losses on other awards or
contracts.
Any excess of costs over income
under any other award or contract of
any nature is unallowable. This in-
cludes, but is not limited to, the non-
Federal entity’s contributed portion by
reason of cost-sharing agreements or
any under-recoveries through negotia-
tion of flat amounts for indirect (F&A)
costs. Also, any excess of costs over au-
thorized funding levels transferred
from any award or contract to another
award or contract is unallowable. All
losses are not allowable indirect (F&A)
costs and are required to be included in
the appropriate indirect cost rate base
for allocation of indirect costs.
§200.452 Maintenance and repair
costs.
Costs incurred for utilities, insur-
ance, security, necessary maintenance,
janitorial services, repair, or upkeep of
buildings and equipment (including
Federal property unless otherwise pro-
vided for) which neither add to the per-
manent value of the property nor ap-
preciably prolong its intended life, but
keep it in an efficient operating condi-
tion, are allowable. Costs incurred for
improvements which add to the perma-
nent value of the buildings and equip-
ment or appreciably prolong their in-
tended life must be treated as capital
expenditures (see §200.439). These costs
are only allowable to the extent not
paid through rental or other agree-
ments.
[85 FR 49569, Aug. 13, 2020]
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187
OMB Guidance §200.458
§200.453 Materials and supplies costs,
including costs of computing de-
vices.
(a) Costs incurred for materials, sup-
plies, and fabricated parts necessary to
carry out a Federal award are allow-
able.
(b) Purchased materials and supplies
must be charged at their actual prices,
net of applicable credits. Withdrawals
from general stores or stockrooms
must be charged at their actual net
cost under any recognized method of
pricing inventory withdrawals, consist-
ently applied. Incoming transportation
charges are a proper part of materials
and supplies costs.
(c) Materials and supplies used for
the performance of a Federal award
may be charged as direct costs. In the
specific case of computing devices,
charging as direct costs is allowable for
devices that are essential and allo-
cable, but not solely dedicated, to the
performance of a Federal award.
(d) Where federally-donated or fur-
nished materials are used in per-
forming the Federal award, such mate-
rials will be used without charge.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014]
§200.454 Memberships, subscriptions,
and professional activity costs.
(a) Costs of the non-Federal entity’s
membership in business, technical, and
professional organizations are allow-
able.
(b) Costs of the non-Federal entity’s
subscriptions to business, professional,
and technical periodicals are allowable.
(c) Costs of membership in any civic
or community organization are allow-
able with prior approval by the Federal
awarding agency or pass-through enti-
ty.
(d) Costs of membership in any coun-
try club or social or dining club or or-
ganization are unallowable.
(e) Costs of membership in organiza-
tions whose primary purpose is lob-
bying are unallowable. See also
§200.450.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49569, Aug. 13, 2020]
§200.455 Organization costs.
Costs such as incorporation fees, bro-
kers’ fees, fees to promoters, organizers
or management consultants, attorneys,
accountants, or investment counselor,
whether or not employees of the non-
Federal entity in connection with es-
tablishment or reorganization of an or-
ganization, are unallowable except
with prior approval of the Federal
awarding agency.
§200.456 Participant support costs.
Participant support costs as defined
in §200.1 are allowable with the prior
approval of the Federal awarding agen-
cy.
[85 FR 49569, Aug. 13, 2020]
§200.457 Plant and security costs.
Necessary and reasonable expenses
incurred for protection and security of
facilities, personnel, and work products
are allowable. Such costs include, but
are not limited to, wages and uniforms
of personnel engaged in security activi-
ties; equipment; barriers; protective
(non-military) gear, devices, and equip-
ment; contractual security services;
and consultants. Capital expenditures
for plant security purposes are subject
to §200.439.
[85 FR 49569, Aug. 13, 2020]
§200.458 Pre-award costs.
Pre-award costs are those incurred
prior to the effective date of the Fed-
eral award or subaward directly pursu-
ant to the negotiation and in anticipa-
tion of the Federal award where such
costs are necessary for efficient and
timely performance of the scope of
work. Such costs are allowable only to
the extent that they would have been
allowable if incurred after the date of
the Federal award and only with the
written approval of the Federal award-
ing agency. If charged to the award,
these costs must be charged to the ini-
tial budget period of the award, unless
otherwise specified by the Federal
awarding agency or pass-through enti-
ty.
[85 FR 49569, Aug. 13, 2020]
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188
2 CFR Ch. II (1–1–21 Edition) §200.459
§200.459 Professional service costs.
(a) Costs of professional and consult-
ant services rendered by persons who
are members of a particular profession
or possess a special skill, and who are
not officers or employees of the non-
Federal entity, are allowable, subject
to paragraphs (b) and (c) of this section
when reasonable in relation to the
services rendered and when not contin-
gent upon recovery of the costs from
the Federal Government. In addition,
legal and related services are limited
under §200.435.
(b) In determining the allowability of
costs in a particular case, no single fac-
tor or any special combination of fac-
tors is necessarily determinative. How-
ever, the following factors are relevant:
(1) The nature and scope of the serv-
ice rendered in relation to the service
required.
(2) The necessity of contracting for
the service, considering the non-Fed-
eral entity’s capability in the par-
ticular area.
(3) The past pattern of such costs,
particularly in the years prior to Fed-
eral awards.
(4) The impact of Federal awards on
the non-Federal entity’s business (i.e.,
what new problems have arisen).
(5) Whether the proportion of Federal
work to the non-Federal entity’s total
business is such as to influence the
non-Federal entity in favor of incur-
ring the cost, particularly where the
services rendered are not of a con-
tinuing nature and have little relation-
ship to work under Federal awards.
(6) Whether the service can be per-
formed more economically by direct
employment rather than contracting.
(7) The qualifications of the indi-
vidual or concern rendering the service
and the customary fees charged, espe-
cially on non-federally funded activi-
ties.
(8) Adequacy of the contractual
agreement for the service (e.g., descrip-
tion of the service, estimate of time re-
quired, rate of compensation, and ter-
mination provisions).
(c) In addition to the factors in para-
graph (b) of this section, to be allow-
able, retainer fees must be supported
by evidence of bona fide services avail-
able or rendered.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49569, Aug. 13, 2020]
§200.460 Proposal costs.
Proposal costs are the costs of pre-
paring bids, proposals, or applications
on potential Federal and non-Federal
awards or projects, including the devel-
opment of data necessary to support
the non-Federal entity’s bids or pro-
posals. Proposal costs of the current
accounting period of both successful
and unsuccessful bids and proposals
normally should be treated as indirect
(F&A) costs and allocated currently to
all activities of the non-Federal entity.
No proposal costs of past accounting
periods will be allocable to the current
period.
§200.461 Publication and printing
costs.
(a) Publication costs for electronic
and print media, including distribu-
tion, promotion, and general handling
are allowable. If these costs are not
identifiable with a particular cost ob-
jective, they should be allocated as in-
direct costs to all benefiting activities
of the non-Federal entity.
(b) Page charges for professional
journal publications are allowable
where:
(1) The publications report work sup-
ported by the Federal Government; and
(2) The charges are levied impartially
on all items published by the journal,
whether or not under a Federal award.
(3) The non-Federal entity may
charge the Federal award during close-
out for the costs of publication or shar-
ing of research results if the costs are
not incurred during the period of per-
formance of the Federal award. If
charged to the award, these costs must
be charged to the final budget period of
the award, unless otherwise specified
by the Federal awarding agency.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49569, Aug. 13, 2020]
§200.462 Rearrangement and recon-
version costs.
(a) Costs incurred for ordinary and
normal rearrangement and alteration
of facilities are allowable as indirect
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189
OMB Guidance §200.464
costs. Special arrangements and alter-
ations costs incurred specifically for a
Federal award are allowable as a direct
cost with the prior approval of the Fed-
eral awarding agency or pass-through
entity.
(b) Costs incurred in the restoration
or rehabilitation of the non-Federal en-
tity’s facilities to approximately the
same condition existing immediately
prior to commencement of Federal
awards, less costs related to normal
wear and tear, are allowable.
§200.463 Recruiting costs.
(a) Subject to paragraphs (b) and (c)
of this section, and provided that the
size of the staff recruited and main-
tained is in keeping with workload re-
quirements, costs of ‘‘help wanted’’ ad-
vertising, operating costs of an em-
ployment office necessary to secure
and maintain an adequate staff, costs
of operating an aptitude and edu-
cational testing program, travel costs
of employees while engaged in recruit-
ing personnel, travel costs of appli-
cants for interviews for prospective
employment, and relocation costs in-
curred incident to recruitment of new
employees, are allowable to the extent
that such costs are incurred pursuant
to the non-Federal entity’s standard
recruitment program. Where the non-
Federal entity uses employment agen-
cies, costs not in excess of standard
commercial rates for such services are
allowable.
(b) Special emoluments, fringe bene-
fits, and salary allowances incurred to
attract professional personnel that do
not meet the test of reasonableness or
do not conform with the established
practices of the non-Federal entity, are
unallowable.
(c) Where relocation costs incurred
incident to recruitment of a new em-
ployee have been funded in whole or in
part to a Federal award, and the newly
hired employee resigns for reasons
within the employee’s control within 12
months after hire, the non-Federal en-
tity will be required to refund or credit
the Federal share of such relocation
costs to the Federal Government. See
also §200.464.
(d) Short-term, travel visa costs (as
opposed to longer-term, immigration
visas) are generally allowable expenses
that may be proposed as a direct cost.
Since short-term visas are issued for a
specific period and purpose, they can be
clearly identified as directly connected
to work performed on a Federal award.
For these costs to be directly charged
to a Federal award, they must:
(1) Be critical and necessary for the
conduct of the project;
(2) Be allowable under the applicable
cost principles;
(3) Be consistent with the non-Fed-
eral entity’s cost accounting practices
and non-Federal entity policy; and
(4) Meet the definition of ‘‘direct
cost’’ as described in the applicable
cost principles.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49569, Aug. 13,
2020]
§200.464 Relocation costs of employ-
ees.
(a) Relocation costs are costs inci-
dent to the permanent change of duty
assignment (for an indefinite period or
for a stated period of not less than 12
months) of an existing employee or
upon recruitment of a new employee.
Relocation costs are allowable, subject
to the limitations described in para-
graphs (b), (c), and (d) of this section,
provided that:
(1) The move is for the benefit of the
employer.
(2) Reimbursement to the employee
is in accordance with an established
written policy consistently followed by
the employer.
(3) The reimbursement does not ex-
ceed the employee’s actual (or reason-
ably estimated) expenses.
(b) Allowable relocation costs for
current employees are limited to the
following:
(1) The costs of transportation of the
employee, members of his or her imme-
diate family and his household, and
personal effects to the new location.
(2) The costs of finding a new home,
such as advance trips by employees and
spouses to locate living quarters and
temporary lodging during the transi-
tion period, up to maximum period of
30 calendar days.
(3) Closing costs, such as brokerage,
legal, and appraisal fees, incident to
the disposition of the employee’s
former home. These costs, together
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190
2 CFR Ch. II (1–1–21 Edition) §200.465
with those described in (4), are limited
to 8 per cent of the sales price of the
employee’s former home.
(4) The continuing costs of ownership
(for up to six months) of the vacant
former home after the settlement or
lease date of the employee’s new per-
manent home, such as maintenance of
buildings and grounds (exclusive of fix-
ing-up expenses), utilities, taxes, and
property insurance.
(5) Other necessary and reasonable
expenses normally incident to reloca-
tion, such as the costs of canceling an
unexpired lease, transportation of per-
sonal property, and purchasing insur-
ance against loss of or damages to per-
sonal property. The cost of canceling
an unexpired lease is limited to three
times the monthly rental.
(c) Allowable relocation costs for new
employees are limited to those de-
scribed in paragraphs (b)(1) and (2) of
this section. When relocation costs in-
curred incident to the recruitment of
new employees have been charged to a
Federal award and the employee re-
signs for reasons within the employee’s
control within 12 months after hire,
the non-Federal entity must refund or
credit the Federal Government for its
share of the cost. If dependents are not
permitted at the location for any rea-
son and the costs do not include costs
of transporting household goods, the
costs of travel to an overseas location
must be considered travel costs in ac-
cordance with §200.474 Travel costs,
and not this relocations costs of em-
ployees (See also §200.464).
(d) The following costs related to re-
location are unallowable:
(1) Fees and other costs associated
with acquiring a new home.
(2) A loss on the sale of a former
home.
(3) Continuing mortgage principal
and interest payments on a home being
sold.
(4) Income taxes paid by an employee
related to reimbursed relocation costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49570, Aug. 13,
2020]
§200.465 Rental costs of real property
and equipment.
(a) Subject to the limitations de-
scribed in paragraphs (b) through (d) of
this section, rental costs are allowable
to the extent that the rates are reason-
able in light of such factors as: rental
costs of comparable property, if any;
market conditions in the area; alter-
natives available; and the type, life ex-
pectancy, condition, and value of the
property leased. Rental arrangements
should be reviewed periodically to de-
termine if circumstances have changed
and other options are available.
(b) Rental costs under ‘‘sale and lease
back’’ arrangements are allowable only
up to the amount that would be al-
lowed had the non-Federal entity con-
tinued to own the property. This
amount would include expenses such as
depreciation, maintenance, taxes, and
insurance.
(c) Rental costs under ‘‘less-than-
arm’s-length’’ leases are allowable only
up to the amount (as explained in para-
graph (b) of this section). For this pur-
pose, a less-than-arm’s-length lease is
one under which one party to the lease
agreement is able to control or sub-
stantially influence the actions of the
other. Such leases include, but are not
limited to those between:
(1) Divisions of the non-Federal enti-
ty;
(2) The non-Federal entity under
common control through common offi-
cers, directors, or members; and
(3) The non-Federal entity and a di-
rector, trustee, officer, or key em-
ployee of the non-Federal entity or an
immediate family member, either di-
rectly or through corporations, trusts,
or similar arrangements in which they
hold a controlling interest. For exam-
ple, the non-Federal entity may estab-
lish a separate corporation for the sole
purpose of owning property and leasing
it back to the non-Federal entity.
(4) Family members include one
party with any of the following rela-
tionships to another party:
(i) Spouse, and parents thereof;
(ii) Children, and spouses thereof;
(iii) Parents, and spouses thereof;
(iv) Siblings, and spouses thereof;
(v) Grandparents and grandchildren,
and spouses thereof;
(vi) Domestic partner and parents
thereof, including domestic partners of
any individual in 2 through 5 of this
definition; and
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191
OMB Guidance §200.466
(vii) Any individual related by blood
or affinity whose close association with
the employee is the equivalent of a
family relationship.
(5) Rental costs under leases which
are required to be treated as capital
leases under GAAP are allowable only
up to the amount (as explained in para-
graph (b) of this section) that would be
allowed had the non-Federal entity
purchased the property on the date the
lease agreement was executed. The pro-
visions of GAAP must be used to deter-
mine whether a lease is a capital lease.
Interest costs related to capital leases
are allowable to the extent they meet
the criteria in §200.449 Interest. Unal-
lowable costs include amounts paid for
profit, management fees, and taxes
that would not have been incurred had
the non-Federal entity purchased the
property.
(6) The rental of any property owned
by any individuals or entities affiliated
with the non-Federal entity, to include
commercial or residential real estate,
for purposes such as the home office
workspace is unallowable.
(d) Rental costs under leases which
are required to be accounted for as a fi-
nanced purchase under GASB stand-
ards or a finance lease under FASB
standards under GAAP are allowable
only up to the amount (as explained in
paragraph (b) of this section) that
would be allowed had the non-Federal
entity purchased the property on the
date the lease agreement was executed.
Interest costs related to these leases
are allowable to the extent they meet
the criteria in §200.449. Unallowable
costs include amounts paid for profit,
management fees, and taxes that would
not have been incurred had the non-
Federal entity purchased the property.
(e) Rental or lease payments are al-
lowable under lease contracts where
the non-Federal entity is required to
recognize an intangible right-to-use
lease asset (per GASB) or right of use
operating lease asset (per FASB) for
purposes of financial reporting in ac-
cordance with GAAP.
(f) The rental of any property owned
by any individuals or entities affiliated
with the non-Federal entity, to include
commercial or residential real estate,
for purposes such as the home office
workspace is unallowable.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49569, Aug. 13, 2020]
§200.466 Scholarships and student aid
costs.
(a) Costs of scholarships, fellowships,
and other programs of student aid at
IHEs are allowable only when the pur-
pose of the Federal award is to provide
training to selected participants and
the charge is approved by the Federal
awarding agency. However, tuition re-
mission and other forms of compensa-
tion paid as, or in lieu of, wages to stu-
dents performing necessary work are
allowable provided that:
(1) The individual is conducting ac-
tivities necessary to the Federal
award;
(2) Tuition remission and other sup-
port are provided in accordance with
established policy of the IHE and con-
sistently provided in a like manner to
students in return for similar activities
conducted under Federal awards as
well as other activities; and
(3) During the academic period, the
student is enrolled in an advanced de-
gree program at a non-Federal entity
or affiliated institution and the activi-
ties of the student in relation to the
Federal award are related to the degree
program;
(4) The tuition or other payments are
reasonable compensation for the work
performed and are conditioned explic-
itly upon the performance of necessary
work; and
(5) It is the IHE’s practice to simi-
larly compensate students under Fed-
eral awards as well as other activities.
(b) Charges for tuition remission and
other forms of compensation paid to
students as, or in lieu of, salaries and
wages must be subject to the reporting
requirements in §200.430, and must be
treated as direct or indirect cost in ac-
cordance with the actual work being
performed. Tuition remission may be
charged on an average rate basis. See
also §200.431.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49569, Aug. 13, 2020]
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192
2 CFR Ch. II (1–1–21 Edition) §200.467
§200.467 Selling and marketing costs.
Costs of selling and marketing any
products or services of the non-Federal
entity (unless allowed under §200.421)
are unallowable, except as direct costs,
with prior approval by the Federal
awarding agency when necessary for
the performance of the Federal award.
[85 FR 49570, Aug. 13, 2020]
§200.468 Specialized service facilities.
(a) The costs of services provided by
highly complex or specialized facilities
operated by the non-Federal entity,
such as computing facilities, wind tun-
nels, and reactors are allowable, pro-
vided the charges for the services meet
the conditions of either paragraph (b)
or (c) of this section, and, in addition,
take into account any items of income
or Federal financing that qualify as ap-
plicable credits under §200.406.
(b) The costs of such services, when
material, must be charged directly to
applicable awards based on actual
usage of the services on the basis of a
schedule of rates or established meth-
odology that:
(1) Does not discriminate between ac-
tivities under Federal awards and other
activities of the non-Federal entity, in-
cluding usage by the non-Federal enti-
ty for internal purposes, and
(2) Is designed to recover only the ag-
gregate costs of the services. The costs
of each service must consist normally
of both its direct costs and its allocable
share of all indirect (F&A) costs. Rates
must be adjusted at least biennially,
and must take into consideration over/
under-applied costs of the previous pe-
riod(s).
(c) Where the costs incurred for a
service are not material, they may be
allocated as indirect (F&A) costs.
(d) Under some extraordinary cir-
cumstances, where it is in the best in-
terest of the Federal Government and
the non-Federal entity to establish al-
ternative costing arrangements, such
arrangements may be worked out with
the Federal cognizant agency for indi-
rect costs.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49569, Aug. 13, 2020]
§200.469 Student activity costs.
Costs incurred for intramural activi-
ties, student publications, student
clubs, and other student activities, are
unallowable, unless specifically pro-
vided for in the Federal award.
§200.470 Taxes (including Value
Added Tax).
(a) For states, local governments and
Indian tribes:
(1) Taxes that a governmental unit is
legally required to pay are allowable,
except for self-assessed taxes that dis-
proportionately affect Federal pro-
grams or changes in tax policies that
disproportionately affect Federal pro-
grams.
(2) Gasoline taxes, motor vehicle
fees, and other taxes that are in effect
user fees for benefits provided to the
Federal Government are allowable.
(3) This provision does not restrict
the authority of the Federal awarding
agency to identify taxes where Federal
participation is inappropriate. Where
the identification of the amount of un-
allowable taxes would require an inor-
dinate amount of effort, the cognizant
agency for indirect costs may accept a
reasonable approximation thereof.
(b) For nonprofit organizations and
IHEs:
(1) In general, taxes which the non-
Federal entity is required to pay and
which are paid or accrued in accord-
ance with GAAP, and payments made
to local governments in lieu of taxes
which are commensurate with the local
government services received are al-
lowable, except for:
(i) Taxes from which exemptions are
available to the non-Federal entity di-
rectly or which are available to the
non-Federal entity based on an exemp-
tion afforded the Federal Government
and, in the latter case, when the Fed-
eral awarding agency makes available
the necessary exemption certificates,
(ii) Special assessments on land
which represent capital improvements,
and
(iii) Federal income taxes.
(2) Any refund of taxes, and any pay-
ment to the non-Federal entity of in-
terest thereon, which were allowed as
Federal award costs, will be credited
either as a cost reduction or cash re-
fund, as appropriate, to the Federal
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193
OMB Guidance §200.472
Government. However, any interest ac-
tually paid or credited to an non-Fed-
eral entity incident to a refund of tax,
interest, and penalty will be paid or
credited to the Federal Government
only to the extent that such interest
accrued over the period during which
the non-Federal entity has been reim-
bursed by the Federal Government for
the taxes, interest, and penalties.
(c) Value Added Tax (VAT) Foreign
taxes charged for the purchase of goods
or services that a non-Federal entity is
legally required to pay in country is an
allowable expense under Federal
awards. Foreign tax refunds or applica-
ble credits under Federal awards refer
to receipts, or reduction of expendi-
tures, which operate to offset or reduce
expense items that are allocable to
Federal awards as direct or indirect
costs. To the extent that such credits
accrued or received by the non-Federal
entity relate to allowable cost, these
costs must be credited to the Federal
awarding agency either as costs or cash
refunds. If the costs are credited back
to the Federal award, the non-Federal
entity may reduce the Federal share of
costs by the amount of the foreign tax
reimbursement, or where Federal
award has not expired, use the foreign
government tax refund for approved ac-
tivities under the Federal award with
prior approval of the Federal awarding
agency.
§200.471 Telecommunication costs and
video surveillance costs.
(a) Costs incurred for telecommuni-
cations and video surveillance services
or equipment such as phones, internet,
video surveillance, cloud servers are al-
lowable except for the following cir-
cumstances:
(b) Obligating or expending covered
telecommunications and video surveil-
lance services or equipment or services
as described in §200.216 to:
(1) Procure or obtain, extend or
renew a contract to procure or obtain;
(2) Enter into a contract (or extend
or renew a contract) to procure; or
(3) Obtain the equipment, services, or
systems.
[85 FR 49570, Aug. 13, 2020]
§200.472 Termination costs.
Termination of a Federal award gen-
erally gives rise to the incurrence of
costs, or the need for special treatment
of costs, which would not have arisen
had the Federal award not been termi-
nated. Cost principles covering these
items are set forth in this section.
They are to be used in conjunction
with the other provisions of this part
in termination situations.
(a) The cost of items reasonably usa-
ble on the non-Federal entity’s other
work must not be allowable unless the
non-Federal entity submits evidence
that it would not retain such items at
cost without sustaining a loss. In de-
ciding whether such items are reason-
ably usable on other work of the non-
Federal entity, the Federal awarding
agency should consider the non-Federal
entity’s plans and orders for current
and scheduled activity. Contempora-
neous purchases of common items by
the non-Federal entity must be re-
garded as evidence that such items are
reasonably usable on the non-Federal
entity’s other work. Any acceptance of
common items as allocable to the ter-
minated portion of the Federal award
must be limited to the extent that the
quantities of such items on hand, in
transit, and on order are in excess of
the reasonable quantitative require-
ments of other work.
(b) If in a particular case, despite all
reasonable efforts by the non-Federal
entity, certain costs cannot be discon-
tinued immediately after the effective
date of termination, such costs are
generally allowable within the limita-
tions set forth in this part, except that
any such costs continuing after termi-
nation due to the negligent or willful
failure of the non-Federal entity to dis-
continue such costs must be unallow-
able.
(c) Loss of useful value of special
tooling, machinery, and equipment is
generally allowable if:
(1) Such special tooling, special ma-
chinery, or equipment is not reason-
ably capable of use in the other work of
the non-Federal entity,
(2) The interest of the Federal Gov-
ernment is protected by transfer of
title or by other means deemed appro-
priate by the Federal awarding agency
(see also §200.313 (d)), and
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194
2 CFR Ch. II (1–1–21 Edition) §200.473
(3) The loss of useful value for any
one terminated Federal award is lim-
ited to that portion of the acquisition
cost which bears the same ratio to the
total acquisition cost as the termi-
nated portion of the Federal award
bears to the entire terminated Federal
award and other Federal awards for
which the special tooling, machinery,
or equipment was acquired.
(d) Rental costs under unexpired
leases are generally allowable where
clearly shown to have been reasonably
necessary for the performance of the
terminated Federal award less the re-
sidual value of such leases, if:
(1) The amount of such rental
claimed does not exceed the reasonable
use value of the property leased for the
period of the Federal award and such
further period as may be reasonable,
and
(2) The non-Federal entity makes all
reasonable efforts to terminate, assign,
settle, or otherwise reduce the cost of
such lease. There also may be included
the cost of alterations of such leased
property, provided such alterations
were necessary for the performance of
the Federal award, and of reasonable
restoration required by the provisions
of the lease.
(e) Settlement expenses including the
following are generally allowable:
(1) Accounting, legal, clerical, and
similar costs reasonably necessary for:
(i) The preparation and presentation
to the Federal awarding agency of set-
tlement claims and supporting data
with respect to the terminated portion
of the Federal award, unless the termi-
nation is for cause (see subpart D, in-
cluding §§200.339–200.343); and
(ii) The termination and settlement
of subawards.
(2) Reasonable costs for the storage,
transportation, protection, and disposi-
tion of property provided by the Fed-
eral Government or acquired or pro-
duced for the Federal award.
(f) Claims under subawards, including
the allocable portion of claims which
are common to the Federal award and
to other work of the non-Federal enti-
ty, are generally allowable. An appro-
priate share of the non-Federal entity’s
indirect costs may be allocated to the
amount of settlements with contrac-
tors and/or subrecipients, provided that
the amount allocated is otherwise con-
sistent with the basic guidelines con-
tained in §200.414. The indirect costs so
allocated must exclude the same and
similar costs claimed directly or indi-
rectly as settlement expenses.
[78 FR 78608, Dec. 26, 2013. Redesignated and
amended at 85 FR 49570, Aug. 13, 2020]
§200.473 Training and education costs.
The cost of training and education
provided for employee development is
allowable.
[78 FR 78608, Dec. 26, 2013. Redesignated at 85
FR 49570, Aug. 13, 2020]
§200.474 Transportation costs.
Costs incurred for freight, express,
cartage, postage, and other transpor-
tation services relating either to goods
purchased, in process, or delivered, are
allowable. When such costs can readily
be identified with the items involved,
they may be charged directly as trans-
portation costs or added to the cost of
such items. Where identification with
the materials received cannot readily
be made, inbound transportation cost
may be charged to the appropriate in-
direct (F&A) cost accounts if the non-
Federal entity follows a consistent, eq-
uitable procedure in this respect. Out-
bound freight, if reimbursable under
the terms and conditions of the Federal
award, should be treated as a direct
cost.
[78 FR 78608, Dec. 26, 2013. Redesignated at 85
FR 49570, Aug. 13, 2020]
§200.475 Travel costs.
(a) General. Travel costs are the ex-
penses for transportation, lodging, sub-
sistence, and related items incurred by
employees who are in travel status on
official business of the non-Federal en-
tity. Such costs may be charged on an
actual cost basis, on a per diem or
mileage basis in lieu of actual costs in-
curred, or on a combination of the two,
provided the method used is applied to
an entire trip and not to selected days
of the trip, and results in charges con-
sistent with those normally allowed in
like circumstances in the non-Federal
entity’s non-federally-funded activities
and in accordance with non-Federal en-
tity’s written travel reimbursement
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195
OMB Guidance §200.500
policies. Notwithstanding the provi-
sions of §200.444, travel costs of offi-
cials covered by that section are allow-
able with the prior written approval of
the Federal awarding agency or pass-
through entity when they are specifi-
cally related to the Federal award.
(b) Lodging and subsistence. Costs in-
curred by employees and officers for
travel, including costs of lodging, other
subsistence, and incidental expenses,
must be considered reasonable and oth-
erwise allowable only to the extent
such costs do not exceed charges nor-
mally allowed by the non-Federal enti-
ty in its regular operations as the re-
sult of the non-Federal entity’s written
travel policy. In addition, if these costs
are charged directly to the Federal
award documentation must justify
that:
(1) Participation of the individual is
necessary to the Federal award; and
(2) The costs are reasonable and con-
sistent with non-Federal entity’s es-
tablished travel policy.
(c)(1) Temporary dependent care
costs (as dependent is defined in 26
U.S.C. 152) above and beyond regular
dependent care that directly results
from travel to conferences is allowable
provided that:
(i) The costs are a direct result of the
individual’s travel for the Federal
award;
(ii) The costs are consistent with the
non-Federal entity’s documented trav-
el policy for all entity travel; and
(iii) Are only temporary during the
travel period.
(2) Travel costs for dependents are
unallowable, except for travel of dura-
tion of six months or more with prior
approval of the Federal awarding agen-
cy. See also §200.432.
(d) In the absence of an acceptable,
written non-Federal entity policy re-
garding travel costs, the rates and
amounts established under 5 U.S.C.
5701–11, (‘‘Travel and Subsistence Ex-
penses; Mileage Allowances’’), or by
the Administrator of General Services,
or by the President (or his or her des-
ignee) pursuant to any provisions of
such subchapter must apply to travel
under Federal awards (48 CFR 31.205–
46(a)).
(e) Commercial air travel. (1) Airfare
costs in excess of the basic least expen-
sive unrestricted accommodations
class offered by commercial airlines
are unallowable except when such ac-
commodations would:
(i) Require circuitous routing;
(ii) Require travel during unreason-
able hours;
(iii) Excessively prolong travel;
(iv) Result in additional costs that
would offset the transportation sav-
ings; or
(v) Offer accommodations not reason-
ably adequate for the traveler’s med-
ical needs. The non-Federal entity
must justify and document these condi-
tions on a case-by-case basis in order
for the use of first-class or business-
class airfare to be allowable in such
cases.
(2) Unless a pattern of avoidance is
detected, the Federal Government will
generally not question a non-Federal
entity’s determinations that cus-
tomary standard airfare or other dis-
count airfare is unavailable for specific
trips if the non-Federal entity can
demonstrate that such airfare was not
available in the specific case.
(f) Air travel by other than commercial
carrier. Costs of travel by non-Federal
entity-owned, -leased, or -chartered
aircraft include the cost of lease, char-
ter, operation (including personnel
costs), maintenance, depreciation, in-
surance, and other related costs. The
portion of such costs that exceeds the
cost of airfare as provided for in para-
graph (d) of this section, is unallow-
able.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014. Redesignated and
amended at 85 FR 49570, Aug. 13, 2020]
§200.476 Trustees.
Travel and subsistence costs of trust-
ees (or directors) at IHEs and nonprofit
organizations are allowable. See also
§200.475.
[85 FR 49571, Aug. 13, 2020]
Subpart F—Audit Requirements
GENERAL
§200.500 Purpose.
This part sets forth standards for ob-
taining consistency and uniformity
among Federal agencies for the audit
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196
2 CFR Ch. II (1–1–21 Edition) §200.501
of non-Federal entities expending Fed-
eral awards.
AUDITS
§200.501 Audit requirements.
(a) Audit required. A non-Federal enti-
ty that expends $750,000 or more during
the non-Federal entity’s fiscal year in
Federal awards must have a single or
program-specific audit conducted for
that year in accordance with the provi-
sions of this part.
(b) Single audit. A non-Federal entity
that expends $750,000 or more during
the non-Federal entity’s fiscal year in
Federal awards must have a single
audit conducted in accordance with
§200.514 except when it elects to have a
program-specific audit conducted in ac-
cordance with paragraph (c) of this sec-
tion.
(c) Program-specific audit election.
When an auditee expends Federal
awards under only one Federal pro-
gram (excluding R&D) and the Federal
program’s statutes, regulations, or the
terms and conditions of the Federal
award do not require a financial state-
ment audit of the auditee, the auditee
may elect to have a program-specific
audit conducted in accordance with
§200.507. A program-specific audit may
not be elected for R&D unless all of the
Federal awards expended were received
from the same Federal agency, or the
same Federal agency and the same
pass-through entity, and that Federal
agency, or pass-through entity in the
case of a subrecipient, approves in ad-
vance a program-specific audit.
(d) Exemption when Federal awards ex-
pended are less than $750,000. A non-Fed-
eral entity that expends less than
$750,000 during the non-Federal entity’s
fiscal year in Federal awards is exempt
from Federal audit requirements for
that year, except as noted in §200.503,
but records must be available for re-
view or audit by appropriate officials
of the Federal agency, pass-through en-
tity, and Government Accountability
Office (GAO).
(e) Federally Funded Research and De-
velopment Centers (FFRDC). Manage-
ment of an auditee that owns or oper-
ates a FFRDC may elect to treat the
FFRDC as a separate entity for pur-
poses of this part.
(f) Subrecipients and contractors. An
auditee may simultaneously be a re-
cipient, a subrecipient, and a con-
tractor. Federal awards expended as a
recipient or a subrecipient are subject
to audit under this part. The payments
received for goods or services provided
as a contractor are not Federal awards.
Section §200.331 sets forth the consider-
ations in determining whether pay-
ments constitute a Federal award or a
payment for goods or services provided
as a contractor.
(g) Compliance responsibility for con-
tractors. In most cases, the auditee’s
compliance responsibility for contrac-
tors is only to ensure that the procure-
ment, receipt, and payment for goods
and services comply with Federal stat-
utes, regulations, and the terms and
conditions of Federal awards. Federal
award compliance requirements nor-
mally do not pass through to contrac-
tors. However, the auditee is respon-
sible for ensuring compliance for pro-
curement transactions which are struc-
tured such that the contractor is re-
sponsible for program compliance or
the contractor’s records must be re-
viewed to determine program compli-
ance. Also, when these procurement
transactions relate to a major pro-
gram, the scope of the audit must in-
clude determining whether these trans-
actions are in compliance with Federal
statutes, regulations, and the terms
and conditions of Federal awards.
(h) For-profit subrecipient. Since this
part does not apply to for-profit sub-
recipients, the pass-through entity is
responsible for establishing require-
ments, as necessary, to ensure compli-
ance by for-profit subrecipients. The
agreement with the for-profit sub-
recipient must describe applicable
compliance requirements and the for-
profit subrecipient’s compliance re-
sponsibility. Methods to ensure compli-
ance for Federal awards made to for-
profit subrecipients may include pre-
award audits, monitoring during the
agreement, and post-award audits. See
also §200.332.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13,
2020]
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197
OMB Guidance §200.503
§200.502 Basis for determining Fed-
eral awards expended.
(a) Determining Federal awards ex-
pended. The determination of when a
Federal award is expended must be
based on when the activity related to
the Federal award occurs. Generally,
the activity pertains to events that re-
quire the non-Federal entity to comply
with Federal statutes, regulations, and
the terms and conditions of Federal
awards, such as: expenditure/expense
transactions associated with awards in-
cluding grants, cost-reimbursement
contracts under the FAR, compacts
with Indian Tribes, cooperative agree-
ments, and direct appropriations; the
disbursement of funds to subrecipients;
the use of loan proceeds under loan and
loan guarantee programs; the receipt of
property; the receipt of surplus prop-
erty; the receipt or use of program in-
come; the distribution or use of food
commodities; the disbursement of
amounts entitling the non-Federal en-
tity to an interest subsidy; and the pe-
riod when insurance is in force.
(b) Loan and loan guarantees (loans).
Since the Federal Government is at
risk for loans until the debt is repaid,
the following guidelines must be used
to calculate the value of Federal
awards expended under loan programs,
except as noted in paragraphs (c) and
(d) of this section:
(1) Value of new loans made or re-
ceived during the audit period; plus
(2) Beginning of the audit period bal-
ance of loans from previous years for
which the Federal Government imposes
continuing compliance requirements;
plus
(3) Any interest subsidy, cash, or ad-
ministrative cost allowance received.
(c) Loan and loan guarantees (loans) at
IHEs. When loans are made to students
of an IHE but the IHE does not make
the loans, then only the value of loans
made during the audit period must be
considered Federal awards expended in
that audit period. The balance of loans
for previous audit periods is not in-
cluded as Federal awards expended be-
cause the lender accounts for the prior
balances.
(d) Prior loan and loan guarantees
(loans). Loans, the proceeds of which
were received and expended in prior
years, are not considered Federal
awards expended under this part when
the Federal statutes, regulations, and
the terms and conditions of Federal
awards pertaining to such loans impose
no continuing compliance require-
ments other than to repay the loans.
(e) Endowment funds. The cumulative
balance of Federal awards for endow-
ment funds that are federally re-
stricted are considered Federal awards
expended in each audit period in which
the funds are still restricted.
(f) Free rent. Free rent received by
itself is not considered a Federal award
expended under this part. However, free
rent received as part of a Federal
award to carry out a Federal program
must be included in determining Fed-
eral awards expended and subject to
audit under this part.
(g) Valuing non-cash assistance. Fed-
eral non-cash assistance, such as free
rent, food commodities, donated prop-
erty, or donated surplus property, must
be valued at fair market value at the
time of receipt or the assessed value
provided by the Federal agency.
(h) Medicare. Medicare payments to a
non-Federal entity for providing pa-
tient care services to Medicare-eligible
individuals are not considered Federal
awards expended under this part.
(i) Medicaid. Medicaid payments to a
subrecipient for providing patient care
services to Medicaid-eligible individ-
uals are not considered Federal awards
expended under this part unless a state
requires the funds to be treated as Fed-
eral awards expended because reim-
bursement is on a cost-reimbursement
basis.
(j) Certain loans provided by the Na-
tional Credit Union Administration. For
purposes of this part, loans made from
the National Credit Union Share Insur-
ance Fund and the Central Liquidity
Facility that are funded by contribu-
tions from insured non-Federal entities
are not considered Federal awards ex-
pended.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014]
§200.503 Relation to other audit re-
quirements.
(a) An audit conducted in accordance
with this part must be in lieu of any fi-
nancial audit of Federal awards which
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198
2 CFR Ch. II (1–1–21 Edition) §200.504
a non-Federal entity is required to un-
dergo under any other Federal statute
or regulation. To the extent that such
audit provides a Federal agency with
the information it requires to carry
out its responsibilities under Federal
statute or regulation, a Federal agency
must rely upon and use that informa-
tion.
(b) Notwithstanding subsection (a), a
Federal agency, Inspectors General, or
GAO may conduct or arrange for addi-
tional audits which are necessary to
carry out its responsibilities under
Federal statute or regulation. The pro-
visions of this part do not authorize
any non-Federal entity to constrain, in
any manner, such Federal agency from
carrying out or arranging for such ad-
ditional audits, except that the Federal
agency must plan such audits to not be
duplicative of other audits of Federal
awards. Prior to commencing such an
audit, the Federal agency or pass-
through entity must review the FAC
for recent audits submitted by the non-
Federal entity, and to the extent such
audits meet a Federal agency or pass-
through entity’s needs, the Federal
agency or pass-through entity must
rely upon and use such audits. Any ad-
ditional audits must be planned and
performed in such a way as to build
upon work performed, including the
audit documentation, sampling, and
testing already performed, by other
auditors.
(c) The provisions of this part do not
limit the authority of Federal agencies
to conduct, or arrange for the conduct
of, audits and evaluations of Federal
awards, nor limit the authority of any
Federal agency Inspector General or
other Federal official. For example, re-
quirements that may be applicable
under the FAR or CAS and the terms
and conditions of a cost-reimbursement
contract may include additional appli-
cable audits to be conducted or ar-
ranged for by Federal agencies.
(d) Federal agency to pay for additional
audits. A Federal agency that conducts
or arranges for additional audits must,
consistent with other applicable Fed-
eral statutes and regulations, arrange
for funding the full cost of such addi-
tional audits.
(e) Request for a program to be audited
as a major program. A Federal awarding
agency may request that an auditee
have a particular Federal program au-
dited as a major program in lieu of the
Federal awarding agency conducting or
arranging for the additional audits. To
allow for planning, such requests
should be made at least 180 calendar
days prior to the end of the fiscal year
to be audited. The auditee, after con-
sultation with its auditor, should
promptly respond to such a request by
informing the Federal awarding agency
whether the program would otherwise
be audited as a major program using
the risk-based audit approach de-
scribed in §200.518 and, if not, the esti-
mated incremental cost. The Federal
awarding agency must then promptly
confirm to the auditee whether it
wants the program audited as a major
program. If the program is to be au-
dited as a major program based upon
this Federal awarding agency request,
and the Federal awarding agency
agrees to pay the full incremental
costs, then the auditee must have the
program audited as a major program. A
pass-through entity may use the provi-
sions of this paragraph for a sub-
recipient.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49570, Aug. 13, 2020]
§200.504 Frequency of audits.
Except for the provisions for biennial
audits provided in paragraphs (a) and
(b) of this section, audits required by
this part must be performed annually.
Any biennial audit must cover both
years within the biennial period.
(a) A state, local government, or In-
dian tribe that is required by constitu-
tion or statute, in effect on January 1,
1987, to undergo its audits less fre-
quently than annually, is permitted to
undergo its audits pursuant to this
part biennially. This requirement must
still be in effect for the biennial period.
(b) Any nonprofit organization that
had biennial audits for all biennial pe-
riods ending between July 1, 1992, and
January 1, 1995, is permitted to under-
go its audits pursuant to this part bi-
ennially.
§200.505 Sanctions.
In cases of continued inability or un-
willingness to have an audit conducted
in accordance with this part, Federal
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199
OMB Guidance §200.507
agencies and pass-through entities
must take appropriate action as pro-
vided in §200.339.
[85 FR 49571, Aug. 13, 2020]
§200.506 Audit costs.
See §200.425.
[85 FR 49571, Aug. 13, 2020]
§200.507 Program-specific audits.
(a) Program-specific audit guide avail-
able. In some cases, a program-specific
audit guide will be available to provide
specific guidance to the auditor with
respect to internal controls, compli-
ance requirements, suggested audit
procedures, and audit reporting re-
quirements. A listing of current pro-
gram-specific audit guides can be found
in the compliance supplement, Part 8,
Appendix VI, Program-Specific Audit
Guides, which includes a website where
a copy of the guide can be obtained.
When a current program-specific audit
guide is available, the auditor must
follow GAGAS and the guide when per-
forming a program-specific audit.
(b) Program-specific audit guide not
available. (1) When a current program-
specific audit guide is not available,
the auditee and auditor must have ba-
sically the same responsibilities for the
Federal program as they would have
for an audit of a major program in a
single audit.
(2) The auditee must prepare the fi-
nancial statement(s) for the Federal
program that includes, at a minimum,
a schedule of expenditures of Federal
awards for the program and notes that
describe the significant accounting
policies used in preparing the schedule,
a summary schedule of prior audit find-
ings consistent with the requirements
of §200.511(b), and a corrective action
plan consistent with the requirements
of §200.511(c).
(3) The auditor must:
(i) Perform an audit of the financial
statement(s) for the Federal program
in accordance with GAGAS;
(ii) Obtain an understanding of inter-
nal controls and perform tests of inter-
nal controls over the Federal program
consistent with the requirements of
§200.514(c) for a major program;
(iii) Perform procedures to determine
whether the auditee has complied with
Federal statutes, regulations, and the
terms and conditions of Federal awards
that could have a direct and material
effect on the Federal program con-
sistent with the requirements of
§200.514(d) for a major program;
(iv) Follow up on prior audit findings,
perform procedures to assess the rea-
sonableness of the summary schedule
of prior audit findings prepared by the
auditee in accordance with the require-
ments of §200.511, and report, as a cur-
rent year audit finding, when the audi-
tor concludes that the summary sched-
ule of prior audit findings materially
misrepresents the status of any prior
audit finding; and
(v) Report any audit findings con-
sistent with the requirements of
§200.516.
(4) The auditor’s report(s) may be in
the form of either combined or sepa-
rate reports and may be organized dif-
ferently from the manner presented in
this section. The auditor’s report(s)
must state that the audit was con-
ducted in accordance with this part
and include the following:
(i) An opinion (or disclaimer of opin-
ion) as to whether the financial state-
ment(s) of the Federal program is pre-
sented fairly in all material respects in
accordance with the stated accounting
policies;
(ii) A report on internal control re-
lated to the Federal program, which
must describe the scope of testing of
internal control and the results of the
tests;
(iii) A report on compliance which in-
cludes an opinion (or disclaimer of
opinion) as to whether the auditee
complied with laws, regulations, and
the terms and conditions of Federal
awards which could have a direct and
material effect on the Federal pro-
gram; and
(iv) A schedule of findings and ques-
tioned costs for the Federal program
that includes a summary of the audi-
tor’s results relative to the Federal
program in a format consistent with
§200.515(d)(1) and findings and ques-
tioned costs consistent with the re-
quirements of §200.515(d)(3).
(c) Report submission for program-spe-
cific audits. (1) The audit must be com-
pleted and the reporting required by
paragraph (c)(2) or (c)(3) of this section
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200
2 CFR Ch. II (1–1–21 Edition) §200.508
submitted within the earlier of 30 cal-
endar days after receipt of the audi-
tor’s report(s), or nine months after
the end of the audit period, unless a
different period is specified in a pro-
gram-specific audit guide. Unless re-
stricted by Federal law or regulation,
the auditee must make report copies
available for public inspection.
Auditees and auditors must ensure
that their respective parts of the re-
porting package do not include pro-
tected personally identifiable informa-
tion.
(2) When a program-specific audit
guide is available, the auditee must
electronically submit to the FAC the
data collection form prepared in ac-
cordance with §200.512(b), as applicable
to a program-specific audit, and the re-
porting required by the program-spe-
cific audit guide.
(3) When a program-specific audit
guide is not available, the reporting
package for a program-specific audit
must consist of the financial state-
ment(s) of the Federal program, a sum-
mary schedule of prior audit findings,
and a corrective action plan as de-
scribed in paragraph (b)(2) of this sec-
tion, and the auditor’s report(s) de-
scribed in paragraph (b)(4) of this sec-
tion. The data collection form prepared
in accordance with §200.512(b), as appli-
cable to a program-specific audit, and
one copy of this reporting package
must be electronically submitted to
the FAC.
(d) Other sections of this part may
apply. Program-specific audits are sub-
ject to:
(1) 200.500 Purpose through 200.503 Re-
lation to other audit requirements,
paragraph (d);
(2) 200.504 Frequency of audits
through 200.506 Audit costs;
(3) 200.508 Auditee responsibilities
through 200.509 Auditor selection;
(4) 200.511 Audit findings follow-up;
(5) 200.512 Report submission, para-
graphs (e) through (h);
(6) 200.513 Responsibilities;
(7) 200.516 Audit findings through
200.517 Audit documentation;
(8) 200.521 Management decision; and
(9) Other referenced provisions of this
part unless contrary to the provisions
of this section, a program-specific
audit guide, or program statutes and
regulations.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13,
2020]
AUDITEES
§200.508 Auditee responsibilities.
The auditee must:
(a) Procure or otherwise arrange for
the audit required by this part in ac-
cordance with §200.509, and ensure it is
properly performed and submitted
when due in accordance with §200.512.
(b) Prepare appropriate financial
statements, including the schedule of
expenditures of Federal awards in ac-
cordance with §200.510.
(c) Promptly follow up and take cor-
rective action on audit findings, in-
cluding preparation of a summary
schedule of prior audit findings and a
corrective action plan in accordance
with §200.511(b) and (c), respectively.
(d) Provide the auditor with access to
personnel, accounts, books, records,
supporting documentation, and other
information as needed for the auditor
to perform the audit required by this
part.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49572, Aug. 13, 2020]
§200.509 Auditor selection.
(a) Auditor procurement. In procuring
audit services, the auditee must follow
the procurement standards prescribed
by the Procurement Standards in
§§200.317 through 200.326 of subpart D of
this part or the FAR (48 CFR part 42),
as applicable. When procuring audit
services, the objective is to obtain
high-quality audits. In requesting pro-
posals for audit services, the objectives
and scope of the audit must be made
clear and the non-Federal entity must
request a copy of the audit organiza-
tion’s peer review report which the
auditor is required to provide under
GAGAS. Factors to be considered in
evaluating each proposal for audit
services include the responsiveness to
the request for proposal, relevant expe-
rience, availability of staff with profes-
sional qualifications and technical
abilities, the results of peer and exter-
nal quality control reviews, and price.
Whenever possible, the auditee must
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201
OMB Guidance §200.511
make positive efforts to utilize small
businesses, minority-owned firms, and
women’s business enterprises, in pro-
curing audit services as stated in
§200.321, or the FAR (48 CFR part 42),
as applicable.
(b) Restriction on auditor preparing in-
direct cost proposals. An auditor who
prepares the indirect cost proposal or
cost allocation plan may not also be se-
lected to perform the audit required by
this part when the indirect costs recov-
ered by the auditee during the prior
year exceeded $1 million. This restric-
tion applies to the base year used in
the preparation of the indirect cost
proposal or cost allocation plan and
any subsequent years in which the re-
sulting indirect cost agreement or cost
allocation plan is used to recover costs.
(c) Use of Federal auditors. Federal
auditors may perform all or part of the
work required under this part if they
comply fully with the requirements of
this part.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49572, Aug. 13, 2020]
§200.510 Financial statements.
(a) Financial statements. The auditee
must prepare financial statements that
reflect its financial position, results of
operations or changes in net assets,
and, where appropriate, cash flows for
the fiscal year audited. The financial
statements must be for the same orga-
nizational unit and fiscal year that is
chosen to meet the requirements of
this part. However, non-Federal entity-
wide financial statements may also in-
clude departments, agencies, and other
organizational units that have separate
audits in accordance with §200.514(a)
and prepare separate financial state-
ments.
(b) Schedule of expenditures of Federal
awards. The auditee must also prepare
a schedule of expenditures of Federal
awards for the period covered by the
auditee’s financial statements which
must include the total Federal awards
expended as determined in accordance
with §200.502. While not required, the
auditee may choose to provide infor-
mation requested by Federal awarding
agencies and pass-through entities to
make the schedule easier to use. For
example, when a Federal program has
multiple Federal award years, the
auditee may list the amount of Federal
awards expended for each Federal
award year separately. At a minimum,
the schedule must:
(1) List individual Federal programs
by Federal agency. For a cluster of pro-
grams, provide the cluster name, list
individual Federal programs within the
cluster of programs, and provide the
applicable Federal agency name. For
R&D, total Federal awards expended
must be shown either by individual
Federal award or by Federal agency
and major subdivision within the Fed-
eral agency. For example, the National
Institutes of Health is a major subdivi-
sion in the Department of Health and
Human Services.
(2) For Federal awards received as a
subrecipient, the name of the pass-
through entity and identifying number
assigned by the pass-through entity
must be included.
(3) Provide total Federal awards ex-
pended for each individual Federal pro-
gram and the Assistance Listings Num-
ber or other identifying number when
the Assistance Listings information is
not available. For a cluster of pro-
grams also provide the total for the
cluster.
(4) Include the total amount provided
to subrecipients from each Federal pro-
gram.
(5) For loan or loan guarantee pro-
grams described in §200.502(b), identify
in the notes to the schedule the bal-
ances outstanding at the end of the
audit period. This is in addition to in-
cluding the total Federal awards ex-
pended for loan or loan guarantee pro-
grams in the schedule.
(6) Include notes that describe that
significant accounting policies used in
preparing the schedule, and note
whether or not the auditee elected to
use the 10% de minimis cost rate as
covered in §200.414.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49572, Aug. 13,
2020]
§200.511 Audit findings follow-up.
(a) General. The auditee is responsible
for follow-up and corrective action on
all audit findings. As part of this re-
sponsibility, the auditee must prepare
a summary schedule of prior audit find-
ings. The auditee must also prepare a
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202
2 CFR Ch. II (1–1–21 Edition) §200.512
corrective action plan for current year
audit findings. The summary schedule
of prior audit findings and the correc-
tive action plan must include the ref-
erence numbers the auditor assigns to
audit findings under §200.516(c). Since
the summary schedule may include
audit findings from multiple years, it
must include the fiscal year in which
the finding initially occurred. The cor-
rective action plan and summary
schedule of prior audit findings must
include findings relating to the finan-
cial statements which are required to
be reported in accordance with
GAGAS.
(b) Summary schedule of prior audit
findings. The summary schedule of
prior audit findings must report the
status of all audit findings included in
the prior audit’s schedule of findings
and questioned costs. The summary
schedule must also include audit find-
ings reported in the prior audit’s sum-
mary schedule of prior audit findings
except audit findings listed as cor-
rected in accordance with paragraph
(b)(1) of this section, or no longer valid
or not warranting further action in ac-
cordance with paragraph (b)(3) of this
section.
(1) When audit findings were fully
corrected, the summary schedule need
only list the audit findings and state
that corrective action was taken.
(2) When audit findings were not cor-
rected or were only partially corrected,
the summary schedule must describe
the reasons for the finding’s recurrence
and planned corrective action, and any
partial corrective action taken. When
corrective action taken is significantly
different from corrective action pre-
viously reported in a corrective action
plan or in the Federal agency’s or pass-
through entity’s management decision,
the summary schedule must provide an
explanation.
(3) When the auditee believes the
audit findings are no longer valid or do
not warrant further action, the reasons
for this position must be described in
the summary schedule. A valid reason
for considering an audit finding as not
warranting further action is that all of
the following have occurred:
(i) Two years have passed since the
audit report in which the finding oc-
curred was submitted to the FAC;
(ii) The Federal agency or pass-
through entity is not currently fol-
lowing up with the auditee on the audit
finding; and
(iii) A management decision was not
issued.
(c) Corrective action plan. At the com-
pletion of the audit, the auditee must
prepare, in a document separate from
the auditor’s findings described in
§200.516, a corrective action plan to ad-
dress each audit finding included in the
current year auditor’s reports. The cor-
rective action plan must provide the
name(s) of the contact person(s) re-
sponsible for corrective action, the cor-
rective action planned, and the antici-
pated completion date. If the auditee
does not agree with the audit findings
or believes corrective action is not re-
quired, then the corrective action plan
must include an explanation and spe-
cific reasons.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49572, Aug. 13, 2020]
§200.512 Report submission.
(a) General. (1) The audit must be
completed and the data collection form
described in paragraph (b) of this sec-
tion and reporting package described in
paragraph (c) of this section must be
submitted within the earlier of 30 cal-
endar days after receipt of the audi-
tor’s report(s), or nine months after
the end of the audit period. If the due
date falls on a Saturday, Sunday, or
Federal holiday, the reporting package
is due the next business day.
(2) Unless restricted by Federal stat-
utes or regulations, the auditee must
make copies available for public in-
spection. Auditees and auditors must
ensure that their respective parts of
the reporting package do not include
protected personally identifiable infor-
mation.
(b) Data collection. The FAC is the re-
pository of record for subpart F of this
part reporting packages and the data
collection form. All Federal agencies,
pass-through entities and others inter-
ested in a reporting package and data
collection form must obtain it by ac-
cessing the FAC.
(1) The auditee must submit required
data elements described in Appendix X
to Part 200, which state whether the
audit was completed in accordance
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203
OMB Guidance §200.512
with this part and provides informa-
tion about the auditee, its Federal pro-
grams, and the results of the audit.
The data must include information
available from the audit required by
this part that is necessary for Federal
agencies to use the audit to ensure in-
tegrity for Federal programs. The data
elements and format must be approved
by OMB, available from the FAC, and
include collections of information from
the reporting package described in
paragraph (c) of this section. A senior
level representative of the auditee (e.g.,
state controller, director of finance,
chief executive officer, or chief finan-
cial officer) must sign a statement to
be included as part of the data collec-
tion that says that the auditee com-
plied with the requirements of this
part, the data were prepared in accord-
ance with this part (and the instruc-
tions accompanying the form), the re-
porting package does not include pro-
tected personally identifiable informa-
tion, the information included in its
entirety is accurate and complete, and
that the FAC is authorized to make the
reporting package and the form pub-
licly available on a website.
(2) Exception for Indian Tribes and
Tribal Organizations. An auditee that is
an Indian tribe or a tribal organization
(as defined in the Indian Self-Deter-
mination, Education and Assistance
Act (ISDEAA), 25 U.S.C. 450b(l)) may
opt not to authorize the FAC to make
the reporting package publicly avail-
able on a Web site, by excluding the au-
thorization for the FAC publication in
the statement described in paragraph
(b)(1) of this section. If this option is
exercised, the auditee becomes respon-
sible for submitting the reporting
package directly to any pass-through
entities through which it has received
a Federal award and to pass-through
entities for which the summary sched-
ule of prior audit findings reported the
status of any findings related to Fed-
eral awards that the pass-through enti-
ty provided. Unless restricted by Fed-
eral statute or regulation, if the
auditee opts not to authorize publica-
tion, it must make copies of the report-
ing package available for public inspec-
tion.
(3) Using the information included in
the reporting package described in
paragraph (c) of this section, the audi-
tor must complete the applicable data
elements of the data collection form.
The auditor must sign a statement to
be included as part of the data collec-
tion form that indicates, at a min-
imum, the source of the information
included in the form, the auditor’s re-
sponsibility for the information, that
the form is not a substitute for the re-
porting package described in paragraph
(c) of this section, and that the content
of the form is limited to the collection
of information prescribed by OMB.
(c) Reporting package. The reporting
package must include the:
(1) Financial statements and sched-
ule of expenditures of Federal awards
discussed in §200.510(a) and (b), respec-
tively;
(2) Summary schedule of prior audit
findings discussed in §200.511(b);
(3) Auditor’s report(s) discussed in
§200.515; and
(4) Corrective action plan discussed
in §200.511(c).
(d) Submission to FAC. The auditee
must electronically submit to the FAC
the data collection form described in
paragraph (b) of this section and the
reporting package described in para-
graph (c) of this section.
(e) Requests for management letters
issued by the auditor. In response to re-
quests by a Federal agency or pass-
through entity, auditees must submit a
copy of any management letters issued
by the auditor.
(f) Report retention requirements.
Auditees must keep one copy of the
data collection form described in para-
graph (b) of this section and one copy
of the reporting package described in
paragraph (c) of this section on file for
three years from the date of submis-
sion to the FAC.
(g) FAC responsibilities. The FAC must
make available the reporting packages
received in accordance with paragraph
(c) of this section and §200.507(c) to the
public, except for Indian tribes exer-
cising the option in (b)(2) of this sec-
tion, and maintain a data base of com-
pleted audits, provide appropriate in-
formation to Federal agencies, and fol-
low up with known auditees that have
not submitted the required data collec-
tion forms and reporting packages.
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204
2 CFR Ch. II (1–1–21 Edition) §200.513
(h) Electronic filing. Nothing in this
part must preclude electronic submis-
sions to the FAC in such manner as
may be approved by OMB.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13,
2020]
FEDERAL AGENCIES
§200.513 Responsibilities.
(a)(1) Cognizant agency for audit re-
sponsibilities. A non-Federal entity ex-
pending more than $50 million a year in
Federal awards must have a cognizant
agency for audit. The designated cog-
nizant agency for audit must be the
Federal awarding agency that provides
the predominant amount of funding di-
rectly (direct funding) (as listed on the
Schedule of expenditures of Federal
awards, see §200.510(b)) to a non-Fed-
eral entity unless OMB designates a
specific cognizant agency for audit.
When the direct funding represents less
than 25 percent of the total expendi-
tures (as direct and subawards) by the
non-Federal entity, then the Federal
agency with the predominant amount
of total funding is the designated cog-
nizant agency for audit.
(2) To provide for continuity of cog-
nizance, the determination of the pre-
dominant amount of direct funding
must be based upon direct Federal
awards expended in the non-Federal en-
tity’s fiscal years ending in 2019, and
every fifth year thereafter.
(3) Notwithstanding the manner in
which audit cognizance is determined,
a Federal awarding agency with cog-
nizance for an auditee may reassign
cognizance to another Federal award-
ing agency that provides substantial
funding and agrees to be the cognizant
agency for audit. Within 30 calendar
days after any reassignment, both the
old and the new cognizant agency for
audit must provide notice of the
change to the FAC, the auditee, and, if
known, the auditor. The cognizant
agency for audit must:
(i) Provide technical audit advice and
liaison assistance to auditees and audi-
tors.
(ii) Obtain or conduct quality control
reviews on selected audits made by
non-Federal auditors, and provide the
results to other interested organiza-
tions. Cooperate and provide support to
the Federal agency designated by OMB
to lead a governmentwide project to
determine the quality of single audits
by providing a reliable estimate of the
extent that single audits conform to
applicable requirements, standards,
and procedures; and to make rec-
ommendations to address noted audit
quality issues, including recommenda-
tions for any changes to applicable re-
quirements, standards and procedures
indicated by the results of the project.
The governmentwide project can rely
on the current and on-going quality
control review work performed by the
agencies, State auditors, and profes-
sional audit associations. This govern-
mentwide audit quality project must
be performed once every 6 years (or at
such other interval as determined by
OMB), and the results must be public.
(iii) Promptly inform other affected
Federal agencies and appropriate Fed-
eral law enforcement officials of any
direct reporting by the auditee or its
auditor required by GAGAS or statutes
and regulations.
(iv) Advise the community of inde-
pendent auditors of any noteworthy or
important factual trends related to the
quality of audits stemming from qual-
ity control reviews. Significant prob-
lems or quality issues consistently
identified through quality control re-
views of audit reports must be referred
to appropriate state licensing agencies
and professional bodies.
(v) Advise the auditor, Federal
awarding agencies, and, where appro-
priate, the auditee of any deficiencies
found in the audits when the defi-
ciencies require corrective action by
the auditor. When advised of defi-
ciencies, the auditee must work with
the auditor to take corrective action.
If corrective action is not taken, the
cognizant agency for audit must notify
the auditor, the auditee, and applicable
Federal awarding agencies and pass-
through entities of the facts and make
recommendations for follow-up action.
Major inadequacies or repetitive sub-
standard performance by auditors must
be referred to appropriate state licens-
ing agencies and professional bodies for
disciplinary action.
(vi) Coordinate, to the extent prac-
tical, audits or reviews made by or for
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205
OMB Guidance §200.513
Federal agencies that are in addition
to the audits made pursuant to this
part, so that the additional audits or
reviews build upon rather than dupli-
cate audits performed in accordance
with this part.
(vii) Coordinate a management deci-
sion for cross-cutting audit findings
(see in §200.1 of this part) that affect
the Federal programs of more than one
agency when requested by any Federal
awarding agency whose awards are in-
cluded in the audit finding of the
auditee.
(viii) Coordinate the audit work and
reporting responsibilities among audi-
tors to achieve the most cost-effective
audit.
(ix) Provide advice to auditees as to
how to handle changes in fiscal years.
(b) Oversight agency for audit respon-
sibilities. An auditee who does not have
a designated cognizant agency for
audit will be under the general over-
sight of the Federal agency determined
in accordance with §200.1 oversight
agency for audit. A Federal agency with
oversight for an auditee may reassign
oversight to another Federal agency
that agrees to be the oversight agency
for audit. Within 30 calendar days after
any reassignment, both the old and the
new oversight agency for audit must
provide notice of the change to the
FAC, the auditee, and, if known, the
auditor. The oversight agency for
audit:
(1) Must provide technical advice to
auditees and auditors as requested.
(2) May assume all or some of the re-
sponsibilities normally performed by a
cognizant agency for audit.
(c) Federal awarding agency respon-
sibilities. The Federal awarding agency
must perform the following for the
Federal awards it makes (See also the
requirements of §200.211):
(1) Ensure that audits are completed
and reports are received in a timely
manner and in accordance with the re-
quirements of this part.
(2) Provide technical advice and
counsel to auditees and auditors as re-
quested.
(3) Follow-up on audit findings to en-
sure that the recipient takes appro-
priate and timely corrective action. As
part of audit follow-up, the Federal
awarding agency must:
(i) Issue a management decision as
prescribed in §200.521;
(ii) Monitor the recipient taking ap-
propriate and timely corrective action;
(iii) Use cooperative audit resolution
mechanisms (see the definition of coop-
erative audit resolution in §200.1 of this
part) to improve Federal program out-
comes through better audit resolution,
follow-up, and corrective action; and
(iv) Develop a baseline, metrics, and
targets to track, over time, the effec-
tiveness of the Federal agency’s proc-
ess to follow-up on audit findings and
on the effectiveness of Single Audits in
improving non-Federal entity account-
ability and their use by Federal award-
ing agencies in making award deci-
sions.
(4) Provide OMB annual updates to
the compliance supplement and work
with OMB to ensure that the compli-
ance supplement focuses the auditor to
test the compliance requirements most
likely to cause improper payments,
fraud, waste, abuse or generate audit
finding for which the Federal awarding
agency will take sanctions.
(5) Provide OMB with the name of a
single audit accountable official from
among the senior policy officials of the
Federal awarding agency who must be:
(i) Responsible for ensuring that the
agency fulfills all the requirements of
paragraph (c) of this section and effec-
tively uses the single audit process to
reduce improper payments and improve
Federal program outcomes.
(ii) Held accountable to improve the
effectiveness of the single audit process
based upon metrics as described in
paragraph (c)(3)(iv) of this section.
(iii) Responsible for designating the
Federal agency’s key management sin-
gle audit liaison.
(6) Provide OMB with the name of a
key management single audit liaison
who must:
(i) Serve as the Federal awarding
agency’s management point of contact
for the single audit process both within
and outside the Federal Government.
(ii) Promote interagency coordina-
tion, consistency, and sharing in areas
such as coordinating audit follow-up;
identifying higher-risk non-Federal en-
tities; providing input on single audit
and follow-up policy; enhancing the
utility of the FAC; and studying ways
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206
2 CFR Ch. II (1–1–21 Edition) §200.514
to use single audit results to improve
Federal award accountability and best
practices.
(iii) Oversee training for the Federal
awarding agency’s program manage-
ment personnel related to the single
audit process.
(iv) Promote the Federal awarding
agency’s use of cooperative audit reso-
lution mechanisms.
(v) Coordinate the Federal awarding
agency’s activities to ensure appro-
priate and timely follow-up and correc-
tive action on audit findings.
(vi) Organize the Federal cognizant
agency for audit’s follow-up on cross-
cutting audit findings that affect the
Federal programs of more than one
Federal awarding agency.
(vii) Ensure the Federal awarding
agency provides annual updates of the
compliance supplement to OMB.
(viii) Support the Federal awarding
agency’s single audit accountable offi-
cial’s mission.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13,
2020]
AUDITORS
§200.514 Scope of audit.
(a) General. The audit must be con-
ducted in accordance with GAGAS. The
audit must cover the entire operations
of the auditee, or, at the option of the
auditee, such audit must include a se-
ries of audits that cover departments,
agencies, and other organizational
units that expended or otherwise ad-
ministered Federal awards during such
audit period, provided that each such
audit must encompass the financial
statements and schedule of expendi-
tures of Federal awards for each such
department, agency, and other organi-
zational unit, which must be consid-
ered to be a non-Federal entity. The fi-
nancial statements and schedule of ex-
penditures of Federal awards must be
for the same audit period.
(b) Financial statements. The auditor
must determine whether the financial
statements of the auditee are presented
fairly in all material respects in ac-
cordance with generally accepted ac-
counting principles. The auditor must
also determine whether the schedule of
expenditures of Federal awards is stat-
ed fairly in all material respects in re-
lation to the auditee’s financial state-
ments as a whole.
(c) Internal control. (1) The compli-
ance supplement provides guidance on
internal controls over Federal pro-
grams based upon the guidance in
Standards for Internal Control in the
Federal Government issued by the
Comptroller General of the United
States and the Internal Control—Inte-
grated Framework, issued by the Com-
mittee of Sponsoring Organizations of
the Treadway Commission (COSO).
(2) In addition to the requirements of
GAGAS, the auditor must perform pro-
cedures to obtain an understanding of
internal control over Federal programs
sufficient to plan the audit to support
a low assessed level of control risk of
noncompliance for major programs.
(3) Except as provided in paragraph
(c)(4) of this section, the auditor must:
(i) Plan the testing of internal con-
trol over compliance for major pro-
grams to support a low assessed level
of control risk for the assertions rel-
evant to the compliance requirements
for each major program; and
(ii) Perform testing of internal con-
trol as planned in paragraph (c)(3)(i) of
this section.
(4) When internal control over some
or all of the compliance requirements
for a major program are likely to be in-
effective in preventing or detecting
noncompliance, the planning and per-
forming of testing described in para-
graph (c)(3) of this section are not re-
quired for those compliance require-
ments. However, the auditor must re-
port a significant deficiency or mate-
rial weakness in accordance with
§200.516 Audit findings, assess the re-
lated control risk at the maximum,
and consider whether additional com-
pliance tests are required because of
ineffective internal control.
(d) Compliance. (1) In addition to the
requirements of GAGAS, the auditor
must determine whether the auditee
has complied with Federal statutes,
regulations, and the terms and condi-
tions of Federal awards that may have
a direct and material effect on each of
its major programs.
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207
OMB Guidance §200.515
(2) The principal compliance require-
ments applicable to most Federal pro-
grams and the compliance require-
ments of the largest Federal programs
are included in the compliance supple-
ment.
(3) For the compliance requirements
related to Federal programs contained
in the compliance supplement, an audit
of these compliance requirements will
meet the requirements of this part.
Where there have been changes to the
compliance requirements and the
changes are not reflected in the com-
pliance supplement, the auditor must
determine the current compliance re-
quirements and modify the audit proce-
dures accordingly. For those Federal
programs not covered in the compli-
ance supplement, the auditor must fol-
low the compliance supplement’s guid-
ance for programs not included in the
supplement.
(4) When internal control over some
or all of the compliance requirements
for a major program are likely to be in-
effective in preventing or detecting
noncompliance, the planning and per-
forming of testing described in para-
graph (c)(3) of this section are not re-
quired for those compliance require-
ments. However, the auditor must re-
port a significant deficiency or mate-
rial weakness in accordance with
§200.516, assess the related control risk
at the
(e) Audit follow-up. The auditor must
follow-up on prior audit findings, per-
form procedures to assess the reason-
ableness of the summary schedule of
prior audit findings prepared by the
auditee in accordance with §200.511(b),
and report, as a current year audit
finding, when the auditor concludes
that the summary schedule of prior
audit findings materially misrepre-
sents the status of any prior audit find-
ing. The auditor must perform audit
follow-up procedures regardless of
whether a prior audit finding relates to
a major program in the current year.
(f) Data collection form. As required in
§200.512(b)(3), the auditor must com-
plete and sign specified sections of the
data collection form.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13,
2020]
§200.515 Audit reporting.
The auditor’s report(s) may be in the
form of either combined or separate re-
ports and may be organized differently
from the manner presented in this sec-
tion. The auditor’s report(s) must state
that the audit was conducted in ac-
cordance with this part and include the
following:
(a) Financial statements. The auditor
must determine and provide an opinion
(or disclaimer of opinion) whether the
financial statements of the auditee are
presented fairly in all materials re-
spects in accordance with generally ac-
cepted accounting principles (or a spe-
cial purpose framework such as cash,
modified cash, or regulatory as re-
quired by state law). The auditor must
also decide whether the schedule of ex-
penditures of Federal awards is stated
fairly in all material respects in rela-
tion to the auditee’s financial state-
ments as a whole.
(b) A report on internal control over
financial reporting and compliance
with provisions of laws, regulations,
contracts, and award agreements, non-
compliance with which could have a
material effect on the financial state-
ments. This report must describe the
scope of testing of internal control and
compliance and the results of the tests,
and, where applicable, it will refer to
the separate schedule of findings and
questioned costs described in para-
graph (d) of this section.
(c) A report on compliance for each
major program and a report on internal
control over compliance. This report
must describe the scope of testing of
internal control over compliance, in-
clude an opinion or disclaimer of opin-
ion as to whether the auditee complied
with Federal statutes, regulations, and
the terms and conditions of Federal
awards which could have a direct and
material effect on each major program
and refer to the separate schedule of
findings and questioned costs described
in paragraph (d) of this section.
(d) A schedule of findings and ques-
tioned costs which must include the
following three components:
(1) A summary of the auditor’s re-
sults, which must include:
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208
2 CFR Ch. II (1–1–21 Edition) §200.516
(i) The type of report the auditor
issued on whether the financial state-
ments audited were prepared in accord-
ance with GAAP (i.e., unmodified opin-
ion, qualified opinion, adverse opinion,
or disclaimer of opinion);
(ii) Where applicable, a statement
about whether significant deficiencies
or material weaknesses in internal con-
trol were disclosed by the audit of the
financial statements;
(iii) A statement as to whether the
audit disclosed any noncompliance
that is material to the financial state-
ments of the auditee;
(iv) Where applicable, a statement
about whether significant deficiencies
or material weaknesses in internal con-
trol over major programs were dis-
closed by the audit;
(v) The type of report the auditor
issued on compliance for major pro-
grams (i.e., unmodified opinion, quali-
fied opinion, adverse opinion, or dis-
claimer of opinion);
(vi) A statement as to whether the
audit disclosed any audit findings that
the auditor is required to report under
§200.516(a);
(vii) An identification of major pro-
grams by listing each individual major
program; however, in the case of a clus-
ter of programs, only the cluster name
as shown on the Schedule of Expendi-
tures of Federal Awards is required;
(viii) The dollar threshold used to
distinguish between Type A and Type B
programs, as described in §200.518(b)(1)
or (3) when a recalculation of the Type
A threshold is required for large loan
or loan guarantees; and
(ix) A statement as to whether the
auditee qualified as a low-risk auditee
under §200.520.
(2) Findings relating to the financial
statements which are required to be re-
ported in accordance with GAGAS.
(3) Findings and questioned costs for
Federal awards which must include
audit findings as defined in §200.516(a).
(i) Audit findings (e.g., internal con-
trol findings, compliance findings,
questioned costs, or fraud) that relate
to the same issue must be presented as
a single audit finding. Where practical,
audit findings should be organized by
Federal agency or pass-through entity.
(ii) Audit findings that relate to both
the financial statements and Federal
awards, as reported under paragraphs
(d)(2) and (d)(3) of this section, respec-
tively, must be reported in both sec-
tions of the schedule. However, the re-
porting in one section of the schedule
may be in summary form with a ref-
erence to a detailed reporting in the
other section of the schedule.
(e) Nothing in this part precludes
combining of the audit reporting re-
quired by this section with the report-
ing required by §200.512(b) when al-
lowed by GAGAS and appendix X to
this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13,
2020]
§200.516 Audit findings.
(a) Audit findings reported. The audi-
tor must report the following as audit
findings in a schedule of findings and
questioned costs:
(1) Significant deficiencies and mate-
rial weaknesses in internal control
over major programs and significant
instances of abuse relating to major
programs. The auditor’s determination
of whether a deficiency in internal con-
trol is a significant deficiency or a ma-
terial weakness for the purpose of re-
porting an audit finding is in relation
to a type of compliance requirement
for a major program identified in the
Compliance Supplement.
(2) Material noncompliance with the
provisions of Federal statutes, regula-
tions, or the terms and conditions of
Federal awards related to a major pro-
gram. The auditor’s determination of
whether a noncompliance with the pro-
visions of Federal statutes, regula-
tions, or the terms and conditions of
Federal awards is material for the pur-
pose of reporting an audit finding is in
relation to a type of compliance re-
quirement for a major program identi-
fied in the compliance supplement.
(3) Known questioned costs that are
greater than $25,000 for a type of com-
pliance requirement for a major pro-
gram. Known questioned costs are
those specifically identified by the
auditor. In evaluating the effect of
questioned costs on the opinion on
compliance, the auditor considers the
best estimate of total costs questioned
(likely questioned costs), not just the
questioned costs specifically identified
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209
OMB Guidance §200.516
(known questioned costs). The auditor
must also report known questioned
costs when likely questioned costs are
greater than $25,000 for a type of com-
pliance requirement for a major pro-
gram. In reporting questioned costs,
the auditor must include information
to provide proper perspective for judg-
ing the prevalence and consequences of
the questioned costs.
(4) Known questioned costs that are
greater than $25,000 for a Federal pro-
gram which is not audited as a major
program. Except for audit follow-up,
the auditor is not required under this
part to perform audit procedures for
such a Federal program; therefore, the
auditor will normally not find ques-
tioned costs for a program that is not
audited as a major program. However,
if the auditor does become aware of
questioned costs for a Federal program
that is not audited as a major program
(e.g., as part of audit follow-up or other
audit procedures) and the known ques-
tioned costs are greater than $25,000,
then the auditor must report this as an
audit finding.
(5) The circumstances concerning
why the auditor’s report on compliance
for each major program is other than
an unmodified opinion, unless such cir-
cumstances are otherwise reported as
audit findings in the schedule of find-
ings and questioned costs for Federal
awards.
(6) Known or likely fraud affecting a
Federal award, unless such fraud is
otherwise reported as an audit finding
in the schedule of findings and ques-
tioned costs for Federal awards. This
paragraph does not require the auditor
to report publicly information which
could compromise investigative or
legal proceedings or to make an addi-
tional reporting when the auditor con-
firms that the fraud was reported out-
side the auditor’s reports under the di-
rect reporting requirements of GAGAS.
(7) Instances where the results of
audit follow-up procedures disclosed
that the summary schedule of prior
audit findings prepared by the auditee
in accordance with §200.511(b) materi-
ally misrepresents the status of any
prior audit finding.
(b) Audit finding detail and clarity.
Audit findings must be presented in
sufficient detail and clarity for the
auditee to prepare a corrective action
plan and take corrective action, and
for Federal agencies and pass-through
entities to arrive at a management de-
cision. The following specific informa-
tion must be included, as applicable, in
audit findings:
(1) Federal program and specific Fed-
eral award identification including the
Assistance Listings title and number,
Federal award identification number
and year, name of Federal agency, and
name of the applicable pass-through
entity. When information, such as the
Assistance Listings title and number
or Federal award identification num-
ber, is not available, the auditor must
provide the best information available
to describe the Federal award.
(2) The criteria or specific require-
ment upon which the audit finding is
based, including the Federal statutes,
regulations, or the terms and condi-
tions of the Federal awards. Criteria
generally identify the required or de-
sired state or expectation with respect
to the program or operation. Criteria
provide a context for evaluating evi-
dence and understanding findings.
(3) The condition found, including
facts that support the deficiency iden-
tified in the audit finding.
(4) A statement of cause that identi-
fies the reason or explanation for the
condition or the factors responsible for
the difference between the situation
that exists (condition) and the required
or desired state (criteria), which may
also serve as a basis for recommenda-
tions for corrective action.
(5) The possible asserted effect to
provide sufficient information to the
auditee and Federal agency, or pass-
through entity in the case of a sub-
recipient, to permit them to determine
the cause and effect to facilitate
prompt and proper corrective action. A
statement of the effect or potential ef-
fect should provide a clear, logical link
to establish the impact or potential
impact of the difference between the
condition and the criteria.
(6) Identification of questioned costs
and how they were computed. Known
questioned costs must be identified by
applicable Assistance Listings num-
ber(s) and applicable Federal award
identification number(s).
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210
2 CFR Ch. II (1–1–21 Edition) §200.517
(7) Information to provide proper per-
spective for judging the prevalence and
consequences of the audit findings,
such as whether the audit findings rep-
resent an isolated instance or a sys-
temic problem. Where appropriate, in-
stances identified must be related to
the universe and the number of cases
examined and be quantified in terms of
dollar value. The auditor should report
whether the sampling was a statis-
tically valid sample.
(8) Identification of whether the
audit finding was a repeat of a finding
in the immediately prior audit and if
so any applicable prior year audit find-
ing numbers.
(9) Recommendations to prevent fu-
ture occurrences of the deficiency iden-
tified in the audit finding.
(10) Views of responsible officials of
the auditee.
(c) Reference numbers. Each audit
finding in the schedule of findings and
questioned costs must include a ref-
erence number in the format meeting
the requirements of the data collection
form submission required by §200.512(b)
to allow for easy referencing of the
audit findings during follow-up.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49574, Aug. 13, 2020]
§200.517 Audit documentation.
(a) Retention of audit documentation.
The auditor must retain audit docu-
mentation and reports for a minimum
of three years after the date of
issuance of the auditor’s report(s) to
the auditee, unless the auditor is noti-
fied in writing by the cognizant agency
for audit, oversight agency for audit,
cognizant agency for indirect costs, or
pass-through entity to extend the re-
tention period. When the auditor is
aware that the Federal agency, pass-
through entity, or auditee is con-
testing an audit finding, the auditor
must contact the parties contesting
the audit finding for guidance prior to
destruction of the audit documentation
and reports.
(b) Access to audit documentation.
Audit documentation must be made
available upon request to the cognizant
or oversight agency for audit or its des-
ignee, cognizant agency for indirect
cost, a Federal agency, or GAO at the
completion of the audit, as part of a
quality review, to resolve audit find-
ings, or to carry out oversight respon-
sibilities consistent with the purposes
of this part. Access to audit docu-
mentation includes the right of Federal
agencies to obtain copies of audit docu-
mentation, as is reasonable and nec-
essary.
§200.518 Major program determina-
tion.
(a) General. The auditor must use a
risk-based approach to determine
which Federal programs are major pro-
grams. This risk-based approach must
include consideration of: current and
prior audit experience, oversight by
Federal agencies and pass-through en-
tities, and the inherent risk of the Fed-
eral program. The process in para-
graphs (b) through (h) of this section
must be followed.
(b) Step one. (1) The auditor must
identify the larger Federal programs,
which must be labeled Type A pro-
grams. Type A programs are defined as
Federal programs with Federal awards
expended during the audit period ex-
ceeding the levels outlined in the table
in this paragraph (b)(1):
Total Federal awards ex-
pended Type A/B threshold
Equal to or exceed $750,000
but less than or equal to
$25 million.
$750,000.
Exceed $25 million but less
than or equal to $100 mil-
lion.
Total Federal awards ex-
pended times .03.
Exceed $100 million but less
than or equal to $1 billion.
$3 million.
Exceed $1 billion but less
than or equal to $10 billion.
Total Federal awards ex-
pended times .003.
Exceed $10 billion but less
than or equal to $20 billion.
$30 million.
Exceed $20 billion ................. Total Federal awards ex-
pended times .0015.
(2) Federal programs not labeled
Type A under paragraph (b)(1) of this
section must be labeled Type B pro-
grams.
(3) The inclusion of large loan and
loan guarantees (loans) must not result
in the exclusion of other programs as
Type A programs. When a Federal pro-
gram providing loans exceeds four
times the largest non-loan program it
is considered a large loan program, and
the auditor must consider this Federal
program as a Type A program and ex-
clude its values in determining other
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211
OMB Guidance §200.518
Type A programs. This recalculation of
the Type A program is performed after
removing the total of all large loan
programs. For the purposes of this
paragraph a program is only considered
to be a Federal program providing
loans if the value of Federal awards ex-
pended for loans within the program
comprises fifty percent or more of the
total Federal awards expended for the
program. A cluster of programs is
treated as one program and the value
of Federal awards expended under a
loan program is determined as de-
scribed in §200.502.
(4) For biennial audits permitted
under §200.504, the determination of
Type A and Type B programs must be
based upon the Federal awards ex-
pended during the two-year period.
(c) Step two. (1) The auditor must
identify Type A programs which are
low-risk. In making this determina-
tion, the auditor must consider wheth-
er the requirements in §200.519(c), the
results of audit follow-up, or any
changes in personnel or systems affect-
ing the program indicate significantly
increased risk and preclude the pro-
gram from being low risk. For a Type
A program to be considered low-risk, it
must have been audited as a major pro-
gram in at least one of the two most
recent audit periods (in the most re-
cent audit period in the case of a bien-
nial audit), and, in the most recent
audit period, the program must have
not had:
(i) Internal control deficiencies
which were identified as material
weaknesses in the auditor’s report on
internal control for major programs as
required under §200.515(c);
(ii) A modified opinion on the pro-
gram in the auditor’s report on major
programs as required under §200.515(c);
or
(iii) Known or likely questioned costs
that exceed five percent of the total
Federal awards expended for the pro-
gram.
(2) Notwithstanding paragraph (c)(1)
of this section, OMB may approve a
Federal awarding agency’s request that
a Type A program may not be consid-
ered low risk for a certain recipient.
For example, it may be necessary for a
large Type A program to be audited as
a major program each year at a par-
ticular recipient to allow the Federal
awarding agency to comply with 31
U.S.C. 3515. The Federal awarding
agency must notify the recipient and,
if known, the auditor of OMB’s ap-
proval at least 180 calendar days prior
to the end of the fiscal year to be au-
dited.
(d) Step three. (1) The auditor must
identify Type B programs which are
high-risk using professional judgment
and the criteria in §200.519. However,
the auditor is not required to identify
more high-risk Type B programs than
at least one fourth the number of low-
risk Type A programs identified as low-
risk under Step 2 (paragraph (c) of this
section). Except for known material
weakness in internal control or compli-
ance problems as discussed in
§200.519(b)(1) and (2) and (c)(1), a single
criterion in risk would seldom cause a
Type B program to be considered high-
risk. When identifying which Type B
programs to risk assess, the auditor is
encouraged to use an approach which
provides an opportunity for different
high-risk Type B programs to be au-
dited as major over a period of time.
(2) The auditor is not expected to per-
form risk assessments on relatively
small Federal programs. Therefore, the
auditor is only required to perform risk
assessments on Type B programs that
exceed twenty-five percent (0.25) of the
Type A threshold determined in Step 1
(paragraph (b) of this section).
(e) Step four. At a minimum, the
auditor must audit all of the following
as major programs:
(1) All Type A programs not identi-
fied as low risk under step two (para-
graph (c)(1) of this section).
(2) All Type B programs identified as
high-risk under step three (paragraph
(d) of this section).
(3) Such additional programs as may
be necessary to comply with the per-
centage of coverage rule discussed in
paragraph (f) of this section. This may
require the auditor to audit more pro-
grams as major programs than the
number of Type A programs.
(f) Percentage of coverage rule. If the
auditee meets the criteria in §200.520,
the auditor need only audit the major
programs identified in Step 4 (para-
graphs (e)(1) and (2) of this section) and
such additional Federal programs with
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212
2 CFR Ch. II (1–1–21 Edition) §200.519
Federal awards expended that, in ag-
gregate, all major programs encompass
at least 20 percent (0.20) of total Fed-
eral awards expended. Otherwise, the
auditor must audit the major programs
identified in Step 4 (paragraphs (e)(1)
and (2) of this section) and such addi-
tional Federal programs with Federal
awards expended that, in aggregate, all
major programs encompass at least 40
percent (0.40) of total Federal awards
expended.
(g) Documentation of risk. The auditor
must include in the audit documenta-
tion the risk analysis process used in
determining major programs.
(h) Auditor’s judgment. When the
major program determination was per-
formed and documented in accordance
with this Subpart, the auditor’s judg-
ment in applying the risk-based ap-
proach to determine major programs
must be presumed correct. Challenges
by Federal agencies and pass-through
entities must only be for clearly im-
proper use of the requirements in this
part. However, Federal agencies and
pass-through entities may provide
auditors guidance about the risk of a
particular Federal program and the
auditor must consider this guidance in
determining major programs in audits
not yet completed.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13,
2020]
§200.519 Criteria for Federal program
risk.
(a) General. The auditor’s determina-
tion should be based on an overall eval-
uation of the risk of noncompliance oc-
curring that could be material to the
Federal program. The auditor must
consider criteria, such as described in
paragraphs (b), (c), and (d) of this sec-
tion, to identify risk in Federal pro-
grams. Also, as part of the risk anal-
ysis, the auditor may wish to discuss a
particular Federal program with
auditee management and the Federal
agency or pass-through entity.
(b) Current and prior audit experience.
(1) Weaknesses in internal control over
Federal programs would indicate high-
er risk. Consideration should be given
to the control environment over Fed-
eral programs and such factors as the
expectation of management’s adher-
ence to Federal statutes, regulations,
and the terms and conditions of Fed-
eral awards and the competence and
experience of personnel who administer
the Federal programs.
(i) A Federal program administered
under multiple internal control struc-
tures may have higher risk. When as-
sessing risk in a large single audit, the
auditor must consider whether weak-
nesses are isolated in a single oper-
ating unit (e.g., one college campus) or
pervasive throughout the entity.
(ii) When significant parts of a Fed-
eral program are passed through to
subrecipients, a weak system for moni-
toring subrecipients would indicate
higher risk.
(2) Prior audit findings would indi-
cate higher risk, particularly when the
situations identified in the audit find-
ings could have a significant impact on
a Federal program or have not been
corrected.
(3) Federal programs not recently au-
dited as major programs may be of
higher risk than Federal programs re-
cently audited as major programs with-
out audit findings.
(c) Oversight exercised by Federal agen-
cies and pass-through entities. (1) Over-
sight exercised by Federal agencies or
pass-through entities could be used to
assess risk. For example, recent moni-
toring or other reviews performed by
an oversight entity that disclosed no
significant problems would indicate
lower risk, whereas monitoring that
disclosed significant problems would
indicate higher risk.
(2) Federal agencies, with the concur-
rence of OMB, may identify Federal
programs that are higher risk. OMB
will provide this identification in the
compliance supplement.
(d) Inherent risk of the Federal pro-
gram. (1) The nature of a Federal pro-
gram may indicate risk. Consideration
should be given to the complexity of
the program and the extent to which
the Federal program contracts for
goods and services. For example, Fed-
eral programs that disburse funds
through third-party contracts or have
eligibility criteria may be of higher
risk. Federal programs primarily in-
volving staff payroll costs may have
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213
OMB Guidance §200.521
high risk for noncompliance with re-
quirements of §200.430, but otherwise
be at low risk.
(2) The phase of a Federal program in
its life cycle at the Federal agency
may indicate risk. For example, a new
Federal program with new or interim
regulations may have higher risk than
an established program with time-test-
ed regulations. Also, significant
changes in Federal programs, statutes,
regulations, or the terms and condi-
tions of Federal awards may increase
risk.
(3) The phase of a Federal program in
its life cycle at the auditee may indi-
cate risk. For example, during the first
and last years that an auditee partici-
pates in a Federal program, the risk
may be higher due to start-up or close-
out of program activities and staff.
(4) Type B programs with larger Fed-
eral awards expended would be of high-
er risk than programs with substan-
tially smaller Federal awards ex-
pended.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49575, Aug. 13, 2020]
§200.520 Criteria for a low-risk
auditee.
An auditee that meets all of the fol-
lowing conditions for each of the pre-
ceding two audit periods must qualify
as a low-risk auditee and be eligible for
reduced audit coverage in accordance
with §200.518.
(a) Single audits were performed on
an annual basis in accordance with the
provisions of this Subpart, including
submitting the data collection form
and the reporting package to the FAC
within the timeframe specified in
§200.512. A non-Federal entity that has
biennial audits does not qualify as a
low-risk auditee.
(b) The auditor’s opinion on whether
the financial statements were prepared
in accordance with GAAP, or a basis of
accounting required by state law, and
the auditor’s in relation to opinion on
the schedule of expenditures of Federal
awards were unmodified.
(c) There were no deficiencies in in-
ternal control which were identified as
material weaknesses under the require-
ments of GAGAS.
(d) The auditor did not report a sub-
stantial doubt about the auditee’s abil-
ity to continue as a going concern.
(e) None of the Federal programs had
audit findings from any of the fol-
lowing in either of the preceding two
audit periods in which they were classi-
fied as Type A programs:
(1) Internal control deficiencies that
were identified as material weaknesses
in the auditor’s report on internal con-
trol for major programs as required
under §200.515(c);
(2) A modified opinion on a major
program in the auditor’s report on
major programs as required under
§200.515(c); or
(3) Known or likely questioned costs
that exceeded five percent of the total
Federal awards expended for a Type A
program during the audit period.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49575, Aug. 13, 2020]
MANAGEMENT DECISIONS
§200.521 Management decision.
(a) General. The management deci-
sion must clearly state whether or not
the audit finding is sustained, the rea-
sons for the decision, and the expected
auditee action to repay disallowed
costs, make financial adjustments, or
take other action. If the auditee has
not completed corrective action, a
timetable for follow-up should be
given. Prior to issuing the manage-
ment decision, the Federal agency or
pass-through entity may request addi-
tional information or documentation
from the auditee, including a request
for auditor assurance related to the
documentation, as a way of mitigating
disallowed costs. The management de-
cision should describe any appeal proc-
ess available to the auditee. While not
required, the Federal agency or pass-
through entity may also issue a man-
agement decision on findings relating
to the financial statements which are
required to be reported in accordance
with GAGAS.
(b) Federal agency. As provided in
§200.513(a)(3)(vii), the cognizant agency
for audit must be responsible for co-
ordinating a management decision for
audit findings that affect the programs
of more than one Federal agency. As
provided in §200.513(c)(3)(i), a Federal
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214
2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. I
awarding agency is responsible for
issuing a management decision for
findings that relate to Federal awards
it makes to non-Federal entities.
(c) Pass-through entity. As provided in
§200.332(d), the pass-through entity
must be responsible for issuing a man-
agement decision for audit findings
that relate to Federal awards it makes
to subrecipients.
(d) Time requirements. The Federal
awarding agency or pass-through enti-
ty responsible for issuing a manage-
ment decision must do so within six
months of acceptance of the audit re-
port by the FAC. The auditee must ini-
tiate and proceed with corrective ac-
tion as rapidly as possible and correc-
tive action should begin no later than
upon receipt of the audit report.
(e) Reference numbers. Management
decisions must include the reference
numbers the auditor assigned to each
audit finding in accordance with
§200.516(c).
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49575, Aug. 13, 2020]
APPENDIX I TO PART 200—FULL TEXT OF
NOTICE OF FUNDING OPPORTUNITY
The full text of the notice of funding op-
portunity is organized in sections. The re-
quired format outlined in this appendix indi-
cates immediately following the title of each
section whether that section is required in
every announcement or is a Federal award-
ing agency option. The format is designed so
that similar types of information will appear
in the same sections in announcements of
different Federal funding opportunities. To-
ward that end, there is text in each of the
following sections to describe the types of in-
formation that a Federal awarding agency
would include in that section of an actual
announcement.
A Federal awarding agency that wishes to
include information that the format does not
specifically discuss may address that subject
in whatever section(s) is most appropriate.
For example, if a Federal awarding agency
chooses to address performance goals in the
announcement, it might do so in the funding
opportunity description, the application con-
tent, or the reporting requirements.
Similarly, when this format calls for a
type of information to be in a particular sec-
tion, a Federal awarding agency wishing to
address that subject in other sections may
elect to repeat the information in those sec-
tions or use cross references between the sec-
tions (there should be hyperlinks for cross-
references in any electronic versions of the
announcement). For example, a Federal
awarding agency may want to include Sec-
tion A information about the types of non-
Federal entities who are eligible to apply.
The format specifies a standard location for
that information in Section C.1 but does not
preclude repeating the information in Sec-
tion A or creating a cross reference between
Section A and C.1, as long as a potential ap-
plicant can find the information quickly and
easily from the standard location.
The sections of the full text of the an-
nouncement are described in the following
paragraphs.
A. PROGRAM DESCRIPTION—REQUIRED
This section contains the full program de-
scription of the funding opportunity. It may
be as long as needed to adequately commu-
nicate to potential applicants the areas in
which funding may be provided. It describes
the Federal awarding agency’s funding prior-
ities or the technical or focus areas in which
the Federal awarding agency intends to pro-
vide assistance. As appropriate, it may in-
clude any program history (e.g., whether this
is a new program or a new or changed area of
program emphasis). This section must in-
clude program goals and objectives, a ref-
erence to the relevant Assistance Listings, a
description of how the award will contribute
to the achievement of the program’s goals
and objectives, and the expected perform-
ance goals, indicators, targets, baseline data,
data collection, and other outcomes such
Federal awarding agency expects to achieve,
and may include examples of successful
projects that have been funded previously.
This section also may include other informa-
tion the Federal awarding agency deems nec-
essary, and must at a minimum include cita-
tions for authorizing statutes and regula-
tions for the funding opportunity.
B. FEDERAL AWARD INFORMATION—REQUIRED
This section provides sufficient informa-
tion to help an applicant make an informed
decision about whether to submit a proposal.
Relevant information could include the total
amount of funding that the Federal awarding
agency expects to award through the an-
nouncement; the expected performance indi-
cators, targets, baseline data, and data col-
lection; the anticipated number of Federal
awards; the expected amounts of individual
Federal awards (which may be a range); the
amount of funding per Federal award, on av-
erage, experienced in previous years; and the
anticipated start dates and periods of per-
formance for new Federal awards. This sec-
tion also should address whether applica-
tions for renewal or supplementation of ex-
isting projects are eligible to compete with
applications for new Federal awards.
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OMB Guidance Pt. 200, App. I
This section also must indicate the type(s)
of assistance instrument (e.g., grant, cooper-
ative agreement) that may be awarded if ap-
plications are successful. If cooperative
agreements may be awarded, this section ei-
ther should describe the ‘‘substantial in-
volvement’’ that the Federal awarding agen-
cy expects to have or should reference where
the potential applicant can find that infor-
mation (e.g., in the funding opportunity de-
scription in Section A. or Federal award ad-
ministration information in Section D. If
procurement contracts also may be awarded,
this must be stated.
C. ELIGIBILITY INFORMATION
This section addresses the considerations
or factors that determine applicant or appli-
cation eligibility. This includes the eligi-
bility of particular types of applicant organi-
zations, any factors affecting the eligibility
of the principal investigator or project direc-
tor, and any criteria that make particular
projects ineligible. Federal agencies should
make clear whether an applicant’s failure to
meet an eligibility criterion by the time of
an application deadline will result in the
Federal awarding agency returning the ap-
plication without review or, even though an
application may be reviewed, will preclude
the Federal awarding agency from making a
Federal award. Key elements to be addressed
are:
1. Eligible Applicants—Required. Announce-
ments must clearly identify the types of en-
tities that are eligible to apply. If there are
no restrictions on eligibility, this section
may simply indicate that all potential appli-
cants are eligible. If there are restrictions on
eligibility, it is important to be clear about
the specific types of entities that are eligi-
ble, not just the types that are ineligible.
For example, if the program is limited to
nonprofit organizations subject to 26 U.S.C.
501(c)(3) of the tax code (26 U.S.C. 501(c)(3)),
the announcement should say so. Similarly,
it is better to state explicitly that Native
American tribal organizations are eligible
than to assume that they can unambiguously
infer that from a statement that nonprofit
organizations may apply. Eligibility also can
be expressed by exception, (e.g., open to all
types of domestic applicants other than indi-
viduals). This section should refer to any
portion of Section D specifying documenta-
tion that must be submitted to support an
eligibility determination (e.g., proof of
501(c)(3) status as determined by the Internal
Revenue Service or an authorizing tribal res-
olution). To the extent that any funding re-
striction in Section D.6 could affect the eli-
gibility of an applicant or project, the an-
nouncement must either restate that restric-
tion in this section or provide a cross-ref-
erence to its description in Section D.6.
2. Cost Sharing or Matching—Required. An-
nouncements must state whether there is re-
quired cost sharing, matching, or cost par-
ticipation without which an application
would be ineligible (if cost sharing is not re-
quired, the announcement must explicitly
say so). Required cost sharing may be a cer-
tain percentage or amount, or may be in the
form of contributions of specified items or
activities (e.g., provision of equipment). It is
important that the announcement be clear
about any restrictions on the types of cost
(e.g., in-kind contributions) that are accept-
able as cost sharing. Cost sharing as an eligi-
bility criterion includes requirements based
in statute or regulation, as described in
§200.306 of this Part. This section should
refer to the appropriate portion(s) of section
D. stating any pre-award requirements for
submission of letters or other documentation
to verify commitments to meet cost-sharing
requirements if a Federal award is made.
3. Other—Required, if applicable. If there are
other eligibility criteria (i.e., criteria that
have the effect of making an application or
project ineligible for Federal awards, wheth-
er referred to as ‘‘responsiveness’’ criteria,
‘‘go-no go’’ criteria, ‘‘threshold’’ criteria, or
in other ways), must be clearly stated and
must include a reference to the regulation of
requirement that describes the restriction,
as applicable. For example, if entities that
have been found to be in violation of a par-
ticular Federal statute are ineligible, it is
important to say so. This section must also
state any limit on the number of applica-
tions an applicant may submit under the an-
nouncement and make clear whether the
limitation is on the submitting organization,
individual investigator/program director, or
both. This section should also address any
eligibility criteria for beneficiaries or for
program participants other than Federal
award recipients.
D. APPLICATION AND SUBMISSION INFORMATION
1. Address to Request Application Package—
Required. Potential applicants must be told
how to get application forms, kits, or other
materials needed to apply (if this announce-
ment contains everything needed, this sec-
tion need only say so). An Internet address
where the materials can be accessed is ac-
ceptable. However, since high-speed Internet
access is not yet universally available for
downloading documents, and applicants may
have additional accessibility requirements,
there also should be a way for potential ap-
plicants to request paper copies of materials,
such as a U.S. Postal Service mailing ad-
dress, telephone or FAX number, Telephone
Device for the Deaf (TDD), Text Telephone
(TTY) number, and/or Federal Information
Relay Service (FIRS) number.
2. Content and Form of Application Submis-
sion—Required. This section must identify
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. I
the required content of an application and
the forms or formats that an applicant must
use to submit it. If any requirements are
stated elsewhere because they are general re-
quirements that apply to multiple programs
or funding opportunities, this section should
refer to where those requirements may be
found. This section also should include re-
quired forms or formats as part of the an-
nouncement or state where the applicant
may obtain them.
This section should specifically address
content and form or format requirements
for:
i. Pre-applications, letters of intent, or
white papers required or encouraged (see
Section D.4), including any limitations on
the number of pages or other formatting re-
quirements similar to those for full applica-
tions.
ii. The application as a whole. For all sub-
missions, this would include any limitations
on the number of pages, font size and type-
face, margins, paper size, number of copies,
and sequence or assembly requirements. If
electronic submission is permitted or re-
quired, this could include special require-
ments for formatting or signatures.
iii. Component pieces of the application
(e.g., if all copies of the application must
bear original signatures on the face page or
the program narrative may not exceed 10
pages). This includes any pieces that may be
submitted separately by third parties (e.g.,
references or letters confirming commit-
ments from third parties that will be con-
tributing a portion of any required cost shar-
ing).
iv. Information that successful applicants
must submit after notification of intent to
make a Federal award, but prior to a Federal
award. This could include evidence of com-
pliance with requirements relating to human
subjects or information needed to comply
with the National Environmental Policy Act
(NEPA) (42 U.S.C. 4321–4370h).
3. Unique entity identifier and System for
Award Management (SAM)—Required. This
paragraph must state clearly that each ap-
plicant (unless the applicant is an individual
or Federal awarding agency that is excepted
from those requirements under 2 CFR
25.110(b) or (c), or has an exception approved
by the Federal awarding agency under 2 CFR
25.110(d)) is required to: (i) Be registered in
SAM before submitting its application; (ii)
Provide a valid unique entity identifier in its
application; and (iii) Continue to maintain
an active SAM registration with current in-
formation at all times during which it has an
active Federal award or an application or
plan under consideration by a Federal award-
ing agency. It also must state that the Fed-
eral awarding agency may not make a Fed-
eral award to an applicant until the appli-
cant has complied with all applicable unique
entity identifier and SAM requirements and,
if an applicant has not fully complied with
the requirements by the time the Federal
awarding agency is ready to make a Federal
award, the Federal awarding agency may de-
termine that the applicant is not qualified to
receive a Federal award and use that deter-
mination as a basis for making a Federal
award to another applicant.
4. Submission Dates and Times—Required.
Announcements must identify due dates and
times for all submissions. This includes not
only the full applications but also any pre-
liminary submissions (e.g., letters of intent,
white papers, or pre-applications). It also in-
cludes any other submissions of information
before Federal award that are separate from
the full application. If the funding oppor-
tunity is a general announcement that is
open for a period of time with no specific due
dates for applications, this section should
say so. Note that the information on dates
that is included in this section also must ap-
pear with other overview information in a lo-
cation preceding the full text of the an-
nouncement (see §200.204 of this part).
5. Intergovernmental Review—Required, if ap-
plicable. If the funding opportunity is subject
to Executive Order 12372, ‘‘Intergovern-
mental Review of Federal Programs,’’ the
notice must say so and applicants must con-
tact their state’s Single Point of Contact
(SPOC) to find out about and comply with
the state’s process under Executive Order
12372, it may be useful to inform potential
applicants that the names and addresses of
the SPOCs are listed in the Office of Manage-
ment and Budget’s website.
6. Funding Restrictions—Required. Notices
must include information on funding restric-
tions in order to allow an applicant to de-
velop an application and budget consistent
with program requirements. Examples are
whether construction is an allowable activ-
ity, if there are any limitations on direct
costs such as foreign travel or equipment
purchases, and if there are any limits on in-
direct costs (or facilities and administrative
costs). Applicants must be advised if Federal
awards will not allow reimbursement of pre-
Federal award costs.
7. Other Submission Requirements— Required.
This section must address any other submis-
sion requirements not included in the other
paragraphs of this section. This might in-
clude the format of submission, i.e., paper or
electronic, for each type of required submis-
sion. Applicants should not be required to
submit in more than one format and this sec-
tion should indicate whether they may
choose whether to submit applications in
hard copy or electronically, may submit only
in hard copy, or may submit only electroni-
cally.
This section also must indicate where ap-
plications (and any pre-applications) must be
submitted if sent by postal mail, electronic
means, or hand-delivery. For postal mail
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OMB Guidance Pt. 200, App. I
1 With respect to electronic methods for
providing information about funding oppor-
tunities or accepting applicants’ submissions
of information, each Federal awarding agen-
cy is responsible for compliance with Section
508 of the Rehabilitation Act of 1973 (29
U.S.C. 794d).
submission, this must include the name of an
office, official, individual or function (e.g.,
application receipt center) and a complete
mailing address. For electronic submission,
this must include the URL or email address;
whether a password(s) is required; whether
particular software or other electronic capa-
bilities are required; what to do in the event
of system problems and a point of contact
who will be available in the event the appli-
cant experiences technical difficulties.1
E. APPLICATION REVIEW INFORMATION
1. Criteria—Required. This section must ad-
dress the criteria that the Federal awarding
agency will use to evaluate applications.
This includes the merit and other review cri-
teria that evaluators will use to judge appli-
cations, including any statutory, regulatory,
or other preferences (e.g., minority status or
Native American tribal preferences) that
will be applied in the review process. These
criteria are distinct from eligibility criteria
that are addressed before an application is
accepted for review and any program policy
or other factors that are applied during the
selection process, after the review process is
completed. The intent is to make the appli-
cation process transparent so applicants can
make informed decisions when preparing
their applications to maximize fairness of
the process. The announcement should clear-
ly describe all criteria, including any sub-
criteria. If criteria vary in importance, the
announcement should specify the relative
percentages, weights, or other means used to
distinguish among them. For statutory, reg-
ulatory, or other preferences, the announce-
ment should provide a detailed explanation
of those preferences with an explicit indica-
tion of their effect (e.g., whether they result
in additional points being assigned).
If an applicant’s proposed cost sharing will
be considered in the review process (as op-
posed to being an eligibility criterion de-
scribed in Section C.2), the announcement
must specifically address how it will be con-
sidered (e.g., to assign a certain number of
additional points to applicants who offer
cost sharing, or to break ties among applica-
tions with equivalent scores after evaluation
against all other factors). If cost sharing will
not be considered in the evaluation, the an-
nouncement should say so, so that there is
no ambiguity for potential applicants. Vague
statements that cost sharing is encouraged,
without clarification as to what that means,
are unhelpful to applicants. It also is impor-
tant that the announcement be clear about
any restrictions on the types of cost (e.g., in-
kind contributions) that are acceptable as
cost sharing.
2. Review and Selection Process—Required.
This section may vary in the level of detail
provided. The announcement must list any
program policy or other factors or elements,
other than merit criteria, that the selecting
official may use in selecting applications for
Federal award (e.g., geographical dispersion,
program balance, or diversity). The Federal
awarding agency may also include other ap-
propriate details. For example, this section
may indicate who is responsible for evalua-
tion against the merit criteria (e.g., peers ex-
ternal to the Federal awarding agency or
Federal awarding agency personnel) and/or
who makes the final selections for Federal
awards. If there is a multi-phase review proc-
ess (e.g., an external panel advising internal
Federal awarding agency personnel who
make final recommendations to the deciding
official), the announcement may describe the
phases. It also may include: the number of
people on an evaluation panel and how it op-
erates, the way reviewers are selected, re-
viewer qualifications, and the way that con-
flicts of interest are avoided. With respect to
electronic methods for providing informa-
tion about funding opportunities or accept-
ing applicants’ submissions of information,
each Federal awarding agency is responsible
for compliance with Section 508 of the Reha-
bilitation Act of 1973 (29 U.S.C. 794d).
In addition, if the Federal awarding agency
permits applicants to nominate suggested re-
viewers of their applications or suggest those
they feel may be inappropriate due to a con-
flict of interest, that information should be
included in this section.
3. For any Federal award under a notice of
funding opportunity, if the Federal awarding
agency anticipates that the total Federal
share will be greater than the simplified ac-
quisition threshold on any Federal award
under a notice of funding opportunity may
include, over the period of performance, this
section must also inform applicants:
i. That the Federal awarding agency, prior
to making a Federal award with a total
amount of Federal share greater than the
simplified acquisition threshold, is required
to review and consider any information
about the applicant that is in the designated
integrity and performance system accessible
through SAM (currently FAPIIS) (see 41
U.S.C. 2313);
ii. That an applicant, at its option, may re-
view information in the designated integrity
and performance systems accessible through
SAM and comment on any information about
itself that a Federal awarding agency pre-
viously entered and is currently in the des-
ignated integrity and performance system
accessible through SAM;
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. I
iii. That the Federal awarding agency will
consider any comments by the applicant, in
addition to the other information in the des-
ignated integrity and performance system,
in making a judgment about the applicant’s
integrity, business ethics, and record of per-
formance under Federal awards when com-
pleting the review of risk posed by appli-
cants as described in §200.206.
4. Anticipated Announcement and Federal
Award Dates—Optional. This section is in-
tended to provide applicants with informa-
tion they can use for planning purposes. If
there is a single application deadline fol-
lowed by the simultaneous review of all ap-
plications, the Federal awarding agency can
include in this section information about the
anticipated dates for announcing or noti-
fying successful and unsuccessful applicants
and for having Federal awards in place. If ap-
plications are received and evaluated on a
‘‘rolling’’ basis at different times during an
extended period, it may be appropriate to
give applicants an estimate of the time need-
ed to process an application and notify the
applicant of the Federal awarding agency’s
decision.
F. FEDERAL AWARD ADMINISTRATION
INFORMATION
1. Federal Award Notices—Required. This
section must address what a successful appli-
cant can expect to receive following selec-
tion. If the Federal awarding agency’s prac-
tice is to provide a separate notice stating
that an application has been selected before
it actually makes the Federal award, this
section would be the place to indicate that
the letter is not an authorization to begin
performance (to the extent that it allows
charging to Federal awards of pre-award
costs at the non-Federal entity’s own risk).
This section should indicate that the notice
of Federal award signed by the grants officer
(or equivalent) is the authorizing document,
and whether it is provided through postal
mail or by electronic means and to whom. It
also may address the timing, form, and con-
tent of notifications to unsuccessful appli-
cants. See also §200.211.
2. Administrative and National Policy Re-
quirements—Required. This section must iden-
tify the usual administrative and national
policy requirements the Federal awarding
agency’s Federal awards may include. Pro-
viding this information lets a potential ap-
plicant identify any requirements with
which it would have difficulty complying if
its application is successful. In those cases,
early notification about the requirements al-
lows the potential applicant to decide not to
apply or to take needed actions before re-
ceiving the Federal award. The announce-
ment need not include all of the terms and
conditions of the Federal award, but may
refer to a document (with information about
how to obtain it) or Internet site where ap-
plicants can see the terms and conditions. If
this funding opportunity will lead to Federal
awards with some special terms and condi-
tions that differ from the Federal awarding
agency’s usual (sometimes called ‘‘general’’)
terms and conditions, this section should
highlight those special terms and conditions.
Doing so will alert applicants that have re-
ceived Federal awards from the Federal
awarding agency previously and might not
otherwise expect different terms and condi-
tions. For the same reason, the announce-
ment should inform potential applicants
about special requirements that could apply
to particular Federal awards after the review
of applications and other information, based
on the particular circumstances of the effort
to be supported (e.g., if human subjects were
to be involved or if some situations may jus-
tify special terms on intellectual property,
data sharing or security requirements).
3. Reporting—Required. This section must
include general information about the type
(e.g., financial or performance), frequency,
and means of submission (paper or elec-
tronic) of post-Federal award reporting re-
quirements. Highlight any special reporting
requirements for Federal awards under this
funding opportunity that differ (e.g., by re-
port type, frequency, form/format, or cir-
cumstances for use) from what the Federal
awarding agency’s Federal awards usually
require. Federal awarding agencies must also
describe in this section all relevant require-
ments such as those at 2 CFR 180.335 and
180.350.
If the Federal share of any Federal award
may include more than $500,000 over the pe-
riod of performance, this section must in-
form potential applicants about the post
award reporting requirements reflected in
appendix XII to this part.
G. FEDERAL AWARDING AGENCY CONTACT(S)—
REQUIRED
The announcement must give potential ap-
plicants a point(s) of contact for answering
questions or helping with problems while the
funding opportunity is open. The intent of
this requirement is to be as helpful as pos-
sible to potential applicants, so the Federal
awarding agency should consider approaches
such as giving:
i. Points of contact who may be reached in
multiple ways (e.g., by telephone, FAX, and/
or email, as well as regular mail).
ii. A fax or email address that multiple
people access, so that someone will respond
even if others are unexpectedly absent dur-
ing critical periods.
iii. Different contacts for distinct kinds of
help (e.g., one for questions of programmatic
content and a second for administrative
questions).
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OMB Guidance Pt. 200, App. II
H. OTHER INFORMATION—OPTIONAL
This section may include any additional
information that will assist a potential ap-
plicant. For example, the section might:
i. Indicate whether this is a new program
or a one-time initiative.
ii. Mention related programs or other up-
coming or ongoing Federal awarding agency
funding opportunities for similar activities.
iii. Include current Internet addresses for
Federal awarding agency Web sites that may
be useful to an applicant in understanding
the program.
iv. Alert applicants to the need to identify
proprietary information and inform them
about the way the Federal awarding agency
will handle it.
v. Include certain routine notices to appli-
cants (e.g., that the Federal Government is
not obligated to make any Federal award as
a result of the announcement or that only
grants officers can bind the Federal Govern-
ment to the expenditure of funds).
[78 FR 78608, Dec. 26, 2013, as amended at 80
FR 43310, July 22, 2015; 85 FR 49575, Aug. 13,
2020]
APPENDIX II TO PART 200—CONTRACT
PROVISIONS FOR NON-FEDERAL ENTI-
TY CONTRACTS UNDER FEDERAL
AWARDS
In addition to other provisions required by
the Federal agency or non-Federal entity, all
contracts made by the non-Federal entity
under the Federal award must contain provi-
sions covering the following, as applicable.
(A) Contracts for more than the simplified
acquisition threshold, which is the inflation
adjusted amount determined by the Civilian
Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils)
as authorized by 41 U.S.C. 1908, must address
administrative, contractual, or legal rem-
edies in instances where contractors violate
or breach contract terms, and provide for
such sanctions and penalties as appropriate.
(B) All contracts in excess of $10,000 must
address termination for cause and for con-
venience by the non-Federal entity including
the manner by which it will be effected and
the basis for settlement.
(C) Equal Employment Opportunity. Ex-
cept as otherwise provided under 41 CFR
Part 60, all contracts that meet the defini-
tion of ‘‘federally assisted construction con-
tract’’ in 41 CFR Part 60–1.3 must include the
equal opportunity clause provided under 41
CFR 60–1.4(b), in accordance with Executive
Order 11246, ‘‘Equal Employment Oppor-
tunity’’ (30 FR 12319, 12935, 3 CFR Part, 1964–
1965 Comp., p. 339), as amended by Executive
Order 11375, ‘‘Amending Executive Order
11246 Relating to Equal Employment Oppor-
tunity,’’ and implementing regulations at 41
CFR part 60, ‘‘Office of Federal Contract
Compliance Programs, Equal Employment
Opportunity, Department of Labor.’’
(D) Davis-Bacon Act, as amended (40 U.S.C.
3141–3148). When required by Federal program
legislation, all prime construction contracts
in excess of $2,000 awarded by non-Federal
entities must include a provision for compli-
ance with the Davis-Bacon Act (40 U.S.C.
3141–3144, and 3146–3148) as supplemented by
Department of Labor regulations (29 CFR
Part 5, ‘‘Labor Standards Provisions Appli-
cable to Contracts Covering Federally Fi-
nanced and Assisted Construction’’). In ac-
cordance with the statute, contractors must
be required to pay wages to laborers and me-
chanics at a rate not less than the prevailing
wages specified in a wage determination
made by the Secretary of Labor. In addition,
contractors must be required to pay wages
not less than once a week. The non-Federal
entity must place a copy of the current pre-
vailing wage determination issued by the De-
partment of Labor in each solicitation. The
decision to award a contract or subcontract
must be conditioned upon the acceptance of
the wage determination. The non-Federal en-
tity must report all suspected or reported
violations to the Federal awarding agency.
The contracts must also include a provision
for compliance with the Copeland ‘‘Anti-
Kickback’’ Act (40 U.S.C. 3145), as supple-
mented by Department of Labor regulations
(29 CFR Part 3, ‘‘Contractors and Sub-
contractors on Public Building or Public
Work Financed in Whole or in Part by Loans
or Grants from the United States’’). The Act
provides that each contractor or sub-
recipient must be prohibited from inducing,
by any means, any person employed in the
construction, completion, or repair of public
work, to give up any part of the compensa-
tion to which he or she is otherwise entitled.
The non-Federal entity must report all sus-
pected or reported violations to the Federal
awarding agency.
(E) Contract Work Hours and Safety
Standards Act (40 U.S.C. 3701–3708). Where
applicable, all contracts awarded by the non-
Federal entity in excess of $100,000 that in-
volve the employment of mechanics or labor-
ers must include a provision for compliance
with 40 U.S.C. 3702 and 3704, as supplemented
by Department of Labor regulations (29 CFR
Part 5). Under 40 U.S.C. 3702 of the Act, each
contractor must be required to compute the
wages of every mechanic and laborer on the
basis of a standard work week of 40 hours.
Work in excess of the standard work week is
permissible provided that the worker is com-
pensated at a rate of not less than one and a
half times the basic rate of pay for all hours
worked in excess of 40 hours in the work
week. The requirements of 40 U.S.C. 3704 are
applicable to construction work and provide
that no laborer or mechanic must be re-
quired to work in surroundings or under
working conditions which are unsanitary,
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. III
hazardous or dangerous. These requirements
do not apply to the purchases of supplies or
materials or articles ordinarily available on
the open market, or contracts for transpor-
tation or transmission of intelligence.
(F) Rights to Inventions Made Under a
Contract or Agreement. If the Federal award
meets the definition of ‘‘funding agreement’’
under 37 CFR §401.2 (a) and the recipient or
subrecipient wishes to enter into a contract
with a small business firm or nonprofit orga-
nization regarding the substitution of par-
ties, assignment or performance of experi-
mental, developmental, or research work
under that ‘‘funding agreement,’’ the recipi-
ent or subrecipient must comply with the re-
quirements of 37 CFR Part 401, ‘‘Rights to In-
ventions Made by Nonprofit Organizations
and Small Business Firms Under Govern-
ment Grants, Contracts and Cooperative
Agreements,’’ and any implementing regula-
tions issued by the awarding agency.
(G) Clean Air Act (42 U.S.C. 7401–7671q.) and
the Federal Water Pollution Control Act (33
U.S.C. 1251–1387), as amended—Contracts and
subgrants of amounts in excess of $150,000
must contain a provision that requires the
non-Federal award to agree to comply with
all applicable standards, orders or regula-
tions issued pursuant to the Clean Air Act
(42 U.S.C. 7401–7671q) and the Federal Water
Pollution Control Act as amended (33 U.S.C.
1251–1387). Violations must be reported to the
Federal awarding agency and the Regional
Office of the Environmental Protection
Agency (EPA).
(H) Debarment and Suspension (Executive
Orders 12549 and 12689)—A contract award
(see 2 CFR 180.220) must not be made to par-
ties listed on the governmentwide exclusions
in the System for Award Management
(SAM), in accordance with the OMB guide-
lines at 2 CFR 180 that implement Executive
Orders 12549 (3 CFR part 1986 Comp., p. 189)
and 12689 (3 CFR part 1989 Comp., p. 235),
‘‘Debarment and Suspension.’’ SAM Exclu-
sions contains the names of parties debarred,
suspended, or otherwise excluded by agen-
cies, as well as parties declared ineligible
under statutory or regulatory authority
other than Executive Order 12549.
(I) Byrd Anti-Lobbying Amendment (31
U.S.C. 1352)—Contractors that apply or bid
for an award exceeding $100,000 must file the
required certification. Each tier certifies to
the tier above that it will not and has not
used Federal appropriated funds to pay any
person or organization for influencing or at-
tempting to influence an officer or employee
of any agency, a member of Congress, officer
or employee of Congress, or an employee of a
member of Congress in connection with ob-
taining any Federal contract, grant or any
other award covered by 31 U.S.C. 1352. Each
tier must also disclose any lobbying with
non-Federal funds that takes place in con-
nection with obtaining any Federal award.
Such disclosures are forwarded from tier to
tier up to the non-Federal award.
(J) See §200.323.
(K) See §200.216.
(L) See §200.322.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75888, Dec. 19, 2014; 85 FR 49577, Aug. 13,
2020]
APPENDIX III TO PART 200—INDIRECT
(F&A) COSTS IDENTIFICATION AND
ASSIGNMENT, AND RATE DETERMINA-
TION FOR INSTITUTIONS OF HIGHER
EDUCATION (IHES)
A. GENERAL
This appendix provides criteria for identi-
fying and computing indirect (or indirect
(F&A)) rates at IHEs (institutions). Indirect
(F&A) costs are those that are incurred for
common or joint objectives and therefore
cannot be identified readily and specifically
with a particular sponsored project, an in-
structional activity, or any other institu-
tional activity. See subsection B.1 for a dis-
cussion of the components of indirect (F&A)
costs.
1. Major Functions of an Institution
Refers to instruction, organized research,
other sponsored activities and other institu-
tional activities as defined in this section:
a. Instruction means the teaching and
training activities of an institution. Except
for research training as provided in sub-
section b, this term includes all teaching and
training activities, whether they are offered
for credits toward a degree or certificate or
on a non-credit basis, and whether they are
offered through regular academic depart-
ments or separate divisions, such as a sum-
mer school division or an extension division.
Also considered part of this major function
are departmental research, and, where
agreed to, university research.
(1) Sponsored instruction and training means
specific instructional or training activity es-
tablished by grant, contract, or cooperative
agreement. For purposes of the cost prin-
ciples, this activity may be considered a
major function even though an institution’s
accounting treatment may include it in the
instruction function.
(2) Departmental research means research,
development and scholarly activities that
are not organized research and, con-
sequently, are not separately budgeted and
accounted for. Departmental research, for
purposes of this document, is not considered
as a major function, but as a part of the in-
struction function of the institution.
(3) Only mandatory cost sharing or cost
sharing specifically committed in the project
budget must be included in the organized re-
search base for computing the indirect (F&A)
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OMB Guidance Pt. 200, App. III
cost rate or reflected in any allocation of in-
direct costs. Salary costs above statutory
limits are not considered cost sharing.
b. Organized research means all research
and development activities of an institution
that are separately budgeted and accounted
for. It includes:
(1) Sponsored research means all research
and development activities that are spon-
sored by Federal and non-Federal agencies
and organizations. This term includes activi-
ties involving the training of individuals in
research techniques (commonly called re-
search training) where such activities utilize
the same facilities as other research and de-
velopment activities and where such activi-
ties are not included in the instruction func-
tion.
(2) University research means all research
and development activities that are sepa-
rately budgeted and accounted for by the in-
stitution under an internal application of in-
stitutional funds. University research, for
purposes of this document, must be com-
bined with sponsored research under the
function of organized research.
c. Other sponsored activities means programs
and projects financed by Federal and non-
Federal agencies and organizations which in-
volve the performance of work other than in-
struction and organized research. Examples
of such programs and projects are health
service projects and community service pro-
grams. However, when any of these activities
are undertaken by the institution without
outside support, they may be classified as
other institutional activities.
d. Other institutional activities means all ac-
tivities of an institution except for instruc-
tion, departmental research, organized re-
search, and other sponsored activities, as de-
fined in this section; indirect (F&A) cost ac-
tivities identified in this Appendix para-
graph B, Identification and assignment of in-
direct (F&A) costs; and specialized services
facilities described in §200.468 of this part.
2. Criteria for Distribution
a. Base period. A base period for distribu-
tion of indirect (F&A) costs is the period
during which the costs are incurred. The
base period normally should coincide with
the fiscal year established by the institution,
but in any event the base period should be so
selected as to avoid inequities in the dis-
tribution of costs.
b. Need for cost groupings. The overall ob-
jective of the indirect (F&A) cost allocation
process is to distribute the indirect (F&A)
costs described in Section B, Identification
and assignment of indirect (F&A) costs, to
the major functions of the institution in pro-
portions reasonably consistent with the na-
ture and extent of their use of the institu-
tion’s resources. In order to achieve this ob-
jective, it may be necessary to provide for
selective distribution by establishing sepa-
rate groupings of cost within one or more of
the indirect (F&A) cost categories referred
to in subsection B.1. In general, the cost
groupings established within a category
should constitute, in each case, a pool of
those items of expense that are considered to
be of like nature in terms of their relative
contribution to (or degree of remoteness
from) the particular cost objectives to which
distribution is appropriate. Cost groupings
should be established considering the general
guides provided in subsection c of this sec-
tion. Each such pool or cost grouping should
then be distributed individually to the re-
lated cost objectives, using the distribution
base or method most appropriate in light of
the guidelines set forth in subsection d of
this section.
c. General considerations on cost groupings.
The extent to which separate cost groupings
and selective distribution would be appro-
priate at an institution is a matter of judg-
ment to be determined on a case-by-case
basis. Typical situations which may warrant
the establishment of two or more separate
cost groupings (based on account classifica-
tion or analysis) within an indirect (F&A)
cost category include but are not limited to
the following:
(1) If certain items or categories of expense
relate solely to one of the major functions of
the institution or to less than all functions,
such expenses should be set aside as a sepa-
rate cost grouping for direct assignment or
selective allocation in accordance with the
guides provided in subsections b and d.
(2) If any types of expense ordinarily treat-
ed as general administration or depart-
mental administration are charged to Fed-
eral awards as direct costs, expenses applica-
ble to other activities of the institution
when incurred for the same purposes in like
circumstances must, through separate cost
groupings, be excluded from the indirect
(F&A) costs allocable to those Federal
awards and included in the direct cost of
other activities for cost allocation purposes.
(3) If it is determined that certain expenses
are for the support of a service unit or facil-
ity whose output is susceptible of measure-
ment on a workload or other quantitative
basis, such expenses should be set aside as a
separate cost grouping for distribution on
such basis to organized research, instruc-
tional, and other activities at the institution
or within the department.
(4) If activities provide their own pur-
chasing, personnel administration, building
maintenance or similar service, the distribu-
tion of general administration and general
expenses, or operation and maintenance ex-
penses to such activities should be accom-
plished through cost groupings which include
only that portion of central indirect (F&A)
costs (such as for overall management)
which are properly allocable to such activi-
ties.
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. III
(5) If the institution elects to treat fringe
benefits as indirect (F&A) charges, such
costs should be set aside as a separate cost
grouping for selective distribution to related
cost objectives.
(6) The number of separate cost groupings
within a category should be held within
practical limits, after taking into consider-
ation the materiality of the amounts in-
volved and the degree of precision attainable
through less selective methods of distribu-
tion.
d. Selection of distribution method.
(1) Actual conditions must be taken into
account in selecting the method or base to
be used in distributing individual cost
groupings. The essential consideration in se-
lecting a base is that it be the one best suit-
ed for assigning the pool of costs to cost ob-
jectives in accordance with benefits derived;
with a traceable cause-and-effect relation-
ship; or with logic and reason, where neither
benefit nor a cause-and-effect relationship is
determinable.
(2) If a cost grouping can be identified di-
rectly with the cost objective benefitted, it
should be assigned to that cost objective.
(3) If the expenses in a cost grouping are
more general in nature, the distribution may
be based on a cost analysis study which re-
sults in an equitable distribution of the
costs. Such cost analysis studies may take
into consideration weighting factors, popu-
lation, or space occupied if appropriate. Cost
analysis studies, however, must (a) be appro-
priately documented in sufficient detail for
subsequent review by the cognizant agency
for indirect costs, (b) distribute the costs to
the related cost objectives in accordance
with the relative benefits derived, (c) be sta-
tistically sound, (d) be performed specifically
at the institution at which the results are to
be used, and (e) be reviewed periodically, but
not less frequently than rate negotiations,
updated if necessary, and used consistently.
Any assumptions made in the study must be
stated and explained. The use of cost anal-
ysis studies and periodic changes in the
method of cost distribution must be fully
justified.
(4) If a cost analysis study is not per-
formed, or if the study does not result in an
equitable distribution of the costs, the dis-
tribution must be made in accordance with
the appropriate base cited in Section B, un-
less one of the following conditions is met:
(a) It can be demonstrated that the use of
a different base would result in a more equi-
table allocation of the costs, or that a more
readily available base would not increase the
costs charged to Federal awards, or
(b) The institution qualifies for, and elects
to use, the simplified method for computing
indirect (F&A) cost rates described in Sec-
tion D.
(5) Notwithstanding subsection (3), effec-
tive July 1, 1998, a cost analysis or base other
than that in Section B must not be used to
distribute utility or student services costs.
Instead, subsection B.4.c, may be used in the
recovery of utility costs.
e. Order of distribution.
(1) Indirect (F&A) costs are the broad cat-
egories of costs discussed in Section B.1.
(2) Depreciation, interest expenses, oper-
ation and maintenance expenses, and general
administrative and general expenses should
be allocated in that order to the remaining
indirect (F&A) cost categories as well as to
the major functions and specialized service
facilities of the institution. Other cost cat-
egories may be allocated in the order deter-
mined to be most appropriate by the institu-
tions. When cross allocation of costs is made
as provided in subsection (3), this order of al-
location does not apply.
(3) Normally an indirect (F&A) cost cat-
egory will be considered closed once it has
been allocated to other cost objectives, and
costs may not be subsequently allocated to
it. However, a cross allocation of costs be-
tween two or more indirect (F&A) cost cat-
egories may be used if such allocation will
result in a more equitable allocation of
costs. If a cross allocation is used, an appro-
priate modification to the composition of
the indirect (F&A) cost categories described
in Section B is required.
B. IDENTIFICATION AND ASSIGNMENT OF
INDIRECT (F&A) COSTS
1. Definition of Facilities and Administration
See §200.414 which provides the basis for
these indirect cost requirements.
2. Depreciation
a. The expenses under this heading are the
portion of the costs of the institution’s
buildings, capital improvements to land and
buildings, and equipment which are com-
puted in accordance with §200.436.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated in
the following manner:
(1) Depreciation on buildings used exclu-
sively in the conduct of a single function,
and on capital improvements and equipment
used in such buildings, must be assigned to
that function.
(2) Depreciation on buildings used for more
than one function, and on capital improve-
ments and equipment used in such buildings,
must be allocated to the individual functions
performed in each building on the basis of
usable square feet of space, excluding com-
mon areas such as hallways, stairwells, and
rest rooms.
(3) Depreciation on buildings, capital im-
provements and equipment related to space
(e.g., individual rooms, laboratories) used
jointly by more than one function (as deter-
mined by the users of the space) must be
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OMB Guidance Pt. 200, App. III
treated as follows. The cost of each jointly
used unit of space must be allocated to bene-
fitting functions on the basis of:
(a) The employee full-time equivalents
(FTEs) or salaries and wages of those indi-
vidual functions benefitting from the use of
that space; or
(b) Institution-wide employee FTEs or sal-
aries and wages applicable to the benefitting
major functions (see Section A.1) of the in-
stitution.
(4) Depreciation on certain capital im-
provements to land, such as paved parking
areas, fences, sidewalks, and the like, not in-
cluded in the cost of buildings, must be allo-
cated to user categories of students and em-
ployees on a full-time equivalent basis. The
amount allocated to the student category
must be assigned to the instruction function
of the institution. The amount allocated to
the employee category must be further allo-
cated to the major functions of the institu-
tion in proportion to the salaries and wages
of all employees applicable to those func-
tions.
3. Interest
Interest on debt associated with certain
buildings, equipment and capital improve-
ments, as defined in §200.449, must be classi-
fied as an expenditure under the category
Facilities. These costs must be allocated in
the same manner as the depreciation on the
buildings, equipment and capital improve-
ments to which the interest relates.
4. Operation and Maintenance Expenses
a. The expenses under this heading are
those that have been incurred for the admin-
istration, supervision, operation, mainte-
nance, preservation, and protection of the in-
stitution’s physical plant. They include ex-
penses normally incurred for such items as
janitorial and utility services; repairs and
ordinary or normal alterations of buildings,
furniture and equipment; care of grounds;
maintenance and operation of buildings and
other plant facilities; security; earthquake
and disaster preparedness; environmental
safety; hazardous waste disposal; property,
liability and all other insurance relating to
property; space and capital leasing; facility
planning and management; and central re-
ceiving. The operation and maintenance ex-
pense category should also include its allo-
cable share of fringe benefit costs, deprecia-
tion, and interest costs.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated in
the same manner as described in subsection
2.b for depreciation.
c. A utility cost adjustment of up to 1.3
percentage points may be included in the ne-
gotiated indirect cost rate of the IHE for or-
ganized research, per the computation alter-
natives in paragraphs (c)(1) and (2) of this
section:
(1) Where space is devoted to a single func-
tion and metering allows unambiguous meas-
urement of usage related to that space, costs
must be assigned to the function located in
that space.
(2) Where space is allocated to different
functions and metering does not allow unam-
biguous measurement of usage by function,
costs must be allocated as follows:
(i) Utilities costs should be apportioned to
functions in the same manner as deprecia-
tion, based on the calculated difference be-
tween the site or building actual square foot-
age for monitored research laboratory space
(site, building, floor, or room), and a sepa-
rate calculation prepared by the IHE using
the ‘‘effective square footage’’ described in
subsection (c)(2)(ii) of this section.
(ii) ‘‘Effective square footage’’ allocated to
research laboratory space must be calculated
as the actual square footage times the rel-
ative energy utilization index (REUI) posted
on the OMB Web site at the time of a rate
determination.
A. This index is the ratio of a laboratory
energy use index (lab EUI) to the cor-
responding index for overall average college
or university space (college EUI).
B. In July 2012, values for these two indices
(taken respectively from the Lawrence
Berkeley Laboratory ‘‘Labs for the 21st Cen-
tury’’ benchmarking tool and the US Depart-
ment of Energy ‘‘Buildings Energy
Databook’’ and were 310 kBtu/sq ft-yr. and
155 kBtu/sq ft-yr., so that the adjustment
ratio is 2.0 by this methodology. To retain
currency, OMB will adjust the EUI numbers
from time to time (no more often than annu-
ally nor less often than every 5 years), using
reliable and publicly disclosed data. Current
values of both the EUIs and the REUI will be
posted on the OMB website.
5. General Administration and General Expenses
a. The expenses under this heading are
those that have been incurred for the general
executive and administrative offices of edu-
cational institutions and other expenses of a
general character which do not relate solely
to any major function of the institution; i.e.,
solely to (1) instruction, (2) organized re-
search, (3) other sponsored activities, or (4)
other institutional activities. The general
administration and general expense category
should also include its allocable share of
fringe benefit costs, operation and mainte-
nance expense, depreciation, and interest
costs. Examples of general administration
and general expenses include: Those expenses
incurred by administrative offices that serve
the entire university system of which the in-
stitution is a part; central offices of the in-
stitution such as the President’s or
Chancellor’s office, the offices for institu-
tion-wide financial management, business
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. III
services, budget and planning, personnel
management, and safety and risk manage-
ment; the office of the General Counsel; and
the operations of the central administrative
management information systems. General
administration and general expenses must
not include expenses incurred within non-
university-wide deans’ offices, academic de-
partments, organized research units, or simi-
lar organizational units. (See subsection 6.)
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be grouped first
according to common major functions of the
institution to which they render services or
provide benefits. The aggregate expenses of
each group must then be allocated to serv-
iced or benefitted functions on the modified
total cost basis. Modified total costs consist
of the same elements as those in Section C.2.
When an activity included in this indirect
(F&A) cost category provides a service or
product to another institution or organiza-
tion, an appropriate adjustment must be
made to either the expenses or the basis of
allocation or both, to assure a proper alloca-
tion of costs.
6. Departmental Administration Expenses
a. The expenses under this heading are
those that have been incurred for adminis-
trative and supporting services that benefit
common or joint departmental activities or
objectives in academic deans’ offices, aca-
demic departments and divisions, and orga-
nized research units. Organized research
units include such units as institutes, study
centers, and research centers. Departmental
administration expenses are subject to the
following limitations.
(1) Academic deans’ offices. Salaries and
operating expenses are limited to those at-
tributable to administrative functions.
(2) Academic departments:
(a) Salaries and fringe benefits attrib-
utable to the administrative work (including
bid and proposal preparation) of faculty (in-
cluding department heads) and other profes-
sional personnel conducting research and/or
instruction, must be allowed at a rate of 3.6
percent of modified total direct costs. This
category does not include professional busi-
ness or professional administrative officers.
This allowance must be added to the com-
putation of the indirect (F&A) cost rate for
major functions in Section C; the expenses
covered by the allowance must be excluded
from the departmental administration cost
pool. No documentation is required to sup-
port this allowance.
(b) Other administrative and supporting
expenses incurred within academic depart-
ments are allowable provided they are treat-
ed consistently in like circumstances. This
would include expenses such as the salaries
of secretarial and clerical staffs, the salaries
of administrative officers and assistants,
travel, office supplies, stockrooms, and the
like.
(3) Other fringe benefit costs applicable to
the salaries and wages included in sub-
sections (1) and (2) are allowable, as well as
an appropriate share of general administra-
tion and general expenses, operation and
maintenance expenses, and depreciation.
(4) Federal agencies may authorize reim-
bursement of additional costs for department
heads and faculty only in exceptional cases
where an institution can demonstrate undue
hardship or detriment to project perform-
ance.
b. The following guidelines apply to the de-
termination of departmental administrative
costs as direct or indirect (F&A) costs.
(1) In developing the departmental admin-
istration cost pool, special care should be ex-
ercised to ensure that costs incurred for the
same purpose in like circumstances are
treated consistently as either direct or indi-
rect (F&A) costs. For example, salaries of
technical staff, laboratory supplies (e.g.,
chemicals), telephone toll charges, animals,
animal care costs, computer costs, travel
costs, and specialized shop costs must be
treated as direct costs wherever identifiable
to a particular cost objective. Direct charg-
ing of these costs may be accomplished
through specific identification of individual
costs to benefitting cost objectives, or
through recharge centers or specialized serv-
ice facilities, as appropriate under the cir-
cumstances. See §§200.413(c) and 200.468.
(2) Items such as office supplies, postage,
local telephone costs, and memberships must
normally be treated as indirect (F&A) costs.
c. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated as
follows:
(1) The administrative expenses of the
dean’s office of each college and school must
be allocated to the academic departments
within that college or school on the modified
total cost basis.
(2) The administrative expenses of each
academic department, and the department’s
share of the expenses allocated in subsection
(1) must be allocated to the appropriate func-
tions of the department on the modified
total cost basis.
7. Sponsored Projects Administration
a. The expenses under this heading are lim-
ited to those incurred by a separate organi-
zation(s) established primarily to administer
sponsored projects, including such functions
as grant and contract administration (Fed-
eral and non-Federal), special security, pur-
chasing, personnel, administration, and edit-
ing and publishing of research and other re-
ports. They include the salaries and expenses
of the head of such organization, assistants,
and immediate staff, together with the sala-
ries and expenses of personnel engaged in
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OMB Guidance Pt. 200, App. III
supporting activities maintained by the or-
ganization, such as stock rooms, print shops,
and the like. This category also includes an
allocable share of fringe benefit costs, gen-
eral administration and general expenses,
operation and maintenance expenses, and de-
preciation. Appropriate adjustments will be
made for services provided to other functions
or organizations.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated to
the major functions of the institution under
which the sponsored projects are conducted
on the basis of the modified total cost of
sponsored projects.
c. An appropriate adjustment must be
made to eliminate any duplicate charges to
Federal awards when this category includes
similar or identical activities as those in-
cluded in the general administration and
general expense category or other indirect
(F&A) cost items, such as accounting, pro-
curement, or personnel administration.
8. Library Expenses
a. The expenses under this heading are
those that have been incurred for the oper-
ation of the library, including the cost of
books and library materials purchased for
the library, less any items of library income
that qualify as applicable credits under
§200.406. The library expense category should
also include the fringe benefits applicable to
the salaries and wages included therein, an
appropriate share of general administration
and general expense, operation and mainte-
nance expense, and depreciation. Costs in-
curred in the purchases of rare books (mu-
seum-type books) with no value to Federal
awards should not be allocated to them.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated
first on the basis of primary categories of
users, including students, professional em-
ployees, and other users.
(1) The student category must consist of
full-time equivalent students enrolled at the
institution, regardless of whether they earn
credits toward a degree or certificate.
(2) The professional employee category
must consist of all faculty members and
other professional employees of the institu-
tion, on a full-time equivalent basis. This
category may also include post-doctorate
fellows and graduate students.
(3) The other users category must consist
of a reasonable factor as determined by insti-
tutional records to account for all other
users of library facilities.
c. Amount allocated in paragraph b of this
section must be assigned further as follows:
(1) The amount in the student category
must be assigned to the instruction function
of the institution.
(2) The amount in the professional em-
ployee category must be assigned to the
major functions of the institution in propor-
tion to the salaries and wages of all faculty
members and other professional employees
applicable to those functions.
(3) The amount in the other users category
must be assigned to the other institutional
activities function of the institution.
9. Student Administration and Services
a. The expenses under this heading are
those that have been incurred for the admin-
istration of student affairs and for services
to students, including expenses of such ac-
tivities as deans of students, admissions, reg-
istrar, counseling and placement services,
student advisers, student health and infir-
mary services, catalogs, and commence-
ments and convocations. The salaries of
members of the academic staff whose respon-
sibilities to the institution require adminis-
trative work that benefits sponsored projects
may also be included to the extent that the
portion charged to student administration is
determined in accordance with subpart E of
this Part. This expense category also in-
cludes the fringe benefit costs applicable to
the salaries and wages included therein, an
appropriate share of general administration
and general expenses, operation and mainte-
nance, interest expense, and depreciation.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in
this category must be allocated to the in-
struction function, and subsequently to Fed-
eral awards in that function.
10. Offset for Indirect (F&A) Expenses Other-
wise Provided for by the Federal Govern-
ment
a. The items to be accumulated under this
heading are the reimbursements and other
payments from the Federal Government
which are made to the institution to support
solely, specifically, and directly, in whole or
in part, any of the administrative or service
activities described in subsections 2 through
9.
b. The items in this group must be treated
as a credit to the affected individual indirect
(F&A) cost category before that category is
allocated to benefitting functions.
C. DETERMINATION AND APPLICATION OF
INDIRECT (F&A) COST RATE OR RATES
1. Indirect (F&A) Cost Pools
a. (1) Subject to subsection b, the separate
categories of indirect (F&A) costs allocated
to each major function of the institution as
prescribed in Section B, must be aggregated
and treated as a common pool for that func-
tion. The amount in each pool must be di-
vided by the distribution base described in
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subsection 2 to arrive at a single indirect
(F&A) cost rate for each function.
(2) The rate for each function is used to
distribute indirect (F&A) costs to individual
Federal awards of that function. Since a
common pool is established for each major
function of the institution, a separate indi-
rect (F&A) cost rate would be established for
each of the major functions described in Sec-
tion A.1 under which Federal awards are car-
ried out.
(3) Each institution’s indirect (F&A) cost
rate process must be appropriately designed
to ensure that Federal sponsors do not in
any way subsidize the indirect (F&A) costs of
other sponsors, specifically activities spon-
sored by industry and foreign governments.
Accordingly, each allocation method used to
identify and allocate the indirect (F&A) cost
pools, as described in Sections A.2 and B.2
through B.9, must contain the full amount of
the institution’s modified total costs or
other appropriate units of measurement used
to make the computations. In addition, the
final rate distribution base (as defined in
subsection 2) for each major function (orga-
nized research, instruction, etc., as described
in Section A.1 functions of an institution)
must contain all the programs or activities
which utilize the indirect (F&A) costs allo-
cated to that major function. At the time an
indirect (F&A) cost proposal is submitted to
a cognizant agency for indirect costs, each
institution must describe the process it uses
to ensure that Federal funds are not used to
subsidize industry and foreign government
funded programs.
2. The Distribution Basis
Indirect (F&A) costs must be distributed to
applicable Federal awards and other benefit-
ting activities within each major function
(see section A.1) on the basis of modified
total direct costs (MTDC), consisting of all
salaries and wages, fringe benefits, materials
and supplies, services, travel, and up to the
first $25,000 of each subaward (regardless of
the period covered by the subaward). MTDC
is defined in §200.1. For this purpose, an indi-
rect (F&A) cost rate should be determined
for each of the separate indirect (F&A) cost
pools developed pursuant to subsection 1.
The rate in each case should be stated as the
percentage which the amount of the par-
ticular indirect (F&A) cost pool is of the
modified total direct costs identified with
such pool.
3. Negotiated Lump Sum for Indirect (F&A)
Costs
A negotiated fixed amount in lieu of indi-
rect (F&A) costs may be appropriate for self-
contained, off-campus, or primarily subcon-
tracted activities where the benefits derived
from an institution’s indirect (F&A) services
cannot be readily determined. Such nego-
tiated indirect (F&A) costs will be treated as
an offset before allocation to instruction, or-
ganized research, other sponsored activities,
and other institutional activities. The base
on which such remaining expenses are allo-
cated should be appropriately adjusted.
4. Predetermined Rates for Indirect (F&A) Costs
Public Law 87–638 (76 Stat. 437) as amended
(41 U.S.C. 4708) authorizes the use of pre-
determined rates in determining the ‘‘indi-
rect costs’’ (indirect (F&A) costs) applicable
under research agreements with educational
institutions. The stated objectives of the law
are to simplify the administration of cost-
type research and development contracts (in-
cluding grants) with educational institu-
tions, to facilitate the preparation of their
budgets, and to permit more expeditious
closeout of such contracts when the work is
completed. In view of the potential advan-
tages offered by this procedure, negotiation
of predetermined rates for indirect (F&A)
costs for a period of two to four years should
be the norm in those situations where the
cost experience and other pertinent facts
available are deemed sufficient to enable the
parties involved to reach an informed judg-
ment as to the probable level of indirect
(F&A) costs during the ensuing accounting
periods.
5. Negotiated Fixed Rates and Carry-Forward
Provisions
When a fixed rate is negotiated in advance
for a fiscal year (or other time period), the
over- or under-recovery for that year may be
included as an adjustment to the indirect
(F&A) cost for the next rate negotiation.
When the rate is negotiated before the carry-
forward adjustment is determined, the carry-
forward amount may be applied to the next
subsequent rate negotiation. When such ad-
justments are to be made, each fixed rate ne-
gotiated in advance for a given period will be
computed by applying the expected indirect
(F&A) costs allocable to Federal awards for
the forecast period plus or minus the carry-
forward adjustment (over- or under-recovery)
from the prior period, to the forecast dis-
tribution base. Unrecovered amounts under
lump-sum agreements or cost-sharing provi-
sions of prior years must not be carried for-
ward for consideration in the new rate nego-
tiation. There must, however, be an advance
understanding in each case between the in-
stitution and the cognizant agency for indi-
rect costs as to whether these differences
will be considered in the rate negotiation
rather than making the determination after
the differences are known. Further, institu-
tions electing to use this carry-forward pro-
vision may not subsequently change without
prior approval of the cognizant agency for
indirect costs. In the event that an institu-
tion returns to a post-determined rate, any
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over- or under-recovery during the period in
which negotiated fixed rates and carry-for-
ward provisions were followed will be in-
cluded in the subsequent post-determined
rates. Where multiple rates are used, the
same procedure will be applicable for deter-
mining each rate.
6. Provisional and Final Rates for Indirect
(F&A) Costs
Where the cognizant agency for indirect
costs determines that cost experience and
other pertinent facts do not justify the use
of predetermined rates, or a fixed rate with
a carry-forward, or if the parties cannot
agree on an equitable rate, a provisional rate
must be established. To prevent substantial
overpayment or underpayment, the provi-
sional rate may be adjusted by the cognizant
agency for indirect costs during the institu-
tion’s fiscal year. Predetermined or fixed
rates may replace provisional rates at any
time prior to the close of the institution’s
fiscal year. If a provisional rate is not re-
placed by a predetermined or fixed rate prior
to the end of the institution’s fiscal year, a
final rate will be established and upward or
downward adjustments will be made based on
the actual allowable costs incurred for the
period involved.
7. Fixed Rates for the Life of the Sponsored
Agreement
a. Except as provided in paragraph (c)(1) of
§200.414, Federal agencies must use the nego-
tiated rates in effect at the time of the ini-
tial award throughout the life of the Federal
award. Award levels for Federal awards may
not be adjusted in future years as a result of
changes in negotiated rates. ‘‘Negotiated
rates’’ per the rate agreement include final,
fixed, and predetermined rates and exclude
provisional rates. ‘‘Life’’ for the purpose of
this subsection means each competitive seg-
ment of a project. A competitive segment is
a period of years approved by the Federal
awarding agency at the time of the Federal
award. If negotiated rate agreements do not
extend through the life of the Federal award
at the time of the initial award, then the ne-
gotiated rate for the last year of the Federal
award must be extended through the end of
the life of the Federal award.
b. Except as provided in §200.414, when an
educational institution does not have a nego-
tiated rate with the Federal Government at
the time of an award (because the edu-
cational institution is a new recipient or the
parties cannot reach agreement on a rate),
the provisional rate used at the time of the
award must be adjusted once a rate is nego-
tiated and approved by the cognizant agency
for indirect costs.
8. Limitation on Reimbursement of
Administrative Costs
a. Notwithstanding the provisions of sub-
section C.1.a, the administrative costs
charged to Federal awards awarded or
amended (including continuation and re-
newal awards) with effective dates beginning
on or after the start of the institution’s first
fiscal year which begins on or after October
1, 1991, must be limited to 26% of modified
total direct costs (as defined in subsection 2)
for the total of General Administration and
General Expenses, Departmental Adminis-
tration, Sponsored Projects Administration,
and Student Administration and Services
(including their allocable share of deprecia-
tion, interest costs, operation and mainte-
nance expenses, and fringe benefits costs, as
provided by Section B, and all other types of
expenditures not listed specifically under
one of the subcategories of facilities in Sec-
tion B.
b. Institutions should not change their ac-
counting or cost allocation methods if the ef-
fect is to change the charging of a particular
type of cost from F&A to direct, or to reclas-
sify costs, or increase allocations from the
administrative pools identified in paragraph
B.1 of this Appendix to the other F&A cost
pools or fringe benefits. Cognizant agencies
for indirect cost are authorized to allow
changes where an institution’s charging
practices are at variance with acceptable
practices followed by a substantial majority
of other institutions.
9. Alternative Method for Administrative Costs
a. Notwithstanding the provisions of sub-
section C.1.a, an institution may elect to
claim a fixed allowance for the ‘‘Adminis-
tration’’ portion of indirect (F&A) costs. The
allowance could be either 24% of modified
total direct costs or a percentage equal to
95% of the most recently negotiated fixed or
predetermined rate for the cost pools in-
cluded under ‘‘Administration’’ as defined in
Section B.1, whichever is less. Under this al-
ternative, no cost proposal need be prepared
for the ‘‘Administration’’ portion of the indi-
rect (F&A) cost rate nor is further identifica-
tion or documentation of these costs re-
quired (see subsection c). Where a negotiated
indirect (F&A) cost agreement includes this
alternative, an institution must make no
further charges for the expenditure cat-
egories described in Section B.5, Section B.6,
Section B.7, and Section B.9.
b. In negotiations of rates for subsequent
periods, an institution that has elected the
option of subsection a may continue to exer-
cise it at the same rate without further iden-
tification or documentation of costs.
c. If an institution elects to accept a
threshold rate as defined in subsection a of
this section, it is not required to perform a
detailed analysis of its administrative costs.
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However, in order to compute the facilities
components of its indirect (F&A) cost rate,
the institution must reconcile its indirect
(F&A) cost proposal to its financial state-
ments and make appropriate adjustments
and reclassifications to identify the costs of
each major function as defined in Section
A.1, as well as to identify and allocate the fa-
cilities components. Administrative costs
that are not identified as such by the insti-
tution’s accounting system (such as those in-
curred in academic departments) will be
classified as instructional costs for purposes
of reconciling indirect (F&A) cost proposals
to financial statements and allocating facili-
ties costs.
10. Individual Rate Components
In order to provide mutually agreed-upon
information for management purposes, each
indirect (F&A) cost rate negotiation or de-
termination must include development of a
rate for each indirect (F&A) cost pool as well
as the overall indirect (F&A) cost rate.
11. Negotiation and Approval of Indirect (F&A)
Rate
a. Cognizant agency for indirect costs is
defined in Subpart A.
(1) Cost negotiation cognizance is assigned
to the Department of Health and Human
Services (HHS) or the Department of De-
fense’s Office of Naval Research (DOD), nor-
mally depending on which of the two agen-
cies (HHS or DOD) provides more funds di-
rectly to the educational institution for the
most recent three years. Information on
funding must be derived from relevant data
gathered by the National Science Founda-
tion. In cases where neither HHS nor DOD
provides Federal funding directly to an edu-
cational institution, the cognizant agency
for indirect costs assignment must default to
HHS. Notwithstanding the method for cog-
nizance determination described in this sec-
tion, other arrangements for cognizance of a
particular educational institution may also
be based in part on the types of research per-
formed at the educational institution and
must be decided based on mutual agreement
between HHS and DOD. Where a non-Federal
entity only receives funds as a subrecipient,
see §200.332.
(2) After cognizance is established, it must
continue for a five-year period.
b. Acceptance of rates. See §200.414.
c. Correcting deficiencies. The cognizant
agency for indirect costs must negotiate
changes needed to correct systems defi-
ciencies relating to accountability for Fed-
eral awards. Cognizant agencies for indirect
costs must address the concerns of other af-
fected agencies, as appropriate, and must ne-
gotiate special rates for Federal agencies
that are required to limit recovery of indi-
rect costs by statute.
d. Resolving questioned costs. The cog-
nizant agency for indirect costs must con-
duct any necessary negotiations with an edu-
cational institution regarding amounts ques-
tioned by audit that are due the Federal
Government related to costs covered by a ne-
gotiated agreement.
e. Reimbursement. Reimbursement to cog-
nizant agencies for indirect costs for work
performed under this Part may be made by
reimbursement billing under the Economy
Act, 31 U.S.C. 1535.
f. Procedure for establishing facilities and
administrative rates must be established by
one of the following methods:
(1) Formal negotiation. The cognizant
agency for indirect costs is responsible for
negotiating and approving rates for an edu-
cational institution on behalf of all Federal
agencies. Federal awarding agencies that do
not have cognizance for indirect costs must
notify the cognizant agency for indirect
costs of specific concerns (i.e., a need to es-
tablish special cost rates) which could affect
the negotiation process. The cognizant agen-
cy for indirect costs must address the con-
cerns of all interested agencies, as appro-
priate. A pre-negotiation conference may be
scheduled among all interested agencies, if
necessary. The cognizant agency for indirect
costs must then arrange a negotiation con-
ference with the educational institution.
(2) Other than formal negotiation. The cog-
nizant agency for indirect costs and edu-
cational institution may reach an agreement
on rates without a formal negotiation con-
ference; for example, through correspond-
ence or use of the simplified method de-
scribed in this section D of this Appendix.
g. Formalizing determinations and agree-
ments. The cognizant agency for indirect
costs must formalize all determinations or
agreements reached with an educational in-
stitution and provide copies to other agen-
cies having an interest. Determinations
should include a description of any adjust-
ments, the actual amount, both dollar and
percentage adjusted, and the reason for mak-
ing adjustments.
h. Disputes and disagreements. Where the
cognizant agency for indirect costs is unable
to reach agreement with an educational in-
stitution with regard to rates or audit reso-
lution, the appeal system of the cognizant
agency for indirect costs must be followed
for resolution of the disagreement.
12. Standard Format for Submission
For facilities and administrative (indirect
(F&A)) rate proposals, educational institu-
tions must use the standard format, shown
in section E of this appendix, to submit their
indirect (F&A) rate proposal to the cog-
nizant agency for indirect costs. The cog-
nizant agency for indirect costs may, on an
institution-by-institution basis, grant excep-
tions from all or portions of Part II of the
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OMB Guidance Pt. 200, App. III
standard format requirement. This require-
ment does not apply to educational institu-
tions that use the simplified method for cal-
culating indirect (F&A) rates, as described in
Section D of this Appendix.
As provided in section C.10 of this appen-
dix, each F&A cost rate negotiation or deter-
mination must include development of a rate
for each F&A cost pool as well as the overall
F&A rate.
D. SIMPLIFIED METHOD FOR SMALL
INSTITUTIONS
1. General
a. Where the total direct cost of work cov-
ered by this Part at an institution does not
exceed $10 million in a fiscal year, the sim-
plified procedure described in subsections 2
or 3 may be used in determining allowable
indirect (F&A) costs. Under this simplified
procedure, the institution’s most recent an-
nual financial report and immediately avail-
able supporting information must be utilized
as a basis for determining the indirect (F&A)
cost rate applicable to all Federal awards.
The institution may use either the salaries
and wages (see subsection 2) or modified
total direct costs (see subsection 3) as the
distribution basis.
b. The simplified procedure should not be
used where it produces results which appear
inequitable to the Federal Government or
the institution. In any such case, indirect
(F&A) costs should be determined through
use of the regular procedure.
2. Simplified Procedure—Salaries and Wages
Base
a. Establish the total amount of salaries
and wages paid to all employees of the insti-
tution.
b. Establish an indirect (F&A) cost pool
consisting of the expenditures (exclusive of
capital items and other costs specifically
identified as unallowable) which customarily
are classified under the following titles or
their equivalents:
(1) General administration and general ex-
penses (exclusive of costs of student adminis-
tration and services, student activities, stu-
dent aid, and scholarships).
(2) Operation and maintenance of physical
plant and depreciation (after appropriate ad-
justment for costs applicable to other insti-
tutional activities).
(3) Library.
(4) Department administration expenses,
which will be computed as 20 percent of the
salaries and expenses of deans and heads of
departments.
In those cases where expenditures classi-
fied under subsection (1) have previously
been allocated to other institutional activi-
ties, they may be included in the indirect
(F&A) cost pool. The total amount of sala-
ries and wages included in the indirect (F&A)
cost pool must be separately identified.
c. Establish a salary and wage distribution
base, determined by deducting from the total
of salaries and wages as established in sub-
section a from the amount of salaries and
wages included under subsection b.
d. Establish the indirect (F&A) cost rate,
determined by dividing the amount in the in-
direct (F&A) cost pool, subsection b, by the
amount of the distribution base, subsection
c.
e. Apply the indirect (F&A) cost rate to di-
rect salaries and wages for individual agree-
ments to determine the amount of indirect
(F&A) costs allocable to such agreements.
3. Simplified Procedure—Modified Total Direct
Cost Base
a. Establish the total costs incurred by the
institution for the base period.
b. Establish an indirect (F&A) cost pool
consisting of the expenditures (exclusive of
capital items and other costs specifically
identified as unallowable) which customarily
are classified under the following titles or
their equivalents:
(1) General administration and general ex-
penses (exclusive of costs of student adminis-
tration and services, student activities, stu-
dent aid, and scholarships).
(2) Operation and maintenance of physical
plant and depreciation (after appropriate ad-
justment for costs applicable to other insti-
tutional activities).
(3) Library.
(4) Department administration expenses,
which will be computed as 20 percent of the
salaries and expenses of deans and heads of
departments. In those cases where expendi-
tures classified under subsection (1) have
previously been allocated to other institu-
tional activities, they may be included in the
indirect (F&A) cost pool. The modified total
direct costs amount included in the indirect
(F&A) cost pool must be separately identi-
fied.
c. Establish a modified total direct cost
distribution base, as defined in Section C.2,
The distribution basis, that consists of all
institution’s direct functions.
d. Establish the indirect (F&A) cost rate,
determined by dividing the amount in the in-
direct (F&A) cost pool, subsection b, by the
amount of the distribution base, subsection
c.
e. Apply the indirect (F&A) cost rate to
the modified total direct costs for individual
agreements to determine the amount of indi-
rect (F&A) costs allocable to such agree-
ments.
E. DOCUMENTATION REQUIREMENTS
The standard format for documentation re-
quirements for indirect (indirect (F&A)) rate
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. IV
proposals for claiming costs under the reg-
ular method is available on the OMB
website.
F. CERTIFICATION
1. Certification of Charges
To assure that expenditures for Federal
awards are proper and in accordance with
the agreement documents and approved
project budgets, the annual and/or final fis-
cal reports or vouchers requesting payment
under the agreements will include a certifi-
cation, signed by an authorized official of
the university, which reads ‘‘By signing this
report, I certify to the best of my knowledge
and belief that the report is true, complete,
and accurate, and the expenditures, disburse-
ments and cash receipts are for the purposes
and intent set forth in the award documents.
I am aware that any false, fictitious, or
fraudulent information, or the omission of
any material fact, may subject me to crimi-
nal, civil or administrative penalties for
fraud, false statements, false claims or oth-
erwise. (U.S. Code, Title 18, Section 1001 and
Title 31, Sections 3729–3733 and 3801–3812)’’.
2. Certification of Indirect (F&A) Costs
a. Policy. Cognizant agencies must not ac-
cept a proposed indirect cost rate unless
such costs have been certified by the edu-
cational institution using the Certificate of
indirect (F&A) Costs set forth in subsection
F.2.c
b. The certificate must be signed on behalf
of the institution by the chief financial offi-
cer or an individual designated by an indi-
vidual at a level no lower than vice president
or chief financial officer.
An indirect (F&A) cost rate is not binding
upon the Federal Government if the most re-
cent required proposal from the institution
has not been certified. Where it is necessary
to establish indirect (F&A) cost rates, and
the institution has not submitted a certified
proposal for establishing such rates in ac-
cordance with the requirements of this sec-
tion, the Federal Government must unilater-
ally establish such rates. Such rates may be
based upon audited historical data or such
other data that have been furnished to the
cognizant agency for indirect costs and for
which it can be demonstrated that all unal-
lowable costs have been excluded. When indi-
rect (F&A) cost rates are unilaterally estab-
lished by the Federal Government because of
failure of the institution to submit a cer-
tified proposal for establishing such rates in
accordance with this section, the rates es-
tablished will be set at a level low enough to
ensure that potentially unallowable costs
will not be reimbursed.
c. Certificate. The certificate required by
this section must be in the following form:
Certificate of Indirect (F&A) Costs
This is to certify that to the best of my
knowledge and belief:
(1) I have reviewed the indirect (F&A) cost
proposal submitted herewith;
(2) All costs included in this proposal [iden-
tify date] to establish billing or final indi-
rect (F&A) costs rate for [identify period
covered by rate] are allowable in accordance
with the requirements of the Federal agree-
ment(s) to which they apply and with the
cost principles applicable to those agree-
ments.
(3) This proposal does not include any costs
which are unallowable under subpart E of
this part such as (without limitation): Public
relations costs, contributions and donations,
entertainment costs, fines and penalties, lob-
bying costs, and defense of fraud pro-
ceedings; and
(4) All costs included in this proposal are
properly allocable to Federal agreements on
the basis of a beneficial or causal relation-
ship between the expenses incurred and the
agreements to which they are allocated in
accordance with applicable requirements.
I declare that the foregoing is true and cor-
rect.
Institution of Higher Education:
Signature: llllllllllllllllll
Name of Official: llllllllllllll
Title: llllllllllllllllllll
Date of Execution: lllllllllllll
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75888, Dec. 19, 2014; 80 FR 54409, Sept. 10,
2015; 85 FR 49577, Aug. 13, 2020]
APPENDIX IV TO PART 200—INDIRECT
(F&A) COSTS IDENTIFICATION AND
ASSIGNMENT, AND RATE DETERMINA-
TION FOR NONPROFIT ORGANIZA-
TIONS
A. GENERAL
1. Indirect costs are those that have been
incurred for common or joint objectives and
cannot be readily identified with a par-
ticular final cost objective. Direct cost of
minor amounts may be treated as indirect
costs under the conditions described in
§200.413(d). After direct costs have been de-
termined and assigned directly to awards or
other work as appropriate, indirect costs are
those remaining to be allocated to benefit-
ting cost objectives. A cost may not be allo-
cated to a Federal award as an indirect cost
if any other cost incurred for the same pur-
pose, in like circumstances, has been as-
signed to a Federal award as a direct cost.
2. ‘‘Major nonprofit organizations’’ are de-
fined in paragraph (a) of §200.414. See indi-
rect cost rate reporting requirements in sec-
tions B.2.e and B.3.g of this Appendix.
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OMB Guidance Pt. 200, App. IV
B. ALLOCATION OF INDIRECT COSTS AND
DETERMINATION OF INDIRECT COST RATES
1. General
a. If a nonprofit organization has only one
major function, or where all its major func-
tions benefit from its indirect costs to ap-
proximately the same degree, the allocation
of indirect costs and the computation of an
indirect cost rate may be accomplished
through simplified allocation procedures, as
described in section B.2 of this Appendix.
b. If an organization has several major
functions which benefit from its indirect
costs in varying degrees, allocation of indi-
rect costs may require the accumulation of
such costs into separate cost groupings
which then are allocated individually to ben-
efitting functions by means of a base which
best measures the relative degree of benefit.
The indirect costs allocated to each function
are then distributed to individual Federal
awards and other activities included in that
function by means of an indirect cost rate(s).
c. The determination of what constitutes
an organization’s major functions will de-
pend on its purpose in being; the types of
services it renders to the public, its clients,
and its members; and the amount of effort it
devotes to such activities as fundraising,
public information and membership activi-
ties.
d. Specific methods for allocating indirect
costs and computing indirect cost rates
along with the conditions under which each
method should be used are described in sec-
tion B.2 through B.5 of this Appendix.
e. The base period for the allocation of in-
direct costs is the period in which such costs
are incurred and accumulated for allocation
to work performed in that period. The base
period normally should coincide with the or-
ganization’s fiscal year but, in any event,
must be so selected as to avoid inequities in
the allocation of the costs.
2. Simplified Allocation Method
a. Where an organization’s major functions
benefit from its indirect costs to approxi-
mately the same degree, the allocation of in-
direct costs may be accomplished by (i) sepa-
rating the organization’s total costs for the
base period as either direct or indirect, and
(ii) dividing the total allowable indirect
costs (net of applicable credits) by an equi-
table distribution base. The result of this
process is an indirect cost rate which is used
to distribute indirect costs to individual
Federal awards. The rate should be expressed
as the percentage which the total amount of
allowable indirect costs bears to the base se-
lected. This method should also be used
where an organization has only one major
function encompassing a number of indi-
vidual projects or activities, and may be
used where the level of Federal awards to an
organization is relatively small.
b. Both the direct costs and the indirect
costs must exclude capital expenditures and
unallowable costs. However, unallowable
costs which represent activities must be in-
cluded in the direct costs under the condi-
tions described in §200.413(e).
c. The distribution base may be total di-
rect costs (excluding capital expenditures
and other distorting items, such as sub-
awards for $25,000 or more), direct salaries
and wages, or other base which results in an
equitable distribution. The distribution base
must exclude participant support costs as de-
fined in §200.1.
d. Except where a special rate(s) is re-
quired in accordance with section B.5 of this
Appendix, the indirect cost rate developed
under the above principles is applicable to
all Federal awards of the organization. If a
special rate(s) is required, appropriate modi-
fications must be made in order to develop
the special rate(s).
e. For an organization that receives more
than $10 million in direct Federal funding in
a fiscal year, a breakout of the indirect cost
component into two broad categories, Facili-
ties and Administration as defined in para-
graph (a) of §200.414, is required. The rate in
each case must be stated as the percentage
which the amount of the particular indirect
cost category (i.e., Facilities or Administra-
tion) is of the distribution base identified
with that category.
3. Multiple Allocation Base Method
a. General. Where an organization’s indi-
rect costs benefit its major functions in
varying degrees, indirect costs must be accu-
mulated into separate cost groupings, as de-
scribed in subparagraph b. Each grouping
must then be allocated individually to bene-
fitting functions by means of a base which
best measures the relative benefits. The de-
fault allocation bases by cost pool are de-
scribed in section B.3.c of this Appendix.
b. Identification of indirect costs. Cost
groupings must be established so as to per-
mit the allocation of each grouping on the
basis of benefits provided to the major func-
tions. Each grouping must constitute a pool
of expenses that are of like character in
terms of functions they benefit and in terms
of the allocation base which best measures
the relative benefits provided to each func-
tion. The groupings are classified within the
two broad categories: ‘‘Facilities’’ and ‘‘Ad-
ministration,’’ as described in section A.3 of
this Appendix. The indirect cost pools are de-
fined as follows:
(1) Depreciation. The expenses under this
heading are the portion of the costs of the
organization’s buildings, capital improve-
ments to land and buildings, and equipment
which are computed in accordance with
§200.436.
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. IV
(2) Interest. Interest on debt associated
with certain buildings, equipment and cap-
ital improvements are computed in accord-
ance with §200.449.
(3) Operation and maintenance expenses.
The expenses under this heading are those
that have been incurred for the administra-
tion, operation, maintenance, preservation,
and protection of the organization’s physical
plant. They include expenses normally in-
curred for such items as: janitorial and util-
ity services; repairs and ordinary or normal
alterations of buildings, furniture and equip-
ment; care of grounds; maintenance and op-
eration of buildings and other plant facili-
ties; security; earthquake and disaster pre-
paredness; environmental safety; hazardous
waste disposal; property, liability and other
insurance relating to property; space and
capital leasing; facility planning and man-
agement; and central receiving. The oper-
ation and maintenance expenses category
must also include its allocable share of
fringe benefit costs, depreciation, and inter-
est costs.
(4) General administration and general ex-
penses. The expenses under this heading are
those that have been incurred for the overall
general executive and administrative offices
of the organization and other expenses of a
general nature which do not relate solely to
any major function of the organization. This
category must also include its allocable
share of fringe benefit costs, operation and
maintenance expense, depreciation, and in-
terest costs. Examples of this category in-
clude central offices, such as the director’s
office, the office of finance, business serv-
ices, budget and planning, personnel, safety
and risk management, general counsel, man-
agement information systems, and library
costs.
In developing this cost pool, special care
should be exercised to ensure that costs in-
curred for the same purpose in like cir-
cumstances are treated consistently as ei-
ther direct or indirect costs. For example,
salaries of technical staff, project supplies,
project publication, telephone toll charges,
computer costs, travel costs, and specialized
services costs must be treated as direct costs
wherever identifiable to a particular pro-
gram. The salaries and wages of administra-
tive and pooled clerical staff should nor-
mally be treated as indirect costs. Direct
charging of these costs may be appropriate
as described in §200.413. Items such as office
supplies, postage, local telephone costs, peri-
odicals and memberships should normally be
treated as indirect costs.
c. Allocation bases. Actual conditions
must be taken into account in selecting the
base to be used in allocating the expenses in
each grouping to benefitting functions. The
essential consideration in selecting a method
or a base is that it is the one best suited for
assigning the pool of costs to cost objectives
in accordance with benefits derived; a trace-
able cause and effect relationship; or logic
and reason, where neither the cause nor the
effect of the relationship is determinable.
When an allocation can be made by assign-
ment of a cost grouping directly to the func-
tion benefitted, the allocation must be made
in that manner. When the expenses in a cost
grouping are more general in nature, the al-
location must be made through the use of a
selected base which produces results that are
equitable to both the Federal Government
and the organization. The distribution must
be made in accordance with the bases de-
scribed herein unless it can be demonstrated
that the use of a different base would result
in a more equitable allocation of the costs,
or that a more readily available base would
not increase the costs charged to Federal
awards. The results of special cost studies
(such as an engineering utility study) must
not be used to determine and allocate the in-
direct costs to Federal awards.
(1) Depreciation. Depreciation expenses
must be allocated in the following manner:
(a) Depreciation on buildings used exclu-
sively in the conduct of a single function,
and on capital improvements and equipment
used in such buildings, must be assigned to
that function.
(b) Depreciation on buildings used for more
than one function, and on capital improve-
ments and equipment used in such buildings,
must be allocated to the individual functions
performed in each building on the basis of
usable square feet of space, excluding com-
mon areas, such as hallways, stairwells, and
restrooms.
(c) Depreciation on buildings, capital im-
provements and equipment related space
(e.g., individual rooms, and laboratories)
used jointly by more than one function (as
determined by the users of the space) must
be treated as follows. The cost of each joint-
ly used unit of space must be allocated to
the benefitting functions on the basis of:
(i) the employees and other users on a full-
time equivalent (FTE) basis or salaries and
wages of those individual functions benefit-
ting from the use of that space; or
(ii) organization-wide employee FTEs or
salaries and wages applicable to the benefit-
ting functions of the organization.
(d) Depreciation on certain capital im-
provements to land, such as paved parking
areas, fences, sidewalks, and the like, not in-
cluded in the cost of buildings, must be allo-
cated to user categories on a FTE basis and
distributed to major functions in proportion
to the salaries and wages of all employees
applicable to the functions.
(2) Interest. Interest costs must be allo-
cated in the same manner as the deprecia-
tion on the buildings, equipment and capital
equipment to which the interest relates.
(3) Operation and maintenance expenses.
Operation and maintenance expenses must
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OMB Guidance Pt. 200, App. IV
be allocated in the same manner as the de-
preciation.
(4) General administration and general ex-
penses. General administration and general
expenses must be allocated to benefitting
functions based on modified total costs
(MTC). The MTC is the modified total direct
costs (MTDC), as described in §200.1, plus the
allocated indirect cost proportion. The ex-
penses included in this category could be
grouped first according to major functions of
the organization to which they render serv-
ices or provide benefits. The aggregate ex-
penses of each group must then be allocated
to benefitting functions based on MTC.
d. Order of distribution.
(1) Indirect cost categories consisting of
depreciation, interest, operation and mainte-
nance, and general administration and gen-
eral expenses must be allocated in that order
to the remaining indirect cost categories as
well as to the major functions of the organi-
zation. Other cost categories should be allo-
cated in the order determined to be most ap-
propriate by the organization. This order of
allocation does not apply if cross allocation
of costs is made as provided in section B.3.d.2
of this Appendix.
(2) Normally, an indirect cost category will
be considered closed once it has been allo-
cated to other cost objectives, and costs
must not be subsequently allocated to it.
However, a cross allocation of costs between
two or more indirect costs categories could
be used if such allocation will result in a
more equitable allocation of costs. If a cross
allocation is used, an appropriate modifica-
tion to the composition of the indirect cost
categories is required.
e. Application of indirect cost rate or
rates. Except where a special indirect cost
rate(s) is required in accordance with section
B.5 of this Appendix, the separate groupings
of indirect costs allocated to each major
function must be aggregated and treated as a
common pool for that function. The costs in
the common pool must then be distributed to
individual Federal awards included in that
function by use of a single indirect cost rate.
f. Distribution basis. Indirect costs must
be distributed to applicable Federal awards
and other benefitting activities within each
major function on the basis of MTDC (see
definition in §200.1).
g. Individual Rate Components. An indi-
rect cost rate must be determined for each
separate indirect cost pool developed. The
rate in each case must be stated as the per-
centage which the amount of the particular
indirect cost pool is of the distribution base
identified with that pool. Each indirect cost
rate negotiation or determination agreement
must include development of the rate for
each indirect cost pool as well as the overall
indirect cost rate. The indirect cost pools
must be classified within two broad cat-
egories: ‘‘Facilities’’ and ‘‘Administration,’’
as described in §200.414(a).
4. Direct Allocation Method
a. Some nonprofit organizations treat all
costs as direct costs except general adminis-
tration and general expenses. These organi-
zations generally separate their costs into
three basic categories: (i) General adminis-
tration and general expenses, (ii) fund-
raising, and (iii) other direct functions (in-
cluding projects performed under Federal
awards). Joint costs, such as depreciation,
rental costs, operation and maintenance of
facilities, telephone expenses, and the like
are prorated individually as direct costs to
each category and to each Federal award or
other activity using a base most appropriate
to the particular cost being prorated.
b. This method is acceptable, provided each
joint cost is prorated using a base which ac-
curately measures the benefits provided to
each Federal award or other activity. The
bases must be established in accordance with
reasonable criteria and be supported by cur-
rent data. This method is compatible with
the Standards of Accounting and Financial
Reporting for Voluntary Health and Welfare
Organizations issued jointly by the National
Health Council, Inc., the National Assembly
of Voluntary Health and Social Welfare Or-
ganizations, and the United Way of America.
c. Under this method, indirect costs con-
sist exclusively of general administration
and general expenses. In all other respects,
the organization’s indirect cost rates must
be computed in the same manner as that de-
scribed in section B.2 of this Appendix.
5. Special Indirect Cost Rates
In some instances, a single indirect cost
rate for all activities of an organization or
for each major function of the organization
may not be appropriate, since it would not
take into account those different factors
which may substantially affect the indirect
costs applicable to a particular segment of
work. For this purpose, a particular segment
of work may be that performed under a sin-
gle Federal award or it may consist of work
under a group of Federal awards performed
in a common environment. These factors
may include the physical location of the
work, the level of administrative support re-
quired, the nature of the facilities or other
resources employed, the scientific disciplines
or technical skills involved, the organiza-
tional arrangements used, or any combina-
tion thereof. When a particular segment of
work is performed in an environment which
appears to generate a significantly different
level of indirect costs, provisions should be
made for a separate indirect cost pool appli-
cable to such work. The separate indirect
cost pool should be developed during the
course of the regular allocation process, and
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. IV
the separate indirect cost rate resulting
therefrom should be used, provided it is de-
termined that (i) the rate differs signifi-
cantly from that which would have been ob-
tained under sections B.2, B.3, and B.4 of this
Appendix, and (ii) the volume of work to
which the rate would apply is material.
C. NEGOTIATION AND APPROVAL OF INDIRECT
COST RATES
1. Definitions
As used in this section, the following terms
have the meanings set forth in this section:
a. Cognizant agency for indirect costs means
the Federal agency responsible for negoti-
ating and approving indirect cost rates for a
nonprofit organization on behalf of all Fed-
eral agencies.
b. Predetermined rate means an indirect cost
rate, applicable to a specified current or fu-
ture period, usually the organization’s fiscal
year. The rate is based on an estimate of the
costs to be incurred during the period. A pre-
determined rate is not subject to adjust-
ment.
c. Fixed rate means an indirect cost rate
which has the same characteristics as a pre-
determined rate, except that the difference
between the estimated costs and the actual
costs of the period covered by the rate is car-
ried forward as an adjustment to the rate
computation of a subsequent period.
d. Final rate means an indirect cost rate
applicable to a specified past period which is
based on the actual costs of the period. A
final rate is not subject to adjustment.
e. Provisional rate or billing rate means a
temporary indirect cost rate applicable to a
specified period which is used for funding, in-
terim reimbursement, and reporting indirect
costs on Federal awards pending the estab-
lishment of a final rate for the period.
f. Indirect cost proposal means the docu-
mentation prepared by an organization to
substantiate its claim for the reimbursement
of indirect costs. This proposal provides the
basis for the review and negotiation leading
to the establishment of an organization’s in-
direct cost rate.
g. Cost objective means a function, organiza-
tional subdivision, contract, Federal award,
or other work unit for which cost data are
desired and for which provision is made to
accumulate and measure the cost of proc-
esses, projects, jobs and capitalized projects.
2. Negotiation and Approval of Rates
a. Unless different arrangements are
agreed to by the Federal agencies concerned,
the Federal agency with the largest dollar
value of Federal awards directly funded to an
organization will be designated as the cog-
nizant agency for indirect costs for the nego-
tiation and approval of the indirect cost
rates and, where necessary, other rates such
as fringe benefit and computer charge-out
rates. Once an agency is assigned cognizance
for a particular nonprofit organization, the
assignment will not be changed unless there
is a shift in the dollar volume of the Federal
awards directly funded to the organization
for at least three years. All concerned Fed-
eral agencies must be given the opportunity
to participate in the negotiation process but,
after a rate has been agreed upon, it will be
accepted by all Federal agencies. When a
Federal agency has reason to believe that
special operating factors affecting its Fed-
eral awards necessitate special indirect cost
rates in accordance with section B.5 of this
Appendix, it will, prior to the time the rates
are negotiated, notify the cognizant agency
for indirect costs. (See also §200.414.) If the
nonprofit does not receive any funding from
any Federal agency, the pass-through entity
is responsible for the negotiation of the indi-
rect cost rates in accordance with
§200.332(a)(4).
b. Except as otherwise provided in
§200.414(f), a nonprofit organization which
has not previously established an indirect
cost rate with a Federal agency must submit
its initial indirect cost proposal immediately
after the organization is advised that a Fed-
eral award will be made and, in no event,
later than three months after the effective
date of the Federal award.
c. Unless approved by the cognizant agency
for indirect costs in accordance with
§200.414(g), organizations that have pre-
viously established indirect cost rates must
submit a new indirect cost proposal to the
cognizant agency for indirect costs within
six months after the close of each fiscal year.
d. A predetermined rate may be negotiated
for use on Federal awards where there is rea-
sonable assurance, based on past experience
and reliable projection of the organization’s
costs, that the rate is not likely to exceed a
rate based on the organization’s actual costs.
e. Fixed rates may be negotiated where
predetermined rates are not considered ap-
propriate. A fixed rate, however, must not be
negotiated if (i) all or a substantial portion
of the organization’s Federal awards are ex-
pected to expire before the carry-forward ad-
justment can be made; (ii) the mix of Federal
and non-Federal work at the organization is
too erratic to permit an equitable carry-for-
ward adjustment; or (iii) the organization’s
operations fluctuate significantly from year
to year.
f. Provisional and final rates must be nego-
tiated where neither predetermined nor fixed
rates are appropriate. Predetermined or
fixed rates may replace provisional rates at
any time prior to the close of the organiza-
tion’s fiscal year. If that event does not
occur, a final rate will be established and up-
ward or downward adjustments will be made
based on the actual allowable costs incurred
for the period involved.
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OMB Guidance Pt. 200, App. V
g. The results of each negotiation must be
formalized in a written agreement between
the cognizant agency for indirect costs and
the nonprofit organization. The cognizant
agency for indirect costs must make avail-
able copies of the agreement to all concerned
Federal agencies.
h. If a dispute arises in a negotiation of an
indirect cost rate between the cognizant
agency for indirect costs and the nonprofit
organization, the dispute must be resolved in
accordance with the appeals procedures of
the cognizant agency for indirect costs.
i. To the extent that problems are encoun-
tered among the Federal agencies in connec-
tion with the negotiation and approval proc-
ess, OMB will lend assistance as required to
resolve such problems in a timely manner.
D. Certification of Indirect (F&A) Costs
(1) Required Certification. No proposal to
establish indirect (F&A) cost rates must be
acceptable unless such costs have been cer-
tified by the nonprofit organization using
the Certificate of Indirect (F&A) Costs set
forth in section j. of this appendix. The cer-
tificate must be signed on behalf of the orga-
nization by an individual at a level no lower
than vice president or chief financial officer
for the organization.
(2) Each indirect cost rate proposal must
be accompanied by a certification in the fol-
lowing form:
Certificate of Indirect (F&A) Costs
This is to certify that to the best of my
knowledge and belief:
(1) I have reviewed the indirect (F&A) cost
proposal submitted herewith;
(2) All costs included in this proposal [iden-
tify date] to establish billing or final indi-
rect (F&A) costs rate for [identify period
covered by rate] are allowable in accordance
with the requirements of the Federal awards
to which they apply and with subpart E of
this part.
(3) This proposal does not include any costs
which are unallowable under subpart E of
this part such as (without limitation): Public
relations costs, contributions and donations,
entertainment costs, fines and penalties, lob-
bying costs, and defense of fraud pro-
ceedings; and
(4) All costs included in this proposal are
properly allocable to Federal awards on the
basis of a beneficial or causal relationship
between the expenses incurred and the Fed-
eral awards to which they are allocated in
accordance with applicable requirements.
I declare that the foregoing is true and cor-
rect.
Nonprofit Organization: lllllllllll
Signature: llllllllllllllllll
Name of Official: llllllllllllll
Title: llllllllllllllllllll
Date of Execution: lllllllllllll
[78 FR 78608, Dec. 26, 2013, as amended at 80
FR 54410, Sept. 10, 2015; 85 FR 49579, Aug. 13,
2020]
APPENDIX V TO PART 200—STATE/LOCAL
GOVERNMENTWIDE CENTRAL SERVICE
COST ALLOCATION PLANS
A. GENERAL
1. Most governmental units provide certain
services, such as motor pools, computer cen-
ters, purchasing, accounting, etc., to oper-
ating agencies on a centralized basis. Since
federally-supported awards are performed
within the individual operating agencies,
there needs to be a process whereby these
central service costs can be identified and
assigned to benefitted activities on a reason-
able and consistent basis. The central service
cost allocation plan provides that process.
All costs and other data used to distribute
the costs included in the plan should be sup-
ported by formal accounting and other
records that will support the propriety of the
costs assigned to Federal awards.
2. Guidelines and illustrations of central
service cost allocation plans are provided in
a brochure published by the Department of
Health and Human Services entitled ‘‘A
Guide for State, Local and Indian Tribal Gov-
ernments: Cost Principles and Procedures for
Developing Cost Allocation Plans and Indirect
Cost Rates for Agreements with the Federal
Government.’’ A copy of this brochure may be
obtained from the HHS Cost Allocation Serv-
ices or at their website.
B. DEFINITIONS
1. Agency or operating agency means an or-
ganizational unit or sub-division within a
governmental unit that is responsible for the
performance or administration of Federal
awards or activities of the governmental
unit.
2. Allocated central services means central
services that benefit operating agencies but
are not billed to the agencies on a fee-for-
service or similar basis. These costs are allo-
cated to benefitted agencies on some reason-
able basis. Examples of such services might
include general accounting, personnel ad-
ministration, purchasing, etc.
3. Billed central services means central serv-
ices that are billed to benefitted agencies or
programs on an individual fee-for-service or
similar basis. Typical examples of billed cen-
tral services include computer services,
transportation services, insurance, and
fringe benefits.
4. Cognizant agency for indirect costs is de-
fined in §200.1. The determination of cog-
nizant agency for indirect costs for states
and local governments is described in section
F.1.
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. V
5. Major local government means local gov-
ernment that receives more than $100 million
in direct Federal awards subject to this Part.
C. SCOPE OF THE CENTRAL SERVICE COST
ALLOCATION PLANS
The central service cost allocation plan
will include all central service costs that
will be claimed (either as a billed or an allo-
cated cost) under Federal awards and will be
documented as described in section E. omit-
ted from the plan will not be reimbursed.
D. SUBMISSION REQUIREMENTS
1. Each state will submit a plan to the De-
partment of Health and Human Services for
each year in which it claims central service
costs under Federal awards. The plan should
include (a) a projection of the next year’s al-
located central service cost (based either on
actual costs for the most recently completed
year or the budget projection for the coming
year), and (b) a reconciliation of actual allo-
cated central service costs to the estimated
costs used for either the most recently com-
pleted year or the year immediately pre-
ceding the most recently completed year.
2. Each major local government is also re-
quired to submit a plan to its cognizant
agency for indirect costs annually.
3. All other local governments claiming
central service costs must develop a plan in
accordance with the requirements described
in this Part and maintain the plan and re-
lated supporting documentation for audit.
These local governments are not required to
submit their plans for Federal approval un-
less they are specifically requested to do so
by the cognizant agency for indirect costs.
Where a local government only receives
funds as a subrecipient, the pass-through en-
tity will be responsible for monitoring the
subrecipient’s plan.
4. All central service cost allocation plans
will be prepared and, when required, sub-
mitted within six months prior to the begin-
ning of each of the governmental unit’s fis-
cal years in which it proposes to claim cen-
tral service costs. Extensions may be grant-
ed by the cognizant agency for indirect costs
on a case-by-case basis.
E. DOCUMENTATION REQUIREMENTS FOR
SUBMITTED PLANS
The documentation requirements described
in this section may be modified, expanded, or
reduced by the cognizant agency for indirect
costs on a case-by-case basis. For example,
the requirements may be reduced for those
central services which have little or no im-
pact on Federal awards. Conversely, if a re-
view of a plan indicates that certain addi-
tional information is needed, and will likely
be needed in future years, it may be rou-
tinely requested in future plan submissions.
Items marked with an asterisk (*) should be
submitted only once; subsequent plans
should merely indicate any changes since the
last plan.
1. General
All proposed plans must be accompanied by
the following: an organization chart suffi-
ciently detailed to show operations including
the central service activities of the state/
local government whether or not they are
shown as benefitting from central service
functions; a copy of the Comprehensive An-
nual Financial Report (or a copy of the Exec-
utive Budget if budgeted costs are being pro-
posed) to support the allowable costs of each
central service activity included in the plan;
and, a certification (see subsection 4.) that
the plan was prepared in accordance with
this Part, contains only allowable costs, and
was prepared in a manner that treated simi-
lar costs consistently among the various
Federal awards and between Federal and
non-Federal awards/activities.
2. Allocated Central Services
For each allocated central service*, the
plan must also include the following: a brief
description of the service, an identification
of the unit rendering the service and the op-
erating agencies receiving the service, the
items of expense included in the cost of the
service, the method used to distribute the
cost of the service to benefitted agencies,
and a summary schedule showing the alloca-
tion of each service to the specific benefitted
agencies. If any self-insurance funds or
fringe benefits costs are treated as allocated
(rather than billed) central services, docu-
mentation discussed in subsections 3.b. and
c. must also be included.
3. Billed Services
a. General. The information described in
this section must be provided for all billed
central services, including internal service
funds, self-insurance funds, and fringe ben-
efit funds.
b. Internal service funds.
(1) For each internal service fund or simi-
lar activity with an operating budget of $5
million or more, the plan must include: A
brief description of each service; a balance
sheet for each fund based on individual ac-
counts contained in the governmental unit’s
accounting system; a revenue/expenses state-
ment, with revenues broken out by source,
e.g., regular billings, interest earned, etc.; a
listing of all non-operating transfers (as de-
fined by GAAP) into and out of the fund; a
description of the procedures (methodology)
used to charge the costs of each service to
users, including how billing rates are deter-
mined; a schedule of current rates; and, a
schedule comparing total revenues (includ-
ing imputed revenues) generated by the serv-
ice to the allowable costs of the service, as
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OMB Guidance Pt. 200, App. V
determined under this part, with an expla-
nation of how variances will be handled.
(2) Revenues must consist of all revenues
generated by the service, including unbilled
and uncollected revenues. If some users were
not billed for the services (or were not billed
at the full rate for that class of users), a
schedule showing the full imputed revenues
associated with these users must be pro-
vided. Expenses must be broken out by ob-
ject cost categories (e.g., salaries, supplies,
etc.).
c. Self-insurance funds. For each self-insur-
ance fund, the plan must include: the fund
balance sheet; a statement of revenue and
expenses including a summary of billings
and claims paid by agency; a listing of all
non-operating transfers into and out of the
fund; the type(s) of risk(s) covered by the
fund (e.g., automobile liability, workers’
compensation, etc.); an explanation of how
the level of fund contributions are deter-
mined, including a copy of the current actu-
arial report (with the actuarial assumptions
used) if the contributions are determined on
an actuarial basis; and, a description of the
procedures used to charge or allocate fund
contributions to benefitted activities. Re-
serve levels in excess of claims (1) submitted
and adjudicated but not paid, (2) submitted
but not adjudicated, and (3) incurred but not
submitted must be identified and explained.
d. Fringe benefits. For fringe benefit costs,
the plan must include: a listing of fringe ben-
efits provided to covered employees, and the
overall annual cost of each type of benefit;
current fringe benefit policies; and proce-
dures used to charge or allocate the costs of
the benefits to benefitted activities. In addi-
tion, for pension and post-retirement health
insurance plans, the following information
must be provided: the governmental unit’s
funding policies, e.g., legislative bills, trust
agreements, or state-mandated contribution
rules, if different from actuarially deter-
mined rates; the pension plan’s costs accrued
for the year; the amount funded, and date(s)
of funding; a copy of the current actuarial
report (including the actuarial assumptions);
the plan trustee’s report; and, a schedule
from the activity showing the value of the
interest cost associated with late funding.
4. Required Certification
Each central service cost allocation plan
will be accompanied by a certification in the
following form:
CERTIFICATE OF COST ALLOCATION
PLAN
This is to certify that I have reviewed the
cost allocation plan submitted herewith and
to the best of my knowledge and belief:
(1) All costs included in this proposal [iden-
tify date] to establish cost allocations or bil-
lings for [identify period covered by plan] are
allowable in accordance with the require-
ments of this Part and the Federal award(s)
to which they apply. Unallowable costs have
been adjusted for in allocating costs as indi-
cated in the cost allocation plan.
(2) All costs included in this proposal are
properly allocable to Federal awards on the
basis of a beneficial or causal relationship
between the expenses incurred and the Fed-
eral awards to which they are allocated in
accordance with applicable requirements.
Further, the same costs that have been
treated as indirect costs have not been
claimed as direct costs. Similar types of
costs have been accounted for consistently.
I declare that the foregoing is true and cor-
rect.
Governmental Unit: lllllllllllll
Signature: llllllllllllllllll
Name of Official: llllllllllllll
Title: llllllllllllllllllll
Date of Execution: lllllllllllll
F. NEGOTIATION AND APPROVAL OF CENTRAL
SERVICE PLANS
1. Federal Cognizant Agency for Indirect Costs
Assignments for Cost Negotiation
In general, unless different arrangements
are agreed to by the concerned Federal agen-
cies, for central service cost allocation
plans, the cognizant agency responsible for
review and approval is the Federal agency
with the largest dollar value of total Federal
awards with a governmental unit. For indi-
rect cost rates and departmental indirect
cost allocation plans, the cognizant agency
is the Federal agency with the largest dollar
value of direct Federal awards with a govern-
mental unit or component, as appropriate.
Once designated as the cognizant agency for
indirect costs, the Federal agency must re-
main so for a period of five years. In addi-
tion, the following Federal agencies continue
to be responsible for the indicated govern-
mental entities:
Department of Health and Human Services—
Public assistance and state-wide cost alloca-
tion plans for all states (including the Dis-
trict of Columbia and Puerto Rico), state
and local hospitals, libraries and health dis-
tricts.
Department of the Interior—Indian tribal
governments, territorial governments, and
state and local park and recreational dis-
tricts.
Department of Labor—State and local labor
departments.
Department of Education—School districts
and state and local education agencies.
Department of Agriculture—State and local
agriculture departments.
Department of Transportation—State and
local airport and port authorities and transit
districts.
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. V
Department of Commerce—State and local
economic development districts.
Department of Housing and Urban Develop-
ment—State and local housing and develop-
ment districts.
Environmental Protection Agency—State and
local water and sewer districts.
2. Review
All proposed central service cost allocation
plans that are required to be submitted will
be reviewed, negotiated, and approved by the
cognizant agency for indirect costs on a
timely basis. The cognizant agency for indi-
rect costs will review the proposal within six
months of receipt of the proposal and either
negotiate/approve the proposal or advise the
governmental unit of the additional docu-
mentation needed to support/evaluate the
proposed plan or the changes required to
make the proposal acceptable. Once an
agreement with the governmental unit has
been reached, the agreement will be accepted
and used by all Federal agencies, unless pro-
hibited or limited by statute. Where a Fed-
eral awarding agency has reason to believe
that special operating factors affecting its
Federal awards necessitate special consider-
ation, the funding agency will, prior to the
time the plans are negotiated, notify the
cognizant agency for indirect costs.
3. Agreement
The results of each negotiation must be
formalized in a written agreement between
the cognizant agency for indirect costs and
the governmental unit. This agreement will
be subject to re-opening if the agreement is
subsequently found to violate a statute or
the information upon which the plan was ne-
gotiated is later found to be materially in-
complete or inaccurate. The results of the
negotiation must be made available to all
Federal agencies for their use.
4. Adjustments
Negotiated cost allocation plans based on a
proposal later found to have included costs
that: (a) are unallowable (i) as specified by
law or regulation, (ii) as identified in subpart
F, General Provisions for selected Items of
Cost of this Part, or (iii) by the terms and
conditions of Federal awards, or (b) are unal-
lowable because they are clearly not allo-
cable to Federal awards, must be adjusted, or
a refund must be made at the option of the
cognizant agency for indirect costs, includ-
ing earned or imputed interest from the date
of transfer and debt interest, if applicable,
chargeable in accordance with applicable
Federal cognizant agency for indirect costs
regulations. Adjustments or cash refunds
may include, at the option of the cognizant
agency for indirect costs, earned or imputed
interest from the date of expenditure and de-
linquent debt interest, if applicable, charge-
able in accordance with applicable cognizant
agency claims collection regulations. These
adjustments or refunds are designed to cor-
rect the plans and do not constitute a re-
opening of the negotiation.
G. OTHER POLICIES
1. Billed Central Service Activities
Each billed central service activity must
separately account for all revenues (includ-
ing imputed revenues) generated by the serv-
ice, expenses incurred to furnish the service,
and profit/loss.
2. Working Capital Reserves
Internal service funds are dependent upon
a reasonable level of working capital reserve
to operate from one billing cycle to the next.
Charges by an internal service activity to
provide for the establishment and mainte-
nance of a reasonable level of working cap-
ital reserve, in addition to the full recovery
of costs, are allowable. A working capital re-
serve as part of retained earnings of up to 60
calendar days cash expenses for normal oper-
ating purposes is considered reasonable. A
working capital reserve exceeding 60 cal-
endar days may be approved by the cog-
nizant agency for indirect costs in excep-
tional cases.
3. Carry-Forward Adjustments of Allocated
Central Service Costs
Allocated central service costs are usually
negotiated and approved for a future fiscal
year on a ‘‘fixed with carry-forward’’ basis.
Under this procedure, the fixed amounts for
the future year covered by agreement are
not subject to adjustment for that year.
However, when the actual costs of the year
involved become known, the differences be-
tween the fixed amounts previously approved
and the actual costs will be carried forward
and used as an adjustment to the fixed
amounts established for a later year. This
‘‘carry-forward’’ procedure applies to all cen-
tral services whose costs were fixed in the
approved plan. However, a carry-forward ad-
justment is not permitted, for a central serv-
ice activity that was not included in the ap-
proved plan, or for unallowable costs that
must be reimbursed immediately.
4. Adjustments of Billed Central Services
Billing rates used to charge Federal awards
must be based on the estimated costs of pro-
viding the services, including an estimate of
the allocable central service costs. A com-
parison of the revenue generated by each
billed service (including total revenues
whether or not billed or collected) to the ac-
tual allowable costs of the service will be
made at least annually, and an adjustment
will be made for the difference between the
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239
OMB Guidance Pt. 200, App. VI
revenue and the allowable costs. These ad-
justments will be made through one of the
following adjustment methods: (a) a cash re-
fund including earned or imputed interest
from the date of transfer and debt interest, if
applicable, chargeable in accordance with
applicable Federal cognizant agency for indi-
rect costs regulations to the Federal Govern-
ment for the Federal share of the adjust-
ment, (b) credits to the amounts charged to
the individual programs, (c) adjustments to
future billing rates, or (d) adjustments to al-
located central service costs. Adjustments to
allocated central services will not be per-
mitted where the total amount of the adjust-
ment for a particular service (Federal share
and non-Federal) share exceeds $500,000. Ad-
justment methods may include, at the option
of the cognizant agency, earned or imputed
interest from the date of expenditure and de-
linquent debt interest, if applicable, charge-
able in accordance with applicable cognizant
agency claims collection regulations.
5. Records Retention
All central service cost allocation plans
and related documentation used as a basis
for claiming costs under Federal awards
must be retained for audit in accordance
with the records retention requirements con-
tained in subpart D of this part.
6. Appeals
If a dispute arises in the negotiation of a
plan between the cognizant agency for indi-
rect costs and the governmental unit, the
dispute must be resolved in accordance with
the appeals procedures of the cognizant
agency for indirect costs.
7. OMB Assistance
To the extent that problems are encoun-
tered among the Federal agencies or govern-
mental units in connection with the negotia-
tion and approval process, OMB will lend as-
sistance, as required, to resolve such prob-
lems in a timely manner.
[78 FR 78608, Dec. 26, 2013, as amended at 80
FR 54410, Sept. 10, 2015; 85 FR 49581, Aug. 13,
2020]
APPENDIX VI TO PART 200—PUBLIC
ASSISTANCE COST ALLOCATION PLANS
A. GENERAL
Federally-financed programs administered
by state public assistance agencies are fund-
ed predominately by the Department of
Health and Human Services (HHS). In sup-
port of its stewardship requirements, HHS
has published requirements for the develop-
ment, documentation, submission, negotia-
tion, and approval of public assistance cost
allocation plans in Subpart E of 45 CFR Part
95. All administrative costs (direct and indi-
rect) are normally charged to Federal awards
by implementing the public assistance cost
allocation plan. This Appendix extends these
requirements to all Federal awarding agen-
cies whose programs are administered by a
state public assistance agency. Major feder-
ally-financed programs typically adminis-
tered by state public assistance agencies in-
clude: Temporary Aid to Needy Families
(TANF), Medicaid, Food Stamps, Child Sup-
port Enforcement, Adoption Assistance and
Foster Care, and Social Services Block
Grant.
B. DEFINITIONS
1. State public assistance agency means a
state agency administering or supervising
the administration of one or more public as-
sistance programs operated by the state as
identified in Subpart E of 45 CFR Part 95.
For the purpose of this Appendix, these pro-
grams include all programs administered by
the state public assistance agency.
2. State public assistance agency costs means
all costs incurred by, or allocable to, the
state public assistance agency, except ex-
penditures for financial assistance, medical
contractor payments, food stamps, and pay-
ments for services and goods provided di-
rectly to program recipients.
C. POLICY
State public assistance agencies will de-
velop, document and implement, and the
Federal Government will review, negotiate,
and approve, public assistance cost alloca-
tion plans in accordance with Subpart E of 45
CFR Part 95. The plan will include all pro-
grams administered by the state public as-
sistance agency. Where a letter of approval
or disapproval is transmitted to a state pub-
lic assistance agency in accordance with
Subpart E, the letter will apply to all Fed-
eral agencies and programs. The remaining
sections of this Appendix (except for the re-
quirement for certification) summarize the
provisions of Subpart E of 45 CFR Part 95.
D. SUBMISSION, DOCUMENTATION, AND AP-
PROVAL OF PUBLIC ASSISTANCE COST ALLO-
CATION PLANS
1. State public assistance agencies are re-
quired to promptly submit amendments to
the cost allocation plan to HHS for review
and approval.
2. Under the coordination process outlined
in section E, affected Federal agencies will
review all new plans and plan amendments
and provide comments, as appropriate, to
HHS. The effective date of the plan or plan
amendment will be the first day of the cal-
endar quarter following the event that re-
quired the amendment, unless another date
is specifically approved by HHS. HHS, as the
cognizant agency for indirect costs acting on
behalf of all affected Federal agencies, will,
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. VII
as necessary, conduct negotiations with the
state public assistance agency and will in-
form the state agency of the action taken on
the plan or plan amendment.
E. REVIEW OF IMPLEMENTATION OF APPROVED
PLANS
1. Since public assistance cost allocation
plans are of a narrative nature, the review
during the plan approval process consists of
evaluating the appropriateness of the pro-
posed groupings of costs (cost centers) and
the related allocation bases. As such, the
Federal Government needs some assurance
that the cost allocation plan has been imple-
mented as approved. This is accomplished by
reviews by the Federal awarding agencies,
single audits, or audits conducted by the
cognizant agency for indirect costs.
2. Where inappropriate charges affecting
more than one Federal awarding agency are
identified, the cognizant HHS cost negotia-
tion office will be advised and will take the
lead in resolving the issue(s) as provided for
in Subpart E of 45 CFR Part 95.
3. If a dispute arises in the negotiation of
a plan or from a disallowance involving two
or more Federal awarding agencies, the dis-
pute must be resolved in accordance with the
appeals procedures set out in 45 CFR Part 16.
Disputes involving only one Federal award-
ing agency will be resolved in accordance
with the Federal awarding agency’s appeal
process.
4. To the extent that problems are encoun-
tered among the Federal awarding agencies
or governmental units in connection with
the negotiation and approval process, the Of-
fice of Management and Budget will lend as-
sistance, as required, to resolve such prob-
lems in a timely manner.
F. UNALLOWABLE COSTS
Claims developed under approved cost allo-
cation plans will be based on allowable costs
as identified in this Part. Where unallowable
costs have been claimed and reimbursed,
they will be refunded to the program that re-
imbursed the unallowable cost using one of
the following methods: (a) a cash refund, (b)
offset to a subsequent claim, or (c) credits to
the amounts charged to individual Federal
awards. Cash refunds, offsets, and credits
may include at the option of the cognizant
agency for indirect cost, earned or imputed
interest from the date of expenditure and de-
linquent debt interest, if applicable, charge-
able in accordance with applicable cognizant
agency for indirect cost claims collection
regulations.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49581, Aug. 13, 2020]
APPENDIX VII TO PART 200—STATES AND
LOCAL GOVERNMENT AND INDIAN
TRIBE INDIRECT COST PROPOSALS
A. GENERAL
1. Indirect costs are those that have been
incurred for common or joint purposes.
These costs benefit more than one cost ob-
jective and cannot be readily identified with
a particular final cost objective without ef-
fort disproportionate to the results achieved.
After direct costs have been determined and
assigned directly to Federal awards and
other activities as appropriate, indirect costs
are those remaining to be allocated to bene-
fitted cost objectives. A cost may not be al-
located to a Federal award as an indirect
cost if any other cost incurred for the same
purpose, in like circumstances, has been as-
signed to a Federal award as a direct cost.
2. Indirect costs include (a) the indirect
costs originating in each department or
agency of the governmental unit carrying
out Federal awards and (b) the costs of cen-
tral governmental services distributed
through the central service cost allocation
plan (as described in Appendix V to this part)
and not otherwise treated as direct costs.
3. Indirect costs are normally charged to
Federal awards by the use of an indirect cost
rate. A separate indirect cost rate(s) is usu-
ally necessary for each department or agen-
cy of the governmental unit claiming indi-
rect costs under Federal awards. Guidelines
and illustrations of indirect cost proposals
are provided in a brochure published by the
Department of Health and Human Services
entitled ‘‘A Guide for States and Local Govern-
ment Agencies: Cost Principles and Procedures
for Establishing Cost Allocation Plans and Indi-
rect Cost Rates for Grants and Contracts with
the Federal Government.’’ A copy of this bro-
chure may be obtained from HHS Cost Allo-
cation Services or at their website.
4. Because of the diverse characteristics
and accounting practices of governmental
units, the types of costs which may be classi-
fied as indirect costs cannot be specified in
all situations. However, typical examples of
indirect costs may include certain state/
local-wide central service costs, general ad-
ministration of the non-Federal entity ac-
counting and personnel services performed
within the non-Federal entity, depreciation
on buildings and equipment, the costs of op-
erating and maintaining facilities.
5. This Appendix does not apply to state
public assistance agencies. These agencies
should refer instead to Appendix VI to this
part.
B. DEFINITIONS
1. Base means the accumulated direct costs
(normally either total direct salaries and
wages or total direct costs exclusive of any
extraordinary or distorting expenditures)
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241
OMB Guidance Pt. 200, App. VII
used to distribute indirect costs to indi-
vidual Federal awards. The direct cost base
selected should result in each Federal award
bearing a fair share of the indirect costs in
reasonable relation to the benefits received
from the costs.
2. Base period for the allocation of indirect
costs is the period in which such costs are in-
curred and accumulated for allocation to ac-
tivities performed in that period. The base
period normally should coincide with the
governmental unit’s fiscal year, but in any
event, must be so selected as to avoid inequi-
ties in the allocation of costs.
3. Cognizant agency for indirect costs means
the Federal agency responsible for reviewing
and approving the governmental unit’s indi-
rect cost rate(s) on the behalf of the Federal
Government. The cognizant agency for indi-
rect costs assignment is described in Appen-
dix V, section F.
4. Final rate means an indirect cost rate ap-
plicable to a specified past period which is
based on the actual allowable costs of the pe-
riod. A final audited rate is not subject to
adjustment.
5. Fixed rate means an indirect cost rate
which has the same characteristics as a pre-
determined rate, except that the difference
between the estimated costs and the actual,
allowable costs of the period covered by the
rate is carried forward as an adjustment to
the rate computation of a subsequent period.
6. Indirect cost pool is the accumulated
costs that jointly benefit two or more pro-
grams or other cost objectives.
7. Indirect cost rate is a device for deter-
mining in a reasonable manner the propor-
tion of indirect costs each program should
bear. It is the ratio (expressed as a percent-
age) of the indirect costs to a direct cost
base.
8. Indirect cost rate proposal means the doc-
umentation prepared by a governmental unit
or subdivision thereof to substantiate its re-
quest for the establishment of an indirect
cost rate.
9. Predetermined rate means an indirect cost
rate, applicable to a specified current or fu-
ture period, usually the governmental unit’s
fiscal year. This rate is based on an estimate
of the costs to be incurred during the period.
Except under very unusual circumstances, a
predetermined rate is not subject to adjust-
ment. (Because of legal constraints, pre-
determined rates are not permitted for Fed-
eral contracts; they may, however, be used
for grants or cooperative agreements.) Pre-
determined rates may not be used by govern-
mental units that have not submitted and
negotiated the rate with the cognizant agen-
cy for indirect costs. In view of the potential
advantages offered by this procedure, nego-
tiation of predetermined rates for indirect
costs for a period of two to four years should
be the norm in those situations where the
cost experience and other pertinent facts
available are deemed sufficient to enable the
parties involved to reach an informed judg-
ment as to the probable level of indirect
costs during the ensuing accounting periods.
10. Provisional rate means a temporary indi-
rect cost rate applicable to a specified period
which is used for funding, interim reimburse-
ment, and reporting indirect costs on Fed-
eral awards pending the establishment of a
‘‘final’’ rate for that period.
C. ALLOCATION OF INDIRECT COSTS AND
DETERMINATION OF INDIRECT COST RATES
1. General
a. Where a governmental unit’s depart-
ment or agency has only one major function,
or where all its major functions benefit from
the indirect costs to approximately the same
degree, the allocation of indirect costs and
the computation of an indirect cost rate may
be accomplished through simplified alloca-
tion procedures as described in subsection 2.
b. Where a governmental unit’s depart-
ment or agency has several major functions
which benefit from its indirect costs in vary-
ing degrees, the allocation of indirect costs
may require the accumulation of such costs
into separate cost groupings which then are
allocated individually to benefitted func-
tions by means of a base which best meas-
ures the relative degree of benefit. The indi-
rect costs allocated to each function are
then distributed to individual Federal
awards and other activities included in that
function by means of an indirect cost rate(s).
c. Specific methods for allocating indirect
costs and computing indirect cost rates
along with the conditions under which each
method should be used are described in sub-
sections 2, 3 and 4.
2. Simplified Method
a. Where a non-Federal entity’s major
functions benefit from its indirect costs to
approximately the same degree, the alloca-
tion of indirect costs may be accomplished
by (1) classifying the non-Federal entity’s
total costs for the base period as either di-
rect or indirect, and (2) dividing the total al-
lowable indirect costs (net of applicable
credits) by an equitable distribution base.
The result of this process is an indirect cost
rate which is used to distribute indirect
costs to individual Federal awards. The rate
should be expressed as the percentage which
the total amount of allowable indirect costs
bears to the base selected. This method
should also be used where a governmental
unit’s department or agency has only one
major function encompassing a number of in-
dividual projects or activities, and may be
used where the level of Federal awards to
that department or agency is relatively
small.
b. Both the direct costs and the indirect
costs must exclude capital expenditures and
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2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. VII
unallowable costs. However, unallowable
costs must be included in the direct costs if
they represent activities to which indirect
costs are properly allocable.
c. The distribution base may be (1) total di-
rect costs (excluding capital expenditures
and other distorting items, such as pass-
through funds, subcontracts in excess of
$25,000, participant support costs, etc.), (2)
direct salaries and wages, or (3) another base
which results in an equitable distribution.
3. Multiple Allocation Base Method
a. Where a non-Federal entity’s indirect
costs benefit its major functions in varying
degrees, such costs must be accumulated
into separate cost groupings. Each grouping
must then be allocated individually to bene-
fitted functions by means of a base which
best measures the relative benefits.
b. The cost groupings should be established
so as to permit the allocation of each group-
ing on the basis of benefits provided to the
major functions. Each grouping should con-
stitute a pool of expenses that are of like
character in terms of the functions they ben-
efit and in terms of the allocation base
which best measures the relative benefits
provided to each function. The number of
separate groupings should be held within
practical limits, taking into consideration
the materiality of the amounts involved and
the degree of precision needed.
c. Actual conditions must be taken into ac-
count in selecting the base to be used in allo-
cating the expenses in each grouping to ben-
efitted functions. When an allocation can be
made by assignment of a cost grouping di-
rectly to the function benefitted, the alloca-
tion must be made in that manner. When the
expenses in a grouping are more general in
nature, the allocation should be made
through the use of a selected base which pro-
duces results that are equitable to both the
Federal Government and the governmental
unit. In general, any cost element or related
factor associated with the governmental
unit’s activities is potentially adaptable for
use as an allocation base provided that: (1) it
can readily be expressed in terms of dollars
or other quantitative measures (total direct
costs, direct salaries and wages, staff hours
applied, square feet used, hours of usage,
number of documents processed, population
served, and the like), and (2) it is common to
the benefitted functions during the base pe-
riod.
d. Except where a special indirect cost
rate(s) is required in accordance with para-
graph (C)(4) of this Appendix, the separate
groupings of indirect costs allocated to each
major function must be aggregated and
treated as a common pool for that function.
The costs in the common pool must then be
distributed to individual Federal awards in-
cluded in that function by use of a single in-
direct cost rate.
e. The distribution base used in computing
the indirect cost rate for each function may
be (1) total direct costs (excluding capital ex-
penditures and other distorting items such
as pass-through funds, subawards in excess of
$25,000, participant support costs, etc.), (2)
direct salaries and wages, or (3) another base
which results in an equitable distribution.
An indirect cost rate should be developed for
each separate indirect cost pool developed.
The rate in each case should be stated as the
percentage relationship between the par-
ticular indirect cost pool and the distribu-
tion base identified with that pool.
4. Special Indirect Cost Rates
a. In some instances, a single indirect cost
rate for all activities of a non-Federal entity
or for each major function of the agency may
not be appropriate. It may not take into ac-
count those different factors which may sub-
stantially affect the indirect costs applicable
to a particular program or group of pro-
grams. The factors may include the physical
location of the work, the level of administra-
tive support required, the nature of the fa-
cilities or other resources employed, the or-
ganizational arrangements used, or any com-
bination thereof. When a particular Federal
award is carried out in an environment
which appears to generate a significantly
different level of indirect costs, provisions
should be made for a separate indirect cost
pool applicable to that Federal award. The
separate indirect cost pool should be devel-
oped during the course of the regular alloca-
tion process, and the separate indirect cost
rate resulting therefrom should be used, pro-
vided that: (1) The rate differs significantly
from the rate which would have been devel-
oped under paragraphs (C)(2) and (C)(3) of
this Appendix, and (2) the Federal award to
which the rate would apply is material in
amount.
b. Where Federal statutes restrict the re-
imbursement of certain indirect costs, it
may be necessary to develop a special rate
for the affected Federal award. Where a ‘‘re-
stricted rate’’ is required, the same proce-
dure for developing a non-restricted rate will
be used except for the additional step of the
elimination from the indirect cost pool those
costs for which the law prohibits reimburse-
ment.
D. SUBMISSION AND DOCUMENTATION OF
PROPOSALS
1. Submission of Indirect Cost Rate Proposals
a. All departments or agencies of the gov-
ernmental unit desiring to claim indirect
costs under Federal awards must prepare an
indirect cost rate proposal and related docu-
mentation to support those costs. The pro-
posal and related documentation must be re-
tained for audit in accordance with the
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243
OMB Guidance Pt. 200, App. VII
records retention requirements contained in
§200.334.
b. A governmental department or agency
unit that receives more than $35 million in
direct Federal funding must submit its indi-
rect cost rate proposal to its cognizant agen-
cy for indirect costs. Other governmental de-
partment or agency must develop an indirect
cost proposal in accordance with the require-
ments of this Part and maintain the proposal
and related supporting documentation for
audit. These governmental departments or
agencies are not required to submit their
proposals unless they are specifically re-
quested to do so by the cognizant agency for
indirect costs. Where a non-Federal entity
only receives funds as a subrecipient, the
pass-through entity will be responsible for
negotiating and/or monitoring the subrecipi-
ent’s indirect costs.
c. Each Indian tribal government desiring
reimbursement of indirect costs must submit
its indirect cost proposal to the Department
of the Interior (its cognizant agency for indi-
rect costs).
d. Indirect cost proposals must be devel-
oped (and, when required, submitted) within
six months after the close of the govern-
mental unit’s fiscal year, unless an exception
is approved by the cognizant agency for indi-
rect costs. If the proposed central service
cost allocation plan for the same period has
not been approved by that time, the indirect
cost proposal may be prepared including an
amount for central services that is based on
the latest federally-approved central service
cost allocation plan. The difference between
these central service amounts and the
amounts ultimately approved will be com-
pensated for by an adjustment in a subse-
quent period.
2. Documentation of Proposals
The following must be included with each
indirect cost proposal:
a. The rates proposed, including subsidiary
work sheets and other relevant data, cross
referenced and reconciled to the financial
data noted in subsection b. Allocated central
service costs will be supported by the sum-
mary table included in the approved central
service cost allocation plan. This summary
table is not required to be submitted with
the indirect cost proposal if the central serv-
ice cost allocation plan for the same fiscal
year has been approved by the cognizant
agency for indirect costs and is available to
the funding agency.
b. A copy of the financial data (financial
statements, comprehensive annual financial
report, executive budgets, accounting re-
ports, etc.) upon which the rate is based. Ad-
justments resulting from the use of
unaudited data will be recognized, where ap-
propriate, by the Federal cognizant agency
for indirect costs in a subsequent proposal.
c. The approximate amount of direct base
costs incurred under Federal awards. These
costs should be broken out between salaries
and wages and other direct costs.
d. A chart showing the organizational
structure of the agency during the period for
which the proposal applies, along with a
functional statement(s) noting the duties
and/or responsibilities of all units that com-
prise the agency. (Once this is submitted,
only revisions need be submitted with subse-
quent proposals.)
3. Required certification.
Each indirect cost rate proposal must be
accompanied by a certification in the fol-
lowing form:
CERTIFICATE OF INDIRECT COSTS
This is to certify that I have reviewed the
indirect cost rate proposal submitted here-
with and to the best of my knowledge and
belief:
(1) All costs included in this proposal [iden-
tify date] to establish billing or final indi-
rect costs rates for [identify period covered
by rate] are allowable in accordance with the
requirements of the Federal award(s) to
which they apply and the provisions of this
Part. Unallowable costs have been adjusted
for in allocating costs as indicated in the in-
direct cost proposal
(2) All costs included in this proposal are
properly allocable to Federal awards on the
basis of a beneficial or causal relationship
between the expenses incurred and the agree-
ments to which they are allocated in accord-
ance with applicable requirements. Further,
the same costs that have been treated as in-
direct costs have not been claimed as direct
costs. Similar types of costs have been ac-
counted for consistently and the Federal
Government will be notified of any account-
ing changes that would affect the predeter-
mined rate.
I declare that the foregoing is true and cor-
rect.
Governmental Unit: lllllllllllll
Signature: llllllllllllllllll
Name of Official: llllllllllllll
Title: llllllllllllllllllll
Date of Execution: lllllllllllll
E. NEGOTIATION AND APPROVAL OF RATES
1. Indirect cost rates will be reviewed, ne-
gotiated, and approved by the cognizant
agency on a timely basis. Once a rate has
been agreed upon, it will be accepted and
used by all Federal agencies unless prohib-
ited or limited by statute. Where a Federal
awarding agency has reason to believe that
special operating factors affecting its Fed-
eral awards necessitate special indirect cost
rates, the funding agency will, prior to the
time the rates are negotiated, notify the cog-
nizant agency for indirect costs.
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244
2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. VIII
2. The use of predetermined rates, if al-
lowed, is encouraged where the cognizant
agency for indirect costs has reasonable as-
surance based on past experience and reli-
able projection of the non-Federal entity’s
costs, that the rate is not likely to exceed a
rate based on actual costs. Long-term agree-
ments utilizing predetermined rates extend-
ing over two or more years are encouraged,
where appropriate.
3. The results of each negotiation must be
formalized in a written agreement between
the cognizant agency for indirect costs and
the governmental unit. This agreement will
be subject to re-opening if the agreement is
subsequently found to violate a statute, or
the information upon which the plan was ne-
gotiated is later found to be materially in-
complete or inaccurate. The agreed upon
rates must be made available to all Federal
agencies for their use.
4. Refunds must be made if proposals are
later found to have included costs that (a)
are unallowable (i) as specified by law or reg-
ulation, (ii) as identified in §200.420, or (iii)
by the terms and conditions of Federal
awards, or (b) are unallowable because they
are clearly not allocable to Federal awards.
These adjustments or refunds will be made
regardless of the type of rate negotiated
(predetermined, final, fixed, or provisional).
F. OTHER POLICIES
1. Fringe Benefit Rates
If overall fringe benefit rates are not ap-
proved for the governmental unit as part of
the central service cost allocation plan,
these rates will be reviewed, negotiated and
approved for individual recipient agencies
during the indirect cost negotiation process.
In these cases, a proposed fringe benefit rate
computation should accompany the indirect
cost proposal. If fringe benefit rates are not
used at the recipient agency level (i.e., the
agency specifically identifies fringe benefit
costs to individual employees), the govern-
mental unit should so advise the cognizant
agency for indirect costs.
2. Billed Services Provided by the Recipient
Agency
In some cases, governmental departments
or agencies (components of the govern-
mental unit) provide and bill for services
similar to those covered by central service
cost allocation plans (e.g., computer cen-
ters). Where this occurs, the governmental
departments or agencies (components of the
governmental unit)should be guided by the
requirements in Appendix V relating to the
development of billing rates and documenta-
tion requirements, and should advise the
cognizant agency for indirect costs of any
billed services. Reviews of these types of
services (including reviews of costing/billing
methodology, profits or losses, etc.) will be
made on a case-by-case basis as warranted by
the circumstances involved.
3. Indirect Cost Allocations Not Using Rates
In certain situations, governmental de-
partments or agencies (components of the
governmental unit), because of the nature of
their Federal awards, may be required to de-
velop a cost allocation plan that distributes
indirect (and, in some cases, direct) costs to
the specific funding sources. In these cases, a
narrative cost allocation methodology
should be developed, documented, main-
tained for audit, or submitted, as appro-
priate, to the cognizant agency for indirect
costs for review, negotiation, and approval.
4. Appeals
If a dispute arises in a negotiation of an in-
direct cost rate (or other rate) between the
cognizant agency for indirect costs and the
governmental unit, the dispute must be re-
solved in accordance with the appeals proce-
dures of the cognizant agency for indirect
costs.
5. Collection of Unallowable Costs and
Erroneous Payments
Costs specifically identified as unallowable
and charged to Federal awards either di-
rectly or indirectly will be refunded (includ-
ing interest chargeable in accordance with
applicable Federal cognizant agency for indi-
rect costs regulations).
6. OMB Assistance
To the extent that problems are encoun-
tered among the Federal agencies or govern-
mental units in connection with the negotia-
tion and approval process, OMB will lend as-
sistance, as required, to resolve such prob-
lems in a timely manner.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75889, Dec. 19, 2014; 85 FR 49581, Aug. 13,
2020]
APPENDIX VIII TO PART 200— NON-
PROFIT ORGANIZATIONS EXEMPTED
FROM SUBPART E OF PART 200
1. Advance Technology Institute (ATI),
Charleston, South Carolina
2. Aerospace Corporation, El Segundo, Cali-
fornia
3. American Institutes of Research (AIR),
Washington, DC
4. Argonne National Laboratory, Chicago, Il-
linois
5. Atomic Casualty Commission, Wash-
ington, DC
6. Battelle Memorial Institute,
Headquartered in Columbus, Ohio
7. Brookhaven National Laboratory, Upton,
New York
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245
OMB Guidance Pt. 200, App. XII
8. Charles Stark Draper Laboratory, Incor-
porated, Cambridge, Massachusetts
9. CNA Corporation (CNAC), Alexandria, Vir-
ginia
10. Environmental Institute of Michigan,
Ann Arbor, Michigan
11. Georgia Institute of Technology/Georgia
Tech Applied Research Corporation/Geor-
gia Tech Research Institute, Atlanta,
Georgia
12. Hanford Environmental Health Founda-
tion, Richland, Washington
13. IIT Research Institute, Chicago, Illinois
14. Institute of Gas Technology, Chicago, Il-
linois
15. Institute for Defense Analysis, Alexan-
dria, Virginia
16. LMI, McLean, Virginia
17. Mitre Corporation, Bedford, Massachu-
setts
18. Noblis, Inc., Falls Church, Virginia
19. National Radiological Astronomy Observ-
atory, Green Bank, West Virginia
20. National Renewable Energy Laboratory,
Golden, Colorado
21. Oak Ridge Associated Universities, Oak
Ridge, Tennessee
22. Rand Corporation, Santa Monica, Cali-
fornia
23. Research Triangle Institute, Research
Triangle Park, North Carolina
24. Riverside Research Institute, New York,
New York
25. South Carolina Research Authority
(SCRA), Charleston, South Carolina
26. Southern Research Institute, Bir-
mingham, Alabama
27. Southwest Research Institute, San Anto-
nio, Texas
28. SRI International, Menlo Park, California
29. Syracuse Research Corporation, Syra-
cuse, New York
30. Universities Research Association, Incor-
porated (National Acceleration Lab), Ar-
gonne, Illinois
31. Urban Institute, Washington DC
32. Nonprofit insurance companies, such as
Blue Cross and Blue Shield Organizations
33. Other nonprofit organizations as nego-
tiated with Federal awarding agencies
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49582, Aug. 13, 2020]
APPENDIX IX TO PART 200—HOSPITAL
COST PRINCIPLES
Based on initial feedback, OMB proposes to
establish a review process to consider exist-
ing hospital cost determine how best to up-
date and align them with this Part. Until
such time as revised guidance is proposed
and implemented for hospitals, the existing
principles located at 45 CFR Part 75 Appen-
dix E, entitled ‘‘Principles for Determining
Cost Applicable to Research and Develop-
ment Under Grants and Contracts with Hos-
pitals,’’ remain in effect.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75889, Dec. 19, 2014]
APPENDIX X TO PART 200—DATA
COLLECTION FORM (FORM SF–SAC)
The Data Collection Form SF–SAC is
available on the FAC Web site.
APPENDIX XI TO PART 200—COMPLIANCE
SUPPLEMENT
The compliance supplement is available on
the OMB website.
[85 FR 49582, Aug. 13, 2020]
APPENDIX XII TO PART 200—AWARD
TERM AND CONDITION FOR RECIPIENT
INTEGRITY AND PERFORMANCE MAT-
TERS
A. REPORTING OF MATTERS RELATED TO
RECIPIENT INTEGRITY AND PERFORMANCE
1. General Reporting Requirement
If the total value of your currently active
grants, cooperative agreements, and procure-
ment contracts from all Federal awarding
agencies exceeds $10,000,000 for any period of
time during the period of performance of this
Federal award, then you as the recipient dur-
ing that period of time must maintain the
currency of information reported to the Sys-
tem for Award Management (SAM) that is
made available in the designated integrity
and performance system (currently the Fed-
eral Awardee Performance and Integrity In-
formation System (FAPIIS)) about civil,
criminal, or administrative proceedings de-
scribed in paragraph 2 of this award term
and condition. This is a statutory require-
ment under section 872 of Public Law 110–417,
as amended (41 U.S.C. 2313). As required by
section 3010 of Public Law 111–212, all infor-
mation posted in the designated integrity
and performance system on or after April 15,
2011, except past performance reviews re-
quired for Federal procurement contracts,
will be publicly available.
2. Proceedings About Which You Must Report
Submit the information required about
each proceeding that:
a. Is in connection with the award or per-
formance of a grant, cooperative agreement,
or procurement contract from the Federal
Government;
b. Reached its final disposition during the
most recent five-year period; and
c. Is one of the following:
(1) A criminal proceeding that resulted in a
conviction, as defined in paragraph 5 of this
award term and condition;
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246
2 CFR Ch. II (1–1–21 Edition) Pt. 200, App. XII
(2) A civil proceeding that resulted in a
finding of fault and liability and payment of
a monetary fine, penalty, reimbursement,
restitution, or damages of $5,000 or more;
(3) An administrative proceeding, as de-
fined in paragraph 5. of this award term and
condition, that resulted in a finding of fault
and liability and your payment of either a
monetary fine or penalty of $5,000 or more or
reimbursement, restitution, or damages in
excess of $100,000; or
(4) Any other criminal, civil, or adminis-
trative proceeding if:
(i) It could have led to an outcome de-
scribed in paragraph 2.c.(1), (2), or (3) of this
award term and condition;
(ii) It had a different disposition arrived at
by consent or compromise with an acknowl-
edgment of fault on your part; and
(iii) The requirement in this award term
and condition to disclose information about
the proceeding does not conflict with appli-
cable laws and regulations.
3. Reporting Procedures
Enter in the SAM Entity Management area
the information that SAM requires about
each proceeding described in paragraph 2 of
this award term and condition. You do not
need to submit the information a second
time under assistance awards that you re-
ceived if you already provided the informa-
tion through SAM because you were required
to do so under Federal procurement con-
tracts that you were awarded.
4. Reporting Frequency
During any period of time when you are
subject to the requirement in paragraph 1 of
this award term and condition, you must re-
port proceedings information through SAM
for the most recent five year period, either
to report new information about any pro-
ceeding(s) that you have not reported pre-
viously or affirm that there is no new infor-
mation to report. Recipients that have Fed-
eral contract, grant, and cooperative agree-
ment awards with a cumulative total value
greater than $10,000,000 must disclose semi-
annually any information about the crimi-
nal, civil, and administrative proceedings.
5. Definitions
For purposes of this award term and condi-
tion:
a. Administrative proceeding means a non-
judicial process that is adjudicatory in na-
ture in order to make a determination of
fault or liability (e.g., Securities and Ex-
change Commission Administrative pro-
ceedings, Civilian Board of Contract Appeals
proceedings, and Armed Services Board of
Contract Appeals proceedings). This includes
proceedings at the Federal and State level
but only in connection with performance of a
Federal contract or grant. It does not in-
clude audits, site visits, corrective plans, or
inspection of deliverables.
b. Conviction, for purposes of this award
term and condition, means a judgment or
conviction of a criminal offense by any court
of competent jurisdiction, whether entered
upon a verdict or a plea, and includes a con-
viction entered upon a plea of nolo
contendere.
c. Total value of currently active grants,
cooperative agreements, and procurement
contracts includes—
(1) Only the Federal share of the funding
under any Federal award with a recipient
cost share or match; and
(2) The value of all expected funding incre-
ments under a Federal award and options,
even if not yet exercised.
B. [Reserved]
[80 FR 43310, July 22, 2015, as amended at 85
FR 49582, Aug. 13, 2020]
PARTS 201–299 [RESERVED]
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13
ATTACHMENT C CONTINUED
FEDERAL PROVISIONS
Should funding be allocated through American Rescue Plan Act (ARPA; (Title VI of the Social Security
Act Section 602 et seq.), the COUNTY will administer and distribute those funds in accordance with
ARPA. ARPA requires that payments from the Coronavirus Fiscal Recovery Fund be used to respond
to the public health emergency or its negative economic impacts, to respond to workers performing
essential work during the COVID-19 public health emergency by providing premium pay, provide
government services to the extent the reduction of revenue due to COVID-19 public health emergency,
and to make necessary investments in water, sewer or broadband infrastructure. It is effective beginning
May 17, 2021 and ends on December 31, 2026.
Subrecipient acknowledges and agrees that this Agreement is subject to the federal requirements,
including but not limited to the federal provisions provided below:
1. NON-DISCRIMINATION. Subrecipient shall not be discriminate in the provision of services,
allocation of benefits, accommodation in facilities, or employment of personnel on the basis of ethnic
group identification, race, religious creed, color, national origin, ancestry, physical handicap, medical
condition, marital status or sex in the performance of this Agreement; and, to the extent they shall be
found to be applicable hereto, shall comply with the provisions of the California Fair Employment and
Housing Act (Gov. Code 12900 et. seq), the Federal Civil Rights Act of 1964 (P.L. 88-352), the
Americans with Disabilities Act of 1990 (42 U.S.C. S1210 et seq.) and all other applicable laws or
regulations.
2. EQUAL EMPLOYMENT OPPORTUNITY/ FAIR EMPLOYMENT PRACTICES/ FEDERAL
PROVISIONS. During the performance of this Agreement, the Subrecipient shall not deny benefits to
any person on the basis of religion, color, ethnic group identification, sex, age, physical or mental
disability, nor shall they discriminate unlawfully against any employee or applicant for employment
because of race, religion, color, national origin, ancestry, physical handicap, mental disability, medical
condition, marital status, age, or sex. Subrecipient shall ensure that the evaluation and treatment of
employees and applicants for employment are free of such discrimination.
A. Subrecipient shall comply with the provisions of the Fair Employment and Housing Act
(Government Code, Section 12900 et seq.), the regulations promulgated thereunder (California Code
of Regulations, Title 2, Section 11000 et seq.), the provisions of Executive Order 11246 of Sept. 23,
1965 and of the rules, regulations, and relevant orders of the Secretary of Labor, the provisions of
Article 9.5, Chapter 1, Part 1, Division 3, Title 2 of the Government Code (Government Code,
Sections 11135-11139.8), and of the rules, regulations or standards adopted by the County to
implement such article.
B. The Subrecipient shall comply with the provisions of the Copeland “Anti-Kickback” Act, 18 U.S.C.
§ 874, 40 U.S.C. § 3145, and the requirements of 29 C.F.R. pt. 3 as may be applicable, which are
incorporated by reference into this Agreement.
3. CLEAN AIR ACT. The Subrecipient agrees to comply with all applicable standards, orders,
or regulations issued pursuant to the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.
The Subrecipient agrees to report each violation to the County and understands and agrees that the
County will, in turn, report each violation as required to assure notification to the California
14
Governor's Office of Emergency Services, Federal Emergency Management Agency (FEMA), and
the appropriate Environmental Protection Agency Regional Office. The Subrecipient agrees to
include these requirements in each subcontract exceeding $150,000 financed in whole or in part
with Federal assistance provided by FEMA.
4. FEDERAL WATER POLLUTION CONTROL ACT
The Subrecipient agrees to comply with all applicable standards, orders, or regulations issued pursuant
to the Federal Water Pollution Control Act, as amended, 33 U.S.C. Sections 1251 et seq.
The Subrecipient agrees to report each violation to the County and understands and agrees that the
County will, in turn, report each violation as required to assure notification to the Federal Emergency
Management Agency (FEMA), and the appropriate Environmental Protection Agency Regional Office.
The Subrecipient agrees to include these requirements in each subcontract exceeding $150,000 financed
in whole or in part with Federal assistance provided by FEMA.
5. DEBARMENT AND SUSPENSION CLAUSE
This Agreement is a covered transaction for purposes of 2 C.F.R. pt. 180 and 2 C.F.R. pt. 3000. As such
the Subrecipient is required to verify that none of the Subrecipient, its principals (defined at 2 C.F.R. §
180.995), or its affiliates (defined at 2 C.F.R. § 180.905) are excluded (defined at 2 C.F.R. § 180.940)
or disqualified (defined at 2 C.F.R. § 180.935).
The Subrecipient must comply with 2 C.F.R. pt. 180, subpart C and 2 C.F.R. pt. 3000, subpart C and
must include a requirement to comply with these regulations in any lower tier covered transaction it
enters into.
This certification is a material representation of fact relied upon by the County. If it is later determined
that the Subrecipient did not comply with 2 C.F.R. pt. 180, subpart C and 2 C.F.R. pt. 3000, subpart C, in
addition to remedies available to the County, the Federal Government may pursue available remedies,
including but not limited to suspension and/or debarment.
The bidder or proposer agrees to comply with the requirements of 2 C.F.R. pt. 180, subpart C and 2
C.F.R. pt. 3000, subpart C while this offer is valid and throughout the period of any contract that may
arise from this offer. The bidder or proposer further agrees to include a provision requiring such
compliance in its lower tier covered transactions.
6. BYRD ANTI- LOBBYING AMENDMENT, 31 U.S.C. § 1352 (AS AMENDED)
Subrecipients who apply or bid for an award of $100,000 or more shall file the required certification.
Each tier certifies to the tier above that it will not and has not used Federal appropriated funds to pay
any person or organization for influencing or attempting to influence an officer or employee of any
agency, a member of Congress, officer or employee of Congress, or an employee of a member of Congress
in connection with obtaining any Federal contract, grant, or any other award covered by 31 U.S.C. § 1352.
Each tier shall also disclose any lobbying with non-Federal funds that takes place in connection with
obtaining any Federal award. Such disclosures are forwarded from tier to tier up to the recipient who in
turn will forward the certification(s) to the County.
APPENDIX A, 44 C.F.R. PART 18- CERTIFICATION REGARDING LOBBYING
The undersigned [Subrecipient] certifies, to the best of his or her knowledge, that:
A. No Federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned,
to any person for influencing or attempting to influence an officer or employee of an agency, a Member
of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection
15
with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal
loan, the entering into of any cooperative agreement, and the extension, continuation, renewal,
amendment, or modification of any Federal contract, grant, loan, or cooperative agreement.
B. If any funds other than Federal appropriated funds have been paid or will be paid to any person
for influencing or attempting to influence an officer or employee of any agency, a Member of Congress,
an officer or employee of Congress, or an employee of a Member of Congress in connection with this
Federal contract, grant, loan, or cooperative agreement, the undersigned shall complete and submit
Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions.
C. The undersigned shall require that the language of this certification be included in the award
documents for all sub-awards at all tiers (including subcontracts, sub-grants, and contracts under grants,
loans, and cooperative agreements) and that all sub-recipients shall certify and disclose accordingly.
This certification is a material representation of fact upon which reliance was placed when this transaction
was made or entered into. Submission of this certification is a prerequisite for making or entering into this
transaction imposed by 31, U.S.C. § 1352 (as amended by the Lobbying Disclosure Act of 1995). Any
person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000
and not more than $100,000 for each such failure.
The Subrecipient certifies or affirms the truthfulness and accuracy of each statement of its certification
and disclosure, if any. In addition, the Subrecipient understands and agrees that the provisions of 31
U.S.C. § 3801 et seq., apply to this certification and disclosure, if any.
SUBRECIPIENT
By
Date
7. PROCUREMENT OF RECOVERED MATERIALS
In the performance of this Agreement, the Subrecipient shall make maximum use of products containing
recovered materials that are EPA-designated items unless the product cannot be acquired
A. Competitively within a timeframe providing for compliance with the contract performance
schedule;
B. Meeting contract performance requirements; or
C. At a reasonable price.
Information about this requirement, along with the list of EPA-designated items, is available at EPA’s
Comprehensive Procurement Guidelines web site, https://www.epa.gov/smm/comprehensive-
procurement-guideline-cpg-program
The Subrecipient also agrees to comply with all other applicable requirements of Section 6002 of the
Solid Waste Disposal Act.
8. ACCESS TO RECORDS
The following access to records requirements apply to this Agreement:
A. The Subrecipient agrees to provide the County, the FEMA Administrator, the Comptroller
General of the United States, or any of their authorized representatives access to any books,
documents, papers, and records of the Subrecipient which are directly pertinent to this Agreement
for the purposes of making audits, examinations, excerpts, and transcriptions
B. The Subrecipient agrees to permit any of the foregoing parties to reproduce by any means
whatsoever or to copy excerpts and transcriptions as reasonably needed.
16
C. The Subrecipient agrees to provide the FEMA Administrator or his or her authorized
representatives access to construction or other work sites pertaining to the work being completed
under the contract.
D. In compliance with the Disaster Recovery Act of 2018, the County and the Subrecipient
acknowledge and agree that no language in this contract is intended to prohibit audits or internal
reviews by the FEMA Administrator or the Comptroller General of the United States.
9. DEPARTMENT OF HOMELAND SECURITY SEAL, LOGO, FLAGS
The Subrecipient shall not use the DHS seal(s), logos, crests, or reproductions of flags or likenesses of
DHS agency officials without specific FEMA pre-approval.
10. COMPLIANCE WITH FEDERAL LAW, REGULATIONS, AND EXECUTIVE ORDERS
This is an acknowledgement that FEMA financial assistance will be used to fund all or a portion of the
contract. The Subrecipient will comply with all applicable Federal law, regulations, executive orders,
FEMA policies, procedures, and directives.
11. NO OBLIGATION BY FEDERAL GOVERNMENT
The Federal Government is not a party to this Agreement and is not subject to any obligations or
liabilities to the non-Federal entity, contractor, or any other party pertaining to any matter resulting from
the contract.
12. PROGRAM FRAUD AND FALSE OR FRAUDULENT STATEMENTS OR RELATED
ACTS
The Subrecipient acknowledges that 31 U.S.C. Chapter 38 (Administrative Remedies for False Claims
and Statements) applies to the Subrecipient’s actions pertaining to this Agreement.
13. FEDERAL PREVAILING WAGE
DAVIS-BACON ACT COMPLIANCE (applicable to construction contracts in excess of $2,000 awarded
by grantees and subgrantees when required by Federal grant program legislation)
To the extent required by any Federal grant programs applicable to expected funding or reimbursement
expenses incurred in connection with the services provided under this Agreement, Subrecipient agrees to
comply with the Davis-Bacon Act (40 U.S.C. §§ 3141-3144 and 3146-3148) as supplemented by
Department of Labor regulations (29 CFR Part 5) as set forth below.
A. The Subrecipient shall be bound to the provisions of the Davis-Bacon Act, and agrees to be bound
by all the provisions of Labor Code section 1771 regarding prevailing wages. All labor on this project shall
be paid neither less than the greater of the minimum wage rates established by the U.S. Secretary of Labor
(Federal Wage Rates), or by the State of California Director of Department of Industrial Relations (State
Wage Rates). Current DIR requirements may be found at http://www.dir.ca.gov/lcp.asp. Additionally,
wages are required to be paid not less than once a week.
B. The general prevailing wage rates may be accessed at the Department of Labor Home Page at
www.wdol.gov. Under the Davis Bacon heading, click on “Selecting DBA WDs.” In the drop down menu
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for State, select, “California.” In the drop down menu for County, select “Riverside.” In the drop down
menu for Construction Type, make the appropriate selection. Then, click Search.
The Federal minimum wage rates for this project are predetermined by the United States
Secretary of Labor. If there is a difference between the minimum wage rates predetermined by the
Secretary of Labor and the general prevailing wage rates determined by the Director of the California
DIR for similar classifications of labor, the Subrecipient and subcontractors shall pay not less than the
higher wage rate. The County will not accept lower State wage rates not specifically included in the
Federal minimum wage determinations. This includes “helper” (or other classifications based on hours
of experience) or any other classification not appearing in the Federal wage determinations. Where
Federal wage determinations do not contain the State wage rate determination otherwise available for
use by the Subrecipient and subcontractors, the Subrecipient and subcontractors shall pay not less than
the Federal minimum wage rate which most closely approximates the duties of the employees in
question.
14. CONTRACT WORK HOURS AND SAFETY STANDARDS (applicable to all contracts in
excess of $100,000 that involve the employment of mechanics or laborers, but not to purchases of supplies
or materials or articles ordinarily available on the open market, or contracts for transportation or
transmission of intelligence)
A. Compliance: Subrecipient agrees that it shall comply with Sections 3702 and 3704 of the
Contract Work Hours and Safety Standards Act (40 U.S.C. §§ 3701–3708) as supplemented by Department
of Labor regulations (29 CFR Part 5), which are incorporated herein.
B. Overtime: No contractor or subcontractor contracting for any part of the work under this
Agreement which may require or involve the employment of laborers or mechanics shall require or permit
any such laborer or mechanic in any workweek in which he or she is employed on such work to work in
excess of forty hours in such workweek unless such laborer or mechanic receives compensation at a rate not
less than one and one-half times the basic rate of pay for all hours worked in excess of forty hours in such
workweek.
C. Violation; liability for unpaid wages; liquidated damages: In the event of any violation of
the provisions of paragraph B of this section, the Subrecipient and any subcontractor responsible therefore
shall be liable for the unpaid wages. In addition, such Subrecipient and subcontractor shall be liable to the
United States for liquidated damages. Such liquidated damages shall be computed with respect to each
individual laborer or mechanic employed in violation of the provisions of paragraph B, in the sum of $10
for each calendar day on which such individual was required or permitted to work in excess of the standard
workweek of forty hours without payment of the overtime wages required by paragraph B.
D. Withholding for unpaid wages and liquidated damages: Subrecipient shall upon its own
action or upon written request of an authorized representative of the Department of Labor withhold or cause
to be withheld, from any moneys payable on account of work performed by the contractor or subcontractor
under any such contract or any other Federal contract with the same prime contractor, or any other federally-
assisted contract subject to the Contract Work Hours and Safety Standards Act, which is held by the same
prime contractor, such sums as may be determined to be necessary to satisfy any liabilities of such contractor
or subcontractor for unpaid wages and liquidated damages as provided in the clause set for in paragraph C
of this section.
E. Subcontracts: The contractor or subcontractor shall insert in any subcontracts the clauses set
forth in paragraphs A through D of this section and also a clause requiring the subcontractors to include
these clauses in any lower tier subcontracts. The prime contractor shall be responsible for compliance by
any subcontractor or lower tier subcontractor with the clauses set forth in paragraphs A through D of this
section.
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15. RIGHTS TO INVENTIONS MADE UNDER A CONTRACT OR AGREEMENT— Contracts
or agreements for the performance of experimental, developmental, or research work shall provide for
the rights of the Federal Government and the recipient in any resulting invention in accordance with 37
CFR part 401, “Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under
Government Grants, Contracts and Cooperative Agreements,” and any implementing regulations issued
by HUD.
16. RIGHTS TO DATA AND COPYRIGHTS – Subrecipients and consultants agree to comply with
all applicable provisions pertaining to the use of data and copyrights pursuant to 48 CFR Part 27.4,
Federal Acquisition Regulations (FAR).
17. PROHIBITION ON CONTRACTING FOR COVERED TELECOMMUNICATIONS
EQUIPMENT OR SERVICES
A. Definitions. As used in this clause, the terms backhaul; covered foreign country; covered
telecommunications equipment or services; interconnection arrangements; roaming; substantial or
essential component; and telecommunications equipment or services have the meaning as defined in
FEMA Policy, #405-143-1 Prohibitions on Expending FEMA Award Funds for Covered
Telecommunications Equipment or Services As used in this clause—
B. Prohibitions.
(1) Section 889(b) of the John S. McCain National Defense Authorization Act for Fiscal Year
2019, Pub. L. No. 115-232, and 2 C.F.R. § 200.216 prohibit the head of an executive agency on
or after Aug.13, 2020, from obligating or expending grant, cooperative agreement, loan, or loan
guarantee funds on certain telecommunications products or from certain entities for national
security reasons.
(2) Unless an exception in paragraph (c) of this clause applies, the contractor and its
subcontractors may not use grant, cooperative agreement, loan, or loan guarantee funds from the
Federal Emergency Management Agency to:
(i) Procure or obtain any equipment, system, or service that uses covered
telecommunications equipment or services as a substantial or essential component of any
system, or as critical technology of any system;
(ii) Enter into, extend, or renew a contract to procure or obtain any equipment, system, or
service that uses covered telecommunications equipment or services as a substantial or
essential component of any system, or as critical technology of any system;
(iii) Enter into, extend, or renew contracts with entities that use covered
telecommunications equipment or services as a substantial or essential component of any
system, or as critical technology as part of any system; or (iv)Provide, as part of its
performance of this contract, subcontract, or other contractual instrument, any equipment,
system, or service that uses covered telecommunications equipment or services as a
substantial or essential component of any system, or as critical technology as part of any
system.
C. Exceptions.
(1) This clause does not prohibit contractors from providing—
a. A service that connects to the facilities of a third-party, such as backhaul,
roaming, or interconnection arrangements; or
b. Telecommunications equipment that cannot route or redirect user data traffic
or permit visibility into any user data or packets that such equipment transmits or
otherwise handles.
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(2) By necessary implication and regulation, the prohibitions also do not apply to:
a. Covered telecommunications equipment or services that:
i. Are not used as a substantial or essential component of any system; and
ii. Are not used as critical technology of any system.
b. Other telecommunications equipment or services that are not considered
covered telecommunications equipment or services.
D. Reporting requirement.
(1) In the event the contractor identifies covered telecommunications equipment or
services used as a substantial or essential component of any system, or as critical technology as
part of any system, during contract performance, or the contractor is notified of such by a
subcontractor at any tier or by any other source, the contractor shall report the information in
paragraph (d)(2) of this clause to the recipient or subrecipient, unless elsewhere in this contract
are established procedures for reporting the information.
(2) The Subrecipient shall report the following information pursuant to paragraph (d)(1)
of this clause:
(i) Within one business day from the date of such identification or notification:
The contract number; the order number(s), if applicable; supplier name; supplier unique
entity identifier (if known); supplier Commercial and Government Entity (CAGE) code
(if known); brand; model number (original equipment manufacturer number,
manufacturer part number, or wholesaler number); item description; and any readily
available information about mitigation actions undertaken or recommended.
ii) Within 10 business days of submitting the information in paragraph (d)(2)(i)
of this clause: Any further available information about mitigation actions undertaken or
recommended. In addition, the contractor shall describe the efforts it undertook to prevent
use or submission of covered telecommunications equipment or services, and any
additional efforts that will be incorporated to prevent future use or submission of covered
telecommunications equipment or services. Page 10
E. Subcontracts. The Subrecipient shall insert the substance of this clause, including this paragraph (e),
in all subcontracts and other contractual instruments.
18. REPORTING OF MATTERS RELATED TO RECIPIENT INTEGRITY AND PERFORMANCE
A. General Reporting Requirement
If the total value of your currently active grants, cooperative agreements, and procurement contracts
from all Federal awarding agencies exceeds $10,000,000 for any period of time during the period of
performance of this Federal award, then you as the recipient during that period of time must maintain
the currency of information reported to the System for Award Management (SAM) that is made available
in the designated integrity and performance system (currently the Federal Awardee Performance and
Integrity Information System (FAPIIS)) about civil, criminal, or administrative proceedings described
in paragraph 2 of this award term and condition. This is a statutory requirement under section 872 of
Public Law 110-417, as amended (41 U.S.C. 2313). As required by section 3010 of Public Law 111-
212, all information posted in the designated integrity and performance system on or after April 15,
2011, except past performance reviews required for Federal procurement contracts, will be publicly
available.
B. Proceedings About Which You Must Report
Submit the information required about each proceeding that:
a. Is in connection with the award or performance of a grant, cooperative agreement, or procurement
contract from the Federal Government;
b. Reached its final disposition during the most recent five-year period; and
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c. Is one of the following:
(1) A criminal proceeding that resulted in a conviction, as defined in paragraph 5 of this award
term and condition;
(2) A civil proceeding that resulted in a finding of fault and liability and payment of a monetary
fine, penalty, reimbursement, restitution, or damages of $5,000 or more;
(3) An administrative proceeding, as defined in paragraph 5. of this award term and condition,
that resulted in a finding of fault and liability and your payment of either a monetary fine or penalty of
$5,000 or more or reimbursement, restitution, or damages in excess of $100,000; or
(4) Any other criminal, civil, or administrative proceeding if:
(i) It could have led to an outcome described in paragraph 2.c.(1), (2), or (3) of this award
term and condition;
(ii) It had a different disposition arrived at by consent or compromise with an
acknowledgment of fault on your part; and
(iii) The requirement in this award term and condition to disclose information about the
proceeding does not conflict with applicable laws and regulations.
C. Reporting Procedures
Enter in the SAM Entity Management area the information that SAM requires about each proceeding
described in paragraph 2 of this award term and condition. You do not need to submit the information a
second time under assistance awards that you received if you already provided the information through
SAM because you were required to do so under Federal procurement contracts that you were awarded.
D. Reporting Frequency
During any period of time when you are subject to the requirement in paragraph 1 of this award term
and condition, you must report proceedings information through SAM for the most recent five year
period, either to report new information about any proceeding(s) that you have not reported previously
or affirm that there is no new information to report. Recipients that have Federal contract, grant, and
cooperative agreement awards with a cumulative total value greater than $10,000,000 must disclose
semiannually any information about the criminal, civil, and administrative proceedings.
E. Definitions
For purposes of this award term and condition:
a. Administrative proceeding means a non-judicial process that is adjudicatory in nature in order to make
a determination of fault or liability (e.g., Securities and Exchange Commission Administrative
proceedings, Civilian Board of Contract Appeals proceedings, and Armed Services Board of Contract
Appeals proceedings). This includes proceedings at the Federal and State level but only in connection
with performance of a Federal contract or grant. It does not include audits, site visits, corrective plans,
or inspection of deliverables.
b. Conviction, for purposes of this award term and condition, means a judgment or conviction of a
criminal offense by any court of competent jurisdiction, whether entered upon a verdict or a plea, and
includes a conviction entered upon a plea of nolo contendere.
c. Total value of currently active grants, cooperative agreements, and procurement contracts includes -
(1) Only the Federal share of the funding under any Federal award with a recipient cost share or match;
and
(2) The value of all expected funding increments under a Federal award and options, even if not yet
exercised.
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Attachment D – Indemnification and Insurance Requirements
INDEMNIFICATION
A. Basic Indemnity
1. To the fullest extent permitted by applicable law, Subrecipient agrees to indemnify, hold
harmless and defend the County of Riverside, its Agencies, Districts, Departments and Special
Districts, Board of Supervisors, elected and appointed officials, and each of their respective
directors, members officers, employees, agents, volunteers and representatives ("Indemnitees")
and each of them from any and all Losses that arise out of or relate to any act or omission
constituting ordinary and not professional negligence (including, without limitation, negligent
breach of contract), recklessness, or willful misconduct on the part of Subrecipient or its
subconsultants or their respective employees, agents, representatives, or independent contractors.
2. "Losses" shall mean any and all economic and non-economic losses, costs, liabilities,
claims, damages, actions, judgements, settlements and expenses, including, without limitation, full
and actual attorney's fees (including, without limitation, attorney's fees for trial and on appeal),
expert and non-expert witness fees, arbitrator and arbitration fees and mediator and mediation fees.
3. Subrecipient further agrees to and shall indemnify and hold harmless the Indemnitees from
all liability arising from suits, claims, demands, actions, or proceedings made by agents, employees
or subcontractors of Subrecipient for salary, wages, compensation, health benefits, insurance,
retirement or any other benefit not explicitly set forth in this Agreement and arising out of work
performed for County pursuant to this Agreement. The Indemnitees shall be entitled to the defense
and indemnification provided for hereunder regardless of whether the Loss is in part caused or
contributed to by the acts or omissions of an Indemnitee or any other person or entity; provided
however, that nothing contained herein shall be construed as obligating Subrecipient to indemnify
and hold harmless any Indemnitee to the extent not required under the provisions of Paragraph B
below.
B. Indemnity for Design Professionals
1. To the fullest extent permitted by Applicable Law, Subrecipient agrees to defend (through
legal counsel reasonably acceptable to County), indemnify and hold harmless the Indemnitees, and
each of them, against any and all Losses that arise out of, pertain to, or relate to, any negligence,
recklessness or willful misconduct constituting professional negligence on the part of Subrecipient
or its Subconsultants, or their respective employees, agents, representatives, or independent
contractors. The Indemnitees shall be entitled to the defense, and indemnification provided for
hereunder regardless of whether the Loss is, in part, caused or contributed to by the acts or
omissions of an Indemnitee or any other person or entity; provided, however, that nothing
contained herein shall be construed as obligating Subrecipient to indemnify and hold harmless any
Indemnitee to the extent not required under the provisions of this section. Subrecipient shall
defend and pay, all costs and fees, including but not limited to attorney fees, cost of investigation,
and defense, in any loss, suits, claims, demands, actions, or proceedings to the extent and in
proportion to the percentage, such costs and fees arise out of, pertain to, or relate to the negligence,
recklessness or willful misconduct of Subrecipient arising out of or from the performance of
professional design services under this Agreement. The duty to defend applies to any alleged or
actual negligence, recklessness, willful misconduct of Subrecipient. The cost for defense shall
apply whether or not Subrecipient is a party to the lawsuit and shall apply whether or not
Subrecipient is directly liable to the plaintiffs in the lawsuit. The duty to defend applies even if
Indemnitees are alleged or found to be actively negligent, but only in proportion to the percentage
of fault or negligence of Subrecipient.
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2. Without affecting the rights of County under any other provision of this Agreement,
Subrecipient shall not be required to indemnify or hold harmless or provide defense or defense
costs to an Indemnitee for a loss due to that Indemnitee's negligence, recklessness or willful
misconduct; provided, however, that such negligence, recklessness or willful misconduct has been
determined by agreement of Subrecipient and Indemnitee or has been adjudged by the findings of
a court of competent jurisdiction.
C. Subrecipient agrees to obtain or cause to be obtained executed defense and indemnity
agreements with provisions identical to those set forth in this section from each and every
Subconsultant, of every Tier.
D. Subrecipient's indemnification obligations under this Agreement shall not be limited by the
amount or type of damages, compensation or benefits payable under any policy of insurance,
workers' compensation acts, disability benefit acts or other employee benefit acts.
E. The Indemnitees shall be entitled to recover their attorneys' fees, costs and expert and
consultant costs in pursuing or enforcing their right to defense and/or indemnification under this
Agreement.
INSURANCE REQUIREMENTS
Without limiting or diminishing the Subrecipient’s obligation to indemnify or hold the County
harmless, Subrecipient shall procure and maintain or cause to be maintained, at its sole cost and
expense, the following insurance coverages during the term of this Agreement. As respects to the
insurance section only, the County herein refers to the County of Riverside, its Agencies, Districts,
Special Districts, and Departments, their respective directors, officers, Board of Supervisors,
employees, elected or appointed officials, agents or representatives as Additional Insureds.
A. Workers’ Compensation: If the Subrecipient has employees as defined by the State of
California, the Subrecipient shall maintain statutory Workers Compensation Insurance (Coverage
A) as prescribed by the laws of the State of California. Policy shall include Employers’ Liability
(Coverage B) including Occupational Disease with limits not less than $1,000,000 per person per
accident. The policy shall be endorsed to waive subrogation in favor of The County of Riverside.
B. Commercial General Liability: Commercial General Liability insurance coverage,
including but not limited to, premises liability, unmodified contractual liability, products and
completed operations liability, personal and advertising injury, and cross liability coverage,
covering claims which may arise from or out of Subrecipient’s performance of its obligations
hereunder. Policy shall name the County as Additional Insured. Policy’s limit of liability shall
not be less than $2,000,000 per occurrence combined single limit. If such insurance contains a
general aggregate limit, it shall apply separately to this agreement or be no less than two (2) times
the occurrence limit. Policy shall name the County as Additional Insureds.
C. Vehicle Liability: If vehicles or mobile equipment are used in the performance of the
obligations under this Agreement, then Subrecipient shall maintain liability insurance for all
owned, non-owned or hired vehicles so used in an amount not less than $1,000,000 per
occurrence combined single limit. If such insurance contains a general aggregate limit, it shall
apply separately to this agreement or be no less than two (2) times the occurrence limit. Policy
shall name the County as Additional Insureds.
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D. Professional Liability: Subrecipient shall maintain Professional Liability Insurance
providing coverage for the Subrecipient’s performance of work included within this
Agreement, with a limit of liability of not less than $1,000,000 per occurrence and $2,000,000
annual aggregate. If Contractor’s Professional Liability Insurance is written on a claims made
basis rather than an occurrence basis, such insurance shall continue through the term of this
Agreement and Subrecipient shall purchase at his sole expense either 1) an Extended
Reporting Endorsement (also, known as Tail Coverage); or 2) Prior Dates Coverage from
new insurer with a retroactive date back to the date of, or prior to, the inception of this
Agreement; or 3) demonstrate through Certificates of Insurance that Subrecipient has
Maintained continuous coverage with the same or original insurer. Coverage provided under
items 1), 2), or 3) will continue as long as the law allows. Policy shall name the County as
Additional Insureds.
E. General Insurance Provisions - All lines:
1. Any insurance carrier providing insurance coverage hereunder shall be admitted to
the State of California and have an A M BEST rating of not less than A: VIII (A:8) unless
such requirements are waived, in writing, by the County Risk Manager. If the County’s Risk
Manager waives a requirement for a particular insurer such waiver is only valid for that specific
insurer and only for one policy term.
2. The Subrecipient must declare its insurance self-insured retention for each coverage
required herein. If any such self-insured retention exceed $500,000 per occurrence each such
retention shall have the prior written consent of the County Risk Manager before the
commencement of operations under this Agreement. Upon notification of self-insured retention
unacceptable to the County, and at the election of the County’s Risk Manager, Subrecipient’s
carriers shall either; 1) reduce or eliminate such self-insured retention as respects this
Agreement with the County, or 2) procure a bond which guarantees payment of losses and
related investigations, claims administration, and defense costs and expenses.
3. Subrecipient shall cause Subrecipient’s insurance carrier(s) to furnish the County
of Riverside with either 1) a properly executed original Certificate(s) of Insurance and
certified original copies of Endorsements effecting coverage as required herein, and 2) if
requested to do so orally or in writing by the County Risk Manager, provide original
Certified copies of policies including all Endorsements and all attachments thereto, showing
such insurance is in full force and effect. Further, said Certificate(s) and policies of insurance
shall contain the covenant of the insurance carrier(s) that a minimum of thirty (30) days written
notice shall be given to the County of Riverside prior to any material modification, cancellation,
expiration or reduction in coverage of such insurance. If Subrecipient insurance carrier(s) policies
does not meet the minimum notice requirement found herein, Subrecipient shall cause
Subrecipient’s insurance carrier(s) to furnish a 30 day Notice of Cancellation Endorsement.
4. In the event of a material modification, cancellation, expiration, or reduction in
coverage, this Agreement shall terminate forthwith, unless the County of Riverside receives,
prior to such effective date, another properly executed original Certificate of Insurance and
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original copies of endorsements or certified original policies, including all endorsements and
attachments thereto evidencing coverage’s set forth herein and the insurance required herein
is in full force and effect. Subrecipient shall not commence operations until the County has
been furnished original Certificate (s) of Insurance and certified original copies of endorsements
and if requested, certified original policies of insurance including all endorsements and any and
all other attachments as required in this Section. An individual authorized by the insurance carrier
to do so on its behalf shall sign the original endorsements for each policy and the Certificate of
Insurance.
5. It is understood and agreed to by the parties hereto that the Subrecipient’s insurance
shall be construed as primary insurance, and the County's insurance and/or deductibles and/or self-
insured retentions or self-insured programs shall not be construed as contributory.
6. If, during the term of this Agreement or any extension thereof, there is a
material change in the scope of services; or, there is a material change in the equipment
to be used in the performance of the scope of work; or, the term of this Agreement,
including any extensions thereof, exceeds five (5) years; the County reserves the right to adjust
the types of insurance and the monetary limits of liability required under this Agreement, if
in the County Risk Management's reasonable judgment, the amount or type of insurance
carried by the Subrecipient has become inadequate.
7. Subrecipient shall pass down the insurance obligations contained herein to all tiers
of subcontractors working under this Agreement.
8. The insurance requirements contained in this Agreement may be met with a
program(s) of self-insurance acceptable to the County.
9. Subrecipient agrees to notify County of any claim by a third party or any incident or
event that may give rise to a claim arising from the performance of this Agreement
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Attachment E - Project Monitoring Requirements
Quarterly Progress Reports shall be submitted on the 21st of the month following the previous
quarter. Quarterly reports shall be sent via e-mail to RIVCOARPA@RIVCO.ORG. The quarterly
report shall include a brief description of the work performed during the reporting period, including
photographs, construction status, milestones achieved, financial status report including cost
incurred to date, cash flow projections, schedule updates, and any problems encountered in the
performance of the work under this Agreement. The progress pay estimate for the reporting period
shall be included as part of the quarterly progress report submittal.
In addition to the above, project schedule and cashflow projection updates shall be emailed to the
County on a monthly basis.
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Attachment F - Construction Requirements
Subrecipient shall:
1. Pursuant to the California Environmental Quality Act ("CEQA"), act as Lead
Agency and assume responsibility for preparation, circulation and adoption of all necessary and
appropriate CEQA documents pertaining to the construction, operation and maintenance of
Neighborhood Revitalization Project.
2. To the extent that it has not already done so, the Subrecipient shall prepare or
cause plans and specifications ("Plans") to be prepared for the Neighborhood Revitalization
Project prior to advertising Neighborhood Revitalization Project for construction bids.
3. Provide County a copy of the engineering design cost proposal and associated
design schedule for the Neighborhood Revitalization Project.
4. Advertise and award a public works construction contract for the Neighborhood
Revitalization Project and begin construction per the schedules included in Attachment A of
this Agreement.
5. Prior to advertising Neighborhood Revitalization Project for public works
construction contract, obtain all necessary permits, approvals, or agreements as may be required
by any federal, state and local resource or regulatory agencies pertaining to the construction,
operation and maintenance of Neighborhood Revitalization Project. Assume sole responsibility
for compliance with the requirements of all regulatory permits, including any amendments
thereto, pertaining to the construction, operation and maintenance of Neighborhood
Revitalization Project.
6. Implement or cause to be implemented, all environmental mitigation required in
association with the construction, operation and maintenance of Neighborhood Revitalization
Project.
7. Prior to advertising Neighborhood Revitalization Project for public works
construction contract, obtain all necessary permits, licenses, agreements, approvals, rights of
way, rights of entry, encroachment permits, and temporary construction easements as may be
needed to construct, operate and maintain the Neighborhood Revitalization Project.
8. Advertise, award and administer a public works construction contract for the
Neighborhood Revitalization Project pursuant to the provisions of applicable laws for public
works of improvements, including but not limited to the California Public Contract Code,
Government Code and Labor Code.
9. Shall certify and cause its contractor to certify, that it is not a target of economic
sanctions imposed in response to Russia’s actions in Ukraine imposed by the United States
government or the State of California. The Subrecipient and its Contractor are required to
comply with the economic sanctions imposed in response to Russia’s actions in Ukraine,
including with respect to, but not limited to, the federal executive orders identified in California
Executive Order N-6-22, located at https://www.gov.ca.gov/wp-
content/uploads/2022/03/3.4.22-Russia-Ukraine-Executive-Order.pdf and the sanctions
identified on the United States Department of the Treasury website
(https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-
information/ukraine-russia-related-sanctions). The Subrecipient and its Contractor are required
to comply with all applicable reporting requirements regarding compliance with the economic
sanctions, including, but not limited to, those reporting requirements set forth in California
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Executive Order N-6-22 for all parties with one or more agreements with the State of California,
the County of Riverside, or any other local agency, with a value of Five Million Dollars
($5,000,000) or more. Notwithstanding any other provision in these documents, failure to
comply with the economic sanctions and all applicable reporting requirements may result in
disqualification or termination of the Construction Agreement, if awarded.
For parties and contractors with an agreement value of Five Million Dollars ($5,000,000) or more
with the State of California, the County of Riverside, or any other local agency, reporting
requirements include, but are not limited to, information related to steps taken in response to
Russia’s actions in Ukraine, including but not limited to:
a. Desisting from making any new investments or engaging in financial transactions with
Russian institutions or companies that are headquartered or have their principal place of
business in Russia;
b. Not transferring technology to Russia or companies that are headquartered or have their
principal place of business in Russia; and
c. Direct support to the government and people of Ukraine.
To comply with this requirement, please insert your name and Federal ID Number (if available)
on the Certification Form attached hereto, execute by a duly authorized representative for the
contractor and return to the County.
10. The Subrecipient shall require, and the specifications, bid and contract documents
shall require all contractors, subcontractors, vendors, equipment operators and owner operators,
in each such case to the extent such individuals or entities are engaged to perform work on the
Neighborhood Revitalization Project, to pay at least general prevailing wage rates to all workers
employed in the execution of the contract, to post a copy of the general prevailing wage rates at
the job-site in a conspicuous place available to all employees and applicants for employment,
and to otherwise comply with applicable provisions of the California Labor Code and applicable
laws relating to general prevailing wage rates.
11. Each contractor engaged to perform work on the Neighborhood Revitalization
Project shall be required to furnish (i) labor and material payment bonds, and (ii) contract
performance bonds, each in an amount equal to 100% of the contract price naming the
Subrecipient as obligee and issued by a California admitted surety which complies with the
provisions of Section 995.660 of the California Code of Civil Procedure.
12. Provide County with written notice that Subrecipient has awarded a public works
construction contract for Neighborhood Revitalization Project. The written notice shall include
the Contractor's actual bid amounts for Neighborhood Revitalization Project, setting forth herein
the lowest responsible bid contract amount.
13. Prior to commencing Neighborhood Revitalization Project construction, provide
to County:
a. A construction schedule which shall show the order and dates in which
Subrecipient or Subrecipient’s contractor proposes to carry on the various parts of work,
including estimated start and completion dates, and
b. A confined space procedure specific to Neighborhood Revitalization
Project. The procedure shall comply with requirements contained in California Code of
28
Regulations, Title 8, Section 5156 et seq. and County's Confined Space Procedures,
SOM-18.
14. Require its construction contractor(s) to comply with all Cal/OSHA safety
regulations including regulations concerning confined space and maintain a safe working
environment for all working on the site.
15. Order the relocation of all utilities within Subrecipient rights of way which
conflict with the construction of Neighborhood Revitalization Project and which must be
relocated at the expense of who may have superior property rights.
16. Procure or caused to be procured insurance coverages during the term of this
Agreement. Subrecipient shall require its Neighborhood Revitalization Project construction
contractor(s) to furnish original certificate(s) of insurance and original certified copies of
endorsements and if requested, certified original policies of insurance including all
endorsements and any and all other attachments. Prior to Subrecipient issuing a Notice to
Proceed to its construction contractor(s) to begin construction of Neighborhood Revitalization
Project, an original certificate of insurance evidencing the required insurance coverage shall be
provided to County. At minimum, the procured insurance coverages should adhere to the
County’s required insurance provided in Attachment D to this Agreement.
17. Construct, or cause to be constructed, Neighborhood Revitalization Project
pursuant to a Subrecipient administered public works construction contract, in accordance with
the Plans, and pay all costs associated therewith.
18. Inspect the Neighborhood Revitalization Project construction or cause the
Neighborhood Revitalization Project's construction to be inspected by its construction manager
and pay all costs associated therewith.
19. Provide County with a copy of the Subrecipient's recorded Notice of Completion.
20. Keep an accurate accounting of Neighborhood Revitalization Project cost and
provide this accounting to County with Subrecipient’s Notice of Completion. The final
accounting of construction cost shall include a detailed breakdown of all costs, including, but
not limited to, payment vouchers, Subrecipient approved change orders and other such
construction contract documents as may be necessary to establish the actual cost of construction
for the PLANS. Subrecipient shall be responsible to pay any amounts in excess of Award amount
provided in this Agreement.
21. Refund to County, at the time of providing a Notice of Completion, any
unexpended portions of Award amount within thirty (30) days of the Notice of Completion is
filed for recordation.
29
COMPLIANCE WITH ECONOMIC SANCTIONS IN RESPONSE TO RUSSIA’S ACTIONS
IN UKRAINE
Prior to bidding on, submitting a proposal, or executing a contract, a party/contractor must certify: 1) it
is not a target of economic sanctions and 2) in compliance with economic sanctions imposed by the U.S.
government in response to Russia’s actions in Ukraine, as well as any requirements related to the Russian
sanctions imposed by the California Governor’s Executive Order N-6-22 issued on March 4, 2022 and
under state law, if any.
To comply with this requirement, please insert the party/contractor name and Federal ID Number (if
available), complete the information described below and execute by an authorized representative of the
contractor.
CERTIFICATION
I, the authorized representative for contractor named below, certify I am duly authorized to execute this
certification on behalf of the contractor below, and the contractor identified below has conducted a good
faith review of existing contracts. I attest that the contractor is not a target of economic sanctions, and that
contractor is in compliance with the economic sanctions imposed by the U.S. government in response to
Russia’s actions in Ukraine, as well as any requirements related to the Russian sanctions imposed by the
California Governor’s Executive Order N-6-22 issued on March 4, 2022 and under state law, if any.
Party/Contractor Name (Printed) Federal ID Number (or n/a)
By (Authorized Signature)
Printed Name and Title of Person Signing
Date
Item No. 10
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Approve the Funding Agreement with the County of Riverside for the Michael
"Mike" Naggar Park Dog Park Renovation Project, PW21-14 and Authorize the
City Manager to Execute the Agreement
PREPARED BY: Nino Abad, Senior Civil Engineer
Kellen Freeman, Assistant Engineer
RECOMMENDATION: That the City Council:
1. Approve the "Funding Agreement for City of Temecula Michael "Mike" Naggar
Community Park Expansion Project" (Agreement) with the County of Riverside; and
2. Authorize the City Manager to execute the Agreement.
BACKGROUND: The Michael "Mike" Naggar Community Park Dog Park
Renovation project, PW21-14, is a parks/recreation project that includes construction of a new dog
park, approximately 33,000 square foot in area, located at Michael "Mike" Naggar Park to replace
the existing dog park currently located behind the Margarita Recreation Center site. The project is
currently funded by a combination of Measure S and Proposition 68 Per Capita Grand funds.
On May 23, 2023 the Temecula City Council authorized staff to bid the construction contract for
the project. The bid advertisement was cancelled as the City was recently informed that additional
grant funds has been allocated to the project.
The City of Temecula previously applied for grant funding through the Coronavirus State and
Local Fiscal Recovery Funds authorized under the American Rescue Plan Act (ARPA) to provide
state, local and tribal governments with the resources needed to respond to the Covid-19 Pandemic,
its economic effects, and to build a stronger, more equitable economy during the recovery. On
July 26, 2023, the County of Riverside formally notified the City that it has committed $200,000
of its allotment of ARPA funds to the City. The City must execute the attached Funding
Agreement with the County prior to use of the funds as well as incorporate any relevant terms
regarding the use of funds into the construction contract documents prior to readvertising the
project for bids.
Staff recommends that the Temecula City Council approve the Agreement and authorize the City
Manager to execute said Agreement.
FISCAL IMPACT: The Michael "Mike" Naggar Community Park Dog Park
Renovation project is identified in the City's Capital Improvement Program (CIP) budget for Fiscal
Years 2024-2028, and is funded with Measure S and Proposition 68 Per Capita Grant funds.
Executing the Agreement will increase the available project funds by $200,000 in ARPA funding.
A separate City Council item to amend the current CIP Budget is also being considered on this
August 22, 2023 City Council Agenda, includes amendment to the PW21-14 budget for the ARPA
funding.
ATTACHMENTS: 1. Funding Agreement
2. Project Description
FUNDING AGREEMENT FOR
CITY OF TEMECULA MIKE NAGGAR COMMUNITY PARK EXPANSION PROJECT
This Funding Agreement ("Agreement") is entered into by and between the County of Riverside,
a political subdivision of the State of California, ("County") and the City of Temecula, ("Subrecipient").
County and Subrecipient are sometimes individually referred to as "Party" and collectively as "Parties."
RECITALS
WHEREAS, on March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law,
amending Section 9901 of Title VI of the Social Security Act which establishes the Coronavirus State
and Local Fiscal Recovery Funds (Fiscal Recovery Funds) to provide state, local and Tribal
governments with the resources needed to respond to the pandemic and its economic effects and to
build a stronger, more equitable economy during the recovery; and
WHEREAS, on February 8, 2022, Minute Order 3.3, the Board of Supervisors of the County of
Riverside approved allocation of ARPA funds to support eligible projects within Riverside County; and
WHEREAS, on January 6, 2022, the U.S. Department of the Treasury (U.S. Treasury) adopted
a final rule implementing the Fiscal Recovery Funds which took effect on April 1, 2022 (Final Rule);
and
WHEREAS, to respond to the negative effects of the pandemic, which in turn affect our
community as a whole, the County has dedicated a portion of the allotted ARPA funds to local agencies
for the delivery and implementation of eligible neighborhood revitalization projects; and
WHEREAS, the County desires to reimburse and the Subrecipient desires to accept ARPA
Fiscal Recovery Funds in a total amount not to exceed $200,000, for expenditures identified in
Attachment A related to the Mike Naggar Community Park Expansion Project ("Neighborhood
Revitalization Project"); and
NOW THEREFORE, in consideration of the mutual benefits, covenants, terms and conditions
contained herein, the Parties agree as follows:
AGREEMENT
1. Incorporation of Recitals. The Recitals set forth above are incorporated herein and made an
operative part of this Agreement.
2. Contract Documents. This Agreement consists of this Agreement and the following
attachments, attached hereto and by this reference incorporated herein:
2.1 Attachment A — Neighborhood Revitalization Project Scope
2.2 Attachment B — U.S. Treasury ARPA Fiscal Recovery Funds Final Rule
2.3 Attachment C — Uniform Administrative Requirements, Cost Principles, Federal
Provisions and Audit Requirements for Federal Awards -2 CFR Part 200 et seq
2.4 Attachment D — Indemnification and Insurance Requirements
2.5 Attachment E — Project Monitoring Requirements
2.6 Attachment F — Construction Requirements
3. Neighborhood Revitalization Project; Scope of Work. Subrecipient shall be responsible for
completion of all activities associated with design, implementation, installation and construction of the
Neighborhood Revitalization Project, as described in Attachment A, on or before December 31, 2026,
by first using funds received from the County in the amount provided in Section 4 of this Agreement.
The Subrecipient shall also furnish timely reporting and documentation assuring Subrecipient's
compliance with the U.S. Treasury ARPA Guidelines (as stated in the Final Rule of the U.S.
Department of the Treasury published in the Federal Register on January 27, 2022), and within the
timelines and specifications provided in Attachment E. Under the provisions of the Agreement, the
County shall bear no responsibility for the Neighborhood Revitalization Project, including without
limitation any activities associated with implementation, installation and construction, or any future
operation or maintenance of the Neighborhood Revitalization Project.
3.1 Project Signage. Subrecipient shall include appropriate acknowledgement of credit to
the County for its support when promoting the Neighborhood Revitalization Project or using any data
and/or information developed under this Agreement. Signage shall be posted in a prominent location
at Neighborhood Revitalization Project site(s) and shall include the U.S. Department of Treasury's, and
the County's color logos, along with the following disclosure statement: "Funding for this project has
been provided in full or in part from the American Rescue Plan Act, and through an agreement with
the County of Riverside." The Subrecipient shall also include in each of its contracts for work under
this Agreement a provision that incorporates the requirements stated within this Paragraph.
4. Funding.
4.1 County shall provide funding to Subrecipient in a total amount not to exceed $200,000
("Award"), in quarterly payments in accordance with progress pay estimates submittals, and in
compliance with ARPA Guidelines as set forth in Attachment B, attached hereto and by this reference
incorporated herein, for the completion of the Neighborhood Revitalization Project. In the event that
there is a conflict in the terms for payment in this Agreement and the terms in Attachments B and C,
the terms in Attachments B and C shall take precedence. Subrecipient shall provide other non-federal
funding at least equal to the amounts shown in Attachment A, attached hereto and by this reference
incorporated herein, as a match to the funds provided by the County for the Neighborhood
Revitalization Project.
4.2 Except as expressly provided in Attachment A of this Agreement, Subrecipient shall
not be entitled to, nor receive from County any additional funding or other type of remuneration for
services rendered under this Agreement. The Award amounts described in this Section are specifically
for the Neighborhood Revitalization Project and make up the entire amount which the County has
approved to fund for the Neighborhood Revitalization Project. Subrecipient shall not be entitled by
virtue of this Agreement to consideration in excess of specified per -project Award amounts, and
Subrecipient shall be responsible for any and all costs incurred above any Award amount for its
implementation and completion of the Neighborhood Revitalization Project. Any subsequent
amendments to the Neighborhood Revitalization Project scope or description is not covered by this
Agreement, and the funding for any such amendment or for any Neighborhood Revitalization Project
cost overruns shall be the sole responsibility of Subrecipient, unless otherwise approved in writing by
the County.
4.3 Should it be determined at any time by the Subrecipient or the County that the
Subrecipient cannot, will not or is unable to complete the Neighborhood Revitalization Project subject
to this Agreement in accordance with the applicable State and Federal requirements and the provisions
of this Agreement on or before December 31, 2026, then the subrecipient shall return 100% of the
Award amount reimbursed to Subrecipient for the uncompleted Neighborhood Revitalization Project
as of the date of notification to the County, within thirty (30) days of notification.
2
4.4 In the event the actual cost for Neighborhood Revitalization Project is less than Award,
Subrecipient shall refund the difference to County within thirty (30) days of filing the Notice of
Completion for the Neighborhood Revitalization Project, or by June 30, 2026, whichever occurs first.
Subrecipient shall return any reimbursed Award Funds that have not been expended or are not
adequately supported by invoices and documentation to the County, within thirty (30) days of
completion of construction of the Neighborhood Revitalization Project, or upon request by the County,
whichever occurs first.
5. Invoicing and Billing
5.1 Invoices.
5.1.1 Invoices shall be submitted via e-mail to RIVCOARPAgRIVCO.ORG. The
final invoice from the Subrecipient will be submitted with enough time for the County to
reimburse the Subrecipient prior to December 31, 2026, per the final rule of ARPA.
5.1.2 Supporting documentation shall accompany each invoice: copies of paid receipts
and invoices of all Neighborhood Revitalization Project costs incurred by Subrecipient.
5.1.3 To ensure compliance with Federal and State regulations, County may require
additional supporting documentation or clarification of claimed expenses as follows:
5.1.3.1 County Executive Office staff shall notify Subrecipient to obtain
necessary additional documentation or clarification.
5.1.3.2 Subrecipient shall respond within three (3) business days with required
additional documentation or clarification to avoid disallowances/partial payment
of invoice.
5.1.3.3 All invoices containing expenses that need additional documentation or
clarification not provided to County within three (3) business days of request
shall have those expenses disallowed and only the allowed expenses shall be
paid.
5.1.3.4 Subrecipient may resubmit disallowed expenses as a supplemental
invoice only and must be accompanied by required documentation.
5.2 Payments
5.2.1 If the conditions set forth in this Agreement are met, County shall pay, on/or
before the thirtieth (30th) day after receipt of a complete and accurate invoice, the sum
of money claimed by the approved invoice, (less any credit due County for adjustments
of prior invoices). If the conditions are not met, County shall pay when the necessary
processing is completed and/or proper backup documentation is provided.
5.2.2 County shall not pay for unauthorized costs incurred by Subrecipient or for the
claimed work which County monitoring shows have not been provided as authorized.
5.2.3 County retains the right to withhold payment on disputed claims.
6. Term. The Term of this Agreement shall be from the date of approval of this Agreement until
filing of notice of completion for the Neighborhood Revitalization Project, or on December 31, 2026,
whichever is sooner, unless sooner terminated as provided herein.
3
7. Subrecipient Compliance Obligations. The Subrecipient agrees to comply with the terms and
conditions of this Agreement. The Subrecipient also agrees to apply the terms and conditions of this
Agreement to all of its subcontractors (if applicable) and to require their strict compliance therewith.
If it is determined that the Subrecipient is noncompliant, County may temporarily withhold or disallow
reimbursement of costs, under 2 C.F.R. Part 200, as supplemented by 2 C.F.R. Part 910.
7.1 Federal Provisions. Subrecipient and all of its subcontractors shall comply with the
Uniform Administrative Requirements, Cost Principles, Federal Provisions and Audit Requirements
for Federal Awards Provisions contained in Attachment C
8. Contract Representatives.
8.1 County Representative. The County Executive Officer, or designee, shall be the
designated representative who shall administer this Agreement on behalf of the County.
8.2 Subrecipient Representative. The City Manager, or designee, shall be the designated
representative who shall administer this Agreement on behalf of the Subrecipient.
8.3 The Contract Representatives may be contacted as described in Section 11, below.
9. Records and Audit.
9.1 Subrecipient shall store and maintain all writings, documents and records prepared or
compiled in connection with the performance of this Agreement for a minimum of five (5) years from
the termination or completion of this Agreement. This includes any handwriting, typewriting, printing,
photostatic, photographing and every other means of recording upon any tangible thing, any form of
communication or representation including letters, words, pictures, sounds or symbols or any
combination thereof. Any authorized representative of County shall have access to any writings as
defined above for the purposes of making a report, audit, evaluation, or examination Further, County has
the right at all reasonable times to audit, inspect or otherwise evaluate the work performed or being
performed under this Agreement.
9.2 If it is determined pursuant to an audit that any funds provided pursuant to this Agreement
have been improperly expended, Subrecipient shall, at the direction of the agency performing the audit,
reimburse the County within thirty (30) days the full amount of such improperly expended funds. The
funds shall be reimbursed in accordance with the recommendations in the audit.
10. Monitoring of Contract Compliance and Infrastructure Progressports.
10.1 Contract Compliance. The Subrecipient shall comply with the monitoring arrangements
set forth in Project Monitoring Requirements, and Construction Requirements, attached as
Attachments E and F, respectively.
10.2 Neighborhood Revitalization Project Progress Reports and Progress Pay Estimates.
Subrecipient shall, as specified herein, provide quarterly reports detailing Neighborhood Revitalization
Project's progress, including a financial status report and milestone progress report as described in
Attachment E.
11. Notices. As used in this Agreement, notice includes but is not limited to the communications
of any notice, request, demand, approval, statement, report, acceptance, consent, waiver, and
appointment. All notices must be in writing. All such notices from one party to another may be
delivered in person, sent via reputable overnight courier, or served by first-class mail, certified or
registered, postage prepaid, to each and all of the addresses set forth below.
4
If to County: If to Subrecipient:
Riverside County Executive Office City of Temecula
Attention: Rania Odenbaugh and Scott Bruckner Attention: Aaron Adams
4080 Lemon Street, 0' Floor, 41000 Main Street
Riverside, CA. 92501 Temecula, CA 92590
12. Conflicts of Interest. Subrecipient covenants that it presently has no interest, including but
not limited to, other projects or independent contracts, and shall not acquire any such interest, direct or
indirect, which would conflict in any manner or degree with the performance of services required
under this Agreement. Subrecipient further covenants that in the performance of this Agreement, no
person having any such interest shall be employed or retained by it under this Agreement. In the event
federal funds are used, in whole or in part, for this Neighborhood Revitalization Project, Subrecipient
understands and agrees it must maintain a conflict of interest policy consistent with 2. C.F.R. section
200.318 (c) and that such conflict of interest policy is applicable to each activity funded under this
award. Subrecipient must disclose in writing to the U.S. Treasury or through County, as appropriate,
any potential conflict of interest affecting the awarded funds in accordance with 2. C.F.R. section
200.12.
13. Nondiscrimination. During any period in which Subrecipient is in receipt of funds from County,
Subrecipient and its Board, officers, employees, agents, representatives or subcontractors shall not
unlawfully discriminate in violation of any Federal, State or local law, rule or regulation against any
employee, applicant for employment or person receiving services under this Agreement because of race,
religious creed, color, national origin, ancestry, physical or mental disability including perception of
disability, medical condition, genetic information, pregnancy related condition, marital status,
gender/sex, sexual orientation, gender identity, gender expression, age (over 40), political affiliation or
belief, or military and veteran status. Subrecipient and its officers, employees, agents, representatives or
subcontractors shall comply with all applicable Federal, State and local laws and regulations related to
non- discrimination and equal opportunity, including without limitation the County's non-
discrimination policy; Title VI of the Civil Rights Act of 1964 (42 US.C. sections 2000d et seq.) and
U.S. Treasury's implementing regulations at 31 C.F.R. Part 22, which prohibit discrimination on the
basis of race, color, or national origin under programs or activities receiving federal financial assistance;
The Fair Housing Act, Title VIII of the Civil Rights Act of 1968 (42 U.S.C. sections 3601 et seq.), which
prohibits discrimination in housing on the basis of race, color, religion, national origin, sex, familial
status, or disability; Section 504 of the Rehabilitation Act of 1973, as amended (42 U.S.C. sections 6101
et seq.), and the U.S. Treasury's implementing regulations at 31 C.F.R. part 23, which prohibit
discrimination on the basis of age in programs or activities receiving federal financial assistance; and
Title II of the Americans with Disabilities Act of 1990, as amended (42 U.S.C. sections 12101 et
seq.)which prohibits discrimination on the basis of disability under programs, activities, and services
provided or made available by state and local governments or instrumentalities or agencies thereto; The
Fair Employment and Housing Act (Government Code sections 12900 et seq.); California Labor Code
sections 1101, and 1102; the Federal Civil Rights Act of 1964 (P.L. 88-352), as amended; and all
applicable regulations promulgated in the California Code of Regulations or the Code of Federal
Regulations, and Riverside County's non-discrimination policy.
Subrecipient shall include the non-discrimination and compliance provisions of this Section in all
subcontracts to perform work under or as a derivative of this Agreement.
5
14. Indemnification. The Subrecipient shall be bound by the indemnification, hold harmless and
defend provisions contained in Attachment D.
15. Insurance. Subrecipient shall obtain, and maintain, or caused to be obtained and maintained, at
all times during the Term of this Agreement, insurance coverage in the amounts and coverage specified
in Attachment D.
16. Termination. The County may terminate this agreement upon a determination that Subrecipient
is not complying with AR -PA terms and conditions. The County may withhold additional planned
distributions of funding to Subrecipient pending receipt of requisite reporting requirements by
Subrecipient to the County as described herein.
17. Compliance with Laws. The Subrecipient is required to comply with all applicable federal, state
and local laws and regulations for all work performed or funded by and through this Agreement. The
Subrecipient is required to obtain all necessary federal, state and local permits, authorizations and
approvals for all work performed under this Agreement.
18. Disputes. The parties shall attempt to resolve any disputes amicably at the working level. If that
is not successful, the dispute shall be referred to the senior management of the parties. The Subrecipient
shall proceed diligently with the Neighborhood Revitalization Project described in this Agreement
pending the resolution of a dispute. The Parties reserve the right to pursue any remedies at law or in
equity should any dispute relating to this Agreement not by resolved by the Parties. Notwithstanding
the foregoing, prior to the filing of any legal action related to this Agreement, the Parties shall be
obligated to attend a mediation session in Riverside County before a neutral third party mediator. A
second mediation session shall be required if the first session is not successful. The parties shall share
the cost of the mediations.
19. Status of Subrecipient. The Subrecipient is, for purposes relating to this Agreement, an
independent contractor and shall not be deemed an employee of the County. It is expressly understood
and agreed that the Subrecipient (including its employees, agents, and subcontractors) shall in no event
be entitled to any benefits to which County employees are entitled, including but not limited to overtime,
any retirement benefits, worker's compensation benefits, and injury leave or other leave benefits. There
shall be no employer -employee relationship between the parties nor is there a joint venture; and
Subrecipient shall indemnify and hold County harmless from any and all claims that may be made against
County based upon any contention by a third party that an employer -employee relationship exists by
reason of this Agreement.
19.1 All acts of Subrecipient and its officers, employees, agents, representatives,
subcontractors, and all others acting on behalf of Subrecipient relating to the performance of this
Agreement, shall be performed as independent contractors and not as agents, officers, or employees of
County. Subrecipient, by virtue of this Agreement, has no authority to bind or incur any obligation on
behalf of County. No agent, officer or employee of the County is to be considered an employee of
Subrecipient. At all times during the term of this Agreement, the Subrecipient and its officers,
employees, agents, representatives, or subcontractors are, and shall represent and conduct themselves as,
independent contractors and not employees of County.
19.2 Subrecipient shall determine the method, details, and means of performing the work and
services to be provided by Subrecipient under this Agreement. Subrecipient shall be responsible to
County only for the requirements and results specified in this Agreement and, except as expressly
11
provided in this Agreement, shall not be subjected to County's control with respect to the physical action
or activities of Subrecipient in fulfillment of this Agreement. Subrecipient has control over the manner
and means for completion of the Neighborhood Revitalization Project described in this Agreement. If
necessary, Subrecipient has the responsibility for employing or engaging other persons or firms to assist
Subrecipient in fulfilling the terms and obligations under this Agreement.
19.3 If in the performance of this Agreement any third persons are employed by Subrecipient,
such persons shall be entirely and exclusively under the direction, supervision, and control of
Subrecipient. All terms of employment including hours, wages, working conditions, discipline, hiring
and discharging or any other term of employment or requirements of law shall be determined by the
Subrecipient. It is further understood and agreed that Subrecipient must issue W-2 forms or other forms
as required by law for income and employment tax purposes for all Subrecipient's assigned personnel
under the terms and conditions of this Agreement.
20. Entire Agreement. This Agreement is the result of negotiations between the Parties. This
Agreement is intended by the Parties as a full and final expression of their understanding with respect to
the matters contained in this Agreement and shall not be modified in any manner except by an instrument
in writing executed by the Parties or their respective successors in interest.
21. Amendment; Modification. No supplement, modification, or amendment of this Agreement shall
be binding unless executed in writing and signed by both Parties.
22. Governing Law and Venue. The interpretation and performance of this Agreement shall be
governed by the laws of the State of California. Venue shall be in Riverside County, California.
23. Construction/Interpretation. Headings or captions to the provisions of this Agreement are solely
for the convenience of the Parties, are not part of this Agreement, and shall not be used to interpret or
determine the validity of this Agreement. Any ambiguity in this Agreement shall not be construed against
the drafter, but rather the terms and provisions hereof shall be given a reasonable interpretation as if both
parties had in fact drafted this Agreement.
24. No Waiver. Failure of the Parties to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor
shall any waiver or relinquishment of any rights or powers hereunder at any one time or more times be
deemed a waiver or relinquishment of such other right or power at any other time or times.
25. No Third -Party Beneficiaries. There are no intended third -party beneficiaries of any right or
obligation assumed by the Parties.
26. Severability. It is intended that each paragraph of this Agreement shall be treated as separate and
divisible, and in the event that any paragraphs are deemed unenforceable, the remainder shall continue
to be in full force and effect so long as the primary purpose of this Agreement is unaffected.
27. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the same instrument.
28. Use of Electronic (Digital) Signatures. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will constitute one instrument.
Each party of this Agreement agrees to the use of electronic signatures, such as digital signatures that
7
meet the requirements of the California Uniform Electronic Transactions Act (("CUETA") Cal. Civ.
Code §§ 1633.1 to 1633.17), for executing this Agreement. The parties further agree that the electronic
signatures of the parties included in this Agreement are intended to authenticate this writing and to have
the same force and effect as manual signatures. Electronic signature means an electronic sound, symbol,
or process attached to or logically associated with an electronic record and executed or adopted by a
person with the intent to sign the electronic record pursuant to the CUETA as amended from time to
time. The CUETA authorizes use of an electronic signature for transactions and contracts among parties
in California, including a government agency. Digital signature means an electronic identifier, created
by computer, intended by the party using it to have the same force and effect as the use of a manual
signature, and shall be reasonably relied upon by the parties. For purposes of this section, a digital
signature is a type of "electronic signature" as defined in subdivision (i) of Section 1633.2 of the Civil
Code
[Signature Provisions on Following Page]
0
28. Authority to Enter Agreement. Each Party to this Agreement warrants to the other that it is duly
organized and existing and that it and the respective signatories have full right and authority to enter into
and consummate this Agreement and all related documents and bind the parties thereto.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date as indicated
beside each Party's signature.
COUNTY:
COUNTY OF RIVERSIDE, a political subdivision
of the State of California
Chair, Board of Supervisors
ATTEST:
Clerk of the Board
Kimberly Rector
M.
Deputy
(Seal)
APPROVED AS TO FORM
County Counsel
01
SUBRECIPIENT:
CITY OF TEMECULA
Lo
Aaron Adams, City Manager
Date
ATTEST:
Randi Johl, City Clerk
APPROVED AS TO FORM:
Peter M. Thorson, City Attorney
Attachment A — Neighborhood Revitalization Project Scope
Doi Park Renovation at Michael "Mike" Na22ar Park
Scope of Work
The Subrecipient will complete all planning, design, and procurement necessary to construct the
Project. The Subrecipient will construct a dog park at Michael "Mike" Naggar Community Park
that includes a pen for small breed dogs and a pen for large breed dogs. In addition, there will be
new water fountains, benches, trash receptacles, dog bag dispensers, trees and other landscape
improvements, and shade structures.
Project Budtet
COUNTY OF
RIVERSIDE
SUBRECIPIENT
ARPA
NON-FEDERAL
ESTIMATED
ITEM
DESCRIPTION
PROJECT
FUNDING
PROJECT COST
FUNDING
AMOUNT
AMOUNT
of to Exceed
1
Facility Planning
$0
$0
$0
2
Preliminary Design
$0
$0
$0
3
Final Design
$0
$71,516
$71,516
4
Spec Review,
$0
$100,000
$100,000
Bid/Award
5
Construction
$200,000
$593,484
$793,484
6
Admin Closeout
$0
$75,000
$75,000
TOTAL:
$200,000
$840,000
$1,040,000
Schedule
ITEM
DESCRIPTION OF SUBMITTAL
ESTIMATED DUE
DATE
1
Feasibility Report
N/A
2
Preliminary Design Report
N/A
3
Final Design
August 21, 2023
4
1 Sec Review, Bid/Award
August 21, 2023
5
Construction and Implementation
January 31, 2024
6
Admin Closeout
Aril 30, 2024
10
Attachment B — U.S. Treasury ARPA Fiscal Recovery Funds Final Rule
11
Attachment C — Uniform Administrative Requirements, Cost Principles, Federal Provisions and
Audit Requirements for Federal Awards -2 CFR Part 200 et seq
2 CFR Part 200 attached hereto
12
ATTACHMENT C CONTINUED
FEDERAL PROVISIONS
Should funding be allocated through American Rescue Plan Act (ARPA; (Title VI of the Social Security
Act Section 602 et seq.), the COUNTY will administer and distribute those funds in accordance with
ARPA. ARPA requires that payments from the Coronavirus Fiscal Recovery Fund be used to respond
to the public health emergency or its negative economic impacts, to respond to workers performing
essential work during the COVID-19 public health emergency by providing premium pay, provide
government services to the extent the reduction of revenue due to COVID-19 public health emergency,
and to make necessary investments in water, sewer or broadband infrastructure. It is effective beginning
May 17, 2021 and ends on December 31, 2026.
Subrecipient acknowledges and agrees that this Agreement is subject to the federal requirements,
including but not limited to the federal provisions provided below:
1. NON-DISCRIMINATION. Subrecipient shall not be discriminate in the provision of services,
allocation of benefits, accommodation in facilities, or employment of personnel on the basis of ethnic
group identification, race, religious creed, color, national origin, ancestry, physical handicap, medical
condition, marital status or sex in the performance of this Agreement; and, to the extent they shall be
found to be applicable hereto, shall comply with the provisions of the California Fair Employment and
Housing Act (Gov. Code 12900 et. seq), the Federal Civil Rights Act of 1964 (P.L. 88-352), the
Americans with Disabilities Act of 1990 (42 U.S.C. S1210 et seq.) and all other applicable laws or
regulations.
2. EQUAL EMPLOYMENT OPPORTUNITY/ FAIR EMPLOYMENT PRACTICES/ FEDERAL
PROVISIONS. During the performance of this Agreement, the Subrecipient shall not deny benefits to
any person on the basis of religion, color, ethnic group identification, sex, age, physical or mental
disability, nor shall they discriminate unlawfully against any employee or applicant for employment
because of race, religion, color, national origin, ancestry, physical handicap, mental disability, medical
condition, marital status, age, or sex. Subrecipient shall ensure that the evaluation and treatment of
employees and applicants for employment are free of such discrimination.
A. Subrecipient shall comply with the provisions of the Fair Employment and Housing Act
(Government Code, Section 12900 et seq.), the regulations promulgated thereunder (California Code
of Regulations, Title 2, Section 11000 et seq.), the provisions of Executive Order 11246 of Sept. 23,
1965 and of the rules, regulations, and relevant orders of the Secretary of Labor, the provisions of
Article 9.5, Chapter 1, Part 1, Division 3, Title 2 of the Government Code (Government Code,
Sections 11135-11139.8), and of the rules, regulations or standards adopted by the County to
implement such article.
B. The Subrecipient shall comply with the provisions of the Copeland "Anti -Kickback" Act, 18 U.S.C.
§ 874, 40 U.S.C. § 3145, and the requirements of 29 C.F.R. pt. 3 as may be applicable, which are
incorporated by reference into this Agreement.
3. CLEAN AIR ACT. The Subrecipient agrees to comply with all applicable standards, orders,
or regulations issued pursuant to the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.
The Subrecipient agrees to report each violation to the County and understands and agrees that the
County will, in turn, report each violation as required to assure notification to the California
13
Governor's Office of Emergency Services, Federal Emergency Management Agency (FEMA), and
the appropriate Environmental Protection Agency Regional Office. The Subrecipient agrees to
include these requirements in each subcontract exceeding $150,000 financed in whole or in part
with Federal assistance provided by FEMA.
4. FEDERAL WATER POLLUTION CONTROL ACT
The Subrecipient agrees to comply with all applicable standards, orders, or regulations issued pursuant
to the Federal Water Pollution Control Act, as amended, 33 U.S.C. Sections 1251 et seq.
The Subrecipient agrees to report each violation to the County and understands and agrees that the
County will, in turn, report each violation as required to assure notification to the Federal Emergency
Management Agency (FEMA), and the appropriate Environmental Protection Agency Regional Office.
The Subrecipient agrees to include these requirements in each subcontract exceeding $150,000 financed
in whole or in part with Federal assistance provided by FEMA.
5. DEBARMENT AND SUSPENSION CLAUSE
This Agreement is a covered transaction for purposes of 2 C.F.R. pt. 180 and 2 C.F.R. pt. 3000. As such
the Subrecipient is required to verify that none of the Subrecipient, its principals (defined at 2 C.F.R. §
180.995), or its affiliates (defined at 2 C.F.R. § 180.905) are excluded (defined at 2 C.F.R. § 180.940)
or disqualified (defined at 2 C.F.R. § 180.935).
The Subrecipient must comply with 2 C.F.R. pt. 180, subpart C and 2 C.F.R. pt. 3000, subpart C and
must include a requirement to comply with these regulations in any lower tier covered transaction it
enters into.
This certification is a material representation of fact relied upon by the County. If it is later determined
that the Subrecipient did not comply with 2 C.F.R. pt. 180, subpart C and 2 C.F.R. pt. 3000, subpart C, in
addition to remedies available to the County, the Federal Government may pursue available remedies,
including but not limited to suspension and/or debarment.
The bidder or proposer agrees to comply with the requirements of 2 C.F.R. pt. 180, subpart C and 2
C.F.R. pt. 3000, subpart C while this offer is valid and throughout the period of any contract that may
arise from this offer. The bidder or proposer further agrees to include a provision requiring such
compliance in its lower tier covered transactions.
6. BYRD ANTI- LOBBYING AMENDMENT, 31 U.S.C. § 1352 (AS AMENDED)
Subrecipients who apply or bid for an award of $100,000 or more shall file the required certification.
Each tier certifies to the tier above that it will not and has not used Federal appropriated funds to pay
any person or organization for influencing or attempting to influence an officer or employee of any
agency, a member of Congress, officer or employee of Congress, or an employee of a member of Congress
in connection with obtaining any Federal contract, grant, or any other award covered by 31 U.S.C. § 1352.
Each tier shall also disclose any lobbying with non -Federal funds that takes place in connection with
obtaining any Federal award. Such disclosures are forwarded from tier to tier up to the recipient who in
turn will forward the certification(s) to the County.
APPENDIX A, 44 C.F.R. PART 18- CERTIFICATION REGARDING LOBBYING
The undersigned [Subrecipient] certifies, to the best of his or her knowledge, that:
A. No Federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned,
to any person for influencing or attempting to influence an officer or employee of an agency, a Member
of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection
14
with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal
loan, the entering into of any cooperative agreement, and the extension, continuation, renewal,
amendment, or modification of any Federal contract, grant, loan, or cooperative agreement.
B. If any funds other than Federal appropriated funds have been paid or will be paid to any person
for influencing or attempting to influence an officer or employee of any agency, a Member of Congress,
an officer or employee of Congress, or an employee of a Member of Congress in connection with this
Federal contract, grant, loan, or cooperative agreement, the undersigned shall complete and submit
Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions.
C. The undersigned shall require that the language of this certification be included in the award
documents for all sub -awards at all tiers (including subcontracts, sub -grants, and contracts under grants,
loans, and cooperative agreements) and that all sub -recipients shall certify and disclose accordingly.
This certification is a material representation of fact upon which reliance was placed when this transaction
was made or entered into. Submission of this certification is a prerequisite for making or entering into this
transaction imposed by 31, U.S.C. § 1352 (as amended by the Lobbying Disclosure Act of 1995). Any
person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000
and not more than $100,000 for each such failure.
The Subrecipient certifies or affirms the truthfulness and accuracy of each statement of its certification
and disclosure, if any. In addition, the Subrecipient understands and agrees that the provisions of 31
U.S.C. § 3801 et seq., apply to this certification and disclosure, if any.
SUBRECIPIENT
By
Date
7. PROCUREMENT OF RECOVERED MATERIALS
In the performance of this Agreement, the Subrecipient shall make maximum use of products containing
recovered materials that are EPA -designated items unless the product cannot be acquired
A. Competitively within a timeframe providing for compliance with the contract performance
schedule;
B. Meeting contract performance requirements; or
C. At a reasonable price.
Information about this requirement, along with the list of EPA -designated items, is available at EPA's
Comprehensive Procurement Guidelines web site, https://www.epa.gov/smm/comprehensive-
procurement-guideline-cpg-program
The Subrecipient also agrees to comply with all other applicable requirements of Section 6002 of the
Solid Waste Disposal Act.
8. ACCESS TO RECORDS
The following access to records requirements apply to this Agreement:
A. The Subrecipient agrees to provide the County, the FEMA Administrator, the Comptroller
General of the United States, or any of their authorized representatives access to any books,
documents, papers, and records of the Subrecipient which are directly pertinent to this Agreement
for the purposes of making audits, examinations, excerpts, and transcriptions
B. The Subrecipient agrees to permit any of the foregoing parties to reproduce by any means
whatsoever or to copy excerpts and transcriptions as reasonably needed.
15
C. The Subrecipient agrees to provide the FEMA Administrator or his or her authorized
representatives access to construction or other work sites pertaining to the work being completed
under the contract.
D. In compliance with the Disaster Recovery Act of 2018, the County and the Subrecipient
acknowledge and agree that no language in this contract is intended to prohibit audits or internal
reviews by the FEMA Administrator or the Comptroller General of the United States.
9. DEPARTMENT OF HOMELAND SECURITY SEAL, LOGO, FLAGS
The Subrecipient shall not use the DHS seal(s), logos, crests, or reproductions of flags or likenesses of
DHS agency officials without specific FEMA pre -approval.
10. COMPLIANCE WITH FEDERAL LAW, REGULATIONS, AND EXECUTIVE ORDERS
This is an acknowledgement that FEMA financial assistance will be used to fund all or a portion of the
contract. The Subrecipient will comply with all applicable Federal law, regulations, executive orders,
FEMA policies, procedures, and directives.
11. NO OBLIGATION BY FEDERAL GOVERNMENT
The Federal Government is not a party to this Agreement and is not subject to any obligations or
liabilities to the non -Federal entity, contractor, or any other party pertaining to any matter resulting from
the contract.
12. PROGRAM FRAUD AND FALSE OR FRAUDULENT STATEMENTS OR RELATED
ACTS
The Subrecipient acknowledges that 31 U.S.C. Chapter 38 (Administrative Remedies for False Claims
and Statements) applies to the Subrecipient's actions pertaining to this Agreement.
13. FEDERAL PREVAILING WAGE
DAVIS-BACON ACT COMPLIANCE (applicable to construction contracts in excess of $2,000 awarded
by grantees and subgrantees when required by Federal grant program legislation)
To the extent required by any Federal grant programs applicable to expected funding or reimbursement
expenses incurred in connection with the services provided under this Agreement, Subrecipient agrees to
comply with the Davis -Bacon Act (40 U.S.C. §§ 3141-3144 and 3146-3148) as supplemented by
Department of Labor regulations (29 CFR Part 5) as set forth below.
A. The Subrecipient shall be bound to the provisions of the Davis -Bacon Act, and agrees to be bound
by all the provisions of Labor Code section 1771 regarding prevailing wages. All labor on this project shall
be paid neither less than the greater of the minimum wage rates established by the U.S. Secretary of Labor
(Federal Wage Rates), or by the State of California Director of Department of Industrial Relations (State
Wage Rates). Current DIR requirements may be found at http://www.dir.ca.gov/lcp.asp. Additionally,
wages are required to be paid not less than once a week.
B. The general prevailing wage rates may be accessed at the Department of Labor Home Page at
www.wdol.gov. Under the Davis Bacon heading, click on "Selecting DBA WDs." In the drop down menu
16
for State, select, "California." In the drop down menu for County, select "Riverside." In the drop down
menu for Construction Type, make the appropriate selection. Then, click Search.
The Federal minimum wage rates for this project are predetermined by the United States
Secretary of Labor. If there is a difference between the minimum wage rates predetermined by the
Secretary of Labor and the general prevailing wage rates determined by the Director of the California
DIR for similar classifications of labor, the Subrecipient and subcontractors shall pay not less than the
higher wage rate. The County will not accept lower State wage rates not specifically included in the
Federal minimum wage determinations. This includes "helper" (or other classifications based on hours
of experience) or any other classification not appearing in the Federal wage determinations. Where
Federal wage determinations do not contain the State wage rate determination otherwise available for
use by the Subrecipient and subcontractors, the Subrecipient and subcontractors shall pay not less than
the Federal minimum wage rate which most closely approximates the duties of the employees in
question.
14. CONTRACT WORK HOURS AND SAFETY STANDARDS (applicable to all contracts in
excess of $100,000 that involve the employment of mechanics or laborers, but not to purchases of supplies
or materials or articles ordinarily available on the open market, or contracts for transportation or
transmission of intelligence)
A. Compliance: Subrecipient agrees that it shall comply with Sections 3702 and 3704 of the
Contract Work Hours and Safety Standards Act (40 U.S.C. §§ 3701-3708) as supplemented by Department
of Labor regulations (29 CFR Part 5), which are incorporated herein.
B. Overtime: No contractor or subcontractor contracting for any part of the work under this
Agreement which may require or involve the employment of laborers or mechanics shall require or permit
any such laborer or mechanic in any workweek in which he or she is employed on such work to work in
excess of forty hours in such workweek unless such laborer or mechanic receives compensation at a rate not
less than one and one-half times the basic rate of pay for all hours worked in excess of forty hours in such
workweek.
C. Violation; liability for unpaid wages; liquidated damages: In the event of any violation of
the provisions of paragraph B of this section, the Subrecipient and any subcontractor responsible therefore
shall be liable for the unpaid wages. In addition, such Subrecipient and subcontractor shall be liable to the
United States for liquidated damages. Such liquidated damages shall be computed with respect to each
individual laborer or mechanic employed in violation of the provisions of paragraph B, in the sum of $10
for each calendar day on which such individual was required or permitted to work in excess of the standard
workweek of forty hours without payment of the overtime wages required by paragraph B.
D. Withholding for unpaid wages and liquidated damages: Subrecipient shall upon its own
action or upon written request of an authorized representative of the Department of Labor withhold or cause
to be withheld, from any moneys payable on account of work performed by the contractor or subcontractor
under any such contract or any other Federal contract with the same prime contractor, or any other federally -
assisted contract subject to the Contract Work Hours and Safety Standards Act, which is held by the same
prime contractor, such sums as may be determined to be necessary to satisfy any liabilities of such contractor
or subcontractor for unpaid wages and liquidated damages as provided in the clause set for in paragraph C
of this section.
E. Subcontracts: The contractor or subcontractor shall insert in any subcontracts the clauses set
forth in paragraphs A through D of this section and also a clause requiring the subcontractors to include
these clauses in any lower tier subcontracts. The prime contractor shall be responsible for compliance by
any subcontractor or lower tier subcontractor with the clauses set forth in paragraphs A through D of this
section.
17
15. RIGHTS TO INVENTIONS MADE UNDER A CONTRACT OR AGREEMENT— Contracts
or agreements for the performance of experimental, developmental, or research work shall provide for
the rights of the Federal Government and the recipient in any resulting invention in accordance with 37
CFR part 401, "Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under
Government Grants, Contracts and Cooperative Agreements," and any implementing regulations issued
by HUD.
16. RIGHTS TO DATA AND COPYRIGHTS — Subrecipients and consultants agree to comply with
all applicable provisions pertaining to the use of data and copyrights pursuant to 48 CFR Part 27.4,
Federal Acquisition Regulations (FAR).
17. PROHIBITION ON CONTRACTING FOR COVERED TELECOMMUNICATIONS
EQUIPMENT OR SERVICES
A. Definitions. As used in this clause, the terms backhaul; covered foreign country; covered
telecommunications equipment or services; interconnection arrangements; roaming; substantial or
essential component; and telecommunications equipment or services have the meaning as defined in
FEMA Policy, #405-143-1 Prohibitions on Expending FEMA Award Funds for Covered
Telecommunications Equipment or Services As used in this clause
B. Prohibitions.
(1) Section 889(b) of the John S. McCain National Defense Authorization Act for Fiscal Year
2019, Pub. L. No. 115-232, and 2 C.F.R. § 200.216 prohibit the head of an executive agency on
or after Aug.13, 2020, from obligating or expending grant, cooperative agreement, loan, or loan
guarantee funds on certain telecommunications products or from certain entities for national
security reasons.
(2) Unless an exception in paragraph (c) of this clause applies, the contractor and its
subcontractors may not use grant, cooperative agreement, loan, or loan guarantee funds from the
Federal Emergency Management Agency to:
(i) Procure or obtain any equipment, system, or service that uses covered
telecommunications equipment or services as a substantial or essential component of any
system, or as critical technology of any system;
(ii) Enter into, extend, or renew a contract to procure or obtain any equipment, system, or
service that uses covered telecommunications equipment or services as a substantial or
essential component of any system, or as critical technology of any system;
(iii) Enter into, extend, or renew contracts with entities that use covered
telecommunications equipment or services as a substantial or essential component of any
system, or as critical technology as part of any system; or (iv)Provide, as part of its
performance of this contract, subcontract, or other contractual instrument, any equipment,
system, or service that uses covered telecommunications equipment or services as a
substantial or essential component of any system, or as critical technology as part of any
system.
C. Exceptions.
(1) This clause does not prohibit contractors from providing
a. A service that connects to the facilities of a third -party, such as backhaul,
roaming, or interconnection arrangements; or
b. Telecommunications equipment that cannot route or redirect user data traffic
or permit visibility into any user data or packets that such equipment transmits or
otherwise handles.
18
(2) By necessary implication and regulation, the prohibitions also do not apply to:
a. Covered telecommunications equipment or services that:
i. Are not used as a substantial or essential component of any system; and
ii. Are not used as critical technology of any system.
b. Other telecommunications equipment or services that are not considered
covered telecommunications equipment or services.
D. Reporting requirement.
(1) In the event the contractor identifies covered telecommunications equipment or
services used as a substantial or essential component of any system, or as critical technology as
part of any system, during contract performance, or the contractor is notified of such by a
subcontractor at any tier or by any other source, the contractor shall report the information in
paragraph (d)(2) of this clause to the recipient or subrecipient, unless elsewhere in this contract
are established procedures for reporting the information.
(2) The Subrecipient shall report the following information pursuant to paragraph (d)(1)
of this clause:
(i) Within one business day from the date of such identification or notification:
The contract number; the order number(s), if applicable; supplier name; supplier unique
entity identifier (if known); supplier Commercial and Government Entity (CAGE) code
(if known); brand; model number (original equipment manufacturer number,
manufacturer part number, or wholesaler number); item description; and any readily
available information about mitigation actions undertaken or recommended.
ii) Within 10 business days of submitting the information in paragraph (d)(2)(i)
of this clause: Any further available information about mitigation actions undertaken or
recommended. In addition, the contractor shall describe the efforts it undertook to prevent
use or submission of covered telecommunications equipment or services, and any
additional efforts that will be incorporated to prevent future use or submission of covered
telecommunications equipment or services. Page 10
E. Subcontracts. The Subrecipient shall insert the substance of this clause, including this paragraph (e),
in all subcontracts and other contractual instruments.
18. REPORTING OF MATTERS RELATED TO RECIPIENT INTEGRITY AND PERFORMANCE
A. General Reporting Requirement
If the total value of your currently active grants, cooperative agreements, and procurement contracts
from all Federal awarding agencies exceeds $10,000,000 for any period of time during the period of
performance of this Federal award, then you as the recipient during that period of time must maintain
the currency of information reported to the System for Award Management (SAM) that is made available
in the designated integrity and performance system (currently the Federal Awardee Performance and
Integrity Information System (FAPIIS)) about civil, criminal, or administrative proceedings described
in paragraph 2 of this award term and condition. This is a statutory requirement under section 872 of
Public Law 110-417, as amended (41 U.S.C. 2313). As required by section 3010 of Public Law I I I-
212, all information posted in the designated integrity and performance system on or after April 15,
2011, except past performance reviews required for Federal procurement contracts, will be publicly
available.
B. Proceedings About Which You Must Report
Submit the information required about each proceeding that:
a. Is in connection with the award or performance of a grant, cooperative agreement, or procurement
contract from the Federal Government;
b. Reached its final disposition during the most recent five-year period; and
19
c. Is one of the following:
(1) A criminal proceeding that resulted in a conviction, as defined in paragraph 5 of this award
term and condition;
(2) A civil proceeding that resulted in a finding of fault and liability and payment of a monetary
fine, penalty, reimbursement, restitution, or damages of $5,000 or more;
(3) An administrative proceeding, as defined in paragraph 5. of this award term and condition,
that resulted in a finding of fault and liability and your payment of either a monetary fine or penalty of
$5,000 or more or reimbursement, restitution, or damages in excess of $100,000; or
(4) Any other criminal, civil, or administrative proceeding if-
(i) It could have led to an outcome described in paragraph 2.c.(1), (2), or (3) of this award
term and condition;
(ii) It had a different disposition arrived at by consent or compromise with an
acknowledgment of fault on your part; and
(iii) The requirement in this award term and condition to disclose information about the
proceeding does not conflict with applicable laws and regulations.
C. Reporting Procedures
Enter in the SAM Entity Management area the information that SAM requires about each proceeding
described in paragraph 2 of this award term and condition. You do not need to submit the information a
second time under assistance awards that you received if you already provided the information through
SAM because you were required to do so under Federal procurement contracts that you were awarded.
D. Reporting Frequency
During any period of time when you are subject to the requirement in paragraph 1 of this award term
and condition, you must report proceedings information through SAM for the most recent five year
period, either to report new information about any proceeding(s) that you have not reported previously
or affirm that there is no new information to report. Recipients that have Federal contract, grant, and
cooperative agreement awards with a cumulative total value greater than $10,000,000 must disclose
semiannually any information about the criminal, civil, and administrative proceedings.
E. Definitions
For purposes of this award term and condition:
a. Administrative proceeding means a non judicial process that is adjudicatory in nature in order to make
a determination of fault or liability (e.g., Securities and Exchange Commission Administrative
proceedings, Civilian Board of Contract Appeals proceedings, and Armed Services Board of Contract
Appeals proceedings). This includes proceedings at the Federal and State level but only in connection
with performance of a Federal contract or grant. It does not include audits, site visits, corrective plans,
or inspection of deliverables.
b. Conviction, for purposes of this award term and condition, means a judgment or conviction of a
criminal offense by any court of competent jurisdiction, whether entered upon a verdict or a plea, and
includes a conviction entered upon a plea of nolo contendere.
c. Total value of currently active grants, cooperative agreements, and procurement contracts includes -
(1) Only the Federal share of the funding under any Federal award with a recipient cost share or match;
and
(2) The value of all expected funding increments under a Federal award and options, even if not yet
exercised.
20
Attachment D — Indemnification and Insurance Requirements
INDEMNIFICATION
A. Basic Indemnity
1. To the fullest extent permitted by applicable law, Subrecipient agrees to indemnify, hold
harmless and defend the County of Riverside, its Agencies, Districts, Departments and Special
Districts, Board of Supervisors, elected and appointed officials, and each of their respective
directors, members officers, employees, agents, volunteers and representatives ("Indemnitees")
and each of them from any and all Losses that arise out of or relate to any act or omission
constituting ordinary and not professional negligence (including, without limitation, negligent
breach of contract), recklessness, or willful misconduct on the part of Subrecipient or its
subconsultants or their respective employees, agents, representatives, or independent contractors.
2. "Losses" shall mean any and all economic and non -economic losses, costs, liabilities,
claims, damages, actions, judgements, settlements and expenses, including, without limitation, full
and actual attorney's fees (including, without limitation, attorney's fees for trial and on appeal),
expert and non -expert witness fees, arbitrator and arbitration fees and mediator and mediation fees.
3. Subrecipient further agrees to and shall indemnify and hold harmless the Indemnitees from
all liability arising from suits, claims, demands, actions, or proceedings made by agents, employees
or subcontractors of Subrecipient for salary, wages, compensation, health benefits, insurance,
retirement or any other benefit not explicitly set forth in this Agreement and arising out of work
performed for County pursuant to this Agreement. The Indemnitees shall be entitled to the defense
and indemnification provided for hereunder regardless of whether the Loss is in part caused or
contributed to by the acts or omissions of an Indemnitee or any other person or entity; provided
however, that nothing contained herein shall be construed as obligating Subrecipient to indemnify
and hold harmless any Indemnitee to the extent not required under the provisions of Paragraph B
below.
B. Indemnity for Design Professionals
1. To the fullest extent permitted by Applicable Law, Subrecipient agrees to defend (through
legal counsel reasonably acceptable to County), indemnify and hold harmless the Indemnitees, and
each of them, against any and all Losses that arise out of, pertain to, or relate to, any negligence,
recklessness or willful misconduct constituting professional negligence on the part of Subrecipient
or its Subconsultants, or their respective employees, agents, representatives, or independent
contractors. The Indemnitees shall be entitled to the defense, and indemnification provided for
hereunder regardless of whether the Loss is, in part, caused or contributed to by the acts or
omissions of an Indemnitee or any other person or entity; provided, however, that nothing
contained herein shall be construed as obligating Subrecipient to indemnify and hold harmless any
Indemnitee to the extent not required under the provisions of this section. Subrecipient shall
defend and pay, all costs and fees, including but not limited to attorney fees, cost of investigation,
and defense, in any loss, suits, claims, demands, actions, or proceedings to the extent and in
proportion to the percentage, such costs and fees arise out of, pertain to, or relate to the negligence,
recklessness or willful misconduct of Subrecipient arising out of or from the performance of
professional design services under this Agreement. The duty to defend applies to any alleged or
actual negligence, recklessness, willful misconduct of Subrecipient. The cost for defense shall
apply whether or not Subrecipient is a party to the lawsuit and shall apply whether or not
Subrecipient is directly liable to the plaintiffs in the lawsuit. The duty to defend applies even if
Indemnitees are alleged or found to be actively negligent, but only in proportion to the percentage
of fault or negligence of Subrecipient.
21
2. Without affecting the rights of County under any other provision of this Agreement,
Subrecipient shall not be required to indemnify or hold harmless or provide defense or defense
costs to an Indemnitee for a loss due to that Indemnitee's negligence, recklessness or willful
misconduct; provided, however, that such negligence, recklessness or willful misconduct has been
determined by agreement of Subrecipient and Indemnitee or has been adjudged by the findings of
a court of competent jurisdiction.
C. Subrecipient agrees to obtain or cause to be obtained executed defense and indemnity
agreements with provisions identical to those set forth in this section from each and every
Subconsultant, of every Tier.
D. Subrecipient's indemnification obligations under this Agreement shall not be limited by the
amount or type of damages, compensation or benefits payable under any policy of insurance,
workers' compensation acts, disability benefit acts or other employee benefit acts.
E. The Indemnitees shall be entitled to recover their attorneys' fees, costs and expert and
consultant costs in pursuing or enforcing their right to defense and/or indemnification under this
Agreement.
INSURANCE REQUIREMENTS
Without limiting or diminishing the Subrecipient's obligation to indemnify or hold the County
harmless, Subrecipient shall procure and maintain or cause to be maintained, at its sole cost and
expense, the following insurance coverages during the term of this Agreement. As respects to the
insurance section only, the County herein refers to the County of Riverside, its Agencies, Districts,
Special Districts, and Departments, their respective directors, officers, Board of Supervisors,
employees, elected or appointed officials, agents or representatives as Additional Insureds.
A. Workers' Compensation: If the Subrecipient has employees as defined by the State of
California, the Subrecipient shall maintain statutory Workers Compensation Insurance (Coverage
A) as prescribed by the laws of the State of California. Policy shall include Employers' Liability
(Coverage B) including Occupational Disease with limits not less than $1,000,000 per person per
accident. The policy shall be endorsed to waive subrogation in favor of The County of Riverside.
B. Commercial General Liability: Commercial General Liability insurance coverage,
including but not limited to, premises liability, unmodified contractual liability, products and
completed operations liability, personal and advertising injury, and cross liability coverage,
covering claims which may arise from or out of Subrecipient's performance of its obligations
hereunder. Policy shall name the County as Additional Insured. Policy's limit of liability shall
not be less than $2,000,000 per occurrence combined single limit. If such insurance contains a
general aggregate limit, it shall apply separately to this agreement or be no less than two (2) times
the occurrence limit. Policy shall name the County as Additional Insureds.
C. Vehicle Liability: If vehicles or mobile equipment are used in the performance of the
obligations under this Agreement, then Subrecipient shall maintain liability insurance for all
owned, non -owned or hired vehicles so used in an amount not less than $1,000,000 per
occurrence combined single limit. If such insurance contains a general aggregate limit, it shall
apply separately to this agreement or be no less than two (2) times the occurrence limit. Policy
shall name the County as Additional Insureds.
22
D. Professional Liability (ONLY TO BE INCLUDED IN CONTRACTS WITH SERVICE
PROVIDERS INCLUDING BUT NOT LIMITED TO ENGINEERS, DESIGN
PROFESSIONALS, DOCTORS, AND LAWYERS) Contractor shall maintain Professional
Liability Insurance providing coverage for the Contractor's performance of work included
within this Agreement, with a limit of liability of not less than $1,000,000 per occurrence
and $2,000,000 annual aggregate. If Contractor's Professional Liability Insurance is written
on a claims made basis rather than an occurrence basis, such insurance shall continue
through the term of this Agreement and Subrecipient shall purchase at his sole expense
either 1) an Extended Reporting Endorsement (also, known as Tail Coverage); or 2) Prior
Dates Coverage from new insurer with a retroactive date back to the date of, or prior to,
the inception of this Agreement; or 3) demonstrate through Certificates of Insurance that
Subrecipient has Maintained continuous coverage with the same or original insurer. Coverage
provided under items 1), 2), or 3) will continue as long as the law allows. Policy shall name
the County as Additional Insureds.
E. General Insurance Provisions - All lines:
1. Any insurance carrier providing insurance coverage hereunder shall be admitted to
the State of California and have an A M BEST rating of not less than A: VIII (A:8) unless
such requirements are waived, in writing, by the County Risk Manager. If the County's Risk
Manager waives a requirement for a particular insurer such waiver is only valid for that specific
insurer and only for one policy term.
2. The Subrecipient must declare its insurance self -insured retention for each coverage
required herein. If any such self -insured retention exceed $500,000 per occurrence each such
retention shall have the prior written consent of the County Risk Manager before the
commencement of operations under this Agreement. Upon notification of self -insured retention
unacceptable to the County, and at the election of the County's Risk Manager, Subrecipient's
carriers shall either; 1) reduce or eliminate such self -insured retention as respects this
Agreement with the County, or 2) procure a bond which guarantees payment of losses and
related investigations, claims administration, and defense costs and expenses.
3. Subrecipient shall cause Subrecipient's insurance carrier(s) to furnish the County
of Riverside with either 1) a properly executed original Certificate(s) of Insurance and
certified original copies of Endorsements effecting coverage as required herein, and 2) if
requested to do so orally or in writing by the County Risk Manager, provide original
Certified copies of policies including all Endorsements and all attachments thereto, showing
such insurance is in full force and effect. Further, said Certificate(s) and policies of insurance
shall contain the covenant of the insurance carrier(s) that a minimum of thirty (30) days written
notice shall be given to the County of Riverside prior to any material modification, cancellation,
expiration or reduction in coverage of such insurance. If Subrecipient insurance carrier(s) policies
does not meet the minimum notice requirement found herein, Subrecipient shall cause
Subrecipient's insurance carrier(s) to furnish a 30 day Notice of Cancellation Endorsement.
23
4. In the event of a material modification, cancellation, expiration, or reduction in
coverage, this Agreement shall terminate forthwith, unless the County of Riverside receives,
prior to such effective date, another properly executed original Certificate of Insurance and
original copies of endorsements or certified original policies, including all endorsements and
attachments thereto evidencing coverage's set forth herein and the insurance required herein
is in full force and effect. Subrecipient shall not commence operations until the County has
been furnished original Certificate (s) of Insurance and certified original copies of endorsements
and if requested, certified original policies of insurance including all endorsements and any and
all other attachments as required in this Section. An individual authorized by the insurance carrier
to do so on its behalf shall sign the original endorsements for each policy and the Certificate of
Insurance.
5. It is understood and agreed to by the parties hereto that the Subrecipient's insurance
shall be construed as primary insurance, and the County's insurance and/or deductibles and/or self -
insured retentions or self -insured programs shall not be construed as contributory.
6. If, during the term of this Agreement or any extension thereof, there is a
material change in the scope of services; or, there is a material change in the equipment
to be used in the performance of the scope of work; or, the term of this Agreement,
including any extensions thereof, exceeds five (5) years; the County reserves the right to adjust
the types of insurance and the monetary limits of liability required under this Agreement, if
in the County Risk Management's reasonable judgment, the amount or type of insurance
carried by the Subrecipient has become inadequate.
7. Subrecipient shall pass down the insurance obligations contained herein to all tiers
of subcontractors working under this Agreement.
8. The insurance requirements contained in this Agreement may be met with a
program(s) of self-insurance acceptable to the County.
9. Subrecipient agrees to notify County of any claim by a third party or any incident or
event that may give rise to a claim arising from the performance of this Agreement
24
Attachment E - Project Monitoring Requirements
Quarterly Progress Reports shall be submitted on the 21' of the month following the previous
quarter. Quarterly reports shall be sent via e-mail to RIVCOARPA&RIVCO.ORG. The quarterly
report shall include a brief description of the work performed during the reporting period, including
construction status, milestones achieved, financial status report including cost incurred to date, cash
flow projections, schedule updates, and any problems encountered in the performance of the work
under this Agreement. The progress pay estimate for the reporting period shall be included as part
of the quarterly progress report submittal.
In addition to the above, project schedule and cashflow projection updates shall be emailed to the
County on a monthly basis.
25
Attachment F - Construction Requirements
Subrecipient shall:
1. Pursuant to the California Environmental Quality Act ("CEQA"), act as Lead
Agency and assume responsibility for preparation, circulation and adoption of all necessary and
appropriate CEQA documents pertaining to the construction, operation and maintenance of
Neighborhood Revitalization Project.
2. To the extent that it has not already done so, the Subrecipient shall prepare or
cause plans and specifications ("Plans") to be prepared for the Neighborhood Revitalization
Project prior to advertising Neighborhood Revitalization Project for construction bids.
3. Provide County a copy of the engineering design cost proposal and associated
design schedule for the Neighborhood Revitalization Project.
4. Advertise and award a public works construction contract for the Neighborhood
Revitalization Project and begin construction per the schedules included in Attachment A of
this Agreement.
5. Prior to advertising Neighborhood Revitalization Project for public works
construction contract, obtain all necessary permits, approvals, or agreements as may be required
by any federal, state and local resource or regulatory agencies pertaining to the construction,
operation and maintenance of Neighborhood Revitalization Project. Assume sole responsibility
for compliance with the requirements of all regulatory permits, including any amendments
thereto, pertaining to the construction, operation and maintenance of Neighborhood
Revitalization Project.
6. Implement or cause to be implemented, all environmental mitigation required in
association with the construction, operation and maintenance of Neighborhood Revitalization
Project.
7. Prior to advertising Neighborhood Revitalization Project for public works
construction contract, obtain all necessary permits, licenses, agreements, approvals, rights of
way, rights of entry, encroachment permits, and temporary construction easements as may be
needed to construct, operate and maintain the Neighborhood Revitalization Project.
8. Advertise, award and administer a public works construction contract for the
Neighborhood Revitalization Project pursuant to the provisions of applicable laws for public
works of improvements, including but not limited to the California Public Contract Code,
Government Code and Labor Code.
9. Shall certify and cause its contractor to certify, that it is not a target of economic
sanctions imposed in response to Russia's actions in Ukraine imposed by the United States
government or the State of California. The Subrecipient and its Contractor are required to
comply with the economic sanctions imposed in response to Russia's actions in Ukraine,
including with respect to, but not limited to, the federal executive orders identified in California
Executive Order N-6-22, located at hgps://www. og v ca.gov/wp-
content/uploads/2022/03/3.4.22-Russia-Ukraine-Executive-Order.pdf and the sanctions
identified on the United States Department of the Treasury website
(https://home.treasM. goy/policy-issues/financial-sanctions/sanctions-pro grams-and-country-
information/ukraine-russia-related-sanctions). The Subrecipient and its Contractor are required
to comply with all applicable reporting requirements regarding compliance with the economic
sanctions, including, but not limited to, those reporting requirements set forth in California
26
Executive Order N-6-22 for all parties with one or more agreements with the State of California,
the County of Riverside, or any other local agency, with a value of Five Million Dollars
($5,000,000) or more. Notwithstanding any other provision in these documents, failure to
comply with the economic sanctions and all applicable reporting requirements may result in
disqualification or termination of the Construction Agreement, if awarded.
For parties and contractors with an agreement value of Five Million Dollars ($5,000,000) or more
with the State of California, the County of Riverside, or any other local agency, reporting
requirements include, but are not limited to, information related to steps taken in response to
Russia's actions in Ukraine, including but not limited to:
a. Desisting from making any new investments or engaging in financial transactions with
Russian institutions or companies that are headquartered or have their principal place of
business in Russia;
b. Not transferring technology to Russia or companies that are headquartered or have their
principal place of business in Russia; and
c. Direct support to the government and people of Ukraine.
To comply with this requirement, please insert your name and Federal ID Number (if available)
on the Certification Form attached hereto, execute by a duly authorized representative for the
contractor and return to the County.
10. The Subrecipient shall require, and the specifications, bid and contract documents
shall require all contractors, subcontractors, vendors, equipment operators and owner operators,
in each such case to the extent such individuals or entities are engaged to perform work on the
Neighborhood Revitalization Project, to pay at least general prevailing wage rates to all workers
employed in the execution of the contract, to post a copy of the general prevailing wage rates at
the job -site in a conspicuous place available to all employees and applicants for employment,
and to otherwise comply with applicable provisions of the California Labor Code and applicable
laws relating to general prevailing wage rates.
11. Each contractor engaged to perform work on the Neighborhood Revitalization
Project shall be required to furnish (i) labor and material payment bonds, and (ii) contract
performance bonds, each in an amount equal to 100% of the contract price naming the
Subrecipient as obligee and issued by a California admitted surety which complies with the
provisions of Section 995.660 of the California Code of Civil Procedure.
12. Provide County with written notice that Subrecipient has awarded a public works
construction contract for Neighborhood Revitalization Project. The written notice shall include
the Contractor's actual bid amounts for Neighborhood Revitalization Project, setting forth herein
the lowest responsible bid contract amount.
13. Prior to commencing Neighborhood Revitalization Project construction, provide
to County:
a. A construction schedule which shall show the order and dates in which
Subrecipient or Subrecipient's contractor proposes to carry on the various parts of work,
including estimated start and completion dates, and
b. A confined space procedure specific to Neighborhood Revitalization
Project. The procedure shall comply with requirements contained in California Code of
27
Regulations, Title 8, Section 5156 et seq. and County's Confined Space Procedures,
SOM-18.
14. Require its construction contractor(s) to comply with all Cal/OSHA safety
regulations including regulations concerning confined space and maintain a safe working
environment for all working on the site.
15. Order the relocation of all utilities within Subrecipient rights of way which
conflict with the construction of Neighborhood Revitalization Project and which must be
relocated at the expense of who may have superior property rights.
16. Procure or caused to be procured insurance coverages during the term of this
Agreement. Subrecipient shall require its Neighborhood Revitalization Project construction
contractor(s) to furnish original certificate(s) of insurance and original certified copies of
endorsements and if requested, certified original policies of insurance including all
endorsements and any and all other attachments. Prior to Subrecipient issuing a Notice to
Proceed to its construction contractor(s) to begin construction of Neighborhood Revitalization
Project, an original certificate of insurance evidencing the required insurance coverage shall be
provided to County. At minimum, the procured insurance coverages should adhere to the
County's required insurance provided in Attachment D to this Agreement.
17. Construct, or cause to be constructed, Neighborhood Revitalization Project
pursuant to a Subrecipient administered public works construction contract, in accordance with
the Plans, and pay all costs associated therewith.
18. Inspect the Neighborhood Revitalization Project construction or cause the
Neighborhood Revitalization Project's construction to be inspected by its construction manager
and pay all costs associated therewith.
19. Provide County with a copy of the Subrecipient's recorded Notice of Completion.
20. Keep an accurate accounting of Neighborhood Revitalization Project cost and
provide this accounting to County with Subrecipient's Notice of Completion. The final
accounting of construction cost shall include a detailed breakdown of all costs, including, but
not limited to, payment vouchers, Subrecipient approved change orders and other such
construction contract documents as may be necessary to establish the actual cost of construction
for the PLANS. Subrecipient shall be responsible to pay any amounts in excess of Award amount
provided in this Agreement.
21. Refund to County, at the time of providing a Notice of Completion, any
unexpended portions of Award amount within thirty (30) days of the Notice of Completion is
filed for recordation.
28
COMPLIANCE WITH ECONOMIC SANCTIONS IN RESPONSE TO RUSSIA'S ACTIONS
IN UKRAINE
Prior to bidding on, submitting a proposal, or executing a contract, a party/contractor must certify: 1) it
is not a target of economic sanctions and 2) in compliance with economic sanctions imposed by the U.S.
government in response to Russia's actions in Ukraine, as well as any requirements related to the Russian
sanctions imposed by the California Governor's Executive Order N-6-22 issued on March 4, 2022 and
under state law, if any.
To comply with this requirement, please insert the party/contractor name and Federal ID Number (if
available), complete the information described below and execute by an authorized representative of the
contractor.
CERTIFICATION
I, the authorized representative for contractor named below, certify I am duly authorized to execute this
certification on behalf of the contractor below, and the contractor identified below has conducted a good
faith review of existing contracts. I attest that the contractor is not a target of economic sanctions, and that
contractor is in compliance with the economic sanctions imposed by the U.S. government in response to
Russia's actions in Ukraine, as well as any requirements related to the Russian sanctions imposed by the
California Governor's Executive Order N-6-22 issued on March 4, 2022 and under state law, if any.
Party/Contractor Name (Printed)
Federal ID Number or n a
By (Authorized Signature)
Printed Name and Title of Person Signing
Date
E-
29
Adft
IT
The Heart of Southern California
Wine Country
DOG PARK RENOVATION
Parks/Recreation Project
Project Description: This project is to design and construct a dog park at
Mike Naggar Community Park. The dog park will include small and large dog
pens, seating, drinking fountains, shade and an agility dog course feature.
Benefit: This project protects the City's vast investment in parks and open
space facilities. In addition, this project satisfies the City's Core Values of a
Healthy and Livable City and Responsive City Government.
Core Value: Healthy and Livable City
Project Status: This project is dependent on the Prop 68 Per Capita Grant.
Design is currently at 90%. The project is estimated to be complete in Fiscal
Year 2023-24.
Department: Public Works - Account No. 210.265.999.5800.PW21-14 / 207
Level: I
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
2023-24
Prior Years
2022-23 Adopted 2024-25 2025-26 2026-27 2027-28
Total Project
Project Cost:
Actuals
Adjusted Budget Projected Projected Projected Projected
Cost
5801-Administration
25,000 100,000
125,000
5804-Construction
533,484 10,000
543,484
5802-Design & Environmental
15,116
56,400
71,516
Total Expenditures
15,116
614,884 110,000
740,000
Source of Funds:
4025-Grants
4002-Measure S
25,000
247,126
357,874 110,000
247,126
492,874
Total Funding
25,000
605,000 110,000
740,000
Future Operating & Maintenance Costs:
Total Operating Costs
Notes :
1. Proposition 68 Grant from the California Department of Parks and Recreation.
Item No. 11
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Approve Specifications and Authorize Solicitation of Construction Bids for
Citywide Slurry Seal Program — Fiscal Year 2022-23, PW23-16
PREPARED BY: Amer Attar, Engineering Manager
Emalee Sena, Engineering Technician II
RECOMMENDATION: That the City Council:
1. Approve the specifications and authorize the Department of Public Works to solicit
construction bids for the Citywide Slurry Seal Program — Fiscal Year 2022-23,
PW23-16; and
2. Make a finding that this project is exempt from CEQA per Article 19, Categorical
Exemption, Section 15301, Existing Facilities, of the CEQA Guidelines.
BACKGROUND: As part of the Operating Budget for Fiscal Year 2022-23, slurry will
be utilized to seal the project roadways against water intrusion and deterioration of asphalt concrete
pavement wearing surface. Ideally, slurry seal is applied every five to seven years as it prolongs
pavement life thereby delaying more costly rehabilitation measures such as asphalt concrete
overlays or removal and reconstruction. Construction involves roadway preparation by removal
of existing striping/markings and cleaning/sealing large cracks. This is followed by application of
slurry seal and subsequent restoration of striping and pavement markings.
Staff has identified the street locations based on the Pavement Management Program (PMP)
Update completed in 2017-18, current pavement conditions, time elapsed since the last
preventative maintenance measure and geographical proximity. The streets to be sealed are in the
communities of Rancho Vista, Los Ranchitos, and Rancho Vista East. An added alternate slurry
seal area for this project is the community of Vail Ranch. The slurry seal of this area is contingent
on the bids received and the available budget. The name of the streets to be slurry sealed are shown
on the attached list and project location maps.
Project specifications are complete and the project is ready to be advertised for construction bids.
The contract documents are available for review in the office of the Director of Public Works.
The Engineer's Construction Estimate for the Project is $1,303,923. The estimate for the added
alternate areas is $973,056.
The project is exempt from the CEQA requirements pursuant to Article 19, Categorical Exemption,
Section 15301, Existing Facilities, of the CEQA Guidelines. Section 15301 states that the repair
and maintenance of existing highways and streets are Class 1 activities which is exempt from
CEQA.
FISCAL IMPACT: This project is funded in the Operating Budget with Measure A
funds. If necessary, the project budget can be supplemented from the Pavement Rehabilitation
Program — Citywide project budget if they are available after consideration of the planned
segments to be rehabilitated under that project. This project will slurry seal as much area as the
budget allows.
ATTACHMENTS: 1. Slurry Seal Street Name List
2. Project Location Maps
Rancho Vista and Los Ranchitos Slurry Seal Street Name List - FY 2022-23
AGENA ST
CRESTA VERDE CT
REMORA ST
ALPHA PL
DEL MAR CT
RENDOVA PL
ARGO CT
EL DOMINO PL
SAN FERMIN PL
ASTEROID WY
EL FARO PL
SAN JULIAN PL
AVENIDA DE
EL LUCERO PL
SANTA CECILIA DR
CALAZADA
ELINDA RD
SANTA SUZANNE PL
BEL MONTE CT
ESCOLACATA DR
SANTIAGO RD
BOREALIS DR
ESTERO ST
SENELA PL
CABO ST
FLORES DR
SENELA PL
CABRILLO AVE
JEDEDIAH SMITH RD
SKY TERRACE DR
CACTUS PL
JOHN WARNER RD
SOUTHERN CROSS RD
CAJON DR
LA PAZ RD
SPICA CT
CALLE CARRANZA
LA PRESA LOOP
STAR CT
CALLE DE VELARDO
LA PRIMAVERA ST
TIERRA ROBLES PL
CALLE HALCON
LAS VIOLETTAS CT
TWILIGHT CT
CALLE SONORA
LAURIE RAE LN
VALLEJO AV
CALLE VIOLETA
LEVANDE PL
VALLEJO AVE E
CAMINO DEL SOL
LOLITA RD
VERDADERO PL
CAMPO ROJO
LOMA PORTOLA DR
VERDE DR
CAMPO VERDE
MANZANO DR
VERONDA PL
CANDIDA DR
MARIPOSA PL
VIA BRISA
CAPRICE CT
MILKY WAY DR
VIA CANADA
CARINO PL
MIRA LOMA DR
VIA VELEZ PL
CASA CHATA PL
MOONTIDE CT
VILLA ALTURAS DR
CENTAUR CT
MOUNTAIN VIEW
VILLA DEL SUR DR
CIELO DE AZUL
NEBULA LN
VILLA TER CT
CIELO MESA
PALMA DR
VIRGO CT
COLINA VERDE
PAULITA RD
VISTA DEL RANCHO
COLVER CT
PESCADO DR
WINDCREST LN
CORONADO DR
PIASANO PL
YORBA AV
CORTE VILLA
PIO PICO RD
COSMIC DR
PORTRAITS LN
Rancho Vista East Slurry Seal Street Name List - FY 2022-23
CALLE JAB ILI
CORTE CORONADO
CORTE SOLEDAD
CALLE RESACA
CORTE DEL CERRO
CORTE VALENTINE
CAMINO CASANA
CORTE FLORECITA
CORTE ZAMORA
CAMINO DE LA TORRE
CORTE HIGUERA
ROSA CT
CAMINO MAREA
CORTE LA PUENTA
VIA ASTURIAS
CAMINO MERANO
CORTE LARA
VIA BALDERAMA
CAMINO NUNEZ
CORTE LAS CRUCES
VIA REINA
CAMINO SENECO
CORTE MONTIA
VIA TORENO
CORTE AMALIA
CORTE PALACIO
VIA TORRES
CORTE BACARRO
CORTE PARADO
VIA VASQUEZ
CORTE BALBOA
CORTE PERGAMINO
VIA VISTANA
CORTE CAMARA
CORTE SAN VICENTE
VINTAGE HILLS DR
CORTE CANEL
CORTE SANTA
CORTE CARMELA
CATALINA
CORTE CHATADA
CORTE SEDA
Additive Alternate - Vail Ranch Slurry Seal Street Name List - FY 2022-23
AKES PASS
COUNTRY GLEN WY
NICLYN DR
ALIGHCHI WY
CRESTWOOD CIR
OVERLAND TR
AVENIDA BICICLETA
CUPA LN
PAROWN DR
AVENIDA DE
CUTCHOGUE DR
PASCUAL CIR
MISSIONS
ENRIQUETA CIR
POTESTAS DR
AVITA CIR
FERN CIR
PRIS LN
BANANAL WY
FREESIA WY
REGINA DR
BOG UTA WY
GAROLI PASS
RHIANNON WY
BRENTWOOD PL
GRADO CIR
ROMERO DR
BRICE CIR
HAFIZ PASS
ROSEWOOD CIR
CALLE ALFREDO
HARMONY LN
ROSSMAN CIR
CALLE BANUELOS
HISLOP WY
SAMILIN CIR
CALLE CANTU
HUPA DR
SASKIA PASS
CALLE HILARIO
HUPP DR
SAWYERS RUN RD
CALLE LANGARICA
JAMIN CIR
SHALE CIR
CALLE LOPEZ
JOHNSTON DR
SHAYNNA CIR
CALLE MIRA COPA
JOSHEROO CT
SILKY PASS
CAMINO ALAMOSA
KABIAN CT
SOTELO DR
CAMINO GONZALES
KARIE WY
STRIGEL CT
CAMINO HERNANDEZ
KIT CT
SUNBEAM TR
CAMINO MARACA
LABETA CIR
TEHACHAPI PASS
CAMINO OTILIA
LAURIANO DR
TERRACE DR
CAMINO PIEDRA ROJO
LEVI CT
TERZICH DR
CAMINO RUBANO
LINALOU RANCH RD
THATCHER CT
CAYENNE TR
LONGFELLOW AV
TIBURCIO DR
CERVIN CIR
LORRAINE DR
TOBIAS CIR
CINON DR
MACHON RD
TULLEY RANCH RD
CORTE CANARIO
MAPLEWOOD CT
VALENTINO WY
CORTE GANSO
MARGE PL
VIA RIO TEMECULA RD
CORTE GUTIERREZ
MARZI CT
WELTON WY
CORTE RODRIGUEZ
MELISSA CIR
CORTE SANCHEZ
MILL RUN CT
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Item No. 12
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Accept Improvements and File the Notice of Completion for the Traffic Signal —
Park and Ride Access Improvements, PW18-11
PREPARED BY: Nino Abad, Senior Civil Engineer
Laura Bragg, Associate Engineer II
RECOMMENDATION: That the City Council:
Accept the construction of the Traffic Signal — Park and Ride Access
Improvements, PW18-11, as complete; and
2. Direct the City Clerk to file and record the Notice of Completion.
BACKGROUND: On May 25, 2021, the City Council awarded a construction contract
to PAL General Engineering, Inc. (PAL), in the amount of $901,846.00, and authorized the City
Manager to approve contract change orders not to exceed the contingency amount of $90,184.60,
for a total authorization of $992,030.60 to complete the Traffic Signal - Park and Ride Access
Improvements, PW18-11.
The Traffic Signal — Park and Ride Access Improvements project provided for the construction of
a traffic signal and modifications to the medians on Temecula Parkway at Wabash Lane,
construction of an access road from Temecula Parkway at Wabash Lane to the existing park and
ride facility, and the elimination of the previously existing entrance to the park and ride facility on
Vallejo Avenue by extending the existing wall. The access road goes through private property,
and it is allowed via an Access Easement Agreement with the property owner. There is also a
Reimbursement Agreement with the property owner, which requires them to pay the City a portion
of the construction costs upon filing of the Notice of Completion.
PAL General Engineering, Inc., exhausted contract working days on March 7, 2022, and continued
to work on contract items through April 21, 2023, with involvement of the Surety Company that
provided the Performance Bond for the project. On April 21, 2023, the City received `Beneficial
Use" of the project area and at that time there were three items outstanding. As of July 31, 2023,
PAL has completed the work in accordance with the approved plans and specifications with the
exception of the same three outstanding items that the City has agreed to complete.
Two of the three outstanding items pertain to installation of the Traffic Signal CCTV camera. The
City has taken possession of the camera purchased for this project and will work with the
manufacturer to place it at an appropriate location that will fully use the cameras capabilities. The
City's IT Department will supply and install a different model CCTV camera. The third item is to
assist in recording the survey document for the Wabash Lane and Temecula Parkway intersection
at the County of Riverside. PAL's survey subcontractor is often nonresponsive, so this item will
be performed by the City as to not delay filing the Notice of Completion.
The City is in the process of negotiating the final payment with PAL, therefore, the Performance
Bond, Labor and Materials Bond, and retention will not be released at this time. This negotiation
may be a lengthy process due to the involvement of the Surety Company. The Contractor's
Affidavit and Final Release will be provided when final payment negotiations are complete. All
work will be warranted for a period of one year from April 21, 2023, the date the City obtained
"beneficial use" of the project improvements. A Maintenance Bond will need to be supplied by
PAL and the Surety Company as part of the final payment negotiations.
Per the terms of the Reimbursement Agreement, the City must provide to the property owner the
Notice of Completion and other project documents before said property owner will reimburse the
City their share of the construction costs. Since the negotiations with the Contractor and Surety
could be lengthy, the City is filing the Notice of Completion now instead of waiting for the final
payment negotiations to be completed.
The base amount of the construction contract was $901,846.00, five contract change orders were
issued in the amount of $9,939.53. A sixth contract change order to reconcile quantity underruns
is in progress and will be processed once the final payment negotiations are complete. The total
project cost will be known at that point.
FISCAL IMPACT: There are no fiscal impact associated with accepting the project and
filing and recording the Notice of Completion.
ATTACHMENTS: 1. Notice of Completion
2. Project Description
3. Project Location
RECORDING REQUESTED BY
AND RETURN TO:
CITY CLERK
CITY OF TEMECULA
41000 Main Street
Temecula, CA 92590
EXEMPT FROM RECORDER'S FEES
Pursuant to Government Code
Sections 6103 and 27383
NOTICE OF COMPLETION
NOTICE IS HEREBY GIVEN THAT:
Temecula Valley Hospitality, LLC, is the owner of the property hereinafter described. The
City of Temecula and Temecula Valley Hospitality, LLC, have entered into an Access
Easement Agreement and a Reimbursement Agreement to allow for the construction and
perpetual usage of a driveway that traverses the south westerly corner of the Temecula
Valley Hospitality Property and connecting to the City of Temecula's property adjacent to
the west.
2. The full address of the City of Temecula is 41000 Main Street, Temecula, California 92590.
3. The Nature of Interest is a Contract which was awarded by the City of Temecula to PAL
General Engineering, Inc., 2364 Paseo De Las Americas #104-1461, San Diego, CA
92154, to perform the following work of improvement:
Traffic Signal — Park and Ride Access Improvements, PW18-11
4. Said work was completed by said company according to plans and specifications and to
the satisfaction of the Director of Public Works of the City of Temecula and that said work
was accepted by the City Council of the City of Temecula at a regular meeting thereof held
on August 22, 2023. That upon said contract Argonaut Insurance Company, c/o
CMGIA, 20335 Ventura Blvd., Ste 426, Woodland Hills, CA, 91364, was surety for the
bond given by the said company as required by law.
5. The property on which said work of improvement was completed is in the City of Temecula,
County of Riverside, State of California, and is described as follows:
Traffic Signal — Park and Ride Access Improvements, PW18-11
Riverside County Tax Assessor's Parcel Number 922-190-033
6. The location of said property is: Wabash Lane and Temecula Parkway, Temecula, CA
92592
Dated at Temecula, California, this 22"d day of August, 2023.
City of Temecula
Randi Johl, City Clerk
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, California, do hereby certify under penalty
of perjury, that the foregoing NOTICE OF COMPLETION is true and correct, and that said
NOTICE OF COMPLETION was duly and regularly ordered to be recorded in the Office of the
County Recorder of Riverside by said City Council.
Dated at Temecula, California, this 22nd day of August, 2023.
City of Temecula
Randi Johl, City Clerk
Alk
f
The Heart of Southern California
Wine Country
City of Temecula
Fiscal Years 2024-28
Capital Improvement Program
TRAFFIC SIGNAL - PARK & RIDE ACCESS IMPROVEMENTS
Circulation Project
Project Description: This project includes the installation of a traffic signal on
Temecula Parkway at Wabash Lane. The project also includes relocating the
access of the Park and Ride facility on Temecula Parkway at La Paz Road from
Vallejo Avenue to Wabash Lane.
Benefit: This project improves traffic safety and circulation throughout the
City.
Core Value: Healthy and Livable City
Project Status: Construction will be completed in Fiscal Year 2022-23.
Department: Public Works - Account No. 210.265.999.605 / PW18-11
Level: I
Project Cost:
Prior Years
Actuals
2023-24
2022-23 Proposed 2024-25 2025-26 2026-27 2027-28
Adjusted Budget Projected Projected Projected Projected
Total Project
Cost
Administration
537,560
17
537,577
Construction
620,950
639,174
1,260,123
Construction Engineering
83,767
47,661
131,428
Design & Environmental
273,651
5,453
279,104
MSHCP
2,664
2,664
Total Expenditures
1,518,590
692,306
2,210,896
Source of Funds:
Developer Contribution
175,000
175,000
General Fund
226,725
226,725
Measure S
1,018,590
290,581
1,309,171
Settlement Proceeds
500,000
500,000
Total Funding
i 1,745,315
465,581 -
2,210,896
Future Operating & Maintenance Costs:
Total Operating Costs
U
/
CO
Traffic Signal Park and Ride Access lmprovements
Circulation Project Location
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2018 Aerial Data
82
Item No. 13
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Receive and File Temporary Street Closures for 2023 Autumnfest Events
PREPARED BY: Anissa Sharp, Management Assistant
Nick Minicilli, Senior Traffic Engineer
RECOMMENDATION: That the City Council receive and file the temporary closure of
certain streets for the following 2023 Autumnfest Events:
GOLDEN ERA RUNWAY SHOW
NATIONAL EMERGENCY PREPAREDNESS FAIR
ARTFEST
HEALTH & COMMUNITY RESOURCE FAIR
CYCLE FOR HOPE
GREEK FESTIVAL
HALLOWEEN CARNIVAL
VETERAN'S DAY
PECHANGA PU'ESKA MOUNTAIN DAY
BACKGROUND: Nine special events are scheduled between August 2023 and
November 2023 which necessitates the physical closure of all or portions of certain streets within
the Old Town area and other streets throughout Temecula. These closures are necessary for event
operation as well as to protect participants and viewers.
The eight events and associated street closures are as follows:
1) GOLDEN ERA RUNWAY SHOW — August 261h
The Golden Era Runway Show is a private permitted event, planned to be held Saturday, August
26th in Old Town Temecula. The street closures are scheduled as follows:
Main Street
from the easterly driveway edge of th
Saturday, August 26
Be Good Restaurant (28636 Old Town Front
Street) to Mercedes Street 8:00 a.m. to 10:00 p.m.
Mercedes Street Saturday, August 26th
Third Street to Fourth Street 8:00 a.m. to 10:00 p.m.
Street closures for the Golden Era Runway Show event are shown on Exhibit "A" attached hereto.
2) NATIONAL EMERGENCY PREPAREDNESS FAIR — September 9'
The National Emergency Preparedness Fair event will be held Saturday, September 9"' in Old
Town Temecula with street closures scheduled as follows:
Main Street
from the easterly driveway edge of
Saturday, September 9th
Be Good Restaurant (28636 Old Town Front
6:00 a.m. to 4:00 p.m.
Street) to Mercedes Street
Mercedes Street
Saturday, September 9th
Third Street to Fourth Street
6:00 a.m. to 4:00 p.m.
Street closures for the National Emergency Preparedness Fair event are shown on Exhibit "A"
attached hereto.
3) ARTFEST — September 15th and September 16t'
The ArtFest event will be held Friday, September 151h and Saturday, September 16th in Old Town
Temecula with street closures scheduled as follows:
Main Street
8:00 a.m. on Thursday, September 14th
from the easterly driveway edge of
to
Be Good Restaurant (28636 Old Town Front
Street) to Mercedes Street
11:00 p.m. on Saturday, September 16th
8:00 a.m. on Thursday, September 14th
Mercedes Street
Third Street to Fourth Street
to
11:00 p.m. on Saturday, September 161h
Street closures for the ArtFest event are shown on Exhibit "A" attached hereto.
4) HEALTH & COMMUNITY RESOURCE FAIR — September 301h
The Health & Community Resource Fair event will be held Saturday, September 30th in Old Town
Temecula with street closures scheduled as follows:
Main Street
8:00 a.m. on Friday, September 29th
from the easterly driveway edge of
Be Good Restaurant (28636 Old Town Front
to
8:00 p.m. on Saturday, September 30th
Street) to Mercedes Street
8:00 a.m. on Friday, September 29th
Mercedes Street
Third Street to Fourth Street
to
8:00 p.m. on Saturday, September 30th
Street closures for the Health & Community Resource Fair event are shown on Exhibit "A"
attached hereto.
5) CYCLE FOR HOPE — October 1't
The Cycle for Hope is a private permitted event, planned to be held Sunday, October lit with street
closures scheduled as follows:
Rider Way
Sunday, October lst
Enterprise Circle West to
6:00 a.m. to 2:00 p.m.
Commerce Center Drive
Commerce Center Drive
Sunday, October I"
Rider Way to Overland Drive
6:00 a.m. to 2:00 p.m.
Street closures for the Cycle for Hope event are shown on Exhibit "B" attached hereto.
6) GREEK FESTIVAL — October 14t' and October 151h
The Greek Festival is a private permitted event, planned to be held Saturday, October 141h and
Sunday, October 15th in Old Town Temecula with street closures scheduled as follows:
Main Street
8:00 a.m. on Friday, October 131h
from the easterly driveway edge of
Be Good Restaurant (28636 Old Town Front
to
8:00 a.m. on Monday, October 16th
Street) to Mercedes Street
8:00 a.m. on Friday, October 131h
Mercedes Street
Third Street to Fourth Street
to
8:00 a.m. on Monday, October 16th
Street closures for the Greek Festival event are shown on Exhibit "A" attached hereto.
7) HALLOWEEN CARNIVAL — October 27t'
The Halloween Carnival event will be held Friday, October 271" in Old Town Temecula with street
closures scheduled as follows:
Main Street
from the easterly driveway edge of
Friday, October 271h
Be Good Restaurant (28636 Old Town Front
8:00 a.m. to 11:00 p.m.
Street) to Mercedes Street
Mercedes Street
Friday, October 271h
Third Street to Fourth Street
8:00 a.m. to 11:00 p.m.
Street closures for the Halloween Carnival event are shown on Exhibit "A" attached hereto.
8) VETERAN'S DAY — November 11th
The Veteran's Day event will be held Saturday, November 11 th in Old Town Temecula with street
closures scheduled as follows:
Main Street
from the easterly driveway edge of
Saturday, November 1 lth
Be Good Restaurant (28636 Old Town Front
10:00 a.m. to 10:00 p.m.
Street) to Mercedes Street
Mercedes Street
Saturday, November 1 lth
Third Street to Fourth Street
10:00 a.m. to 10:00 p.m.
Street closures for the Veteran's Day event are shown on Exhibit "A" attached hereto.
9) PECHANGA PU'ESKA MOUNTAIN DAY — November 15th
The Pechanga Pu'6ska Mountain Day event will be held Wednesday, November 15th in Old Town
Temecula with street closures scheduled as follows:
Main Street
from the easterly driveway edge of
Wednesday, November 15th
Be Good Restaurant (28636 Old Town Front
12:00 p.m. to 9:00 p.m.
Street) to Mercedes Street
Mercedes Street
Wednesday, November 15th
Third Street to Fourth Street
12:00 p.m. to 9:00 p.m.
Street closures for the Pechanga Pu'eska Mountain Day event are shown on Exhibit "A" attached
hereto.
Street closures are allowed by the California Vehicle Code upon approval by the local governing
body for certain conditions. Under Vehicle Code Section 21101, "Regulation of Highways," local
authorities, for those highways under their jurisdiction, may adopt rules and regulations by
ordinance or resolution for, among other instances, "temporary closing a portion of any street for
celebrations, parades, local special events, and other purposes, when, in the opinion of local
authorities having jurisdiction, the closing is necessary for the safety and protection of persons
who are to use that portion of the street during the temporary closing."
Chapter 12.12 of the Temecula Municipal Code, Parades and Special Events, provides standards
and procedures for special events on public streets, highways, sidewalks, or public right of way
and authorizes the City Council or City Manager to temporarily close streets, or portions of streets,
for these events.
FISCAL IMPACT: The costs of police services, as well as services provided by the City
Public Works Maintenance Division (for providing, placing, and retrieving of necessary warning
and advisory devices), are appropriately budgeted within the City's operating budget.
ATTACHMENTS: 1. Exhibit A — Autumnfest Road Closures 2023
2. Exhibit B — Cycle for Hope Road Closures 2023
Exhibit A: Autumnfest Road Closures 2023
Autumnfest Events
• Golden Era Runway Show
August 26th, 8 AM - 10 PM
• National Emergency
Preparedness Fair
- ^P'"
Mercedes St
September 9th, 6 AM - 4 PM
[
,
• ArtFest,
September 14th, 8 AM to
'r ..{
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September 16th, 11 PM
• Health & Community
�Fourth
---------
Resource Fair
St
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September 29th, 8 AM to
September 30th, 8 PM'
• Greek Festival
October 13th, 8 AM to
October 16th, 8 AM
q��;
Main St
• Halloween Carnival
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October 27th, 8 AM - 11 PM;
• Veteran's Day
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November 11 th, 10 AM - 10 PM
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Day
November 15th, 12 PM - 9 PM
Road Closure
gem
28636 Old
ell
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• Cycle for Hope
Sunday, October 1st
6:00 a.m. to 2:00 p.m.
Exhibit B: Cycle for Hope Road Closures 2023
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Item No. 14
ACTION MINUTES
TEMECULA COMMUNITY SERVICES DISTRICT MEETING
COUNCIL CHAMBERS
41000 MAIN STREET
TEMECULA, CALIFORNIA
AUGUST 8, 2023
CALL TO ORDER at 6:16 PM: President James Stewart
ROLL CALL: Alexander, Brown, Kalfus, Schwank, Stewart
CSD PUBLIC COMMENTS -None
CSD CONSENT CALENDAR
Unless otherwise indicated below, the following pertains to all items on the Consent Calendar.
Approved the Staff Recommendation (5-0): Motion by Alexander, Second by Brown. The vote reflected
unanimous approval.
5. Approve Action Minutes of July 25, 2023
Recommendation: That the Board of Directors approve the action minutes of July 25, 2023.
CSD DIRECTOR OF COMMUNITY SERVICES REPORT
CSD GENERAL MANAGER REPORT
CSD BOARD OF DIRECTORS REPORTS
CSD ADJOURNMENT
At 6:17 PM, the Community Services District meeting was formally adjourned to Tuesday, August 22,
2023 at 4:30 PM for a Closed Session, with a regular session commencing at 6:00 PM, City Council
Chambers, 41000 Main Street, Temecula, California.
James Stewart, President
ATTEST:
Randi Johl, Secretary
[SEAL]
Item No. 15
TEMECULA COMMUNITY SERVICES DISTRICT
AGENDA REPORT
TO: General Manager/Board of Directors
FROM: Erica Russo, Director of Community Services
DATE: August 22, 2023
SUBJECT: Approve Agreement with Titan Rental Group, Inc. for Event and Program Rental
Items
PREPARED BY: Dawn Adamiak, Community Services Superintendent
RECOMMENDATION: That the Board of Directors approve the agreement with Titan
Rental Group, Inc. for event and program rental items.
BACKGROUND: Dependable, professional vendors play an essential role in
supporting the Community Services Department by providing needed services. Titan Rentals
Group, Inc. is committed to providing high quality rental items and has been serving Temecula
residents and visitors in this capacity for over 10 years. Under this three-year contract, Titan Rental
Group, Inc. will provide various rental items for numerous events and programs, including:
• Temecula Rod Run
• Teen Night Light Egg Hunt
• Temecula Special Games
• 4th of July Extravaganza
• Memorial Day Event
• Human Services Events & Programs
• New Year's Eve Grape Drop
• Art Fest
• Santa's Electric Light Parade
This three-year agreement will begin August 22, 2023, and remain in effect until July 31, 2026,
unless terminated earlier pursuant to the provisions of the agreement. The cost for this agreement
will not exceed $190,000 for the three-year term.
FISCAL IMPACT: Adequate funds for the current fiscal year have been requested as
part of the Fiscal Year 2023-24 Annual Operating Budget. Funds for future fiscal years under this
multi -year agreement will be requested as part of the normal annual budget process.
ATTACHMENTS: Agreement
NON-EXCLUSIVE SERVICES AGREEMENT
BETWEEN TEMECULA COMMUNITY SERVICES DISTRICT AND
TITAN RENTAL GROUP, INC.
EVENT SERVICES
THIS AGREEMENT is made and effective as of August 22, 2023, between the Temecula
Community Services District, a community services district (hereinafter referred to as "City"), and
Titan Rental Group, Inc., a Corporation, (hereinafter referred to as "Vendor"). In consideration
of the mutual covenants and conditions set forth herein, the parties agree as follows:
1. TERM
This Agreement shall commence on August 22, 2023, and shall remain and continue in
effect until tasks described herein are completed, but in no event later than July 31, 2026, unless
sooner terminated pursuant to the provisions of this Agreement.
2. SERVICES
Vendor shall perform the services and tasks described and set forth in Exhibit A, attached
hereto and incorporated herein as though set forth in full. Vendor shall complete the tasks in
according to the schedule of services which is also set forth in Exhibit A.
Vendor recognizes and agrees that this Agreement is for the purpose of establishing a
contractual relationship between the City and the Vendor for the non-exclusive procurement of
services outlined on Exhibit A, attached hereto, and incorporated herein as though set forth in full.
The Vendor understands this Agreement is non-exclusive and the City reserves the right to
purchase similar services from other Vendors.
3. PERFORMANCE
Vendor shall faithfully and competently exercise the ordinary skill and competence of
members of their profession. Vendor shall employ all generally accepted standards and practices
utilized by persons engaged in providing similar services as are required of Vendor hereunder in
meeting its obligations under this Agreement.
4. PAYMENT
a. The City agrees to pay Vendor, in accordance with the payment rates and
terms and the schedule of payment as set forth in Exhibit B, Payment Rates and Schedule,
attached hereto and incorporated herein by this reference as though set forth in full, based upon
actual time spent on the above tasks. Any terms in Exhibit B, other than the payment rates and
schedule of payment, are null and void. This amount shall not exceed One Hundred Ninety
Thousand Dollars and No Cents ($190,000.00) for the total term of this agreement unless
additional payment is approved as provided in this Agreement.
b. Vendor shall not be compensated for any services rendered in connection
with its performance of this Agreement which are in addition to those set forth herein, unless such
additional services are authorized in advance and in writing by the General Manager. Vendor
shall be compensated for any additional services in the amounts and in the manner as agreed to
by General Manager and Vendor at the time City's written authorization is given to Vendor for the
performance of said services. The not to exceed payment amount listed herein is an estimated
expenditure and this Agreement does not guarantee Vendor this amount in purchases.
08/08/2021
C. Vendor will submit invoices for actual services performed. Payment shall
be made within thirty (30) days of receipt of each invoice as to all non -disputed fees. If the City
disputes any of Vendor's fees, it shall give written notice to Vendor within thirty (30) days of receipt
of an invoice of any disputed fees set forth on the invoice. For all reimbursements authorized by
this Agreement, Vendor shall provide receipts on all reimbursable expenses in excess of Fifty
Dollars ($50) in such form as approved by the Director of Finance.
5. NON -ASSIGNABILITY
The Vendor shall not assign the performance of this Agreement, nor any part thereof, nor
any monies due hereunder, without prior written consent of the City.
6. INDEPENDENT CONTRACTOR
The Vendor is and shall at all times remain as to the City a wholly independent contractor.
The personnel performing the Work under this Agreement on behalf of the Vendor shall at all
times be under Vendor's exclusive direction and control.
7. LEGAL RESPONSIBILITIES
The Vendor shall keep itself informed of State and Federal laws and regulations which in
any manner affect those employed by it or in any way affect the performance of its service
pursuant to this Agreement. The Vendor shall at all times observe and comply with all such laws
and regulations. The City, and its officers and employees, shall not be liable at law or in equity
occasioned by failure of the Vendor to comply with this section.
8. LICENSES
At all times during the term of this Agreement, Vendor shall have in full force and effect,
all licenses required of it by law for the performance of services described in this Agreement.
9. INDEMNIFICATION
Vendor agrees to defend, indemnify, protect, and hold harmless, the City of Temecula,
Temecula Community Services District, and/or the Successor Agency to the Temecula
Redevelopment Agency, and its officers, officials, employees, agents, and volunteers, from and
against any and all claims, demands, losses, defense costs or expenses, actions, liability or
damages of any kind and nature which the City of Temecula, Temecula Community Services
District, and/or the Successor Agency to the Temecula Redevelopment Agency, its officers,
agents, employees, and volunteers may sustain or incur or which may be imposed upon them for
injury to or death of persons, or damage to property arising out of Vendor's negligent or wrongful
acts or omissions arising out of or in any way related to the Work or the Vendor's performance or
non-performance of this Agreement, excepting only liability out of the sole negligence of the City
of Temecula, Temecula Community Services District, and/or the Successor Agency to the
Temecula Redevelopment Agency.
10. INSURANCE REQUIREMENTS
Vendor shall procure and maintain for the duration of the contract insurance against claims
for injuries to persons or damages to property, which may arise from or in connection with the
performance of the work hereunder by the Vendor, its agents, representatives, or employees.
a. Minimum Scope of Insurance. Coverage shall be at least as broad as:
08/08/2021
1) Insurance Services Office Commercial General Liability Form No. CG
00 01 11 85 or 88.
2) Insurance Services Office Business Auto Coverage form CA 00 01 06
92 covering Automobile Liability, code 1 (any auto). If the Vendor owns no automobiles, a non -
owned auto endorsement to the General Liability policy described above is acceptable.
3) Worker's Compensation insurance as required by the State of
California and Employer's Liability Insurance. If the Vendor has no employees while performing
under this Agreement, worker's compensation insurance is not required, but Vendor shall execute
a declaration that it has no employees.
a. Minimum Limits of Insurance. Vendor shall maintain limits no less than:
1) General Liability: One Million ($1,000,000) per occurrence for bodily
injury, personal injury, and property damage. If Commercial General Liability Insurance or other
form with a general aggregate limit is used, either the general aggregate limit shall apply
separately to this project/location or the general aggregate limit shall be twice the required
occurrence limit.
2) Automobile Liability: One Million ($1,000,000) per accident for bodily
injury and property damage.
3) Worker's Compensation as required by the State of California;
Employer's Liability: One Million Dollars ($1,000,000) per accident for bodily injury or disease.
b. Deductibles and Self -Insured Retentions. Any deductibles or
self -insured retentions shall not exceed Twenty Five Thousand Dollars and No Cents ($25,000).
C. Other Insurance Provisions. The general liability and
automobile liability policies are to contain, or be endorsed to contain, the following provisions:
1) The City of Temecula, the Temecula Community Services District,
the Successor Agency to the Temecula Redevelopment Agency, their officers, officials,
employees and volunteers are to be covered as insured's, as respects: liability arising out of
activities performed by or on behalf of the Vendor; products and completed operations of the
Vendor; premises owned, occupied or used by the Vendor; or automobiles owned, leased, hired
or borrowed by the Vendor. The coverage shall contain no special limitations on the scope of
protection afforded to the City of Temecula, the Temecula Community Services District, the
Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees
or volunteers.
2) For any claims related to this project, the Vendor's insurance
coverage shall be primary insurance as respects the City of Temecula, the Temecula Community
Services District, the Successor Agency to the Temecula Redevelopment Agency, their officers,
officials, employees and volunteers. Any insurance or self -insured maintained by the City of
Temecula, Temecula Community Services District, and/or the SuccessorAgency to the Temecula
Redevelopment Agency, its officers, officials, employees or volunteers shall be excess of the
Vendor's insurance and shall not contribute with it.
3) Any failure to comply with reporting or other provisions of the
policies including breaches of warranties shall not affect coverage provided to the City of
Temecula, the Temecula Community Services District, and the Successor Agency to the
Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees
or volunteers.
4) The Vendor's insurance shall apply separately to each insured
against whom claim is made or suit is brought, except with respect to the limits of the insurer's
liability.
08/08/2021
5) Each insurance policy required by this agreement shall be endorsed
to state in substantial conformance to the following: If the policy will be canceled before the
expiration date the insurer will notify in writing to the City of such cancellation not less than thirty
(30) days' prior to the cancellation effective date.
6) If insurance coverage is canceled or, reduced in coverage or in
limits the Vendor shall within two (2) business days of notice from insurer phone, fax, and/or notify
the City via certified mail, return receipt requested of the changes to or cancellation of the policy.
d. Acceptability of Insurers. Insurance is to be placed with insurers
with a current A.M. Best rating of A-:VII or better, unless otherwise acceptable to the City. Self-
insurance shall not be considered to comply with these insurance requirements.
e. Verification of Coverage. Vendor shall furnish the City with
original endorsements effecting coverage required by this clause. The endorsements are to be
signed by a person authorized by that insurer to bind coverage on its behalf. The endorsements
are to be on forms provided by the City. All endorsements are to be received and approved by
the City before work commences. As an alternative to the City's forms, the Vendor's insurer may
provide complete, certified copies of all required insurance policies, including endorsements
affecting the coverage required by these specifications.
11. TERMINATION OR SUSPENSION
This Agreement may be terminated or suspended at any time, for any reason, with or
without cause at the sole and exclusive discretion of the General Manager, without default or
breach of this Agreement by the City.
12. NOTICES
Any notices which either party may desire to give to the other party under this Agreement
must be in writing and may be given either by (i) personal service, (ii) delivery by a reputable
document delivery service, such as but not limited to, Federal Express, that provides a receipt
showing date and time of delivery, or (iii) mailing in the United States Mail, certified mail, postage
prepaid, return receipt requested, addressed to the address of the party as set forth below or at
any other address as that party may later designate by Notice. Notice shall be effective upon
delivery to the addresses specified below or on the third business day following deposit with the
document delivery service or United States Mail as provided above.
Mailing Address: City of Temecula
Attn: General Manager
41000 Main Street
Temecula, CA 92590
To Vendor: Titan Rental Group, Inc.
Attn: Jeff Leichty
14460 Veterans Way
Moreno Valley, CA 92553
13. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court of final
jurisdiction, it is the intent of the parties that all other provisions of this Agreement be construed
to remain fully valid, enforceable, and binding on the parties.
08/08/2021
14. GOVERNING LAW
This Agreement shall be construed in accordance with, and governed by, the laws of the
State of California as applied to contracts that are executed and performed entirely in California.
The City and Vendor understand and agree that the laws of the State of California shall govern
the rights, obligations, duties, and liabilities of the parties to this Agreement and also govern the
interpretation of this Agreement. Any litigation concerning this Agreement shall take place in the
municipal, superior, or federal district court with geographic jurisdiction over the City of Temecula.
In the event such litigation is filed by one party against the other to enforce its rights under this
Agreement, the prevailing party, as determined by the court's judgment, shall be entitled to
reasonable attorney fees and litigation expenses for the relief granted.
15. PROHIBITED INTEREST
No officer, or employee of the City of Temecula that has participated in the development
of this agreement or its approval shall have any financial interest, direct or indirect, in this
Agreement, the proceeds thereof, the Vendor, or Vendor's sub -contractors for this project, during
his/her tenure or for one year thereafter. The Vendor hereby warrants and represents to the City
that no officer or employee of the City of Temecula that has participated in the development of
this agreement or its approval has any interest, whether contractual, non -contractual, financial or
otherwise, in this transaction, the proceeds thereof, or in the business of the Vendor or Vendor's
sub -contractors on this project. Vendor further agrees to notify the City in the event any such
interest is discovered whether or not such interest is prohibited by law or this Agreement.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties relating to the
obligations of the parties described in this Agreement. All prior or contemporaneous agreements,
understandings, representations and statements, oral or written, are merged into this Agreement
and shall be of no further force or effect. Each party is entering into this Agreement based solely
upon the representations set forth herein and upon each party's own independent investigation
of any and all facts such party deems material.
17. AUTHORITY TO EXECUTE THIS AGREEMENT
The person or persons executing this Agreement on behalf of the Vendor warrants and
represents that he or she has the authority to execute this Agreement on behalf of the Vendor
and has the authority to bind the Vendor to the performance of its obligation hereunder. The
General Manager is authorized to enter into an amendment on behalf of the City to make the
following non -substantive modifications to the agreement: (a) name changes; (b) extension of
time; (c) non -monetary changes in scope of work; (d) agreement termination.
08/08/2021
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the
day and year first above written.
TEMECULA COMMUNITY SERVICES
DISTRICT
By:
James Stewart, TCSD President
ATTEST:
By:
Randi Johl, Secretary
APPROVED AS TO FORM:
By:
Peter M. Thorson, General
Counsel
TITAN RENTAL GROUP, INC.
By:
i
By:
Angel Leichty, Vice s dent
VENDOR
Titan Rental Group, Inc.
Jeff Leichty
14460 Veterans Way
Moreno Valley, CA 92553
951-453-1541
infop,titaneventrentals.com
6
City Purchasing Mgr.
Initials and Date:
08/08/2021
EXHIBIT A
Scope of Work / Outline Of Order or Service Procedure
Vendor recognizes and agrees that this Agreement is for the purpose of establishing a contractual
relationship between the Temecula Community Services District and the Vendor, for the
purchase of goods or services. The procedure for ordering goods or requesting services is set
forth as follows:
1. The General Manager or his designee shall submit to Vendor a written "Request
for Order/Services". The Request for Order/Services shall include a description of the items to
be purchased or the services to be completed, the time for delivery or completion of the services,
and the plans and specifications for goods and equipment, if any.
2. Within five (5) business days of the date of the Request for Order/Services, Vendor
shall respond in writing to the Request for Order/Services and advise the General Manager or his
designee whether the goods are available, or services can be performed, along with the cost and
estimated delivery or start of services.
3. In the event an emergency or service is required, the General Manager or his
designee may transmit the Request for Order/Services orally to the Vendor. As soon as practical
following the emergency, the Vendor and City designee shall in good faith confirm in writing the
scope of the emergency order submitted or services undertaken.
4. Upon acceptance of the Vendor's response by the General Manager or his designee
the Vendor shall proceed with the order or begin services. The acceptance of the goods and/or
performance of the services shall be pursuant to the terms of this Agreement.
Services Include but may not be limited to:
Event site rental items, including but not limited to
a. Tables
b. Chairs
c. Canopies
d. Pedestrian Fencing
e. Tablecloths
08/08/2021
EXHIBIT B
PAYMENT RATES AND SCHEDULE
Quotes shall be provided as requested by City staff for each service requested. Cost of services
shall be as quoted, but in no event shall the total Agreement amount exceed $190,000.00, as
outlined in Section 4 of this Agreement. The not to exceed payment amount listed herein is an
estimated expenditure and this Agreement does not guarantee Vendor this amount in purchases.
08/08/2021
Item No. 16
TEMECULA COMMUNITY SERVICES DISTRICT
AGENDA REPORT
TO: General Manager/Board of Directors
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Approve Annexation of Tract Map Numbers 37341 and 37341-17, Within
Sommers Bend, to Service Level B (Residential Street Lights) Rates and Charges
(Located on East Side of Butterfield Stage Road and North of Long Valley Wash)
PREPARED BY: Ron Moreno, Assistant Director of Public Works
Annie Bostre-Le, Public Works Development Manager
RECOMMENDATION: That the Board of Directors adopt the following resolutions entitled:
RESOLUTION NO. CSD
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
TEMECULA COMMUNITY SERVICES DISTRICT OF THE
CITY OF TEMECULA, DECLARING INTENTION TO ANNEX
PROPERTY (TRACT MAP 37341 AND 37341-17) TO SERVICE
LEVEL B - RESIDENTIAL STREET LIGHTS AND TO LEVY
ASSESSMENTS ON SUCH PROPERTY FOR FISCAL YEAR
2024-25, APPROVING THE ENGINEER'S REPORT, AND
SETTING THE DATE, TIME AND PLACE OF A PUBLIC
HEARING ON THE PROPOSED ANNEXATION AND
ASSESSMENTS
RESOLUTION NO. CSD
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
TEMECULA COMMUNITY SERVICES DISTRICT OF THE
CITY OF TEMECULA, INITIATING PROCEEDINGS TO
ANNEX PROPERTY (TRACT MAP 37341 AND 37341-17) TO
SERVICE LEVEL B FOR FISCAL YEAR 2024-25
BACKGROUND: The Temecula Community Services District (TCSD) operates under
the authority of Community Services District Law and provides residential street lighting to
numerous residential subdivisions within the City of Temecula through Service Level "B". The
boundaries of the TCSD are coterminous with the City, and City Council serves as the Board of
Directors of the TCSD.
Tract Map Numbers 37341 and 37341-17, within Sommers Bend, formerly known as Roripaugh
Ranch is an existing residential development. On November 26, 2002, the City Council approved
the Roripaugh Ranch Specific Plan with private streets. On January 23, 2018, the City Council
approved the Roripaugh Ranch Specific Plan Amendment Number 4, which included a slight
realignment and removal of gated entries on Sommers Bend (Loop Road) and interior local streets
were revised to comply with updated fire safety requirements. These improvements allowed the
roadway and street lights to be publicly dedicated as accepted on Tract Map 37368 recorded on
July 25, 2019.
The property owner has requested that the TCSD establish the future parcel charges necessary to
provide ongoing revenue for residential street lighting within the development. Beginning Fiscal
Year 2024-25, the following TCSD rates and charges are proposed for residential street lighting
services within Tract Map Numbers 37341 and 37341-17:
Service Level B $ 25.68 per residential parcel
Pursuant to the provisions of Proposition 218, the TCSD is required to hold a public hearing and
obtain voter or property owner approval in order to establish certain new rates and charges. In
addition, a report must be prepared and filed with the Secretary/City Clerk which identifies all of
the affected parcels and the amount of the proposed rates and charges and date of the Public
Hearing. The Public Hearing is held at least 45 days after the mailing of the notices. If the
proposed rates and charges are not rejected pursuant to a written protest, then the TCSD will
conduct a mailed ballot proceeding not less than 45 days after the public hearing. The proposed
rates and charges for Service Level B cannot be imposed unless the property owners have approved
the new charges.
Staff recommends that the Board of Directors adopt the resolution to accept the filing of the report
on the proposed residential street lighting rates and charges for Tract Map Numbers 37341 and
37341-17, beginning in Fiscal Year 2024-25 and schedule a public hearing concerning this issue
for October 10, 2023. Staff will then proceed with noticing the owner of Tract Map Numbers
37341 and 37341-17, regarding the proposed rates and charges and the public hearing date. If there
is no majority protest against the rates and charges on October 10, 2023, staff with then proceed
with the mailed ballot process of Service Level B.
FISCAL IMPACT: If voter approved, the proposed rates and charges of $25.68 per
parcel will generate an annual levy of $ 3,543.84 for Service Level B. Actual costs for providing
long-term residential street lighting services within Tract Map Numbers 37341 through 37341-17
will be absorbed into Service Level B upon installation of said improvements.
ATTACHMENTS: 1. Vicinity Maps — Tract Maps 37341 and 37341-17
2. Resolution of Intention
3. Resolution of Initiating Proceedings
4. Preliminary Annexation Engineer's Report
IN THE CITY CIF TEMECULA, COUNTY OF RIVERSIDE , STATE OF CALIFORNIA
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AS PARCEL A PER LGT LINE ADJUSTMENT NO. LD 19-1393 RECORDEG FEBRUARY 20,
V 2020 AS INSTRUMENT NO.2020-0076510, ALL IN THE CITY OF TEMECULA, COUNTY
OF RIVERSIDE, STATE OF CALIFORNIA, LYING WITHIN SECTION 21, TCWNSHIP 7
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1. SEE SHEET NO. 2 FOR BOUNDARY CONTROL SHEET.
SURVEYOR'S NOTES AND MONUMENT NOTES.
2. SEE SHEET NO. 3 FOR BOUNDARY MAP, BASIS OF
BEARINGS AND VICINITY MAP.
MARCH 2O19 LEGEND
INDICATES BOUNDARY.
- INOICATES CENTER LINE.
INDICATES LOT LINE
INDICATES SHEET NO.
Ax- EASEMENT NOTES
1. AN EASEMENT FOR PUBLIC UTIL[TIES AND
INCIDENTAL PURPOSES fN FAVOR OF GENERAL
TELEPHONE COMPANY OF CALIFORNIA
RECORDED DECEMBER 5, 1986 AS INSTRUMENT
NO. 88-354239, O.R. CANNOT BE PLOTTED FROM
RECORD-
2 A 3' PUBLIC UTILITY EASEMENT DEDICATED HEREON.
3 A PRIVATE DRAINAGE EASEMENT WITHIN LOT 53
AND LOT 54.
4. AN EASEMENT FOR PUBLIC UTILITY PURPOSES IN FAVOR OF
EASTERN MUNICIPAL WATER DISTRICT RECORDED NOVEMBER
14, 2013 AS DOCUMENT NO. 2013-0539683, O.R.
5. AN EASEMENT FOR UNDERGROUND ELECTRICAL. SUPPLY SYSTEMS
AND COMMUNICATION SYSTEMS AND INCIMENTAL PURPOSES
IN FAVOR OF SOUTHERN CALIFORNIA EDISON COMPANY, A
CORPORATION RECORDED DECEMBER 4, 2019 AS INSTRUMENT
NO. 2019-0499070, O.R.
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LEGEND
INDICATES BOUNDARY.
— INDICATES CENTER LINE.
INDICATES LOT LINE.
OINDICATES SHEET N0.
�X EASEMENT NOTES
1. AN EASEMENT FOR PUBLIC UTILITIES AND
INCIDENTAL PURPOSES IN FAVOR OF GENERAL
TELEPHONE COMPANY OF CALIFORNIA
RECORDED DECEMBER 5, 1988 AS INSTRUMENT
NO. 88-354239, O.R. CANNOT BE PLOTTED FROM
RECORD..
2 A 3' PUBLIC UTILITY EASEMENT DEDICATED
HEREON.
3 A SEWER EASEMENT DEDICATED TO EASTERN
MUNICIPAL WATER DISTRICT FOR SEWER
PURPOSES WITHIN LOT 82 AND LOT 84.
4 AN EASEMENT DEDICATED TO
EASTERN MUNICIPAL WATER
DISTRICT FOR SEWER AND WATER
PURPOSES.
21 Al 22
23
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IN THE CITY OF TEMECULA,COUNTY OF RIVERSIDE ,STATE OF CALIFORNIA
TRACI MAP N010 3 17
BEING A PORTION OF PARCEL B OF NOTICE OF LOT LINE ADJUSTMENT NO.LD19-1393 RECORDED FEBRUARY 20,2020 AS
INSTRUMENT N0. 2020-0076510 OF OFFICIAL. RECORDS, A PORTION OF LOTS 24 AND 25 OF TRACT MAP N0. 37368, AS FILED
IN BOOK 468,PAGES 89 THROUGH 96,INCLUSIVE,OF MAPS, SHOWN AS PARCEL B OF NOTICE OF LOT LINE ADJUSTMENT
N0. LD21-1111 RECORDED JANUARY 6, 2022 AS INSTRUMENT N0. 2022-0008833 OF OFFICIAL RECORDS, ALL IN THE
CITY OF TEMECULA, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, LYING WITHIN SECTION 21, TOWNSHIP 7 SOUTH,
RANGE 2 WEST, SAN BERNARDINO MERIDIAN.
RICK ENGINEERING COMPANY JUNE 2021
SHEET INDEX MAP
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NO. LD21-�
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SHEET 4 OF 7 SHEETS
1. SEE SHEET NO. 2 FOR BOUNDARY CONTROL SHEET,
SURVEYOR'S NOTES, MONUMENT NOTES AND
RECORD DATA FOR BOUNDARY.
2. SEE SHEET NO. 3 FOR BOUNDARY MAP, BASIS OF
BEARINGS AND VICINITY MAP.
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RESOLUTION NO. CSD 2023-
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
TEMECULA COMMUNITY SERVICES DISTRICT OF THE
CITY OF TEMECULA, DECLARING INTENTION TO
ANNEX PROPERTY (TRACT MAP 37341 AND 37341-17) TO
SERVICE LEVEL B - RESIDENTIAL STREET LIGHTS AND
TO LEVY ASSESSMENTS ON SUCH PROPERTY FOR
FISCAL YEAR 2024-25, APPROVING THE ENGINEER'S
REPORT, AND SETTING THE DATE, TIME AND PLACE
OF A PUBLIC HEARING ON THE PROPOSED
ANNEXATION AND ASSESSMENTS
WHEREAS, the Board of Directors (the "Board") of the Temecula Community Services
District (the "District") of the City of Temecula has initiated proceedings for the annexation of
certain property, to Service Level B of the District (the "Assessment District") pursuant to the
Landscaping and Lighting Act of 1972, as found in Part 2 (commencing with Section 22500) of
Division 15 of the California Streets and Highways Code ("the Act"), for the purpose of funding
Residential Street Lighting; and
WHEREAS, as ordered by the Board, Webb Municipal Finance, LLC., the assessment
engineer, has prepared and filed with the Clerk of the Board a report regarding the assessments
which are proposed to be levied on and collected from the owners of the Subject Property, as
defined below, for Fiscal Year 2024-25, to pay the costs of the maintenance and servicing of such
Residential Street Lighting, and that report has been presented to and considered by the Board;
and
WHEREAS, it is necessary that the Board adopt a resolution of intention pursuant to
Sections 22606 and 22587 of the California Streets and Highways Code setting and providing for
notice of the time, date and place of public hearing on said report, the proposed annexation of the
Subject Property to the Assessment District and the proposed assessments; and
WHEREAS, in addition to the requirements set forth in the Act, to annex property into the
Assessment District, Proposition 218 establishes detailed requirements for the imposition of a
"new or increased" special assessment; and
WHEREAS, in addition to notice, ballot and hearing requirements, Proposition 218
requires the District to separate the general benefits from the special benefits conferred on a parcel,
and to only asses the special benefits on that parcel; and
WHEREAS, Proposition 218 requires all assessments to be supported by a detailed
Engineer's Report prepared by a registered professional engineer; and
WHEREAS, the proposed assessment will assess properties located within the Assessment
District pursuant to the amounts stated in the Engineer's Report ("Assessment Amount"); and
WHEREAS, pursuant to Proposition 218, the District must comply with applicable
sections of Article XII(D) of the California Constitution regarding the notice, hearing and protest
procedures.
NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by
Board of Directors of the Temecula Community Services District of the City of Temecula,
California as follows:
Section 1. Recitals. The above recitals are true and correct and are incorporated herein
by this reference.
Section 2. Findings. The Board of Directors finds that:
(a) The Engineer's report of Webb Municipal Finance, LLC. (the "Report") contains
all matters required by the Act and Proposition 218 and may, therefore, be approved by the Board;
(b) The assessments which are proposed to be levied for Fiscal Year 2024-25 on all
parcels of assessable property which are proposed to be annexed, to the Assessment District are
based on special benefit conferred upon each such parcel from the payment of the costs of the
residential street lighting and the maintenance and servicing thereof;
(c) The proportionate special benefit derived by each parcel within the Assessment
District has been determined in relationship to the entirety of the capital cost of the installation,
maintenance and servicing of the residential street lights and appurtenant facilities;
(d) The Assessment Amount which is proposed to be assessed on each such parcel is
based upon and will not exceed the reasonable cost of the proportional special benefit conferred
on that parcel;
(e) The Assessment Amount is supported by a detailed engineer's report prepared by
a registered professional engineer certified by the State of California.
Section 3. Intention. The Board declares that it intends to annex the Subject Property,
as defined below, into the Assessment District, to levy and collect assessments on all of the lots
and parcels of assessable property which are proposed to be annexed, to the Assessment District
for Fiscal Year 2024-25, and for the duration specified in Section 7 herein, in the amounts set forth
in the Report. Such assessments will be collected at the same time and in the same manner as
county taxes are collected, and all laws providing for the collection and enforcement of county
taxes shall apply to the collection and enforcement of the assessments.
Section 4. Improvements. The improvements which shall be provided for such
property by and through the assessments levied annually thereon include the following:
(a) The installation, maintenance and servicing of residential street lights;
Section 5. Annexation to Assessment District. The property which is proposed to
be annexed to the Assessment District is all the property that is in the Temecula Community
Services District and which is described in Exhibit "A" attached hereto and by this reference made
a part hereof ("Subject Property"). Upon the completion of the annexation proceedings, the
property proposed to be annexed will be included in the Assessment District. The boundaries of
the annexation are further described and shown in the Report.
Section 6. Report and Assessments. The Report, which is on file with the Clerk of
the Board, and which has been presented to the Board at the meeting at which this resolution is
adopted, is approved. Reference is made to the Report for a full and detailed description of the
improvements, the boundaries of the annexation, the assessments which are proposed to be levied
on the assessable lots and parcels of land in the annexation as a part of the Assessment District for
Fiscal Year 2024-25.
Section 7. Duration of Assessments. The assessments shall be levied on all parcels
of assessable property in the annexation, as identified in the Report, so long as the assessments are
necessary to finance the improvements specified in Section 4 hereof and the maintenance and
servicing thereof.
Section 8. Hearing. The public hearing on the proposed annexation of the Subject
Property to the Assessment District and the assessments which are proposed to be levied for Fiscal
Year 2024-25 and which is required by Sections 22587 through 22594 and 22624 through 22629
of the California Streets and Highways Code and Section 53753 of the California Government
Code, and Proposition 218 shall be held at 6:00 p.m. on October 10, 2023, in the City Council
Chambers at 41000 Main Street, Temecula, California.
Section 9. Notice of Hearing and Ballots. The Clerk of the Board shall mail a notice
of the proposed annexation, the proposed assessments and of the time, date and place of the public
hearing, as specified in Section 8 hereof, to the record owner of each parcel of property identified
in the Report. Such notice shall specify the total amount of the assessment chargeable to all the
property within the annexation, the amount chargeable to each owner's particular parcel, the
duration of the assessments, the reason for the assessments and the basis upon which the amounts
of the proposed assessments were calculated, together with the date, time and location of the public
hearing, as specified in Section 8 hereof. The notice shall include, in a conspicuous place, thereon,
a summary of the procedures applicable to the completion, return and tabulation of the assessment
ballots which will accompany the notice and shall include a statement that the existence of a
majority protest will result in the assessments not being levied, and that a majority protest will
exist if, upon the conclusion of the hearing, assessment ballots submitted in opposition to the
assessments exceed the assessment ballots submitted in favor of the assessments based on financial
obligation. There shall be included with each such notice mailed to owner of identified parcels
within the annexation an assessment ballot which includes the District's address for receipt of any
ballot when completed by any owner receiving such notice whereby such owner may indicate his
or her name, reasonable identification of the parcel and support or opposition to the proposed
assessments. The notice and the assessment ballots shall conform in all respects to the requirements
of subdivisions (b) and (c) of Section 53753 of the California Government Code and Article
XIII(D) of the California Constitution. Should there be any conflict between the Act and
Proposition 218, Proposition 218 shall control.
K3
Section 10. If Maiority Protest Exists
If a maiority protest exists, the Board shall not undergo another District -initiated
petition under the Act for at least twelve (12) months from the hearing date thereof, unless
otherwise provided by law.
PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Temecula
Community Services District of the City of Temecula this 22" d day of August, 2023.
James Stewart, President
ATTEST:
Randi Johl, Secretary
[SEAL]
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, Secretary of the Temecula Community Services District of the City of
Temecula, do hereby certify that the foregoing Resolution No. CSD 2023- was duly and
regularly adopted by the Board of Directors of the Temecula Community Services District of the
City of Temecula at a meeting thereof held on the 22nd day of August, 2023, by the following vote:
AYES: BOARD MEMBERS:
NOES: BOARD MEMBERS:
ABSTAIN: BOARD MEMBERS:
ABSENT: BOARD MEMBERS:
W
Randi Johl, Secretary
EXHIBIT A
DESCRIPTION OF PROPOSED TERRITORY TO BE ANNEXED
The properties proposed to be annexed into Service Level B of the Temecula Community Services District
are identified by Riverside County Assessor's Parcel Numbers (APN) in the Preliminary Annexation
Engineer's Report - Appendix A — Assessment Roll.
RESOLUTION NO. CSD 2023-
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
TEMECULA COMMUNITY SERVICES DISTRICT OF THE
CITY OF TEMECULA, INITIATING PROCEEDINGS TO
ANNEX PROPERTY (TRACT MAP 37341 AND 37341-1) TO
SERVICE LEVEL B FOR FISCAL YEAR 2024-25
WHEREAS, the Board of Directors (the "Board") of the Temecula Community Services
District (the "District") of the City of Temecula desires to undertake proceedings pursuant to the
provisions of the Landscape and Lighting Act of 1972, Part 2, Division 15 of the California Streets
and Highways Code (commencing with Section 22500) (hereafter referred to as the "Act"), to
annex certain property, to Service Level B of the District (the "Assessment District") for the
purpose of funding Residential Street Lighting; and
WHEREAS, the Board of Directors has retained Webb Municipal Finance, LLC. for the
purpose of preparing and filing the Engineer's Report and assisting in the public hearing and
formation process of the proposed annexation.
NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by the Board
of Directors of the Temecula Community Services District of the City of Temecula, California as
follows:
Section 1. Recitals
That the Recitals set forth above are true and correct.
Section 2. Engineer's Report
The Board of Directors hereby orders Webb Municipal Finance, LLC. to prepare and file
with the Clerk of the Board the Engineer's Report (the "Report") concerning the annexation of
property, to the Assessment District in accordance with the Act and the laws of the State of
California.
Section 3. Improvements
The improvements shall include the maintenance and servicing of residential street lighting.
Section 4. Severability
That the Board of Directors declares that, should any provision, section, paragraph,
sentence or word of this Resolution be rendered or declared invalid by any final court action in a
court of competent jurisdiction or by reason of any preemptive legislation, the remaining
provisions, sections, paragraphs, sentences or words of the Resolution as hereby adopted shall
remain in full force and effect
Section 5. Effective Date
That this Resolution shall take effect upon its adoption.
Section 6. Certification
That the Clerk of the Board shall certify as to the adoption of this Resolution and shall
cause the same to be processed in the manner required by law.
PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Temecula
Community Services District of the City of Temecula this 22"d day of August, 2023.
James Stewart, President
ATTEST:
Randi Johl, Secretary
[SEAL]
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, Secretary of the Temecula Community Services District of the City of
Temecula, do hereby certify that the foregoing Resolution No. CSD 2023- was duly and
regularly adopted by the Board of Directors of the Temecula Community Services District of the
City of Temecula at a meeting thereof held on the 22nd day of August, 2023, by the following vote:
AYES: BOARD MEMBERS:
NOES: BOARD MEMBERS:
I.\:331I_\I0: 97_ MLINLTJR]a:7.Y�
ABSENT: BOARD MEMBERS:
Randi Johl, Secretary
3
Webb
MUNICIPAL FINANCE
Preliminary Annexation Engineer's Report
Tract Nos. 37341 and 37341-17
Temecula Community Services District
Service Level B — Residential Streetlights
Prepared For
a
The Heart of Southern California
Wine Country
August 2023
Table of Contents
Sections
Section i.
Section 1
Section 2
Section 3
Tables
Table 3-1.
Appendices
Appendix A
Appendix B
Engineer's Statement
Plans and Specifications
Method of Apportionment
Budget
Operating Budget for Service Level B
Tax Roll
Annexation Assessment Diagram
_i
1
2
4
4
A-1
B-1
i. Engineer's Statement
AGENCY: CITY OF TEMECULA
PROJECT: TEMECULA COMMUNITY SERVICES DISTRICT SERVICE LEVEL B — RESIDENTIAL STREET LIGHTING
ANNEXATION —TRACT NOS. 37341 AND 37341-17
TO: BOARD OF DIRECTORS
CITY OF TEMECULA
STATE OF CALIFORNIA
REPORT PURSUANT TO "LANDSCAPING AND LIGHTING ACT OF 1972"
Pursuant to Articles XIII D, Section 4 of the California Constitution, the Proposition 218 Omnibus Implementation
Act and the Landscape and Lighting Act of 1972 this Report is prepared and presented to the Board of Directors
(the "Board") to describe and outline the proposed annexation of territory into Temecula Community Services
District Service Level B (the "District"). The Board will conduct a noticed public hearing to consider public
comments and written protests regarding the annexation and levy of the parcels within the proposed annexation
territory. Upon conclusion of the public hearing, property owner protest ballots received will be tabulated to
determine whether a majority protest exists. The Board will confirm the results of the balloting once the ballot
tabulation is completed. If a majority protest exists, further proceedings to implement the proposed annexation
and levy of assessments shall be abandoned at that time. If tabulation of the ballots indicates that a majority
protest does not exist for the proposed annexation and levy of assessments, the Board may adopt this Report and
confirm the annexation of territory and levy of assessments as presented herein. In such case, the levy information
will be submitted to the Riverside County Auditor/Controller and included as Assessments on the property tax roll
for Fiscal Year 2024-2025.
SECTION 1 The PLANS AND SPECIFICATIONS describe the annexation territory and the overall nature and extent
of the improvements and services provided.
SECTION 2 The METHOD OF APPORTIONMENT outlines the method of calculating each property's proportional
special benefit necessary to calculate the property's annual assessment. This method of
apportionment is consistent with the previously adopted method of apportionment for Service
Level B that was approved by the property owners in a protest ballot proceeding conducted when
the Service Level was formed.
SECTION 3 A BUDGET showing the estimated annual costs to operate, maintain and service the local lighting
improvements and appurtenant facilities within the annexation territory.
SECTION 4 An ASSESSMENT ROLL with the proposed assessment amounts to be levied and collected in Fiscal
Year 2024-2025 for each parcel based on the parcel's calculated proportional special benefit as
outlined in the Method of Apportionment and the annual assessment rates established by the
estimated budgets.
SECTION 5 ASSESSMENT DIAGRAM showing the boundaries of the proposed annexation territory. Parcel
identification, the lines and dimensions of each lot, parcel, and subdivision of land within the
annexation territory are shown on the Riverside County Assessor's Parcel Maps and shall include
any subsequent lot line adjustments or parcel changes therein. Reference is hereby made to the
Riverside County Assessor's Parcel Maps for a detailed description of the lines and dimensions of
each lot and parcel of land within the annexation territory.
Temecula Community Services District Service Level B — Residential Street Lighting
Engineer's Report —Annexation Tract Nos. 37341 and 37341-17
i. Engineer's Statement
I Matthew E. Webb, a Professional Civil Engineer (employed at Albert A. Webb Associates and retained through
an agreement between Webb Municipal Finance, LLC and my employer), acting on behalf of the Temecula
Community Services District, pursuant to the "CSD Law", do hereby submit the following:
The District requested Webb Municipal Finance, LLC, to prepare and file an Engineer's Annexation Report for
Temecula Community Services District Service Level B, pursuant to Article XIII D, Section 4 of the California
Constitution, presenting plans and specifications describing the general nature, location and extent of the
improvements to be maintained, an estimate of the costs of the maintenance, operations, and servicing of the
improvements for Service Level B, for the referenced Fiscal Year, an assessment of the estimated costs of the
maintenance, operations, and servicing the improvements, assessing the net amount upon all assessable lots
and/or parcels within the proposed annexation territory in proportion to the special benefit received;
Reference is hereby made to the Riverside County Assessor's maps for a detailed description of the lines and
dimensions of parcels within the District. The undersigned respectfully submits the enclosed Report as directed
by the Board of Directors of the Temecula Community Services District. Please note that Albert A. Webb Associates
provides engineering advice and related consulting services. Albert A. Webb Associates is not a registered
municipal advisor and does not participate in municipal advisory activities, and nothing in this Engineer's Report
is or should be interpreted to be municipal advisory services or advice.
Temecula Community Services District Service Level B — Residential Street Lighting
Engineer's Report —Annexation Tract Nos. 37341 and 37341-17
i. Engineer's Statement
Executed this day of
QRflFESS�QN
a NN . 37385 M
'rr CIVIC- Y
�oF CALiF°�
2023.
ALBERT A. WEBB ASSOCIATES
MATTHEW E. WEBB
PROFESSIONAL CIVIL ENGINEER NO. 37385
ENGINEER OF WORK
ON BEHALF OF THE CITY OF TEMECULA AND
THE TEMECULA COMMUNITY SERVICES DISTRICT
STATE OF CALIFORNIA
Final approval, confirmation and levy of the annexation territory and all matters in the Engineer's Report were
made on the day of 2023, by adoption of Resolution No. by the Board
of Directors.
CITY CLERK
CITY OF TEMECULA
STATE OF CALIFORNIA
A copy of the Tax Roll and Engineer's Annexation Report were filed in the office of the City Clerk on the
day of , 2023.
CITY CLERK
CITY OF TEMECULA
STATE OF CALIFORNIA
Temecula Community Services District Service Level B — Residential Street Lighting
Engineer's Report —Annexation Tract Nos. 37341 and 37341-17
1. Plans and Specifications
The territory within the proposed annexation consists of lots or parcels of land within the District, which is
coterminous with the City of Temecula boundary. The purpose of the District is to provide through annual
assessments, funding for the ongoing operation, maintenance, utility costs, and administration of residential
streetlights.
Temecula Services District Service Level B — Residential Street Lighting
Engineer's Report —Annexation Tract Nos. 37341 and 37341-17
2. Methodology
Proposition 218 Compliance
On November 5, 1996, California voters approved Proposition 218, entitled the "Right to Vote on Taxes Act," which
added Article XIII D to the California Constitution. While its title refers only to taxes, Proposition 218 establishes
new procedural requirements for the formation and administration of assessment districts. Proposition 218 also
requires that with certain specified exceptions, which are described below, all existing assessment districts must
be ratified by the property owners within the District using the new procedures.
Some of these exceptions include:
1. Any assessments imposed exclusively to finance the capital cost or maintenance and operation expenses for
streets.
2. Any assessments levied pursuant to a petition signed by the persons owning all of the parcels subject to the
assessment at the time the assessment was initially imposed.
However, even if assessments are initially exempt from Proposition 218, if the assessments are increased in the
future, the City will need to comply with the provisions of Proposition 218 for that portion of the increased
assessment formula.
Proposition 218 does not define the term "streets," however, based on the opinions of the public agency officials,
attorneys, assessment engineers, and Senate Bill 919, it has been determined that streets include all public
improvements located within the street rights -of -way. This would include median and parkway landscaping, traffic
signals, safety lighting, and street lighting.
Proposition 218 defines "assessment" as "any levy or charge upon real property by an agency for a special benefit
conferred upon the real property." Cal. Const., art. XIII D, §2(b). A special assessment, sometimes called a "benefit
assessment," is a charge generally levied upon parcels of real property to pay for benefits the parcels receive from
local improvements. Special assessments are levied according to statutory authority granted by the Legislature or,
in some instances, local charters. Distinguishing among taxes, fees, and assessments can be difficult and often
depends on the context in which the distinction is made. For example, taxes, assessments, and property -related
fees all may be imposed on property. The key feature that distinguishes an assessment from a tax, fee, or charge
is the existence of a special benefit to real property. Without identifying a special benefit, there can be no
assessment.
Distinguishing General and Special Benefit
Proposition 218 added a set of procedures and requirements, which a local government must follow to levy an
assessment. In addition to notice, hearing, and assessment ballot proceedings, Proposition 218 provides that "only
special benefits are assessable" and requires a local government to "separate the general benefits from the special
benefits conferred on a parcel."
By its nature, most public improvements financed through an assessment district contain an element of public
benefit. The test is: does there exist, with relation to the improvement, a special benefit to the property assessed?
The law requires the portion of the cost of the improvement, which benefits the public generally, to be separated
from that portion of the cost of the improvement, which specially benefits assessed properties. Proposition 218
provides the following definition of "special benefit":
"Special benefit" means a particular and distinct benefit over and above general benefits conferred on real
property located in the district or to the public at large. General enhancement of property value does not
constitute "special benefit".
Temecula Services District Service Level B — Residential Street Lighting
Engineer's Report —Annexation Tract Nos. 37341 and 37341-17
2. Methodology
Method of Apportionment
Pursuant to the Landscaping and Lighting Act of 1972 and Article XI II D of the Constitution of the State of California,
all parcels that have special benefit conferred upon them as a result of the maintenance and operation of
improvements shall be identified, and the proportionate special benefit derived by each identified parcel shall be
determined in relationship to the entire cost of the maintenance and operation of the improvements. Only parcels
that receive direct special benefit are assessed, and each parcel is assessed in proportion to the estimated benefit
received.
To assess benefits equitably it is necessary to calculate each property's relative share of the special benefits
conferred by the funded improvements and service. The Equivalent Dwelling Unit (EDU) method of assessment
apportionment is utilized in this District and establishes a basic unit (base value) of benefit and then calculates the
benefit derived by each assessed parcel as a multiple (or a fraction) of that basic unit. For the purposes of this
Engineer's Report, an EDU is the quantum of benefit derived from the various improvements by a single-family
residential parcel. The single-family residential parcel has been selected as the basic unit for the calculation of
assessments since it represents the majority of the parcels in the District. Thus, the "benchmark" property (the
single-family residential parcel) derives one EDU of benefit and is assigned 1.00 Equivalent Dwelling Unit. The
Assessment for Single -Family parcels within the District is therefore calculated by dividing the total District
Assessment by the total number of Equivalent Dwelling Units to determine the Annual Assessment per Equivalent
Dwelling Unit or Single -Family parcel.
Total District Balance to Levy (Budgeted) / Total Number of EDUs (Total Residential Lots + Assigned
Condominium Units) = Assessment per EDU/Parcel
The district includes all developed single-family residential parcels, condominiums, and residential vacant lots for
which the District provides ongoing servicing, operation, and maintenance of local street lighting improvements.
The current rate and charge for Service Level B is $25.68 per residential lot ($12.84 per condominium unit within
Specific Plans) and shall be applied to developed and undeveloped residential parcels.
Temecula Services District Service Level B — Residential Street Lighting 3
Engineer's Report —Annexation Tract Nos. 37341 and 37341-17
3. Budget
Table 3-1
Estimated Service Level B Annexation Operating Budget Summary for Fiscal Year 2024-2025
Budget Item
Level B Level
192 Annexation
B
OPERATIONS MAINTENANCE
Property Tax Administrative Fees
$12,000
$65
Street Lighting
$455,000
$2,463
Subtotal Operations Maintenance
$455,000
$2,463
TOTAL DIRECT DISTRICT COSTS
$467,000
$2,528
EXPENDITURES/REVENUES
Contingency Reserve
$0
$0
TOTAL EXPENDITURES / REVENUES
$467,000
$2,528
CONTRIBUTIONS
Other Contributions
($187,763)
($1,016)
TOTAL COLLECTION/CONTRIBUTIONS
($187,763)
($1,016)
Balance to Levy .•
Number of Parcels
138
Number of EDUs
138
Assessment Rate per EDU
$25.68
Temecula Services District Service Level B — Residential Street Lighting
Engineer's Report —Annexation Tract Nos. 37341 and 37341-17
APPENDIX A
Assessment Roll
Service Level B Annexation
Assessment Roll
,.
964690001 1 $ 25.68
964690002 1 $ 25.68
964690003
1
$ 25.68
964690004
1
$ 25.68
964690005
1
$ 25.68
964690006
1
$ 25.68
964690007
1
$ 25.68
964690008
1
$ 25.68
964691001
1
$ 25.68
964691002
1
$ 25.68
964691003
1
$ 25.68
964691004
1
$ 25.68
964691005
1
$ 25.68
964691006
1
$ 25.68
964691007
1
$ 25.68
964692001
1
$ 25.68
964692002
1
$ 25.68
964692003
1
$ 25.68
964692004
1
$ 25.68
964692005
1
$ 25.68
964692006
1
$ 25.68
964692007
1
$ 25.68
964692008
1
$ 25.68
964692009
1
$ 25.68
964692010
1
$ 25.68
964693001
1
$ 25.68
964693002
1
$ 25.68
964693003
1
$ 25.68
964693004
1
$ 25.68
964693005
1
$ 25.68
964693006
1
$ 25.68
964693007
1
$ 25.68
964693008
1
$ 25.68
964693009
1
$ 25.68
964693010
1
$ 25.68
964693011
1
$ 25.68
964693012
1
$ 25.68
964693013
1
$ 25.68
964693014
1
$ 25.68
964693015
1
$ 25.68
964693016
1
$ 25.68
..
964693017
1
$ 25.68
964694001
1
$ 25.68
964694002
1
$ 25.68
964694003
1
$ 25.68
964694004
1
$ 25.68
964694005
1
$ 25.68
964694006
1
$ 25.68
964694007
1
$ 25.68
964694008
1
$ 25.68
964694009
1
$ 25.68
964694010
1
$ 25.68
964694011
1
$ 25.68
964694012
1
$ 25.68
964910001
1
$ 25.68
964910002
1
$ 25.68
964910003
1
$ 25.68
964910004
1
$ 25.68
964910005
1
$ 25.68
964910006
1
$ 25.68
964910007
1
$ 25.68
964910008
1
$ 25.68
964910009
1
$ 25.68
964910010
1
$ 25.68
964910011
1
$ 25.68
964910012
1
$ 25.68
964910013
1
$ 25.68
964910014
1
$ 25.68
964910015
1
$ 25.68
964910016
1
$ 25.68
964910017
1
$ 25.68
964910018
1
$ 25.68
964910019
1
$ 25.68
964910020
1
$ 25.68
964910021
1
$ 25.68
964910022
1
$ 25.68
964910023
1
$ 25.68
964910024
1
$ 25.68
964910025
1
$ 25.68
964910026
1
$ 25.68
964910027
1
$ 25.68
964910028
1
$ 25.68
964910029
1
$ 25.68
964910030
1
$ 25.68
964910031
1
$ 25.68
964910032
1
$ 25.68
..
964910033
1
$ 25.68
964910034
1
$ 25.68
964910035
1
$ 25.68
964910036
1
$ 25.68
964910037
1
$ 25.68
964910038
1
$ 25.68
964910039
1
$ 25.68
964910040
1
$ 25.68
964910041
1
$ 25.68
964910042
1
$ 25.68
964910043
1
$ 25.68
964910044
1
$ 25.68
964910045
1
$ 25.68
964911001
1
$ 25.68
964911002
1
$ 25.68
964911003
1
$ 25.68
964911004
1
$ 25.68
964911005
1
$ 25.68
964911006
1
$ 25.68
964911007
1
$ 25.68
964911008
1
$ 25.68
964911009
1
$ 25.68
964911010
1
$ 25.68
964911011
1
$ 25.68
964911012
1
$ 25.68
964911013
1
$ 25.68
964911014
1
$ 25.68
964911015
1
$ 25.68
964911016
1
$ 25.68
964911017
1
$ 25.68
964911018
1
$ 25.68
964911019
1
$ 25.68
964911020
1
$ 25.68
964911021
1
$ 25.68
964911022
1
$ 25.68
964911023
1
$ 25.68
964911024
1
$ 25.68
964911025
1
$ 25.68
964911026
1
$ 25.68
964911027
1
$ 25.68
964911028
1
$ 25.68
964911029
1
$ 25.68
964911030
1
$ 25.68
964911031
1
$ 25.68
964911032
1
$ 25.68
APPENDIX B
Annexation Assessment Diagram
Webb
MVNICIPAL FINANCE
ASSESSMENT DIAGRAM
SERVICE LEVEL B - RESIDENTIAL STREET LIGHTING
ANNEXATION BOUNDARY - TRACT NOs. 37341 AND 37341-17
TEMECULA COMMUNITY SERVICES DISTRICT
CITY OF TEMECULA, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA
OUSS'?O R OD
GLUBNsg GeN1E
F\1NE
Legend
ANNEXATION BOUNDARY
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Item No. 17
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Luke Watson, Deputy City Manager
DATE: August 22, 2023
SUBJECT: Introduce Ordinance Amending Titles 5, 8, and 17 of the Temecula Municipal
Code, and Adopt a Resolution Setting the Fee for a Tobacco Shop Permit and Find
that this Ordinance is Exempt from the California Environmental Quality Act
(CEQA) Pursuant to CEQA Guidelines Section 15061 (b)(3)
PREPARED BY:
RECOMMENDATION:
Mark Collins, Assistant Planner
That the City Council:
1. Introduce and read by title only an ordinance entitled:
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
TEMECULA AMENDING TITLES 5, 8, AND 17 OF THE
TEMECULA MUNICIPAL CODE TO (1) AMEND MASSAGE
ESTABLISHMENT REGULATIONS, (2) ADD DEFINITIONS
FOR TOBACCO SHOP, TOBACCO SHOP PERMIT AND
UPDATE DEFINITIONS OF TOBACCO PRODUCT AND
TOBACCO PARAPHERNALIA, (3) IMPLEMENT A TOBACCO
SHOP PERMIT PROGRAM TO INCLUDE STRUCTURAL AND
OPERATIONAL REQUIREMENTS, (4) UPDATE TOBACCO
RETAILERS LICENSE PROCESSES, (5) AMEND
REGULATIONS ON SMOKING IN HOTEL ROOMS, (6)
REMOVE TOBACCO SHOP AS A CONDITIONALLY
PERMITTED USE IN TABLE 17.08.030, (7) IMPLEMENT
TOBACCO SHOP PERMIT REQUIREMENTS IN PLANNED
DEVELOPMENT OVERLAY ZONING DESIGNATIONS 1 AND
4, AND (8) MAKE A FINDING THAT THIS ORDINANCE IS
EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL
QUALITY ACT (CEQA) PURSUANT TO CEQA GUIDELINES
SECTION 15061 (13)(3)
2. Adopt Resolution entitled:
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TEMECULA ESTABLISHING A TOBACCO SHOP PERMIT
FEE
SUMMARY OF ORDINANCE: The proposed Ordinance would make amendments
to Titles 5, 8, and 17 of the Temecula Municipal Code. Listed below is a summary of the proposed
changes to the Municipal Code:
Changes to Title 5 — Chapter 5.22 Massage and Massage Establishments:
Clarifying that Reiki, Cupping, Lymphatic, and similar massage, or wellness activities are
massage activities that require a Massage Establishment Permit (MEP)
2. Require the practitioners of Reiki, Cupping, Lymphatic and similar massage or wellness
activities to be a Certified Massage Therapist with a valid California Massage Therapy
Council License (CAMTC)
3. Prohibit outcall massage services without a physician's written recommendation or order
4. Prohibit pets at massage establishments, with the exception of working service dogs
5. Require medical professionals who operate, own or supervise an exempt massage business
to sign an affidavit attesting that massage is performed under their care and must be on site
during such treatments
6. Modify the code to consolidate violations into an inspection friendly table
Changes to Title 5 — Chapter 5.24 Licensure of Tobacco Retailers:
7. Add definition for "Tobacco Shop," "Tobacco Shop Permit," and update the definitions of
"Tobacco Paraphernalia," and "Tobacco Product"
Implement an annual permit for Tobacco Shops, to include:
a. A cap on the number of Tobacco Shops within the City at a rate of one (1) Tobacco
Shop per 10,000 Temecula residents,
b. Separation requirements for Tobacco Shops from sensitive receptors,
c. Operational standards,
d. Sign and lighting requirements,
e. Prohibit lounge and leisure type activities; and
f. Prohibit the sale or consumption of alcohol
9. Update the process for a Tobacco Retailers License and assign duties to specific
departments, in this instance it would be the Chief of Police or their designee
Changes to Title 8 — Chapter 8.36 Smoking in Public Places:
10. Update the number of hotels rooms permitted to be designated as "smoking" rooms in
accordance with state law
11. Remove an outdated exemption for smoking indoors for significant tobacco retailers
Changes to Title 17
Table 17.08.030 Schedule of Permitted Uses:
12. Remove Tobacco Shop as a conditionally permitted use in the Neighborhood Commercial
(NC) Zoning Designation
Planned Development Overlay No. 1 — Table 17.22.106 Schedule of Permitted Uses:
13. Add "Note 6" to the table specifying that Tobacco Shops are subject to the requirements
of Section 5.24.120
Planned Development Overlay No. 4 — Table 17.22.136B Schedule of Permitted Uses:
14. Add "Note 7" to the table specifying that Tobacco Shops are subject to the requirements
of Section 5.24.120
BACKGROUND: The City of Temecula City Council adopted the Municipal Code in
January 1990. Since its adoption, the City Council has periodically made amendments to various
sections of the Code to improve its clarity, make corrections and implement state law. The
proposed amendments to the Temecula Municipal Code include amendments to Title 5 (Business
Licenses and Regulations), Title 8 (Health and Safety), and Title 17 (Zoning).
Pursuant to Government Code Section 65800, the Planning Commission is required to review and
make recommendations to the City Council regarding zoning regulations and amendments to Title
17 Zoning (Development Code) of the Temecula Municipal Code. The changes to Title 5 (Business
Licenses and Regulations), and Title 8 (Health and Safety) of the Temecula Municipal Code of the
proposed ordinance fall outside the purview of the Planning Commission, in that it is not an
amendment to Title 17. However, staff felt it was important for the Planning Commission to review
these proposed changes, which will place new requirements on existing and future tobacco shops
throughout the City. The item was presented at a public hearing to the Planning Commission on
July 19, 2023, and Resolution No. 2023-14 was adopted recommending the City Council adopt
the proposed ordinance.
City staff met with the City Council Public Safety Ad Hoc Subcommittee on April 25, 2023 to
discuss the proposed ordinance and again on June 13, 2023 to discuss proposed changes to the
draft ordinance (Councilmembers Alexander and Kalfus).
City staff met with the Planning Commission Municipal Code Maintenance Ad Hoc Subcommittee
on June 7, 2023 (Commissioners Hagel and Ruiz).
FISCAL IMPACT: Community Development budgeted sufficient funds for the
ordinance development and fee study, which will include administrative costs, and enforcement.
ATTACHMENTS: 1. Ordinance
2. Resolution
3. Planning Commission Resolution No. 2023-14
4. Notice of Public Hearing
5. Notice of Exemption
ORDINANCE NO.2023-
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF TEMECULA AMENDING TITLES 5, 8, AND 17 OF THE
TEMECULA MUNICIPAL CODE TO (1) AMEND
MASSAGE ESTABLISHMENT REGULATIONS, (2) ADD
DEFINITIONS FOR TOBACCO SHOP, TOBACCO SHOP
PERMIT AND UPDATE DEFINITIONS OF TOBACCO
PRODUCT AND TOBACCO PARAPHERNALIA, (3)
IMPLEMENT A TOBACCO SHOP PERMIT PROGRAM TO
INCLUDE STRUCTURAL AND OPERATIONAL
REQUIREMENTS, (4) UPDATE TOBACCO RETAILERS
LICENSE PROCESSES, (5) AMEND REGULATIONS ON
SMOKING IN HOTEL ROOMS, (6) REMOVE TOBACCO
SHOP AS A CONDITIONALLY PERMITTED USE IN
TABLE 17.08.030, (7) IMPLEMENT TOBACCO SHOP
PERMIT REQUIREMENTS IN PLANNED DEVELOPMENT
OVERLAY ZONING DESIGNATIONS 1 AND 4, AND (8)
MAKE A FINDING THAT THIS ORDINANCE IS EXEMPT
FROM THE CALIFORNIA ENVIRONMENTAL QUALITY
ACT (CEQA) PURSUANT TO CEQA GUIDELINES
SECTION 15061 (B)(3)
THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY ORDAIN AS
FOLLOWS:
Section 1. Procedural Findings. The City Council of the City of Temecula does
hereby find, determine and declare that:
A. City staff identified the need to make minor revisions and clarifications to portions
of Title 5 (Business Licenses and Regulations), Title 8 (Health and Safety), and Title 17 (Zoning)
of the Temecula Municipal Code.
B. The code amendments are being made to address operational concerns surrounding
massage establishments, implement a new permit for tobacco shops to include operational
standards, and remove tobacco shop as a conditionally permitted use in the neighborhood
commercial zoning district. In addition, the ordinance updates the number of permitted smoking
rooms allowed in hotels in accordance with changes in state law. Finally, the code amendment
makes minor typographical edits to the code.
C. As required by State law, the Planning Commission considered the proposed
amendments to Title 17 (Zoning) of the Temecula Municipal Code ("Ordinance") on July 19,
2023, at a duly noticed public hearing as prescribed by law, at which time the City staff and
interested persons had an opportunity to and did testify either in support of or opposition to this
matter.
D. At the conclusion of the Planning Commission hearing and after due consideration
of the testimony, the Planning Commission adopted PC Resolution No. 2023-14, recommending
that the City Council approve the code amendments.
E. The City Council, at a regular meeting, considered the Ordinance on August 22,
2023, at a duly noticed public hearing, as prescribed by law, at which time the City Staff and
interested persons had an opportunity to and did testify either in support or opposition to this
matter.
F. Following the public hearing, the City Council considered the entire record of
information received at the public hearings before the Planning Commission and City Council.
Section 2. Further Findings. The City Council, in approving the proposed
Ordinance, hereby makes the following additional findings as required by Section 17.01.040
("Relationship to General Plan") of the Temecula Municipal Code:
1. The proposed uses are allowed in the land use designation in which the use is located,
as shown on the land use map, or is described in the text of the general plan.
The proposed changes to Title 17 include removal of tobacco shop as a permitted use in
Neighborhood Commercial Zoning Designation and requiring Tobacco Shops in Planned
Development Overlay (PDO) districts No. 1 and 4 to adhere to the new requirements of a Tobacco
Shop Permit. These changes are prohibiting land uses or imposing requirements on existing uses,
rather than allowing a use where it was not previously permitted. All other proposed amendments
are minor clarifications and typographical edits and do not propose any land use changes contrary
to the adopted General Plan.
2. The proposed uses are in conformance with the goals, policies, programs and
guidelines of the elements of the general plan.
The proposed amendments to Title 17 of the Temecula Municipal Code do not propose any land
use that is inconsistent with the Temecula General Plan. The majority of the Code Amendments
do not create or allow new uses where they were not previously allowed. Only the revisions to the
Neighborhood Commercial (NC) Zoning district impact the use of land. The Code Amendments
would remove Tobacco Shop as a permitted use in the NC Zoning district only. The remaining
proposed amendments to the Temecula Municipal Code are minor clarifications and typographical
edits and do not result in a contrary policy direction or indicate an inconsistency between the
Temecula Municipal Code and the adopted General Plan.
3. The proposed uses are to be established and maintained in a manner which is consistent
with the general plan and all applicable provisions contained therein.
The proposed amendments to Title 5, 8, and 17 of the Temecula Municipal Code do not propose
any land use that is inconsistent with the Temecula General Plan. The proposed changes to massage
establishments modify definitions and operational requirements, require notarized documentation
for exempt massage facilities and the prohibition of pets furthers Policy 5.4 of the Economic
Development Element of the Temecula General Plan, which is to "Monitor existing businesses
and support small businesses and the business retention program to encourage local employment
and growth of local businesses." Changes to tobacco regulations include modifying definitions,
implementing an annual permit for tobacco shops to include operational requirements, and
updating the number of designated smoking rooms is in compliance with Goal 3 of the Community
Design Element of the Temecula General Plan which is to ensure "Preservation and enhancement
of the positive qualities of individual districts or neighborhood." All other proposed amendments
are clarifications and typographical edits and do not propose any land use changes contrary to the
adopted General Plan.
Section 3. Environmental Findings. The City Council hereby finds that this
Ordinance is exempt from the requirements of the California Environmental Quality Act
("CEQA") pursuant to Title 14 of the California Code of Regulations, Section 15061(b)(3) because
it can be seen with certainty that there is no possibility that the Municipal Code amendments would
have a significant impact on the environment. The Municipal Code amendments are minor policy
changes, changes required by state law, and the imposition of regulations on existing uses and will
not increase the intensity or density of any land use. A Notice of Exemption has been prepared and
will be filed in accordance with CEQA and the State CEQA Guidelines.
Section 4. Section 5.22.020 (Definitions) of Chapter 5.22 (Massage and Massage
Establishments) of Title 5 (Business License and Regulations) of the Temecula Municipal Code is
hereby amended to amend the definition of "Massage" as follows (with additions appearing in
underlined text), with all other provisions of Section 5.22.020 remaining unchanged:
"Massage" means the scientific manipulation of the soft tissues of the human body.
"Massage" includes bodywork such as reiki, trigger point, hiatsu, cpppin and l3phatic drainage.
Section 5. A new Item 5.22.040.A.I is hereby added to Subsection 5.22.040.A of
Section 5.22.040 (Massage Establishment Permit Required) of Chapter 5.22 (Massage and
Massage Establishments) of Title 5 (Business License and Regulations) of the Temecula
Municipal Code (with additions appearing in underlined text), with all other provisions of Section
5.22.040 remaining unchanged:
A. It is unlawful for any person to engage in, operate, conduct or carry on, in or upon any
premises, a massage establishment without first obtaining a massage establishment permit
pursuant to this chapter, securing the necessary business license as required by this code,
and complying with Title 5 of this code. A separate permit shall be obtained for each
separate massage establishment operated by such person.
1. Massage establishments include facilities that provide Reiki, Trigger Point, Shiatsu,
Cupping, Lymphatic Drainage and any other activity that meets the definition of
massage, as defined in Section 5.22.020 of this code.
Professionals of such massage practices or any activity that meets the definition of
massage as defined in Section 5.22.020 of this code shall be CAMTC certified in
accordance with Section 5.22.030 of this code.
3
Section 6. Item 5.22.090.A.1 of Subsection 5.22.090.A (Requirements applicable to
the operation of outcall services) of Chapter 5.22 (Massage and Massage Establishments) of Title
5 (Business License and Regulations) of the Temecula Municipal Code is hereby amended to read
as follows (with additions appearing in underlined text), with all other provisions of Section
5.22.090 remaining unchanged:
A. Outcall Massage. No person shall provide outcall massage in the city unless all of the
following requirements are met:
1. The appointment for the outcall massage is performed only under a physician's written
recommendation or order and the appointment was made by a massage establishment
in good standing under this chapter and the massage professional is employed by the
same massage establishment.
Section 7. A new Subsection "28" (Pets) is hereby added to Subsection B (Operations)
of Section 5.22.080 (Requirements applicable to the operation of massage establishments.) of
Chapter 5.22 (Massage and Massage Establishments) of Title 5 (Business License and
Regulations) of the Temecula Municipal Code to read as follows (with additions appearing in
underlined text), with all other provisions of Section 5.22.080 remaining unchanged:
28. Pets. No pet(s) or live animal mascots, regardless of species, shall be allowed on site of
any massage establishment, except for a working "service animal" as defined in Section
6.04.010 of this code.
Section 8. Subsection 5.22.120A.I (Exemptions) of Chapter 5.22 (Massage and
Massage Establishments) of Title 5 (Business License and Regulations) of the Temecula
Municipal Code is hereby amended to read as follows (with deletions shown in strikethrough text
and additions appearing in underlined text), with all other provisions of Section 5.22.120
remaining unchanged:
A. This chapter shall not apply to the following individuals or businesses while engaged in
the performance of the duties of their respective professions:
1. Persons
of the state of Galifomia, > btA not fifnited to, holders of medieal degfees,
stleh as
pPhysicians, surgeons, chiropractors, osteopaths, and per -sons the-r- medical professionals and
other persons holding a valid certificate to practice the healing arts, except for CAMTC-certified
massage eg therapists, working under their direct supervision who are working at the same location
as the licensed person, provided such professionals are performing massage, as defined in this
chapter, at a licensed business as part of, and to the extent permitted by, their respective
professions. Direct supervision, as used in this subsection, requires persons holding a valid
certificate to practice the healing arts under the provisions of Division 2 (commencing with Section
500) Business and Professions Code to be present at the office of the business establishment and
immediately available to furnish assistance and direction throughout the performance of the
massage. The supervising medical professional is required to be physicalpresent on site. The
required presence does not include virtual presence through audio/video real-time communications
technology;
4
Section 9. A new subsection "C" (Affidavit) is hereby added to Section 5.22.120
(Exemptions) of Chapter 5.22 (Massage and Massage Establishments) of Title 5 (Business License
and Regulations) of the Temecula Municipal Code to read as follows (with additions appearing in
underlined text), with all other provisions of Section 5.22.120 remaining unchanged:
C. Affidavit. All persons holding a valid certificate to practice the healing arts under the laws
of the state of California who operate an exempt massage facility as defined by Section
5.22.120 of this code shall provide a notarized affidavit attesting that all massage treatments
performed are under their order or direction and that they will remain on site during all such
treatments. Such persons must assure that all assistants, students or aides do not function
autonomously.
Section 10. A new Section 5.22.155 (Violation Summary) is hereby added to Chapter
5.22 (Massage and Massage Establishments) of Title 5 (Business License and Regulations) of the
Temecula Municipal Code to read as follows:
5.22.155 Violation and Penalty Table.
Table 5.22.155 - Violation Summary'
Level 1 VIOLATIONS
Code Section
Per TMC 5.22.140(B)(1) - Any violation of the provisions below are
rounds to revoke a Massage Establishment Permit
5.22.070(C)(1)(a)
Applicant or any officer/director of a corporation operating a massage
establishment has been convicted of any crime that requires registration with any
level of government or agency similar to and including Penal Code Section 290 or
involves conduct that violates any law similar to and including Penal Code
Sections 266(h), 266(i), 314, 315, 316, 318, 647 (a), (b , or (d), 653.22, 653.23 or
any crime settled in a plea to violations of Penal Code Section 415, 602 or any
lesser included or related offense.
5.22.070(C (1� )(b)
Applicant or any officer/director of a corporation operating a massage
establishment has been convicted of a Health and Safety Code Section 11550
offense or any offense involvingthe sale, distribution or possession of a
controlled substance specified in Health and Safety Code Sections 11054, 11055,
11056, 11057 or 11058.
5.22.070(C (1)(c)
Applicant or any officer/director of a corporation operating a massage
establishment has engaged in conduct in another jurisdiction which, if it had
occurred within the City, would constitute grounds for denial or revocation under
this chapter.
5.22.070(C)(1)(d)
Applicant or any officer/director of a corporation operating a massage
establishment has been subjected to a permanent injunction against the conducting
or maintaining of a nuisance pursuant to Penal Code Sections 11225 through
11235 or any similar provisions of law in a jurisdiction outside the state of
California
5.22.070(C)(1)(e)
Applicant or any officer/director of a corporation operating a massage
establishment has engaged in conduct in any state or country which would
constitute an offense as described in subsection 5.22.070(1)(a) or (b) of this
section
5.22.070(C)(1)(fl
Applicant or any officer/director of a corporation operating a massage
establishment has been convicted of an act involving theft, dishonesty, fraud,
deceit or moral turpitude or an act of violence, which act or acts are related to the
qualifications, functions or duties of the operator of a massage establishment, or
which act or acts occurred in connection with the operation of a massage
establishment
5.22.070 C (1� )(g)
Applicant or any officer/director of a corporation operating a massage
establishment is registered under Penal Code Section 290, or any similar law in
any state or other jurisdiction.
5.22.070(C)(1)(h)
Applicant or any officer/director of a corporation operating a massage
establishment has had a massage establishment permit, or other similar license or
permit denied, suspended or revoked for cause by any governmental authority.
5.22.070(C)(1)(i)
Applicant or any officer/director of a corporation operating a massage
establishment has had any massage therapist or massage practitioner permit,
^
license, or certification denied, revoked or suspended by the CAMTC.
5.22.080(B)(5)
No person or persons shall be allowed to live inside the massage establishment at
any time. Beds, mattresses, waterbeds, futons, sofa beds, or any We of portable or
convertible beds are not permitted on the premises.
5.22.080(B)(7)
No person shall enter, be in or remain in anyof a massage establishment while
_part
in possession of, consuming using or under the influence of any alcoholic
beverage, recreational drugs or controlled substance. The operator and on -duty
manager shall be responsible to ensure that no such person shall enter or remain
upon the massage establishment. Service of alcoholic beverages or recreational
drugs shall not be allowed.
5.22.080(B)(8)
No contraceptive devices, i.e., condoms or other prophylactics, or sexual devices,
the primM purpose of which is for sexual stimulation, shall be sold, utilized, or
allowed on the premises or possessed by any employee while on the premises.
5.22.080(B)(20)
No massage professional or any person employed by the massage establishment,
including independent contractors, may engage in acts that a reasonable person in
the client's perspective, would be understood as an offer to perform or engage in
with a client, acts that are sexual in nature, nor shall any massage professional or
any_person employed by the massage establishment, massage the genitals or anal
area of any patron, nor shall anyoperator or manager allow or permit such
massage. An operator must comply with Business and Professions Code Section
4609(a) relating to sexual acts, including not allowing massage professionals to
engage in any form of sexual activi on the premises of the massage
,
establishment, or to engage in sexual activi while providing massage for
,
compensation. A massage professional may only provide massage of female
breasts with written consent of the person receiving the massage and a referral
from a licensed California health care provider. This section is not intended to
prohibit any massage technique recognized zed by CAMTC as legitimate, or to impose
any specific restriction or professional practice beyond those set forth in Business
and Professions Code Section 4609(a). No operator, manager or employee while
performing any task or service associated with the massage business, shall be
present in any room with another person unless the person's genitals, lg uteal
crease, anus and, in the case of a female, her breasts, are fully covered.
5.22.080(B)(21)
A massage professional may not wear attire that is transparent, see -through, or
substantially exposes the massage professional's undergarments or that exposes
his or her breasts, buttocks or genitals, or that in any way willfully and lewdly
exposes his or her private parts in any that is in public or where there are
other people present who may be offended or annoyed by such action. Swim attire
may not be worn unless the massage professional is providing a water -based
massage modality approved by the CAMTC. A massage professional shall not
wear any clothing that is deemed by the CAMTC to constitute unprofessional
attire. All employees of the massage establishment that are not massage
professionals shall also adhere to these clothing requirements.
5.22.140(B ((a)
The massage establishment is emplo�g a massagepist that does not hold a
valid CAMTC license.
5.22.140(B (1� )(d)
Alcoholic beverage or recreational drugs are found on -site.
5.22.140(B)(1)(e)
The massage establishment has violated anyprovision of Business and Professions
Code Section 4600 et seq
5.22.140(B)(1)(fl
The chief of police determines that the massage establishment's operations
constitute an immediate threat to the public health and safety.
Level 2 VIOLATIONS
Code Section
Per TMC 5.22.140(B)(2) - Any three violations in a 12 month period of
the provisions below are grounds to revoke a Massage Establishment
Permit
5.22.080(A)(1)(a)
Massage establishments shall be located in a zoning district which permits such
use. When a new massage establishment is proposed to be constructed, a set of
plans shall be submitted to the city for approval and shall be accompanied by he
appropriate application and plan check fee.
5.22.080(A)(1)(b)
No massage establishment located in a building or structure with exterior windows
fronting a public street, highway, walkway, or parking area, shall, during business
hours, block visibility into the interior reception and waiting area through the use
of curtains, closed blinds, or any other material that obstructs, blurs or darkens the
view into the premises.
5.22.080(A)(2)
Neither signs nor the front of the business shall be illuminated by strobe, flashing
lights or string lights. Each operator and/or on -du manager shall display the
,
massage establishment permit in a conspicuous public place in the lobby of the
massage establishment. In addition, each operator and/or on -duty manager shall
ensure: (a) CAMTC Certificates for each massage professional employed at the
establishment (whether on -du or not,) are conspicuously displayed in the lobby
,
area of the massage establishment, and (b) that each massage professional has his
or her identification card in his or her possession while providing massage services
for compensation.
5.22.080(A)(3)
Services List. Each operator shall post and maintain a list of services available and
the cost of such services, in a conspicuous public place within the premises. No
owner, managerperator shall permit, and no massage professional shall offer
or perform, any service other than those posted, nor shall an operator or a massage
professional request or charge a fee for any service other than those on the list of
services available and posted in the reception area or provided to the client in
advance of any outcall services.
5.22.080(A)(4)
-�
Each operator shall illuminate each room or area where massage is performed with
light equivalent to a minimum of forty -watt incandescent light bulb, and shall
provide sufficient ventilation. Such lighting and ventilation shall otherwise comply
with the current mechanical and building code of the city. The lighting in each
massage room shall be activated at all times while the patron is in such room or
area.
5.22.080(A)(5)
-�
A minimum of one toilet and one separate wash basin shall be provided for patrons
in each massage establishment. Each wash basin shall be equipped with soap or
detergent and hot running water at all times and shall be located in close proximity
to the area devoted to the performing of massage services. A permanently installed
soap dispenser, filled with soap, and a single service towel dispenser or hand air
dryer shall be provided at the restroom hand wash sink. Bar soap shall not be used.
A trash receptacle shall be provided in each toilet room. Showers may be provided
at the o erator's o tion.
5.22.080(A)06
If male and female patrons are to be treated simultaneously at the same massage
establishment, separate massage rooms shall be provided for male and female
patrons provided, however, that massage establishments having separate massage
rooms for male and female patrons may provide "couples massage" in a single
room, subject to the requirements of this subsection. Couples massage, i.e_,
concurrent massage of two persons, is permitted within one room provided all
other requirements of this chapter are satisfied including, but not limited to,
provision of a separate massage table and massage professional for each customer.
Any room to be used for couples massage shall be sufficiently sized so as to
comply with any and all applicable building and fire codes and to permit free
assa e and movement of the massage professionals.
5.22.080(A)(7)
All facilities of the massage establishment must be in good and shall be
thoroughly cleaned and sanitized each day the business is in operation. All walls,
floors and ceilings of each restroom and shower area, if any, shall be made of
washable mold -resistant surfaces.
5.22.080(A)(8)
A massage table shall be provided in each massage room and the massage shall be
performed on this massage table. The tables shall have a minimum height of
twenty-eight inches. Two-inch thick foam pads with maximum width of four feet
may be used on a massage table and must be covered with durable, washable
plastic or other waterproof material. Beds, floor mattresses and waterbeds are not
permitted on the premises.
5.22.080(B)(1)
Each operator and/or on duty manager shall provide and maintain on the premises
adequate equipment for disinfecting and sterilizing instruments used in massa e.
5.22.080(B)(3)
Common use of towels or linen shall not be permitted. Towels and linen shall be
laundered or changed promptly after each use. Separate cabinets or containers
shall be provided for the storage of clean and soiled linen and towels, and such
cabinets or containers shall be plainly marked: "clean linen" and "soiled linen."
5.22.080(B)(4)
Each massage establishment and/or massage professional shall provide and
maintain at the location where the massage is performed adequate equipment for
disinfecting and sterilizing instruments used in massage. Instruments utilized in
performing massage shall not be used on more than one client unless they
been sterilized, using approved sterilization methods.
5.22.080(B)(6)
No food of any kind shall be cooked or prepared in a massage establishment. No
food of any kind shall be for sale or sold in the establishment.
5.22.080(B)(9)
No electrical, mechanical or artificial device shall be used by the operator or any
employee of the massage establishment for audio and/or video recordingor r for
monitoring the performance of a massage or the conversation or other sounds in
the massage rooms without the written consent of the patron.
5.22.080(B)(10)
The operator and/or manager of the massage establishment shall maintain a roster
of all employees, including operators, managers and massage professionals,
showing each name, nickname and alias, home address, age, birth date, gender,
height, weight, color of hair and eyes, phone number, Social Security Number,
CAMTC certificate number, date of employment, and duties of each employee.
The foregoing roster and all information therein shall be maintained on the
premises for a period of two years following the termination of each employee.
Upon consent or upon obtaining an applicable warrant, the operator or manager on
duty shall make the roster immediately available for inspection during all hours the
massage establishment is open for business. Information in the roster shall be
available for inspection only try or police department representatives while
performing official duties. It is unlawful for a massage establishment to employ or
retain any person to provide massage for compensation, or to allow any person to
provide massage for compensation on the premises of a massage establishment,
unless that person is listed as a massage professional on the massage permit issued
pursuant tothis cha ter.
5.22.080(B)(11)
The massage professional shall provide to each patron clean, sanitary and opaque
coverings capable of covering areas of the patron identified as prohibited massage
areas including the genital area, anus and female breast(s). Re -use of such
coverings is prohibited unless adequately cleaned and sanitized.
5.22.080(B)(12)
Every person operating a massage establishment shall keep a record of the dates
and hours of each treatment or service provided, the name and address of the
patron, the name of massage professional administering such service and a
description of the treatment or service rendered.
5.22.080(B)(13)
The owner must advise the city, in writing, at the time of application for a permit
of the business hours, and any change in hours occurring thereafter. No person
shall operate a massage establishment or administer a massage in any massage
establishment or at an outcall location booked by that massage establishment
between the hours of nine p.m. and seven a.m. All massages must terminate by
nine p.m., regardless of the start time. All customers, patrons and visitors shall be
excluded from the massage establishment during these hours and be advised of
these hours. The hours of operation must be displayed in a conspicuous public
place in the lobby within the massage establishment and in the front window
clearly visible from the outside. It is the obligation and responsibili of the
,
massage establishment to inform clients of the requirement that any massage
service must cease by nine p.m.
5.22.080(B)(14)
No permitted massage establishment shall place, publish or distribute, or cause to
be placed, published or distributed, in any publication or any website, any
advertisingthat hat depicts any portion of the human body that would reasonably
suggest to prospective patrons that any service is available other than those
services authorized by the Massage Therapy Act and pursuant to this chapter. No
massage establishment shall employ language in the text of such advertising that
would reasonably suggest to a prospective patron that any service is available
other than those services authorized by this chapter. The massage establishment
shall ensure that it and all certified massage professionals comply with Business
and Professions Code Sections 4608, 4609 and 4611, by requiring the massage
professionals to include the name under which he or she is certified and his or her
certificate number in yLny and all advertising of massage for com ensation• to not
engage in sexually suggestive advertising related to massage services; to not hold
him or herself out as a certified massage professional, or use terms such as
"licensed" or "certified," that implies that an uncertified person is certified as a
massage professional; to not falsely state or advertise or put out any sign or card,
or to falsely represent to the public, that any individual is licensed, certified, or
registered as a massage professional if that individual is not so certified by the
CAMTC.
5.22.080(B)(15)
No operator or manager shall engage in, conduct or carry on the business of a
massage establishment unless there is on file with the police department, in full
force and effect at all times, documents issued by an insurance company
authorized to do business in the state of California evidencing that the permit
holder is insured under a liability insurance policy providing minimum coverage
of one million dollars for personal injury or death to one person arising out of the
operation of the massage establishment and/or the administration of any massage.
Evidence of the required insurance shall be provided to the chief of police at the
time an initial application, or renewal application, is filed.
5.22.080(B)(16)
All massage establishments must comply with all state and federal laws and
regglations providing for access to and receipt of services by disabled persons.
5.22.080(B)(17)
All front, reception, hallway or front exterior doors (except back or exterior doors
used solely for employee entrance to and exit from the massage establishment)
shall be unlocked during business hours, except as may be permitted by applicable
law (such as the Temecula Fire Code) which allow for safety doors that may be
opened from the inside when locked. No massage may be performed within any
cubicle, room, booth or any other area within a massage establishment that is fitted
with a lock of an,, kind as a locking doorknob, padlock, dead bolt, sliding
bar or similar device), unless the door is an exterior door. No entry doors to any
room shall be obstructed by any means. The requirement that an exterior door
must remain unlocked at all times does not apply to any massage establishment
owned by one individual with one or no employees or independent contractors.
5.22.080(B)(18)
No person shall be permitted to be within a massage establishment except within
the lobby or reception area, or area where a customer is receiving massage
services, during hours of operation, unless that person has been disclosed to the
Lty as required under this chapter, including Section 5.22.060(A)(5).
5.22.080(B)(19)
No massage establishment may discriminate or exclude patrons on the basis of
their race, sex, religion, age, disability or any other classification protected under
federal or state laws, rules or regulations.
5.22.080(B)(22)
The operator and on du manager shall be jointly responsible for the conduct of
,
all employees while the employees are on the premises of the massage
establishment. Any act or omission of an employee constituting a violation of any
provision of this chapter shall be deemed to be an act or omission of the operator
and on duty managerpurposes of determining whether the massage
establishment permit should be revoked, or an application for such permit or
renewal thereof, denied.
5.22.080(B)(23j
No operator or manager shall employ any person as a massage professional who
does not hold a CAMTC Certificate. Every operator or manager shall report to the
chief of police any change of employees, whether by new or renewed employment,
discharge or termination, on the form and in the manner required by the chief of
police. The report shall contain the name of the employee and the date of hire or
termination. The report shall be made within ten business days of the date of hire
or termination. The operator and manager must notify the chief of police
10
immediately upon the massage establishment's notice of any disciplinary action
taken by the CAMTC regarding one of the establishment's massage professionals
and submit a copy of the notice or order. This provision requires reportin to the
chief of police, even if the operator or manager believes that the chief of police has
or will receive the information from another source.
5.22.080(B)(24)
No massage establishment shall operate as a school of massage, or use the same
facilities as that of a school of massage,
5.22.080(B)(25)
Operation of a massage establishment without a qualified manager being present at
all times that the massage establishment is open for business is prohibited.
5.22.080(B)(26)
Each operator and on -duty manager shall at all times comply with all provisions of
this chapter and all other applicable provisions of the Temecula Municipal Code,
all conditions of any required zoning approvals, conditions imposed by the chief of
police, and all state and federal laws, statutes and regulations, and shall provide
roof of compliance u on request by the police de artment.
5.22.080(B)(27)
Each massage establishment shall have and maintain a dedicated
telecommunication device physically at the business location with an assigned
telephone number capable of receiving_ incoming calls and dialingout ut to
emergency services specifically 911.
5.22.080(B)(28)
No pet(s) or live animal mascot(s), regardless of species, shall be allowed on site
of any massage establishment, the only exemption shall be a working "service
animal" as defined in Section 6.04.010 of this code.
' This is a summary of violations only. Please see the referenced code sections for complete
details an omission from this table does not remove the burden of compliance.
Section 11. Chapter 5.24 is hereby renamed as "Licensure of Tobacco Retailers and
Tobacco Shops".
Section 12. Section 5.24.030 (Definitions) of Chapter 5.24 (Licensure of Tobacco
Retailers) of Title 5 (Business Licenses and Regulations) of the Temecula Municipal Code is
hereby amended to add definitions for "Tobacco Shop" and "Permit" and to revise the definitions
for "Tobacco paraphernalia" and "Tobacco product" to read as follows (with additions appearing
in underlined text) with all other provisions of Section 5.24.030 remaining unchanged:
"Tobacco Shop" means any premises dedicated to the disnlav, sale, distribution, delivery, offerin
furnishing, or marketing of tobacco, tobacco products, tobacco accessories, or tobacco
paraphernalia, including all non -tobacco products that contain nicotine. Any premises that
dedicates more than 10 percent of its floor space(excluding bathrooms, kitchens, breakrooms, and
other exclusive employee use common areas) to tobacco products, tobacco accessories or tobacco
paraphernalia shall be considered a "Tobacco Shop" for purposes of this chapter. If a premises
dedicates less than 10 percent of its floor space (excluding bathrooms, kitchens, breakrooms, and
other exclusive employee use common areas) to tobacco products, tobacco accessories or tobacco
paraphernalia, then it shall be considered a "Tobacco Retailer" as defined in Section 5.24.030. and
is not governed by this Chapter.
"Tobacco Shop Permit" or "TSP" means a Tobacco Shop Permit issued pursuant to this chapter.
m
"Tobacco paraphernalia" means cigarette papers or wrappers, pipes, electronic cigarette or vqping
devices, holders of smoking materials of all types, cigarette rolling machines, and any other item
designed for the smoking, preparation, storing, or consumption of tobacco products.
"Tobacco product" means:
1. Any substance containing tobacco leaf, including but not limited to cigarettes, cigars,
pipe tobacco, electronic cigarette or vaping device to include liquid, snuff, chewing tobacco,
dipping tobacco, bidis, or any other preparation of tobacco; and
2. Any product or formulation of matter containing biologically active amounts of nicotine
that is manufactured, sold, offered for sale, or otherwise distributed with the expectation that the
product or matter will be introduced into the human body but does not include any product
specifically approved by the Federal Food and Drug Administration for use in treating nicotine or
tobacco product dependence.
Section 12. A new Section 5.24.120 "Tobacco Shops" is hereby added to Chapter 5.24
(Licensure of Tobacco Retailers) of Title 5 (Business Licenses and Regulations) of the Temecula
Municipal Code to read as follows (with additions appearing in underlined text):
5.24.120 Tobacco Shops.
A. Tobacco Shop Permit (TSP) Required.
1. It is unlawful for any person to engage in, operate, conduct or carry on, in or upon any
premises, a tobacco shop without first obtaining a permit pursuant to this chapter, securing
the necessary business license as required by this code, and complying with Title 5 of this
code. A separate permit shall be obtained for each separate tobacco shop operated by such
person.
2. A permit to operate a tobacco shop shall be valid for a period of one year and shall expire
in conjunction with the business license.
B. Maximum Number of Tobacco Shops.
1. The maximum number of tobacco shops within the city shall not exceed one tobacco shop
per every ten thousand (10,000) inhabitants of the city, with any fraction of that ratio being
rounded down to the nearest whole number. For purposes of this section, the total number
of inhabitants of the citv shall be determined by the most current published data available
from the California State Department of Finances, as of the date an application for a
tobacco shop permit is filed.
2. If there is no lapse in the timely renewal of a city business license and tobacco retailers
license as required under this chapter, tobacco shops operating with a valid and current
business license and current and valid Tobacco Retailers License no later than sixty 60)
days after the effective date of this ordinance and that operate in compliance with all local,
state and federal laws, ordinances, rules and regulations, may continue to operate in the
city even if the number of tobacco shops exceed the maximum number of tobacco shops
permitted in the city pursuant to subsection B(1) above and separation requirements
pursuant to subsection E(l)(a) of this chapter.
3. Any owner that meets the requirements of subsection 2 above may sell or transfer the
tobacco shop, but the new owner of the tobacco shop shall apply and obtain a tobacco shop
12
permit before the new owner or operator begins operating the tobacco shop. If the tobacco
shop that is sold or transferred does not have a history of violating any provisions of the
chapter for at least one year preceding the date of sale or transfer of the business, the
business may obtain a tobacco shop permit to operate in the city even if the number of
tobacco shops exceed the maximum number of tobacco shops permitted in the city pursuant
to subsection B(1) above, as long as the business meets all the requirements of Section
5.24.120(D).
C. Application for Tobacco Shop Permit.
1. All persons desiring a tobacco shop permit shall file a written application on the required
form available at the citesplanning department. The application, to be signed under
penalty of perjury, shall be accompanied by the appropriate filing fee established by
resolution of the city council. The applicant must be at least twenty-one (21) years of age
at the time of application. The application shall be completed and signed b, t�perator
of the proposed tobacco shop, if a sole proprietorship; one e�partner, if the operator
is a partnership; one officer or one director, if the operator is a corporation; and one
participant, if the operator is a joint venture. The application for a tobacco shoppermit does
not authorize operation of a tobacco shop unless and until such permit has been properly
granted. The application shall contain or be accompanied by the following information:
a. The type of ownership of the business; for example, whether an individual, partnership,
or corporation. If the applicant is a corporation, the name of the corporation shall be set
forth exactly as shown in its articles of incorporation or charter, together with the state
and date of incorporation and the names and residence addresses of each of its current
officers and directors, and of each stockholder holding more than five percent of the
stock of that corporation. If the applicant is a partnership, the application shall set forth
the name and residence of each of the partners, including limited partners. If the
business is a limited partnership, it shall furnish a copy of its certificate of limited
partnership filed with the Secretary of State. If one or more of the partners is a
corporation, the provisions of this subsection pertainingtrporations shall apply;
b. The precise name under which the tobacco shop is to be conducted;
c. The complete address, all telephone numbers, and email address of the tobacco shop;
d. The following personal information concerningtpplicant:
i. Full complete name and all aliases used by the applicant,
ii. Current address and all previous residential addresses for eight years immediately
preceding the present address of the applicant,
iii. Acceptable proof that the applicant is at least twenty-one (21) years of age,
iv. Proof of legal residency and/or the ability to legally work in the United States,
v. The applicant's complete business, occupation and employment history for eight
years preceding the date of application, including, but not limited to, the tobacco
shop or similar business history and experience of the applicant,
vi. The complete tobacco shop license history of the applicant, whether such person
has ever had any permit, license, or certification to conduct sales of tobacco
products issued or denied by any governmental authority; the date of issuance of
13
such a permit or license, whether the permit or license was denied, revoked or
suspended; and the reason therefor,
vii. Whether the applicant has ever had a tobacco retailers license, tobacco shop permit,
or any_permit/license required for the operation of a tobacco shop denied, revoked
or suspended by any government authority, and the reason therefor,
viii. All criminal convictions occurring in any state or country, including convictions
resulting from any plea of nolo contendere (no contest), within the last ten years,
including those dismissed or expunged pursuant to Penal Code Section 1203.4, but
excluding infraction traffic violations, and the date and place of each such
conviction and reason therefor,
ix. Information re ag rding any pending criminal charges against the applicant, and
x. A complete set of fingerprints taken by the police department.
e. The name and address of the owner and lessor of the premises upon or in which the
tobacco shop is to be located. In the event the applicant is not the legal owner of the
premises, the application must be accompanied by a copy of the lease and a notarized
acknowledgment from the owner of the premises that a tobacco shop will be located on
the premises, and that the tobacco shop must operate in compliance with the
requirements of this chapter;
f. Such other identification and information as the chief of police may reauire in order to
discover the truth of the matters required to be set forth in the application;
g. A statement in writing and dated by the applicant that he or she certifies under penalty
of perjury that all information contained in the application is true and correct;
h. Statements in writing and dated by the applicant and the applicant's designated
manager(s) certify under nder penalty of perjury that they:
i. Have reviewed Chapter 5.24 and Chapter 8.56 of the Temecula Municipal Code,
ii. Understand its contents,
iii. Understand the duties of a manager,
iv. Will only ploy persons of legal age to sell tobacco products,
v. Authorize the chief of police to investigate the truth of the information contained
in the application, and
vi. Will be responsible for the conduct of all tobacco shop operators, employees,
agents, independent contractors, or other representatives while such persons are on
the premises of the tobacco shop, and that failure to comply with the provisions of
this chapter and any federal, state, or local law, may result in the revocation of the
tobacco shop permit.
If, during the term of a tobacco shop permit, the permit holder has any change in
information submitted on the original or renewal application, the permit holder shall
notify the police department of such change, within ten (10) business days thereafter,
in writing and
A floor plan of the proposed tobacco shop showing all interior areas, includingareas
reas
where tobacco products are stored or sold, all doors, display cases, restrooms,
plumbing, and an., other features required by the chief of police.
14
k. The applicant, if a corporation or partnership, shall designate one or more of its officers
or partners to act as manager during business hours. If the applicant is an individual,
then that individual, or designee thereof shall act as manager. Each person who shall
serve as manager shall complete and sign all application forms required of an individual
,qpplicant for a tobacco shop permit.
1. Notwithstanding the fact that an application filed under this section may be a "public
record" under Government Code Section 6250, et seq., certain portions of such
application contain information vital to the effective administration and enforcement
of the licensing and/or permit scheme established herein which is personal, private,
confidential, or the disclosure of which could expose the applicant to a risk of harm.
Those portions of the application which are not subject to disclosure are: the applicant's
residence address and telephone number, the applicant's date of birth and/or age, the
applicant's driver's permit and/or social security number, and/or personal financial
data. The city council in adopting the he application or permitting system set forth herein
has determined in accordance with Government Code Section 6255 that the public
interest in disclosure of the information set forth above is outweighed the public
interest in achieving compliance with this chapter by ensuring that the applicant's
privacy, confidentially or security interests are protected. The city clerk shall cause to
be redacted from any copy of a completed permit application made available to any
member of the public, the information set forth above.
D. Tobacco Shon Permit Issuance and Denial.
1. Upon receipt of a written application for a tobacco shop permit, the chief of police shall
conduct an investigation to ascertain whether the applicant satisfies the requirements of
this chapter. The chief of police shall, within thirty (30) days of receipt of an application,
and on a first -come -first -served -basis, approve, conditionally approve or deny the
gpplication. The thirty -day (30) period may be extended for up to thirty (30) additional
days, if necessary, to complete the investigation at the discretion of the chief of police or
their designee.
2. The chief of police shall deny all tobacco shop permit application(s) if the maximum
number of tobacco shops under section 5.24.120(B)(1) has been met.
3. The chief of police shall deny all tobacco shop permit application(s) if they make any of
the followingfindings:
a. The applicant, if an individual, or any of the officers or directors of the corporation, if
the applicant is a corporation; or a partner, if the applicant is a partnership, or any
person directly engaged or employed in the tobacco shop, includingif f any of the above
listed parties, has within ten (10) years preceding the date of application:
i. Been convicted of a violation of Health and Safety Code Section 11550 or any
offense involving the illegal sale, distribution or possession of a controlled
substance specified in Health and Safety Code Sections 11054, 11055, 11056,
11057 or 11058:
ii. Engaged in conduct in another jurisdiction which, if it had occurred within the city,
would constitute grounds for denial or revocation under this chapter;
15
iii. Been subjected to a permanent injunction against the conducting or maintaining of
a nuisance pursuant to Penal Code Sections 11225 through 11235 or any similar
provisions of law in a jurisdiction outside the state of California;
iv. Engaged in conduct in any state or country which would constitute an offense as
described in subsection (3)(i) or (ii) of this section;
v. The applicant has had a Tobacco Retailers License revoked from any jurisdiction
authorized to issue such license(s);
vi. The applicant or any of the applicant's proposed employees, after a full hearing by
administrative proceeding or state court, has aided and abetted any of the offenses
listed in this section;
vii. The applicant has made a false, misleading or fraudulent statement or omission of
fact to the city in the permit application;
viii. The application does not contain all of the information required by this section;
ix. The tobacco shop, as proposed by the applicant, does not comply with all applicable
laws, including, but not limited to, health, zoning, fire and safety requirements,
regulations and standards;
x. The applicant has not satisfied the requirements of this chapter in the time specified;
xi. The location of the proposed tobacco shop has within a twelve (12) month period
prior to the submittal of the application:
(a) Been the site of a violation of this chapter, or any similar criminal or civil
ordinance, law, rule, or regulation of the state of California or any other public
agency related to the operation of a tobacco shop,
(b) Been the site of a tobacco shop that was closed due to criminal activity. For
purposes of this subsection, closure due to criminal activity includes voluntary
closure of a tobacco shop after there have been arrests at the location or other
notices relating to criminal activity,
(c) Been the site of a tobacco shop where violations have not been addressed in the
time specified in the notice of violation or administrative citation,
(d) Been the site of a tobacco shop that has been revoked pursuant to this chapter,
(e) Been the site of a tobacco shop that has received a notice of revocation or fine
issued pursuant to the Temecula Municipal Code, while any appeal of the
revocation or fine is pending, or
(f) Been the site of a tobacco shop that has outstanding fines issued pursuant to the
Temecula Municipal Code that have not been paid.
b. If the application is denied for failure to comply with this chapter, the applicant, owner
and operator of the tobacco shop may not reapply for a period of one year from the date
the application was denied.
c. An appeal of the denial of a tobacco shop establishment permit shall be ,governed by
procedures set forth in Section 5.24.120(J).
E. Tobacco Shop Requirements.
1. Facilities.
a. Location. No tobacco shoe shall be located within five hundred (500) feet of a sensitive
receptor(s), as defined in Chapter 9.20.020 of this code or from another tobacco sho.
16
This shall be measured in a straight line from any entrance of the tobacco shop to the
property line of a sensitive receptor or another tobacco shop. A radius map package
shall be required at the time of submittal when there is concern about the proposed
tobacco shop location in relation to sensitive receptors, this shall be at the discretion of
the chief of police or the director of community development.
b. Structure. Tobacco shops shall be located in a zoning district which permits such use.
No tobacco shop located in a building or structure with exterior windows fronting a
public street, highway, walkway, or parking area, shall, during business hours, block
visibility into the interior area through the use of curtains, closed blinds, or an., other
material that obstructs, blurs or darkens the view into the premises.
c. Display of Permits. Tobacco shops shall at all times display in a conspicuous and
prominent manner, visible upon entrance to the tobacco shop all permits, licenses, or
any other approval required for the operation of a tobacco shop. Expired permits do not
satisfy this requirement.
d. Signs. All tobacco shop signs shall comply with all provisions of Chapter 17.28 (Sign
Standards,) or the appropriate Specific Plan or Planned Development Overlgy PDO).
When there is a conflict between standards, the more restrictive standard shall be
followed. Tobacco shops shall not have signage on doors, windows or storefronts
except as provided for in Chapter 17.28.050(I)&(J). No signs shall be closer than
eighteen (18) inches from all exterior doors, windows and storefront. No signs
depicting tobacco use shall be able to be seen from the public right of way. Each sign
violating this section shall be counted as a violation.
e. Lighting. Tobacco shops shall be internally illuminated with white or soft white lights
only. No lightingfor or any purpose shall be placed around or on windows or doors, to
include frames.
f. Accessory Uses. Lounge, arcade, and similar accessory activities prohibited. No
tobacco shop shall allow or provide an area either indoor or outdoor that is for a
customer lounge, arcade, or similar use(s).
g. Bathroom Facilities. Customers shall be prohibited from utilizing any bathroom
facilities on site.
2. Operations.
a. Business License. Each tobacco shop shall hold a valid business license issued b. the
City of Temecula.
b. State Tobacco Retailers License. Each tobacco shop shall hold a valid California
Cigarette and Tobacco Products Retailer's License issued by the State Board of
Equalization, in accordance with State law.
c. City Tobacco Retailers License. Each tobacco shop shall hold a valid Tobacco Retailers
License issued by the City of Temecula.
d. Tobacco Shop Permit. Each tobacco shop shall hold a valid Tobacco Shop Permit
(TSP) issued by the City of Temecula.
e. Hours of Operation. The owner must advise the city, in writing, at the time of
gpplication for a permit of the business hours, and any change in hours occurring
17
thereafter. No person shall operate a tobacco shop between the hours of nine p.m. and
seven a.m.
f. Employee Age. No person under the age of twenty-one (21) years, at the time of
application, shall operate or be employed by a tobacco shop.
g. Living Prohibited. No person or persons shall be allowed to live inside the tobacco shop
at any time. Beds, mattresses, waterbeds, futons, sofa beds, or any type of portable or
convertible beds are not permitted on the premises.
h. Alcoholic Beverages/Drugs — Prohibited Materials. No person shall enter, be in or
remain in any part of a tobacco shop while in possession of, consuming or under
the influence of any alcoholic beverage, recreational drugs (including cannabis,) or a
controlled substance. The operator and on -duty manager shall be responsible to ensure
that no such person shall enter or remain upon the tobacco shop. Service of alcoholic
beverages or recreational drugs shall not be allowed to include all substances located
in Chapter 8.56 (Psychoactive Bath Salts, Psychoactive Herbal Incense, and other
Synthetic Drugs). A tobacco shop is not permitted to sell, store, distribute, trade or _give
for no charge alcohol.
i. Tobacco Use. There shall be no tobacco use or consumption (including "tasting_s") at
any tobacco shop.
j. Samples. Tobacco shops are prohibited from providing samples or tastings of any
tobacco product or accessory whether free or for charge.
k. Entrances. Tobacco shops cater specifically to adult customers over the age of twenty-
one (21) to purchase tobacco products, accessories, etc. not the general public. As such,
entrances/exits shall remain closed, not locked, during the hours of operation and
employees shall not congregate, gather, or loiter in such areas.
Tobacco Products, and Paraphernalia. Tobacco Products, and tobacco paraphernalia
shall not be kept within ten (10) linear feet from any building entrance or check-out
counter. This prohibition shall not apply if the display is not physically accessible to
customers.
m. Tobacco Flavors. A tobacco shop, or any of the tobacco shop's agents or employ
shall not sell, offer for sale, or possess with the intent to sell or offer for sale, a flavored
tobacco product or a tobacco product flavor enhancer as defined in Health and SafetX
Code § 104559.5. This includes the storage of flavored tobacco products.
n. Single Cigarettes. No tobacco shop shall sell single or individual cigarettes sometimes
referred to as "loosies."
o. Self -Service Displays Prohibited. No person shall display tobacco products or tobacco
paraphernalia by means of a self-service display or to engage in tobacco retailing by
means of a self-service display. A tobacco retailer who chooses to display tobacco
products or tobacco paraphernalia in a locked cabinet, case or similar structure must
post a clear and conspicuous sign on or within five feet of the display, stating that the
case or structure is locked at all times.
p. Compliance With All Laws. Each operator or manager shall at all times comply with
all provisions of this chapter and all other applicable provisions of the Temecula
Municipal Code, all conditions of any required zoning approvals, conditions imposed
18
by the chief of police, and all state and federal laws, statutes and regulations, and shall
provide proof of compliance upon request by the police department.
3. Inspections.
a. A tobacco shop may b�pected twice a year for the purpose of determining that the
provisions of this chapter are met. Such inspections may be made by the police
department, persons employed by the city whose job descriptions require the person to
enforce the provisions of this code, including, but not limited to, code enforcement
officers, and such other enforcement officials as described in Sections 1.16.020 and
1.21.020 of the Temecula Municipal Code or its successor sections.
b. Complaints or violations related to this chapter reported to the City may result in
additional inspections at the discretion of the chief of police.
F. Transfer and Changes of Business.
1. No tobacco shop permit may be sold, transferred or assi.need by a permit holder, or by
operation of law, to any other person or persons. Any such sale, transfer or assignment, or
attempted sale, transfer or assignment, shall be deemed to constitute a voluntary surrender
of such permit and such permit shall thereafter be null and void; provided and exceptin&
however, that if the permit holder is a partnership and one or more of the partners should
die, one or more of the surviving partners may acquire, by purchase or otherwise, the
interest of the deceased partner or partners without effecting a surrender or termination of
such permit, and in such case, the permit, upon notification to the chief of police, shall be
placed in the name of the surviving partners.
G. Fees.
1. The city council shall establish by resolution, and from time to time may amend, the fees
for the administration of this chapter. Fees required by this chapter shall be in addition to
any required under any other chapter of this code.
H. Duration and Renewal of Permits.
1. Tobacco shop permits may be renewed on the first business day in February 2024, and on
a year-to-year basis thereafter on the first business day in February, provided the permit
holder continues to meet the requirements of this chapter. "Business day" as used in this
subsection shall mean the days that Temecula City Hall is open for business.
2. No permit granted herein shall confer any vested right to anyPersonfor more than the
permit period.
3. Applications for a permit renewal shall be filed with the chief of police at least sixty 0)
days prior to expiration of the existing �permit, otherwise the permit will lapse. At the
discretion of the chief of police, a conditional permit pending satisfactory completion of
the renewal application process may be issued to renewal applicants who have no permit
revocation proceedings pending at the time of filing of the renewal application.
4. Renewal applications shall set forth such information as ma.. b�quired by the chief of
police to update and verify the information contained in the original permit application.
The applicant shall pay an application fee when applying for renewal.
5. If an application for renewal of permit and all required information is not timely received
and the permit expires, no right or privilege to operate a tobacco shop shall exist.
I. Violation and Penalty.
19
1. Violations of this Section are broken down into two levels of severity as they relate to the
Tobacco Shop Permit (TSP):
a. Level 1 Violations are violations of such significance that a single violation of such
provisions would cause the immediate revocation of the tobacco shop permit (TSP).
b. Level 2 Violations are violations of this chapter that do not rise to the severity of Level
1 Violations. Any three (3) Level 2 violations in a twelve (12) month period is grounds
for revocation of the TSP by the chief of police.
2. Table 5.24.120 — Violation Summary Table
Table 5.24.120 - Violation Summary'
Level 1 VIOLATIONS
Code Section
Per TMC 5.24.120.H(I)(1)(a) - Any violation of the provisions
below are urounds to revoke a Tobacco Shop Permit
5.24.120.E(1)(a)
No tobacco shop shall be located within one -thousand (1,000)feet of a
sensitive receptor(s), as defined in Chapter 9.20.020 of this code or from
another tobacco shop. This shall be measured in a straight line from any
entrance of the facility to the property line of a sensitive receptor or
another tobacco shop.
5.24.120.E(1)(b)
Tobacco shops shall be located in a zoning district which permits such
use. No tobacco shop located in a building or structure with exterior
windows fronting a public street, highway, walkway, or parking area,
shall, during business hours, block visibility into the interior area through
the use of curtains, closed blinds, or any other material that obstructs,
blurs or darkens the view into the premises.
5.24.120.E(1)(f)
Lounge, arcade and similar accessory activities prohibited. No tobacco
shop shall allow or provide an area either indoor or outdoor that is for
customer lounge, arcade or similar use (s).
5.24.120.E(2)(a)
Each tobacco shop shall hold a valid business license issued by the City of
Temecula.
5.24.120.E(2)(b)
Each tobacco shop shall hold a valid California Cigarette and Tobacco
Products Retailer's License issued by the State Board of Equalization, in
accordance with State law.
5.24.120.E(2)(c)
Each tobacco shop shall hold a valid Tobacco Retailers License issued by
the City of Temecula.
5.24.120.E(2)(d)
Each tobacco shop shall hold a valid Tobacco Shop Permit issued b, the
City of Temecula.
5.24.120.E(2)(g)
No person or persons shall be allowed to live inside the tobacco shop at
any time. Beds, mattresses, waterbeds, futons, sofa beds, or any type of
portable or convertible beds are not permitted on the premises.
5.24.120.E(2)(h)
No person shall enter, be in or remain in any part of a tobacco shop while
in possession of, consuming using or under the influence of any alcoholic
beverage, recreational drugs or controlled substance. The operator and on-
duty manager shall be responsible to ensure that no such person shall enter
or remain upon the tobacco shop. Service of alcoholic beverages or
recreational drugs shall not be allowed to include all substances located in
Chapter 8.56 (Psychoactive Bath Salts, Psychoactive Herbal Incense, and
20
other Synthetic Drugs). A tobacco shop is not permitted to sell, store,
distribute, trade or give for no charge alcohol.
Level 2 VIOLATIONS
Code Section
Per TMC 5.24.120.H(I)(1)(b) - Any three violations in a 12
month period of the provisions below are grounds to revoke a
Tobacco Shop Permit
5.24.120.E(1)(c)
Tobacco shops shall at all times display in a conspicuous and prominent
manner, visible upon entrance to the tobacco shop all permits, licenses, or
any other approval required for the operation of a tobacco shop. Expired
permits do not satisfy this requirement.
5.24.120.E(1)(d)
All tobacco shop signs shall comply with all provisions of Chapter 17.28
(Sign Standards) or the appropriate Specific Plan or Planned Development
Overlay (y (PDO). When there is a conflict between standards, the more
restrictive standard shall be followed. Tobacco shops shall not have
signage on doors, windows or storefronts except as provided for in
Chapter 17.28.050(D)(J). No signs shall be closer than eighteen 18)
inches from all exterior doors, windows and storefront. No signs depicting
tobacco use shall be able to be seen from the public right of way
sign violating this section shall be counted as a violation.
5.24.120.E(1)(e)
Tobacco shops shall be internally illuminated with white or soft white
lights only. No lightingfor any purpose shall be placed around or on
windows or doors, to include frames.
5.24.120.E(1)(g)
Customers shall be prohibited from utilizing any bathroom facilities on
site.
5.24.120.E(2)(e)
The owner must advise the city, in writing, at the time of application for a
permit of the business hours, and any change in hours occurring thereafter.
No person shall operate a tobacco shop between the hours of nine p.m. and
seven a.m.
5.24.120.E(2)(f)
No person under the age of twenty-one (21) years, at the time of
gpplication, shall operate or be employ a tobacco shop_
5.24.120.E(2)(i)
There shall be no tobacco use or consumption at any tobacco shop_
5.24.120.E(2)(i)
Tobacco shops are prohibited from providing samples of any tobacco
product or accessory whether free or for charge.
5.24.120.E(2)(k)
Tobacco shops cater specifically to adult customers over the age of
twen -one (21) to purchase tobacco products, accessories, etc. not the
,
general public. As such, entrances/exits shall remain closed, not locked,
during the hours of operation and employees shall not congregate, ag ther
or loiter in such areas.
5.24.120.E(2)(1)
Tobacco Products, and Paraphernalia shall not be kept within ten Ll0)
linear feet from any building entrance or check-out counter. This
prohibition shall not apply if the display is not physically accessible to
customers.
5.24.120.E(2)(m)
A tobacco shop, or any of the tobacco shops agents or employees, shall
not sell, offer for sale, or possess with the intent to sell or offer for sale, a
flavored tobacco product or a tobacco product flavor enhancer as defined
21
in Health and Safety Code § 104559.5. This includes the storage of
5.24.120.E(2)(n) No tobacco shop shall sell single or individual cigarettes sometimes
referred to as "loosies."
No person shall display tobacco products or tobacco paraphernalia by
means of a self-service display or to engage in tobacco retailing by means
of a self-service display. A tobacco retailer who chooses to display
5.24.120.E(2)(o) tobacco products or tobacco paraphernalia in a locked cabinet, case or
similar structure must post a clear and conspicuous sign on or within five
feet of the display stating that the cabinet, case or structure is locked at all
times.
1 This is a summary of violations only. Please see the referenced code sections for
3. Violations that are not specifically identified in this section such as 5.24.120(E)(2)(a) shall
be classified at the sole discretion of the chief of police on a case-bv-case basis.
J. Revocation, Permit Denial and Appeal.
1. Violation and Noncompliance. The chief of bolice may refuse to issue a hermit. renew a
permit, or may revoke an existing permit, on the grounds that the applicant or permit holder
has failed to comply with the permit conditions or other requirements of this chapter, or
any requirement of state law. In any such case, the applicant or permit holder shall have
the right to appeal in the time and manner set forth in this section.
For purposes of this section. if an administrative citation is contested. and is held to be
invalid or rescinded by an independent hearing officer appointed pursuant to this chapter,
or by any court of law, the violations identified in the administrative citation shall not form
the basis for revoking or refusing to renew a tobacco shop permit. If any administrative
citation is contested, and is upheld by an independent hearing officer appointed pursuant
to this chanter, or by anv court of law, that administrative citation can form the basis for
the revocation or refusal to renew a tobacco shop permit.
2. Notice. When the chief of police concludes that grounds for denial of a new permit or
permit renewal, or permit revocation exist, the chief of police shall serve the applicant or
permit holder, either personally or by certified mail, addressed to the business or residence
address of applicant or permit holder, with a notice of denial of permit, or notice of intent
to revoke or deny renewal. This notice shall state the reasons for the decision, the effective
date of the decision, the right of the applicant or permit holder to appeal the decision to a
hearing officer, and that the decision will be final if no written anneal is filed within the
time permitted.
3. Appeal.
a. The right to file a written appeal of a revocation or denial of new permit or renewal of
aapermit shall terminate upon the expiration of fifteen (15) dqys of the date of mailing
by the chief of police of the notice specified in subsection J(2) of this section. The
written anneal shall be filed with the citv clerk of the citv of Temecula and shall be
22
accompanied by an appeal fee in an amount as set by city council resolution, and the
city clerk shall promptly forward a copy of the appeal to the chief of police.
b. In the event an appeal is timely filed, the denial of the permit, or renewal or revocation
of the permit, shall not be effective until a final decision has been made on the appeal.
Notwithstanding the foregoing, if the chief of police finds and determines that
permitting a tobacco shop to continue to operate, pending the appeal hearing, would
present an unreasonable and immediate risk to the public health and safety, the denial
of renewal or revocation may take effect immediately. If no timely appeal is filed, the
denial of renewal or revocation shall become effective upon expiration of the period
for filing appeals.
c. Upon receipt of a timely appeal, the city clerk shall refer the appeal to the California
Office of Administrative Hearings ("OAH") for the assignment of an administrative
law judge to serve as the hearing officer.
i. Not less than fifteen (15) dqys prior to the meal hearing, the city clerk shall notify
the chief of police and the appellant of the names of three qualified attorneys or
retired Superior Court or Appellate Court judges submitted to the city clerk by a
reputable firm providing mediators and arbitrators to serve as a panel from which
the hearing officer will be selected.
ii. Within five days of the date of mailing the notice of the available panel, the chief
of police and the appellant matey the city clerk in writing that he or she elects
to remove one of the three potential hearing officers.
iii. The city clerk shall then request the mediation and arbitration firm to select one of
the remaining names on the list as the designated hearing officer for the appeal
hearing.
iv. The hearing officer shall be fair and impartial and shall have no bias for or against
the chief of police or the appellant.
d. At the appeal hearing, the hearing officer shall receive oral and written evidence from
the chief of police and the appellant. The hearing officer shall have authority to
administer oaths to those persons who will provide oral testimony. The evidence
presented need not comply with the strict rules of evidence set forth in the California
Evidence Code, but shall be the type of evidence upon which reasonable and prudent
people rely upon in the conduct of serious affairs. The hearing officer shall have broad
authority to control the proceedings and to provide for cross examination of witness in
a fair and impartial manner. The chief of police shall have the burden of proof to
establish by clear and convincing evidence the facts upon which his or her decision is
based. The appeal hearing shall be recorded by audio recording. Anyparty ma.
sole cost and expense, utilize the services of a certified court reporter to prepare the
verbatim record of the hearing. If a court reporter is used, the transcript prepared shall
be made available for purchase to both parties. The hearing officer may continue the
agppeal hearing from time to time, but only upon written motion of a party showing
good cause for the continuance.
e. The hearing officer may uphold, modify or reverse the decision of the chief of police.
Within thirty (30) days or as otherwise determined by OAH, of the conclusion of the
23
appeal hearing, the hearing officer shall render his or her decision and make written
findings supporting the decision. He or she shall send the decision to the city clerk.
Upon receipt of the hearing officer's decision, the city clerk shall send a copy of it to
the chief of police and the appellant, alongwith ith a proof of mailing.
f. Within ten (10days from date of the city clerk's mailing of the decision, either party
may appeal the decision to the city manager. The appeal shall be in writing and filed
with the city clerk, and shall state the grounds of the appeal and specify the errors in
the hearing officer's decision. Upon receipt of the appeal, the city clerk shall schedule
the appeal for review by the city manager to occur within thirty days.
g. The city manager's review of the appeal shall be limited to determining whether the
evidence received at the appeal hearing_ supports the findings and decision of the
hearing officer. The city manager shall be limited to considering the evidence presented
at the appeal hearing. No public hearing shall be required and no new evidence shall
be taken by the city manager. The city manager's decision on the appeal shall be set
forth in a written opinion. The city clerk shall mail a copy of the city manager's _opinion
to the chief of police and the appellant along with a proof of service. Any legal action
challenging the city manager's decision shall be filed within ninety (90) days of the
date of the proof of service of mailing of the citmanager's opinion, pursuant to Section
1094.5. et sea.. of the California Code of Civil Procedure. The citv manager's decision
shall be final and effective upon mailing of the opinion. If the appellant prevails
following a final decision, the appeal fee shall be returned.
K. Application to Existing Businesses.
1. All requirements set forth in this chapter are deemed to be necessary for the protection of
the public health, safety, and welfare and shall be applicable to and govern all existing and
proposed tobacco shops immediately upon the date the ordinance is codified in this chapter,
and shall become effective.
Section 13. Section 5.24.030 (Definitions) of Chapter 5.24 (Licensure of Tobacco
Retailers) of Title 5 (Business Licenses and Regulations) of the Temecula Municipal Code is
hereby amended to add a definition for "chief of police" to read as follows with all other provisions
of Section 5.24.030 remaining unchanged:
"Chief of police" means the head of the agency or division which at the time involved has
responsibility for performing the police function for, or within, the city, or his or her designee.
Section 14. Subsection E of Section 5.24.040 (Tobacco license prerequisite —
Application process) of Chapter 5.24 (Licensure of Tobacco Retailers) of Title 5 (Business
Licenses and Regulations) of the Temecula Municipal Code is hereby amended to read as follows
(with deletions appearing in strikethrough text and additions appearing in underlined text) with all
other provisions of Section 5.24.040 remaining unchanged:
E. All applications shall be submitted on a form supplied by the eity managef chief of
op lice and shall contain the following information:
1. The name, address, email, website, and telephone number of each proprietor;
24
2. The business name, address, email, website, and telephone number of the single fixed
location for which tobacco retailer's license is sought;
3. The name and mailing address authorized by each proprietor to receive all license -
related communications and notices (the "authorized address"). If an authorized
address is not supplied, each proprietor shall be understood to consent to the provision
of notice at the business address specified in subsection (E)(2) of this section;
4. Proof that the location for which a tobacco retailer's license is sought has been issued a
valid state tobacco retailer's license by the California Board of Equalization;
5. Whether or not any proprietor is a person who has been determined to have violated this
chapter or has been a proprietor at a location that has been determined to have violated
this chapter and, if so, the dates and locations of all such violations;
6. Such other information as the chief of police deems necessary for the
administration or enforcement of this chapter;
Section 15. Subsection B of Section 5.24.050 (License Issuance — Standards) of Chapter
5.24 (Licensure of Tobacco Retailers) of Title 5 (Business Licenses and Regulations) of the
Temecula Municipal Code is hereby amended to read as follows (with deletions appearing in
strikethrough text and additions appearing in underlined text) with all other provisions of Section
5.24.050 remaining unchanged:
B. Upon the receipt of an application for a tobacco retailer's license and the license fee, the
chief of police shall issue a license unless substantial record evidence
demonstrates that one of the following bases for denial exists:
1. The application is incomplete or inaccurate.
2. The application seeks authorization for tobacco retailing at a location for which
a prohibition on issuing licenses is in effect pursuant to Section 5.24.100(B) of this chapter.
However, this subsection shall not constitute a basis for denial of a license if the applicant
provides the city with documentation demonstrating by clear and convincing evidence that
the applicant has acquired or is acquiring the location or business in an arm's length
transaction.
3. The application seeks authorization for tobacco retailing for a proprietor for
which a prohibition on issuing licenses is in effect pursuant to Section 5.24.100(B) of this
chapter.
4. The application seeks authorization for tobacco retailing that is prohibited
pursuant to subsection A of this section, that is unlawful pursuant to any other city chapter,
or that is unlawful pursuant to any other local, state, or federal law.
Section 16. Item 1 of Subsection B of Section 5.24.090 (License Violation) of Chapter
5.24 (Licensure of Tobacco Retailers) of Title 5 (Business License and Regulations) of the
Temecula Municipal Code is hereby amended to read as follows (with deletions appearing in
strikethrough text and additions appearing in underlined text) with all other provisions of Section
5.24.090 remaining unchanged:
25
B. License Compliance Monitoring.
1. Compliance with this chapter shall be monitored by the chief of police.
Any peace officer may enforce the provisions of this chapter.
Section 17. Subsection C of Section 8.36.030 (Prohibition of smoking in public places,
places of employment and other areas.) of Chapter 8.36 (Smoking in Public Places of Title 8
(Health and Safety) of the Temecula Municipal Code is hereby amended to read as follows (with
deletions appearing in strikethrough text and additions appearing in underlined text):
C. Unless otherwise prohibited by law, smoking is permitted in the following locations:
store;
12. By performers during theatrical productions, if smoking is a part of the theatrical
production;
2-3. Private residential property, except when designated as nonsmoking under
Chapter 17.30 of this code or used as a childcare or health care facility subject to licensing
requirements and children, patients, or employees are present;
34. Up to twenty -€rye 20 percent of hotel and motel guest rooms, if the hotel or motel
permanently designates particular guest rooms as nonsmoking rooms such that eightX seventy five
80 or more of its guest rooms are nonsmoking and ashtrays and matches are permanently
removed from such nonsmoking rooms. Permanent "no smoking" signage shall be posted in
nonsmoking rooms;
45. Outdoor dining areas of businesses operating under an on -sale license for public
premises issued by the California Department of Alcoholic Beverage Control.
Section 18. Table 17.08.030 (Schedule of Permitted Uses Commercial/Office/Industrial
Districts) of Section 17.08.030 (Use Regulations) of Chapter 17.08 (Use Regulations) of Title 17
(Zoning) of the Temecula Municipal Code is hereby amended to read as follows (with additions
appearing in underlined text):
Table 17.08.030
Schedule of Permitted Uses
Commercial/Office/Industrial Districts
Description of Use
NC
I CC
I HT
I SCIPOIBPI
LI
T
Tailor shop
P
P
-
-
P
-
-
Taxi or limousine service
-
P
P
P
Tile sales
-
P
-
P
-
-
-
Tobacco shop
C- _
P13
P 13
P 13
Notes:
13. Subject to the requirements contained in Section 5.24.120 of this code.
Section 19. Table 17.22.106 (Schedule of Permitted Uses Pala Road Planned
Development Overlay District -1) of Section 17.22.106 (Use Regulations) of Article 2. (Pala Road
Planned Development Overlay District-1) of Chapter 17.22 (Planned Development Overlay
26
Zoning District (PDO-)) of Title 17 (Zoning) of the Temecula Municipal Code is hereby amended
to read as follows (with additions appearing in underlined text):
Table 17.22.106 Schedule of Permitted Uses
Pala Road Planned Development Overlay District-1
Description of Use
PDO-1
T
Tailor shop
P
Taxi or limousine service
P
Tile sales
P
Tobacco sho 6
P
Tool and die casting
-
Transfer, moving and storage
Transportation terminals and stations
-
Truck rentals (no sales or/service)
C
TVNCR repair
P
Notes:
1. The CUP will be subject to Section 17.10.020(B), special standards for the sale of alcoholic beverages.
2. Subject to citywide antenna standards.
3. See Section 17.10.020(L), special standards for indoor swap meets.
4. See Section 17.10.020(N ), special standards for self -storage or mini -warehouse facilities.
5. Subject to the special setback provisions contained in Section 17.22.108.
6. Subject to the requirements of Section 5.24.120
Section 20. Table 17.22.136B (Schedule of Permitted Uses Temecula Creek Village
Planned Development Overlay District -4) of Section 17.22.136 (Use Regulations) of Article V.
(Temecula Creek Village Planned Development Overlay District-4) of Chapter 17.22 (Planned
Development Overlay Zoning District (PDO-)) of Title 17 (Zoning) of the Temecula Municipal
Code is hereby amended to read as follows (with additions appearing in underlined text):
Table 17.22.136B
Schedule of Permitted Uses
Temecula Creek Village Planned Development Overlay District-4
Description of Use
PD04R
PDO-4V6
T
Tailor shop
P
P
Taxi or limousine service
P
-
Tile sales
P
-
Tobacco shopi
P7
-
Tool and die casting-
-
Transfer, moving and storage
-
Transportation terminals and stations
-
-
27
Table 17.22.136B
Schedule of Permitted Uses
Temecula Creek Village Planned Development Overlay District-4
Description of Use
PDO-4R
PDO-4V6
Truck rentals no sales or service
-
-
TV/VCR repair P P4
Notes:
1. The CUP will be subject to Section 17.10.020(B) special standards for the sale of alcoholic beverages.
2. Subject to the requirements of Chapter 17.40 of the Temecula Municipal Code.
3. In PDO-4, all senior housing residential projects shall use the development and performance standards
for the high density residential zone and the provisions contained in Section 17.06.050(H).
4. The size of the use or activity is limited to 5,000 square feet.
5. Outdoor entertainment in conjunction with an eating establishment is permitted provided that the
outside noise levels do not interfere with off -site conversation.
6. Drive through facilities are not allowed in the village planning area.
Retail/support commercial planning area is identified as PDO-4R.
Village commercial planning area is identified as PDO-4V.
Multifamily planning areas A and B use the high density column in Table 17.06.030.
7. Subject to the requirements of Section 5.24.120
Section 21. Severability. If any section or provision of this Ordinance is for any reason
held to be invalid or unconstitutional by any court of competent jurisdiction, or contravened by
reason of any preemptive legislation, the remaining sections and/or provisions of this Ordinance
shall remain valid. The City Council hereby declares that it would have adopted this Ordinance,
and each section or provision thereof, regardless of the fact that any one or more section(s) or
provision(s) may be declared invalid or unconstitutional or contravened via legislation.
Section 22. Certification. The Mayor shall sign and the City Clerk shall certify to the
passage and adoption of this Ordinance and shall cause the same or a summary thereof to be
published and posted in the manner required by law.
Section 23. Effective Date. This Ordinance shall take effect thirty (30) days after
passage.
28
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula
this day of ,
ATTEST:
Randi Johl, City Clerk
[SEAL]
29
Zak Schwank, Mayor
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing
Ordinance No. 2023- was duly introduced and placed upon its first reading at a meeting of the
City Council of the City of Temecula on the 22nd day of August, 2023, and that thereafter, said
Ordinance was duly adopted by the City Council of the City of Temecula at a meeting thereof held
on the day of , , by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
30
Randi Johl, City Clerk
RESOLUTION NO.2023-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF TEMECULA ESTALISHING A TOBACCO SHOP
PERMIT FEE
THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS
FOLLOWS:
Section 1. The City Council has the authority to establish application review fees. As
such, the City Council has the authority to establish a fee for the review of Tobacco Shop Permit
applications.
Section 2. The City Council herby finds and determines that, based upon its review of
the information and analysis of City Staff, the proposed establishes a reasonable fee for staff to
conduct Tobacco Shop Permit application reviews.
Section 3. The City Council herby approves the following fee schedule:
Permit Type
I Fee
Tobacco Shop Permit — New Application
$854.00
Tobacco Shop Permit — Renewal Application
$346.00
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula
this 22"d day of August, 2023.
Zak Schwank, Mayor
ATTEST:
Randi Johl, City Clerk
[SEAL]
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing
Resolution No. 2023- was duly and regularly adopted by the City Council of the City of
Temecula at a meeting thereof held on the 22"d day of August, 2023, by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
Randi Johl, City Clerk
PC RESOLUTION NO.2023-14
A RESOLUTION OF THE PLANNING COMMISSION OF
THE CITY OF TEMECULA RECOMMENDING THAT
THE CITY COUNCIL ADOPT AN ORDINANCE
ENTITLED, "AN ORDINANCE OF THE CITY COUNCIL
OF THE CITY OF TEMECULA AMENDING TITLES 5, 8,
AND 17 OF THE TEMECULA MUNICIPAL CODE TO (1)
AMEND MASSAGE ESTABLISHMENT REGULATIONS,
(2) ADD DEFINITIONS FOR TOBACCO SHOP, TOBACCO
SHOP PERMIT AND UPDATE DEFINITIONS OF
TOBACCO PRODUCT AND TOBACCO
PARAPHERNALIA, (3) IMPLEMENT A TOBACCO SHOP
PERMIT PROGRAM TO INCLUDE STRUCTURAL AND
OPERATIONAL REQUIREMENTS, (4) UPDATE
TOBACCO RETAILERS LICENSE PROCESSES, (5)
AMEND REGULATIONS ON SMOKING IN HOTEL
ROOMS, (6) REMOVE TOBACCO SHOP AS A
CONDITIONALLY PERMITTED USE IN TABLE 17.08.030,
(7) IMPLEMENT TOBACCO SHOP PERMIT
REQUIREMENTS IN PLANNED DEVELOPMENT
OVERLAY ZONING DESIGNATIONS 1 AND 4, AND (8)
MAKE A FINDING THAT THIS ORDINANCE IS EXEMPT
FROM THE CALIFORNIA ENVIRONMENTAL QUALITY
ACT (CEQA) PURSUANT TO CEQA GUIDELINES
SECTION 15061 (B)(3)."
Section 1. Procedural Findings. The Planning Commission of the City of Temecula
does hereby find, determine and declare that:
A. City staff identified the need to make revisions and clarifications to portions of
Title 5 (Business Licenses and Regulations), Title 8 (Health and Safety), and Title 17 (Zoning)
of the Temecula Municipal Code.
B. The Planning Commission, at a regular meeting, considered the proposed
amendments to Title 5 (Business Licenses and Regulations), Title 8 (Health and Safety), and
Title 17 (Zoning) of the Temecula Municipal Code on July 19, 2023, at a duly noticed public
hearing as prescribed by law, at which time the City staff and interested persons had an
opportunity to, and did testify either in support or opposition to this matter.
C. The proposed amendments to Title 5, 8, & 17 are consistent with the City of
Temecula General Plan, and each element thereof.
D. At the conclusion of the Planning Commission hearing and after due
consideration of the testimony, the Planning Commission recommended that the City Council
adopt the Ordinance attached hereto as Exhibit "A".
E. All legal preconditions to the adoption of this Resolution have occurred.
Section 2. Further Findings. In recommending adoption of the proposed Ordinance,
the Planning Commission of the City of Temecula does hereby make the following additional
findings as required by Section 17.01.040 ("Relationship to General Plan") of the Temecula
Municipal Code:
1. The proposed use is allowed in the land use designation in which the use is located, as
shown on the land use map, or is described in the text of the general plan.
Of the 15 proposed amendments to Title 5 (Business Licenses and Regulations), Title 8
(Health and Safety), and Title 17 (Zoning) none propose any land use that is inconsistent
with the Temecula General Plan. The changes to Title 17 include removing tobacco shop
as a permitted use in Neighborhood Commercial Zoning District and add a note to the
permitted use table in Planned Development Overlay Districts No. 1 and 4 related to
tobacco shops. These changes are prohibiting land uses or imposing requirements on
existing uses, rather than allowing a use where it was not previously permitted. All other
proposed amendments are minor clarifications and typographical edits and do not
propose any land use changes contrary to the adopted General Plan.
2. The proposed uses are in conformance with the goals, policies, programs and guidelines
of the elements of the general plan.
The proposed amendments to Title 17 of the Temecula Municipal Code do not propose
any land use that is inconsistent with the Temecula General Plan. The majority of the
Code Amendments do not create or allow new uses where they were not previously
allowed. Only the revisions to the Neighborhood Commercial (NC) Zoning district
impact the use of land. The Code Amendments would remove Tobacco Shop as a
permitted use in the NC Zoning district only. The remaining proposed amendments to
the Temecula Municipal Code are minor clarifications and typographical edits and do not
result in a contrary policy direction or indicate an inconsistency between the Temecula
Municipal Code and the adopted General Plan.
3. The proposed uses are to be established and maintained in a manner which is consistent
with the general plan and all applicable provisions contained therein.
The proposed amendments to Title 5, 8, and 17 of the Temecula Municipal Code do not
propose any land use that is inconsistent with the Temecula General Plan. The proposed
changes to massage establishments modify definitions and operational requirements,
require notarized documentation for exempt massage facilities and the prohibition of pets
furthers Policy 5.4 of the Economic Development Element of the Temecula General Plan,
which is to "Monitor existing businesses and support small businesses and the business
retention program to encourage local employment and growth of local businesses."
Changes to tobacco regulations include modifying definitions, implementing an annual
permit for tobacco shops to include operational requirements, and updating the number of
designated smoking rooms is in compliance with Goal 3 of the Community Design
Element of the Temecula General Plan which is to ensure "Preservation and enhancement
of the positive qualities of individual districts or neighborhood." All other proposed
amendments are clarifications and typographical edits and do not propose any land use
changes contrary to the adopted General Plan.
Section 3. Environmental Compliance. In accordance with the California
Environmental Quality Act, the proposed Ordinance is exempt from the requirements of the
California Environmental Quality Act ("CEQA") pursuant to Title 14 of the California Code of
Regulations, Section 15061 (b) (3) because it can be seen with certainty that there is no
possibility that the Ordinance will have a significant effect on the environment. The Municipal
Code amendments are minor policy changes, changes required by state law, and the imposition
of regulations on existing uses and will not increase the intensity or density of any land use. The
Planning Commission, therefore, recommends that the City Council of the City of Temecula
adopt a Notice of Exemption for the proposed ordinance.
Section 4. Recommendation. The City of Temecula Planning Commission hereby
recommends the City Council approve Planning Application No. LR23-0050, a proposed
Citywide Ordinance as set forth on Exhibit "A", attached hereto, and incorporated herein by this
reference.
PASSED, APPROVED AND ADOPTED by the City of Temecula Planning
Commission this 19th day of July 2023.
v I Wow;
mw)
7PA PRA
Chair
ATTEST:
Luke Watson
Secretary
[SEAL]
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA }
I, Luke Watson, Secretary of the Temecula Planning Commission, do hereby certify that
the forgoing PC Resolution No. 2023-14 was duly and regularly adopted by the Planning
Commission of the City of Temecula at a regular meeting thereof held on the 19th day of July,
2023, by the following vote:
AYES:
4
PLANNING COMMISSIONERS:
Hagel, Solis, Turley-Trejo, Watts
NOES:
0
PLANNING COMMISSIONERS:
None
ABSTAIN:
0
PLANNING COMMISSIONERS:
None
ABSENT: 1 PLANNING COMMISSIONERS
Ruiz
.1
Luke Watson
Secretary
ORDINANCE NO.2023-
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF TEMECULA AMENDING TITLES 5, 8, AND 17 OF THE
TEMECULA MUNICIPAL CODE TO (1) AMEND
MASSAGE ESTABLISHMENT REGULATIONS, (2) ADD
DEFINITIONS FOR TOBACCO SHOP, TOBACCO SHOP
PERMIT AND UPDATE DEFINITIONS OF TOBACCO
PRODUCT AND TOBACCO PARAPHERNALIA, (3)
IMPLEMENT A TOBACCO SHOP PERMIT PROGRAM TO
INCLUDE STRUCTURAL AND OPERATIONAL
REQUIREMENTS, (4) UPDATE TOBACCO RETAILERS
LICENSE PROCESSES, (5) AMEND REGULATIONS ON
SMOKING IN HOTEL ROOMS, (6) REMOVE TOBACCO
SHOP AS A CONDITIONALLY PERMITTED USE IN
TABLE 17.08.030, (7) IMPLEMENT TOBACCO SHOP
PERMIT REQUIREMENTS IN PLANNED DEVELOPMENT
OVERLAY ZONING DESIGNATIONS 1 AND 4, AND (8)
MAKE A FINDING THAT THIS ORDINANCE IS EXEMPT
FROM THE CALIFORNIA ENVIRONMENTAL QUALITY
ACT (CEQA) PURSUANT TO CEQA GUIDELINES
SECTION 15061 (11)(3)
THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY ORDAIN AS
FOLLOWS:
Section 1. Procedural Findings. The City Council of the City of Temecula does
hereby find, determine and declare that:
A. City staff identified the need to make minor revisions and clarifications to portions
of Title 5 (Business Licenses and Regulations), Title 8 (Health and Safety), and Title 17 (Zoning)
of the Temecula Municipal Code.
B. The code amendments are being made to address operational concerns surrounding
massage establishments, implement a new permit for tobacco shops to include operational
standards, and remove tobacco shop as a conditionally permitted use in the neighborhood
commercial zoning district. In addition, the ordinance updates the number of permitted smoking
rooms allowed in hotels in accordance with changes in state law. Finally, the code amendment
makes minor typographical edits to the code.
C. As required by State law, the Planning Commission considered the proposed
amendments to Title 17 (Zoning) of the Temecula Municipal Code ("Ordinance") on July 19,
2023, at a duly noticed public hearing as prescribed by law, at which time the City staff and
interested persons had an opportunity to and did testify either in support of or opposition to this
matter.
1
D. At the conclusion of the Planning Commission hearing and after due consideration
of the testimony, the Planning Commission adopted PC Resolution No. 2023-14, recommending
that the City Council approve the code amendments.
E. The City Council, at a regular meeting, considered the Ordinance on August 22,
2023, at a duly noticed public hearing, as prescribed by law, at which time the City Staff and
interested persons had an opportunity to and did testify either in support or opposition to this
matter.
F. Following the public hearing, the City Council considered the entire record of
information received at the public hearings before the Planning Commission and City Council.
Section 2. Further Findings. The City Council, in approving the proposed
Ordinance, hereby makes the following additional findings as required by Section 17.01.040
("Relationship to General Plan") of the Temecula Municipal Code:
1. The proposed uses are allowed in the land use designation in which the use is located,
as shown on the land use map, or is described in the text of the general plan.
The proposed changes to Title 17 include removal of tobacco shop as a permitted use in
Neighborhood Commercial Zoning Designation and requiring Tobacco Shops in Planned
Development Overlay (PDO) districts No. 1 and 4 to adhere to the new requirements of a Tobacco
Shop Permit. These changes are prohibiting land uses or imposing requirements on existing uses,
rather than allowing a use where it was not previously permitted. All other proposed amendments
are minor clarifications and typographical edits and do not propose any land use changes contrary
to the adopted General Plan.
2. The proposed uses are in conformance with the goals, policies, programs and
guidelines of the elements of the general plan.
The proposed amendments to Title 17 of the Temecula Municipal Code do not propose any land
use that is inconsistent with the Temecula General Plan. The majority of the Code Amendments
do not create or allow new uses where they were not previously allowed. Only the revisions to the
Neighborhood Commercial (NC) Zoning district impact the use of land. The Code Amendments
would remove Tobacco Shop as a permitted use in the NC Zoning district only. The remaining
proposed amendments to the Temecula Municipal Code are minor clarifications and typographical
edits and do not result in a contrary policy direction or indicate an inconsistency between the
Temecula Municipal Code and the adopted General Plan.
3. The proposed uses are to be established and maintained in a manner which is consistent
with the general plan and all applicable provisions contained therein.
The proposed amendments to Title 5, 8, and 17 of the Temecula Municipal Code do not propose
any land use that is inconsistent with the Temecula General Plan. The proposed changes to massage
establishments modify definitions and operational requirements, require notarized documentation
for exempt massage facilities and the prohibition of pets furthers Policy 5.4 of the Economic
0a
Development Element of the Temecula General Plan, which is to "Monitor existing businesses
and support small businesses and the business retention program to encourage local employment
and growth of local businesses." Changes to tobacco regulations include modifying definitions,
implementing an annual permit for tobacco shops to include operational requirements, and
updating the number of designated smoking rooms is in compliance with Goal 3 of the Community
Design Element of the Temecula General Plan which is to ensure "Preservation and enhancement
of the positive qualities of individual districts or neighborhood." All other proposed amendments
are clarifications and typographical edits and do not propose any land use changes contrary to the
adopted General Plan.
Section 3. Environmental Findings. The City Council hereby finds that this
Ordinance is exempt from the requirements of the California Environmental Quality Act
("CEQA") pursuant to Title 14 of the California Code of Regulations, Section 15061(b)(3) because
it can be seen with certainty that there is no possibility that the Municipal Code amendments would
have a significant impact on the environment. The Municipal Code amendments are minor policy
changes, changes required by state law, and the imposition of regulations on existing uses and will
not increase the intensity or density of any land use. A Notice of Exemption has been prepared and
will be filed in accordance with CEQA and the State CEQA Guidelines.
Section 4. Section 5.22.020 (Definitions) of Chapter 5.22 (Massage and Massage
Establishments) of Title 5 (Business License and Regulations) of the Temecula Municipal Code is
hereby amended to amend the definition of "Massage" as follows (with additions appearing in
underlined text), with all other provisions of Section 5.22.020 remaining unchanged:
"Massage" means the scientific manipulation of the soft tissues of the human body.
"Massage" includes bodywork such as reiki, trigger point, hiatsu, cupping and lymphatic drainage.
Section 5. A new Item 5.22.040.A.1 is hereby added to Subsection 5.22.040.A of
Section 5.22.040 (Massage Establishment Permit Required) of Chapter 5.22 (Massage and
Massage Establishments) of Title 5 (Business License and Regulations) of the Temecula
Municipal Code (with additions appearing in underlined text), with all other provisions of Section
5.22.040 remaining unchanged:
A. It is unlawful for any person to engage in, operate, conduct or carry on, in or upon any
premises, a massage establishment without first obtaining a massage establishment permit
pursuant to this chapter, securing the necessary business license as required by this code,
and complying with Title 5 of this code. A separate permit shall be obtained for each
separate massage establishment operated by such person.
1. Massage establishments include facilities that provide Reiki, Trigger Point, Shiatsu,
Cupping, Lymphatic Drainage and any other activity that meets the definition of
massage. as defined in Section 5.22.020 of this code.
Professionals of such massage practices or any activity that meets the definition of
massage as defined in Section 5.22.020 of this code shall be CAMTC certified in
accordance with Section 5.22.030 of this code.
Section 6. Item 5.22.090.A.1 of Subsection 5.22.090.A (Requirements applicable to
the operation of outcall services) of Chapter 5.22 (Massage and Massage Establishments) of Title
5 (Business License and Regulations) of the Temecula Municipal Code is hereby amended to read
as follows (with additions appearing in underlined text), with all other provisions of Section
5.22.090 remaining unchanged:
A. Outcall Massage. No person shall provide outcall massage in the city unless all of the
following requirements are met:
1. The appointment for the outcall massage is performed only under aphysician's written
recommendation or order and the appointment was made by a massage establishment
in good standing under this chapter and the massage professional is employed by the
same massage establishment.
Section 7. A new Subsection "28" (Pets) is hereby added to Subsection B (Operations)
of Section 5.22.080 (Requirements applicable to the operation of massage establishments.) of
Chapter 5.22 (Massage and Massage Establishments) of Title 5 (Business License and
Regulations) of the Temecula Municipal Code to read as follows (with additions appearing in
underlined text), with all other provisions of Section 5.22.080 remaining unchanged:
28. Pets. No pet(s) or live animal mascots. reg rdless of species. shall be allowed on site of
any massage establishment, except for a working "service animal" as defined in Section
6.04.010 of this code.
Section 8. Subsection 5.22.120A.I (Exemptions) of Chapter 5.22 (Massage and
Massage Establishments) of Title 5 (Business License and Regulations) of the Temecula
Municipal Code is hereby amended to read as follows (with deletions shown in strikethrough text
and additions appearing in underlined text), with all other provisions of Section 5.22.120
remaining unchanged:
A. This chapter shall not apply to the following individuals or businesses while engaged in
the performance of the duties of their respective professions:
1. Personsholding n al-rd eei4ifie to t.-.... aetiee !he ..Wal,iig afts under the laws
of the steate of Cie=,ia. i,zc-luding. but jiet limited to,-helde nedi,.�grees. stieli as
pPhysicians, surgeons, chiropractors, osteopaths, and per -sons the-r- medical professionals and
other persons holding a valid certificate tc practice the healing arts, except liar CANI C-certified
massage thejmULs:[s, working under their direct supervision who are working at the same location
as the licensed person, provided such professionals are performing massage, as defined in this
chapter, at a licensed business as part of, and to the extent permitted by, their respective
professions. Direct supervision, as used in this subsection. requires persons holding a valid
certificate to practice the healing arts under the previsions of Division 2 (commencing with Section
500) Business and Professions Code to be aesent at the office of the business establishment and
immediately -available to furnish assistance and direction throe hoot the performance or the
massa e. The supervising medical professional is required to be physical present on site. The
IR
rCq aired presence does not include virtual presence through audio/video real -t-time coiizmunications
technology;
Section 9. A new subsection "C" (Affidavit) is hereby added to Section 5.22.120
(Exemptions) of Chapter 5.22 (Massage and Massage Establishments) of Title 5 (Business License
and Regulations) of the Temecula Municipal Code to read as follows (with additions appearing in
underlined text), with all other provisions of Section 5.22.120 remaining unchanged:
C. Affidavit. All persons holding a valid certificate to practice the healing arts under the laws
of the state of California who operate an exempt massage facility as defined by Sectiop
5.22.120 of this code shall provide a notarized affidavit attesting that all massage treatments
performed are under their order or direction and that they will remain on site during all such
treatments. Such persons must assure that all assistants, students or aides do not function
autonOMOUsly. -
Section 10. A new Section 5.22.155 (Violation Summary) is hereby added to Chapter
5.22 (Massage and Massage Establishments) of Title 5 (Business License and Regulations) of the
Temecula Municipal Code to read as follows:
5.22.155 Violation and Penalty Table.
Table 5.22.155 - Violation Summary'
Level 1 VIOLATIONS
Code Section
Per TMC 5.22.140(B){1) - Any violation of the provisions below are
rounds to revoke a Massage Establishment Permit
5.22.070(C)(1)(a)
Applicant or any officer/director of a corporation operating a massage
establishment has been convicted of anythat requires registration with any
_crime
level of governinent or a red E1cy similar to and inchiding Penal Code Section 290 o?-
involves conduct that violates airy law similar to avid includingPeital Code
Sections 266(h), 266(i), 314, 3 15,316 318, 647 (a), (b), or (d), 653.22, 653.23 or
aiV crime settled in a plea to violations of Penal Code Section 415, 602 or aiw
lesser included or related offense.
5.22.070tC)(.1)(b)
Applicant or any officer/director of a corporation operating a massage
establishment has been convicted of a Health and Safe Code Section 11550
eaffeitse or arty offense involving the illegal sale, distribution or possessioq of a
euiitrol led substance specified in flealth and Safety Code Sections 11054. 1 1055.
1 1056, 11057 or 11058.
5.22.070(C)(1)(c)
Applicant or any officer/director of a corporation operating a nlassag�
establishment has engaged in conduct in another_iw•isdiction which, if it had
occurred_ within the City, would constitute Q'OUnds for denial or revocation under
this chapter.
5.22.070(� 1)(d)
Applicant or any officer/director of a corporation operating a massage
establishment has been subiccted to a permanent injtnietion against [lye condtictin
or maintaiEtingof a iiiiisattce pursuant to Penal Code Sections 1 1225 tltrotigli
1 1235 or any similar provisions of law in a jurisdiction outside the state of
California
5.22.070(C)(I)(e)
Applicant or ma officer/director of a corporation operating a massage
establishment has engaged in conduct in any state or country which would
constitute an offense as described in subsection 5.22.070 I a orb of this
section
5.22.070(C)(1)(f)
Applicant or any officer/director of a corporation operating a massage
establishment has been convicted of an act involving theft, dishonesty, fraud,
deceit or moral turpitude or an act of violence, which act or acts are related to the
C]llalitiCation5, functions or duties of the operator of massage establishment, ar
which act or acts occurred in connection_ with the operation of massage
establishment
5.22.070(C)( I )fg)
nJpal ant or any officer/director of a Corporation O erp ating a nlasSM
establishment is registered under Penal Code Section 290 or any similar law in
any. state or olher 'urisdicti w
5.22.070(C)(1)(11)
ADD licant or any officer/director of a car orb atio�a z�perating a massage
establishment has had a massage estahlishinent permit, or other similar Iicense or
perm it denied, --suspended or revoked for cause by any governmental authorit .
5.22.070(C)(I )(i)
�licant or any officeildirector of a car�oraiivn rating inassae
establishinent has had any massage therapist or massage practitioner permit.
license, or certification denied revoked or suspended bytheCAMTC.
5.22.080(B)(5)
No person or„persons shall be allowed to live inside the massage establishment at
any time. Beds, mattresses, waterbeds, futons, sofa beds, or any type of portable or
convertible beds are not permitted on the remises.
5.22 080t13](7)
No pursr�n shall enter, he in or remain in any part of a massage estahlishment while_
in possession of, consuming, using or under the influence of any alcoholic
beverage, recreational drugs or controlled substance. The operator and on -duty
manager shall be respansbie to_ eaisure that no such person shall enter or remain
upon the massage establishment. Service of alcoholic beverages_or recreational
drugs shall not be allowed.
5.22.080(B)(8)
No contraceptive devices; i.e., condoins or other prophylactics, or sexual devices,
the prutiary urpose of which is for sexual stimulation. shall be sold, utilized, or
allowed on the remises or possessed by any employee while on the prermses.
5.22.080( )(20)
No massage professional or any person ern toyed by the massage establishment.
includin ig ndependent contractors, may engage in acts that a reasonable person in
the client's perspective, would be understood as an offer to perform or engage in
with a client, acts that are sexual in nature, nor shall any massage professional or
91W-person employed by the massage establishment. massage tliegenitals or anal
area of any patron, nor shaI I any operator or manager al low or permit such
massage. An operator must comply with Business and Professions Code Section
4609(a) relating to sexual acts. including not allowing inassMe professionals to
engage in any form of sexual activity on the premises of the massame
establishment, or to engage in sexual activity while providing massage for
compensation. A massage professional may only provide massa e of female
breasts with written consent of the person receiving the massage and a referral
from a licensed California health care provider. This section is not intended to
prohibit any massage techIlique recognized by CAMTC as legitimate, or to impose
any specific restriction or professional practice beyond those set forth in Business
and Professions Code Section 4609(a). No operator, manager or employee while
performing my task _or service associated with the massage business shall be
present in any room with another person. unless the person's genitals, gluteal
crease anus and in the case of a female her breasts are fully covered.
5.22.080(B)(21)
A massage professional may not wear attire that is transparent, see -through, �, or
substantially exposes the massage professional's undergarments or that exposes
his or her breasts, buttocks or genitals, or that in any way willfully and lewd
exposes his or her private parts in any that is in public or where there are
ether peo le )j-cscnt who inay he offended or annoyed by such_aetioti. Swine attire
may not be worn unless the massage professional is providing a water -based
massage modality approved by the CAMTC. A massage professional shall not
wear any clothingthat is deemed by the CAMTC to constitute unprofessional
attire. All employees of the massage establishment that are not massage
professionals shall also adhere to these clothin ► requirements.
5.22.140(B)( I )(a)
The massa eg establishment is employing a massage therapist that does not hold a
valid CAMTC license.
5.22.14Q B 1 d
Alcoholic beverage or recreational dai s are found on -site.
5.22.140(B)(1)(e)
The massagg establishment has violated any provision of Business and Professions
Code Section 4600 et se
5.22.140(B)(1)(f)
The chiefof_p:olice determines that the massage establishment's operations
constitute an immediate threat to the ublic health and salet .
Level 2 VIOLATIONS
Code Section
11'et- 'I'MC 5.22.140(13)(2) - Any three violations in a 12 month period of
the provisions below are grounds to revoke a Massage Establishment
Permit
5.22.080(A)(1)(a)
Massage estahli.shments shall be. located in a zoning district which permits'snch
use. When a new massage establishment is pMposed to be constructed, a set of
tans shall be submitted to the_ city for ap roval and shall be accompanied by the
a ra riate application and plan check fee.
5.22.080(A)(1)(b)
No massage establishment located in a buildhig ❑r structure with exterior windows
frontingal2ublic street. highway, walkway, or ap rking area, shall. during business
hours, block visibility into the interior reception and waiting area through the use
of curtains, closed blinds, or any other material that obstructs, blurs or darkens the
view into the remises.
5.22.080(A)(2)
Neither signs nor the front of the business shall be illuminated by strobe, flashing
fights or string lights. Each operator andlor on -duty manager shalI display [lie
massa a establishment permit in a conspicuous u�7 blic place in the lobby of the
massage establishment. In addition, each operator and/or on -duty mana eg r shall
ensure: (a) CAMTC Certificates for each massage professional employed at the
establishment (whether on -duty or not) are conspicuously displayed in the lobby
area of the massage establishment; and (b). that each massage. pipfeLsional has his
or her identification card in his or her possession while providing, tnassag;e services
for com ensation.
5.22.080(A)(3)
Services list. Each operator shall post and maintain a list of services available and
the cost of such services, in a conspicuous public place within the premises. No
owner, manager or operator shall permit, and no ntassai a .rofessional shall offer
or perform,_any service other than those posted, nor shall all ooperator or a massage
professional request or charge a fee for any service other than those on the list of
services available and posted in the reception area or rovided to the client in
advance of aily outcall services.
5.22.080(A)(4)
Each operator shall illuminate each room or area where massage is performed with
light equivalent to a minimum of forty -watt incandescent light bulb, and shall
provide sufficient ventilation. Such lighting and ventilation shall otherwise com I
with the current mechanical and building code of the city. The lightiiig_,in each
massage room shall be activated at all tinges while the patron is in such room or
area.
5.22.080(A)(5)
A minimum of one toilet and one separate wash basin shall be provided for patrons
in each massage establishment. Each wash basin shall be equipped with soap or
detergent and hot running water' at all_tintes and shall be located in close proximity
to the area devoted to the performing of massage services. A permanently installed
soap dispenser, filled with soap, and a single service towel dispenser or hand air
dryer shall be provided at the restroonl hand wash sink. Bar soap shall not be used.
A trash receptacle shall be provided in each toilet_room. Showers may be provided
at theoperator's o tion.
5.22.080(A)(6)
If male and female patrons are to be treated simultaneously at the same massage
establishment-s_eRrate massage rooms shall be provided for male and female
patrons provided, however. that massage establishments having separate massage
rooms for male and female patrons may provide "couples massage" in a single
room sub'ect to the re uirements of this subsection. Cou Ies massa e i.e.
concurrent massage of two persons, is permitted within one room provided all
other requirements ofthis chapter are satisfied 'ineIudin,:, but not limited to,
provision of separate massage table and massage professional for each customer.
Any room to be used for couples massage shall be Sufficiently sized so as to
coijjplly with any and all applicable building and fire codes and to hermit free
passage and movement of the massa e professionals.
5.22.080 A 7
All facilities of the massage establishment must be in &pod rel2gir and sllall tare
thoroughly cleaned and sanitized each day the business is in operation. All walls,
floors and ceilings of each restroom and shower area, if any, shall be made of
washable mold -resistant surfaces.
5.22.080(A)(8)
A massage table shall be provided in each massage room and the massage shall be
performed on this massage table. The tables shall have a minimum Ilei hg t of
twenty-eight inches. Two-inch thick foam pads with maximum width of four feet
may be used on a massage table and must be covered with durable, washable
plastic or other waterproof material, Beds .floor mattresses and waterbeds are not
permitted on the premises.
5.2 08a.CB)L}
Each operator and/or on duly manager shall provide and maintain on the premises
ode uate e ii ment for disinfecting and sterilizing instruments used in massa e.
5.22.080 B 3
_
Common use of towels or linen shall not be permitted. Towels and linen shall be
laundered or changed promptly after each use. Separate cabinets or containers
shall be provided for the storage ofclean and soiled linen and towels, and such
cabinets or containers shall be pjainly marked: "clean linen" and "soiled linen."
5.22.080(B)(4)
Eacli niassage estab I i sh me n I and/or massage professional shall Provide alld
maiutaul at the location where the massage is performed adequate equipment for
disinfecting and sterilizing instruments used in massage. Instruments utilized in
performing massage shall not be used on more than one client unless they have
been sterilized, Ming approved sterilization methods.
5.22.080(B)(6)
No food of any kind shall be cooked or prepared in a massage establishment. No
fop ol'any kind shall be For sale or sold in the establishment.
5.22.080 B 9)
��(—
No electrical, mechanical or artificial device shall be used by the operator or any
Gn,�loxee of the massage establishment for audio and/or video recording or for
11.1Mlitorin rg the performance of a massage or the conversation or other sounds in
the massage rooms without the written consent of thepatron.
5.22.080(B)(10)
The operator aandlor manager of the massage establishment shall maintain a roster
of all elllp oyees, including operators, managers and massage pl�OfessionaI$,
showing each name, nickname and al ias, home address, age, birth date, gender,
height, weight, color of hair and eyes, plione number, Social SeCUrijxNumber
CAMTC certificate number, date of employment, and duties of each employee.
Tliefaregoing roster and all information therein shall be maintained on the
premises For a period of two gears following the termination of each employee.
!1 on consent or upon obtaining an applicable warrant, the operator or manager on
duty shall make the roster immediately available for inspection during all hours the
massage establishment is open for business. Information in the roster shall be
available for inspection only to city or police department representatives while
performing official duties. it is unlawful for massage establishment to ern Mkt u or
retain an person to provide massa for com�ensatinn, or to allow aEly_persan tc�
provide massage for compensation on the premises of a massage establishment,
unless that person is listed as a massage professional on the massajze permit issued
)lrsuant to this cha ter.
5.22.080(B)(1 1
The massage professional shall provide to each patron clean, sanitary and opaque
coverings ca able of covering areas of the patron identified as prohibited massage
Areas including the gCtittal a!'ea, anus and felllale breasts Re -use or such
coverings is prohibited unless ade uatel cleaned and sanitized.
5.22.080 B 12
Every person operating a massage establishment shall keep a record of the dates
and hours of each treatment or service provided, Elie [tame and address of the
patron, the name of massa gc professional administering such service and a
des cri tion oFthe treatment or service rendered.
5.22.080(B)(13)
The owner must advise the ci-, in writii g. at the lime ohapplicalio[t For a Perinit
of the business hours, and any change in hours occun'ing thereafter. No m soll
shall operate a massage establishment or administer a massage in any massage
establishment or at an outcall location booked by that massage establishment
between the hours of nine p.m. and seven a.m. All massages must terminate by
nine p.m., regardiess_of the start time. All customers patrons and visitors shall be
excluded from the massage establishment durins these !lours and be advised of
these hours. The hours of operation must be displayed in a conspicuous public
place in the lobby within the massage establishment and in the front window
clearly visible from the outside. It -is the obligation and responsibility of the
massage establishment to in form clients of the re a irement that a[l massage
service must cease §y nine p.m.
5.22.080(B)(14)
No permitted !Massage ostablisllnlenl shall place, publish or distribute,_or cause to
be placed. _published or distributed, in any publication or any website,_afty
advertising that depicts any portion of the human body that would reasonably
su T e€�g st to prospcc__ tiyE g ons_that any service is available other than those
services authorized by the Massage Therms Act and pursuant to this chapter. No
massage establishment shall employ language in the text of such advertising that
would reasonably suggest to a prospective patron that any service is available
other than those services authorized by this chapter. The massage establishment
shall ensure that it and all certified massage proressi.onals comply with Business
and Professions Code Sections 4608, 4609 and 4611. by requiring the massage
professionals to include the name under which he or she is certified and his or her
certificate number in any and all advertising of massage for compensation, to not
engage in sexually suggestive advertising related to massage services, to not hold
him or herselfout as a certified massage professional, or use terms such as
"licensed" or "certified," that implies that an uncertified person is certified as a
massage professionals to not falsely state or advertise or put out a{y siga or card,
or to falselypresent to the public, that any individual is licensed, certified, or
registered as a massage professional if that individual is not so certified by the
CAMTC.
5.22.080(B)(15)
No operator or manager shall engage in. conduct or carry on the business of a
massage establishment unless there is on file with the police department, in full
force and effect at all times, documents issued by an insurance company
authorized to do business in the state of California evidencing that the permit
holder is insured under a liability insurance_ policy providing minimum coverage
of one million dollars forinjury or death to one person arising out of the
_personal
operation of the massage establishment and/or the administration of any, massage.
Evidence of the re aired insurance shall be provided to the chief of police at the
time an initial application, or renewal application, is filed.
5.22.080(B)(16)
All massage establishments must comply wwith all state and federal laws and
regulations providing for access to and receipt of services by disabled 2ersons.
5.22.080(B)(17)
All front, reception, hallway .or front exterior doors (except back or exterior doors
used solely for employee entrance to and exit from the massage establishment
shall be unlocked during business hours, except as may be permitted by applicable
law (such as the Temecula Fire Code) which allow for safer doors that maybe
opened from the inside when Iocked. No mass"a may be erformed within an
cubicle, room, booth or any other area within a massage establishment is fitted
that
with a lock of any kind ind (such as a locking doorknob, padlock, dead bolt sliding
bar or similar device), unless the door is an exterior door. No entr doors to an
room shall be obstructed by any means. The requirement that an exterior door
must remain unlocked at all times does not applyto any massage establishment
owned by one individual with one or no employees or independent contractors.
5.22.080 B i 8
No person shall be permitted to be within a massage estabIishmejit gxctpt within
the lobby or reception area, or area where a customer is receiving passage
services, during hours of operation, unless that person has been disclosed to the
city as re aired under this chapter, includin Section 5.22.060(A)(5).
5.22.080(B)(19)
No massage establishment may discriminate or exclude patrons on the basis of
their race sex religion, age, disability or any other classification protected under
rederal or state laws rules or regulations.
5.22.080(B)(22)
The operator and on duty manager shall be jointly responsible for the conduct of
all employees while the employees are on the premises of the massage
establishment. Any act or omission of an employee constituting a violation of any,
provision of this chapter shal I be deemed to be an act or omission of the operator
and on duty manager for purposes of determining whether the massa e
establishment permit should be revoked, or an application for such permit or
renewed thereo�_dBklleil,
5.22.080(B)(23)
No operator or manager sllall employ ant' person as a massage professional who
does not hold a CAMTC Certificate. Eveiy operator or manager shall report to the
chief of police any change of employees, whether by. new or renewed em In men
discharge or termination, on the form and in the manner required by the chief of
police_ The report shall contain the name of the employee and the date of hire or
termination. The report small be made within ten business days of the date of hire
or termination. Theoperator and manager must notify the chief of police
10
in�tnediarElY upon the mass ap,a estabIislimem's notice of any disciplinary action
taken by the CAMTC regard iigone ofthe establishment's massage professionals
and submit a co of the notice: or order. This provision retdres reporting to the
chief of pollee, even if the o,peratoror nianaaer believes that else clliet�of 11olice Itas
or %%gill receive the information fi•om anotlier source.
5.22.080(B)(24
No massage establishment shall o_Wrate as a school ofrnassaV, or use the same
facilities as that of a school of rnassa e.
5.22.080(B)(25)
oration of massage establishment without a garalified immager' being pr•esem at
all times that the rnassa rc establishment is o en for business is roliibitcd,
5.22.080(B (�
Each operator and on -duty ny tanager shall at all times comply with all provisions of
this cliapter and all other applicable provisions of the Temecula Murt!ici all Code.
all conditions of any required zoninW approvals, conditions imposed by the Chief of
police, and all state and federal laws, statutes and regulations, and shall provide
roof of cornliance upon request by the police department.
5.22.080(B)(27)
Eas h massaye establishment shall have and maintain a dedicated
telecommunication device physically at the business location with an assigned
telephone number capable of receiving iiicorniiig calls and dialing out to
g2Lergeiiqj services specifically 911.
5.22.080(B)(28)
No pet(s) or live animal mascot0, regardless of species, shall be allowed on site
of any massage establishment, the only exemption shall be a working "service
animal" as defined in Section 6.04.010 of this code.
' This is a summary of violations only. Please see the referenced code sections for complete
details an omission from this table does not remove the burden of com liiancc.
Section 11. Chapter 5.24 is hereby renamed as "Licensure of Tobacco Retailers and
Tobacco Shops".
Section 12. Section 5.24.030 (Definitions) of Chapter 5.24 (Licensure of Tobacco
Retailers) of Title 5 (Business Licenses and Regulations) of the Temecula Municipal Code is
hereby amended to add definitions for "Tobacco Shop" and "Permit" and to revise the definitions
for "Tobacco paraphernalia" and "Tobacco product" to read as follows (with additions appearing
in underlined text) with all other provisions of Section 5.24.030 remaining unchanged:
"Tobacco Shop" means anv premises dedicated to the disolay. sale. distribution. deliverv. offerin
furnishing, or marketing of tobacco, tobacco products, tobacco accessories, or tobacco
paraphernalia, including all non -tobacco products that contain nicotine. Any premises that
dedicates more than 10 percent of its floor space exe I ud i ng bathrooms kitchens breakrooms and
other exclusive employee use common areas) to tobacco products, tobacco accessories or tobacco
paraphernalia_ shall be considered a "Tobacco Shop" for purposes of this chapter. If a premises
dedicates less than 10 percent of its floor space (excluding bathrooms, kitchens, breakrooms, and
other exclusive employee use common areas) to tobacco products, tobacco accessories or tobacco
paraphernalia, then it shall be considered a "Tobacco Retailer" as defined in Section 5.24.030. and
is not governed by this Chapter.
"Tobacco Shop Permit" or "TSP" means a Tobacco Shop Permit issued pursuant to this chapter.
11
"Tobacco paraphernalia" means cigarette papers or wrappers, pipes, electronic cigarette ar va ins
devices, holders of smoking materials of all types, cigarette rolling machines, and any other item
designed for the smoking, preparation, storing, or consumption of tobacco products.
"Tobacco product" means:
1. Any substance containing tobacco leaf, including but not limited to cigarettes, cigars,
pipe tobacco, electronic cigarette or vaping device to include ligUid, snuff, chewing tobacco,
dipping tobacco, bidis, or any other preparation of tobacco; and
2. Any product or formulation of matter containing biologically active amounts of nicotine
that is manufactured, sold, offered for sale, or otherwise distributed with the expectation that the
product or matter will be introduced into the human body but does not include any product
specifically approved by the Federal Food and Drug Administration for use in treating nicotine or
tobacco product dependence.
Section 12. A new Section 5.24.120 "Tobacco Shops" is hereby added to Chapter 5.24
(Licensure of Tobacco Retailers) of Title 5 (Business Licenses and Regulations) of the Temecula
Municipal Code to read as follows (with additions appearing in underlined text):
5.24.120 Tobacco Shops.
A. Tobacco Sinop Permit (TSP) Required.
1. It is unlawful for any person to engage in, operate, conduct or carry on, in or upon any
premises, a tobacco shop without first obtaining a permit pursuant to this chapter. securing
the necessary business license as required by this code, and complying with Title 5 of this
code. A se arate ermit shall be obtained for each separate tobacco shop ol2erated b such
person.
2. A pgnnit tooperate a tobacco shop shall be valid fora period of one year and shall expire
in conjunction with the business license.
B. Maximum Number of Tobacco Shops,
I . The maximum number of tobacco shops within the city shall not exceed one tobacco shop
per every ten thousand (10,000) inhabitants of the city witlz any fraction of that ratio being
rounded down to the nearest whole number. For purposes of this section the total number
of inhabitants of the city shall be determined by the most current published data available
from the California State Department of Finances as of the date an application for a
tobacco shop ermit is filed.
2. If there is no lapse in the timely renewal of a city business license and tobacco retailers
license as required under this chapter, tobacco shops operating with a valid and current
business license and current and valid Tobacco Retailers License no later than sixty (60)
days after the effective date of this ordinance and that operate incompliance with all local.
state and federal laws, ordinances, rules and regulations, may continue to operate in the
city even if the number of tobacco shops exceed the maximum number of tobacco shops
permitted in the city pursuant to subsection B(I) above and separation requirements
pursuant to subsection E(1)(a) of this chapter.
3. Any owner that meets the requirements of subsection 2 above ma sell or transfer the
tobacco shop, but the new owner of the tobacco shop shall appty and obtain a tobacco sho
12
perinit before the new owner or operator begins operating titre tobacco shop. Ii'the tobacco
shop that is sold or transferred does not have a histoU of violating any provisions of the
chapter for at least one year preceding the date of sale or transfer of the business, the
business may obtain a tobacco shop uerniit to operate in (lie city eveti if the number- of
tobacco shops exceed the maximum number of tobacco shops permitted in the citXpursuant
to subsection BM } above. as long as the business meets all the requirements of Section
5.24.120(D).
C. Application for Tobacco Shop Permit.
1. All persons desiring a tobacco shop permit shall file a written application on the required
form available at the city's planning department. The application, to be signed under
peiialltty of perjgi.y, shall be accompanied by (lie appropriate tiling fee established by
resolution of the city council. The applicant must be at least twenty-one (21) years of age
at the time of application. The application shall be completed and signed by the operator
of the proposed tobacco shop, if a sole proprietorship; one general partner, if the operator
is_a partnership: one officer or one director. if the operator is a corporation: and one
participant, if the operator is a joint venture. The application for a tobacco shop permit does
not awhori7.e operation of a tobacco shop unless and until such permit has begg properly
granted. The application shall contain or be accompanied by the following information:
a. The type of ownership of the business; for exwnple, whether an individual, partnership,
or corporation. If the applicant is a corporation, the name of the corporation shall be set
forth exactly as shown in its articles of incorporation or charter, together with the state
and date of incorporation and the names and residence addresses of each of its current
officers and directors, and of each stockholder holding more than five percent of the
stock of that corporation. If the applicant is a partnership, the application shall set forth
the name and residence of each of the partners. including limited partners. If the
business is a limited partnership, it shall furnish a copy of its certificate of limited
partnership filed with the Secretary of State. If one or more of the partners is a
corporation, the provisions of this subsection pertaining to corporations shall apply:
b. The precise name under which the tobacco shoe is to be conducted:
c. The complete address, aI.l telephone numbers, and email address of the tobacco shop;
d. The following personal information concerningthe he applicant:
i. Full complete name and all aliases used by the applicant,
ii. Current address and all previous residential addresses Cor eight years immediately
preceding_ the present address of the applicant.
iii. Acceptable proof that the applicant is at least twenty-one (21) years of age,
iv. Proof of legal residency and/or the ability to legally work in the United States,
v. The -applicant's complete business occupation and employment histooLfor eight
years preceding the elate ol'application, including,; but not limited to. the tobacco
shop or similar business history and experience of the applicant,
vi. The complete tobacco shop license history of the applicant, whether such person
has ever had any permit, license, or certification to conduct sales of tobacco
products issued or denied by any ayernmental authorityi the date of issuance of
13
sucli a permit or license, wliether the permit or license was denied, revoked or
Suspended; and [lie reason therefor,
vii. Whether the applicant has ever had a tobacco retailers license, tobacco shop permit,
or any permitllicense reg uired flor the o,peration of a tobacco shop denied. revoked
or suspended by any government authority, and the reason therefor.
viii. All criminal convictions occurring in any state or country, including convictions
resulting from any plea of nolo contenders {no contest}, within the last ten Years,
inc.ltiding those dismissed or expunged pursuant to Penal Code Section 1203.4, but
excluding infraction traffic violations, and the date and place of each such
conviction and reason therefor,
ix. Information regarding any ending criminal charges against the applicant, and
x. A caMplete set of fingerprints taken by the police department.
e. The name and address of the owner and lessor of the premises upon or in which the
tobacco shop is to be located. In the event the applicant is not the legal owner of the
premises. the application nlList be accompanied by a copy of the lease and a notarized
acknowledgment from the owner of the premises that a tobacco shop will be located on
Elie premises, and that the tobacco shop must operate in compliance with the
requirements of this chapter;
f. Such other identification and information as the chief of police may require in order to
discover the truth of the matters required to be set forth in the application;
g. A statement in writing and dated by the applicant that he or she certifies under penalty
of perjury that all information contained in the application is true and correct;
h. Statements in writing and dated by The applicant and the applicant's designated
manager(s) certifyingunder nder penalty of perjury that they;
i. Have reviewed Chapter 5.24 and Chapter 8.56 of the Temecula Municipal Code,
ii. Understand its contents,
iii. Understand the duties of a manager,
iv. Will only employ persons of legal .age to sell tobacco products,
v. Authorize the chief of police to investigate the truth of the information contained
in the application, and
vi. Will be responsible for the conduct of all tobacco shop operators, employees,
agents, independent contractors, or other representatives while such persons are on
the premises of the tobacco shop. and that failure to comply with the provisions of
this chapter and any federal, state, or local law, may result in the revocation of the
tobacco shop pel-mit.
If, during the term of a tobacco shop permit, the peinit holder has any change in
information submitted on the original or renewal application, the permit holder shall
note Fy the poIice de artntent of sttch change. within ten 10 business da s thereafter
in writing; and
A floor plan of the proposed tobacco shop showing all interior areas. including, areas
where tobacco products are stored or sold, all doors, display cases, restrooms,
plumbing, and any other physical features required by the chief of police.
14
k. The applicant. if a corporation or partnership, shall designate one or more of its officers
or pariners to act as, manager during business hours. If the appIicall t i5 all lndiyidllal,
then that individual or designee thereof shall act as manager. Each person who shall
serve as manager shall complete and sign all application Forms required of an individual
applicant_ for a tobacco shop hermit.
1. Notwithstanding the tirct that an application fled under this section may be a "public
record" under Government Code Section 6250 et seq., certain portions of such
application contain information vital to the effective administration and enforcement
of the licensing and/or permit scheme established herein which is personal, private,
confidential, or the disclosure of which could expose the applicant to a risk of harm,
Those portions of the application which are not subject to disclosure are: the applicant'
•ant's
residence address and telephone number, the applicant's date of birth and/or age, the
applicant's driver's permit and/or social security number, and/or personal financial
data. The city council in adopting the application or permitting system set forth herein
has determined in accordance with Government Code Section 6255 that the public
interest in disclosure of the information set forth above is outweighed by the public
interest in achieving compliance with this chapter by ensuring that the applicant's
privacy, confidentially or security interests are protected. The city clerk shall cause to
be redacted from any copy of a completed permit application made available to any
member of the public, the information sct forth above.
D. Tobacco Shop Permit Issuance and Denial.
1. Upon receipt of a written application for a tobacco shop permit, the chief of police shall
conduct an investigation to ascertain whether the applicant satisfies the requirements of
this chapter. The chief of police shall, within thirty (30) days of receipt of an application.
and on a first -come -first -served -basis approve, conditionally approve or denly the
application. The thirty -day 30period may be extended for up to thin 30 additional
days, if necessary, to .complete the investigation at the discretion of the chief of police or
their designee.
2. The chief of police shall deny all tobacco shop permit application(s) if the maximum
number of tobacco shops under section 5.24.120(B)(1) has been met.
3. The chief of police shall deny all tobacco shop permit application(s) if they make any of
the following findings. -
a. The applicant, if an individual, or any of the officers or directors of the corporation, if
the applicant is a corporation; or a partner, if the applicant is a partnership, or any
person directly engand or employed in the tobacco shop, includin if of the above
listed parties, has within ten 10 ears preceding the date of application:
Been convicted of a violation of Ilealtli and Safety Code Section 11550 or an
offense involving the illegal sale, distribution or possession_ of a controlled
substance sl2ecified in Health and Safety Code Sections 11054 11055 11056
11057 or 11058;
H. Engaged in conduct in another 'urisdiction which if it had occurred within the city,
would constitute grounds for denial or revocation under this chapter;
15
iii. Been subjected to a permanent injunction against the conducting or maintaining of
a nuisance pursuant to Penal Code Sections 11225 tlirouR;h 11235 or any similar
provisions of law in a jurisdiction outside the state of California;
iv. En a ed in conduct in any state or country which would constitute an offense as
described in subsection (3)(i) or (ii) of this section;
v. Tiie ap licant has had a Tobacco Retailers License revoked from any jurisdiction
authorized to issue such license(s):
vi. The applicant or any of the applicant's proposed employees, after a fig ll hearing by
administrative proceeding or state court, has aided and abetted any of the offenses
listed in this section;
vii. The applicant has made a false, misleading or fraudulent statement or omission of
fact to the city in the permit application;
viii. The application does not contain all of the information required by this section,
ix. The tobacco. shop. as proposed b. the lie applicant, does not comply with all appiicable
laws, including. but not limited to. health, zoning, fire and safety requirements,
regulations and standards;
x. The applicant has not satisfied (lie requirements of this cliapteriri the time specified;
xi. The location of the proposed tobacco shop has within a twelve 12 month period
prior to the submittal of the application:
(a) Been the site of a violation of this chapter, or any similar criminal or civil
ordinance. law. rule, or regulation of the state of California or an,, other
agency related to the operation of a tobacco shops
(b) Been the site of a tobacco shop that was closed due to criminal activity. For
purposes of this subsection, closure due to criminal activity includes voluntary
closure of a tobacco shop after there have been arrests at the location or other
notices relating to criminal activity,
(c) Been the site of a tobacco shop where violations have not been addressed in the
timespecified in the notice of violation or administrative citation
(d) Been the site of a tobacco shop that has been revoked pursuant to this chapter,
(e) Been the site of tobacco shop. that has received a notice of revocation or fine
issued pursuant to the Temecula Municipal Code, while any appeal of the
revocation or fine is pending, or
(f) Been the site of a tobacco shop that has outstanding fines issued pursuant to the
Temecula Municipal Code that have not been paid.
b. If the application is denied for failure to comp] y with this chapter. the applicant owner
and operator of the tobacco shop may not reapply for a period of one year from the date
the application was denied.
c. An appeal of the denial of a tobacco shop establishment permit shall be governed by
procedures set forth in Section 5.24.120(J).
E. Tobacco Shop Requirements.
1. Facilities.
a. Location. No tobacco shop shall be located within five hundred (500) feet of a sensitive
receptor(,$), as defined in Chapter 9.20.020 of this code or from another tobacco shop
16
This shall be measured in a straight line from any entrance of the tobacco shop to the
property line of a sensitive receptor or another tobacco shop. A radius map package
shall be required at the time of submittal when there is concern about the proposed
tobacco shot) location in relation to sensitive recet)tors. this shall be at the discretion of
the chief of police or the director of community development.
b. Structure. Tobacco shops shall be located in a zoning district which permits such use.
No tobacco shop located in a building or structure with exterior windows fronting a
public street, highway, walkway, or parking area. shall, during business hours, block
visibility into the interior area through the use of curtains, closed blinds, or any other
material that obstructs blurs or darkens the view into the premises.
c. Display of Permits. "Tobacco slops shall at all times display in a conspicuous and
prominent manner, visible upon entrance to the tobacco shop all permits. licenses, or
any other approval required for the operation of tobacco shop. Expired permits do not
satisfy this requirement.
d. Sirens. All tobacco shop signs shall comply with all provisions of Chapter 17.28 (,Sign
Standards) or the appropriate Specific Plan or Planned Development Overlay (PDO,i
When there is a conflict between standards, the more restrictive standard shall be
followed. Tobacco shops shall not have signage on doors, windows or storefronts
except as provided for in Chapter 17.28.050(1)&(J) No signs shall be closer than
eighteen (18) inches from all exterior doors, windows and storefront. No sighs
depicting tobacco use shall be able to be seen from the public right of way. Each sign
violating this section shall be counted as a violation.
e. Lighting. Tobacco shops shall be internally illuminated with white or soft white lights
only. No lightingfor off• any purpose shall be placed around or on windows or doors, to
include frames.
f. Accessory Uses. Lounbe, arcade, and similar accessory activities prohibited. No
tobacco shop shall allow or provide an area either indoor or outdoor that is for a
custorner_lounge. arcade, or similar use(s).
g. Bathroom Facilities. Customers shall be prohibited from utilizing any bathroom
facilities on site.
2. Operations.
a. Business License. Each tobacco shoo shall hold a valid business license issued by the
City of Temecula.
b. State Tobacco Retailers License. Each tobacco shop shall hold a valid California
Cigarette and Tobacco Products Retailer's License issued by the State Board of
Equalization, in accordance with State law.
c. City Tobacco Retailers License. Each tobacco shot) shall hold a valid Tobacco Retailers
License issued by the C ity of Temecula.
d. Tobacco Shop Permit. Each tobacco shop shall hold a valid Tobacco Shop Permit
(TSP)issued by the City of Temecula.
e. Hours of Operation. The owner must advise the city, in writing, at the time of
application for a permit of the business hours, and any change in hours occurring
17
thereafter. No person shall operate a tobacco shop between the hours of nine p.m. and
seven a.m.
f. Employee Age. No person under the age of twenty-one 21 ears at the time of
application, shall operate or be employed by a tobacco shop.
g. Living Prohibited, No person or persons shal l be allowed to live inside the tobacco shop
at anv time. Beds, mattresses, waterbeds. futons, sofa beds, or any type of portable or
convertible beds are not permitted on the premises.
h. Alcoholic Beverages/Drugs — Prohibited Materials. No person shall enter, be in or
remain in any_pail of'a tobacco shop while in possession of, consuming or under
the influence of any alcoholic beverage, recreational drugs (including cannabis,) or a
controlled substance. Theoperator and on -duty manager shall be responsible to ensure
that no such person shall enter or remain upon the tobacco shop. Service of alcoholic
beverages or recreational drugs shall not be allowed to include all substances located
in Chapter 8.56 Psychoactive Bath Salts Psychoactive Herbal Incense, and other
Synthetic Drugs). A tobacco shop is not permitted to sell store distribute trade or give
for no charge alcohol.
i. Tobacco Use. There shall be no tobacco use or consumption including ``tastings") at
any tobacco shot.
j. Samples. Tobacco shops are prohibited from providing samples or tastings of any
tobacco product or accessory whether free or For charge.
k. Entrances. Tobacco shops cater specifically o adult customers over the age of twenty-
one 21 to purchase tobacco products, accessories, etc. not the genera public. As such,
entrances/exits shall remain closed. not locked, during_ the hours of operation and
employees shall not congregate, gather, or loiter in such areas.
1. Tobacco Products, and Paraphernalia. Tobacco Products, and tobacco paraphernalia
shall not be kept within ten 10 linear feet from any building entrance or check-out
counter. This rohibition shall not apply if the dis la is not phasically accessible to
customers.
m. Tobacco Flavors. A tobacco shop, or any of the tobacco shop's agents or employees,
shall not sell, offer for sale, or possess with the intent to sell or offer for sale, a flavored
tobacco product or a tobacco product flavor enhancer as defined in Health and Safety
Code §104559.5. This includes the storage of flavored tobacco products.
n. Single Cigarettes. No tobacco shop shall sell single or individual cigarettes sometimes
referred to as "loosies."
o. Self -Service Displays Prohibited. No person shall display tobacco products or tobacco
paraphernalia by means of a self-service display or to engage in tobacco retailing by.
means of a self-service display. A tobacco retailer who chooses to display tobacco
products or tobacco paraphernalia in a locked cabinet, case or similar structure must
post a clear and conspicuous sign on or within rive feet of the display statingthat the
cabinet, case or structure is locked at all times.
p. Compliance Willi All Laws. Each operator or manager shall at all times comply with
all provisions of this chapter and all other applicable provisions of the Temecula
Municipal Code. all conditions of any required zoning approvals, conditions imposed
18
by the chief of police, and all state and federal laws, statutes and regulations. and shall
provide proof of compliance upon request by the police department.
3. lnspec;tions.
a. A tobacco shop may be inspected twice a year for the purpose of determining that the
provisions of this -chapter are net. Such inspections may be made by. the police
department. persons employed by the city whose job descril2tions re uire the person to
enforce the provisions of this code, including,hut not limited to, cede enlorcemcnt
officers and such other enforcement officials as described in Sections 1.16.020 and
1.21.020 of the Temecula Municipal Code or its successor sections.
b. Complaints or violations related to this chapter re orted to the City may result in
additional inspections at the discretion of the chief of pollce.
F. Transfer and Changes of Business.
1. No tobacco shop permit may be sold, transferred or assigned by a permit holder, or by
operation of law, to any other person or persons. Any such sale, transfer or assignment, or
attempted sale,_ transfer or assignment, shall be deemed to constitute a voluntary surrender
of -such permit and such permit shall thereafter be null and void, provided and excepting,
however, that if the permit holder is a partnership and one or more of the partners should
die. one or more of the surviving partners may acquire, by purchase or otherwise, the
interest of the deceased partner or partners without effecting a surrender or termination of
such permit, and in such case, the permit, upon notification to the chief of police, shall be
placed in the name of the surviving partners.
G. Fees.
1. The city council shall establish by resolution, and from time to time ma amend the fees
for the administration of this chapter. Fees rgquired b this chapter shall be in addition to
any required under any other chapter of this code.
H. Duration and Renewal of Permits.
1. Tobacco shop permits may be renewed on the first business day in February 2024, and on
a_year-to-year basis thereafter on the first business day in February, provided the permit
holder continues to meet the requirements of this chapter. "Business day" as used in this
subsection shall mean the days that Temecula City Hall is open for business.
2. No permit granted herein shall confer agy vested right to any person for more than the
permit period.
3. Applications for a permit renewal shall be filed with the chief of police at least sixth
days prior to expiration of the existing permit, otherwise the permit will lase. At the
discretion of the chief of police, a conditional permit pending satisfactory completion of
the renewal application process may be issued to renewal applicants who have no permit
revocation proceedings pcndin T at the time of fil ing of the renewal application.
4. Renewal_ applications shall set forth such information as may be required by the chief of
police to update and verify the information contained in the original permit application.
The applicant shall pay an application fee when applying for renewal.
5. If an anl2lication for renewal of permit and all required information is not timelx received
and the permit expires. no right or privilege tooperate a tobacco shop shall exist.
Violation and Penalty.
19
1. Violations of this Section are broken down into two levels of severit as they relate to the
Tobacco Shop Permit (TSP):
a. Level 1 Violations are violations of such significance that a single violation of such
..provisions would cause the immediate revocation of the tobacco shop permit (TSP}.
b. Level 2 Violations are violations of this chapter that do not rise to the severi!Y of Level
1 Violations. An. three hree (_3) Level 2 violations in a twelve (12) month period is rounds
for revocation of the TSP by the chief of police,
2. Table 5.24.120 — Violation Summary Table
Table 5.24.120 - Violation Summary'
Level 1 VIOLATIONS
Code Section
Per TMC 5.24.120.H I 1 a - Any violation of the provisions
below are L3rounds to revoke a Tobacco Shop Permit
5.24.120.E(l)(a)
No tobacco shop shall be located within one -thousand (I,000) Feet of a
sensitive receptor(s), as defined in Chapter 9.20.020 of this code or from
another tobacco shop. This shall be measured in a straight line fi•om any
entrance of the facility to the property line of a sensitive receptor or
another_ tobacco shop.
5.24.120.E(1)(b)
Tobacco shops shall be located in a zoning district which nerniits such
use. No tobacco shop located in a building or structure with exterior
windows fronting a pUbfic street h ighway, walkway, or parking area
shall during business horns block visibili into the interior area through
the use of curtains closed blinds or any other material that obstructs
blurs or darkens the view into the premises.
5.24.120.E(1)(f)
Lounge,, arcade_ and similar accessory activities No tobacco
„prohibited.
shop shall allow or provide an area either indoor or outdoor that is For
customer lounge, arcade or similar use(s).
5.24.120.E(2)(a)
shall hold a valid business license issued City; of
Each tobacco shopt� t
Temecula.
5.24.120.E(2)(b)
Each tobacco shop shall hold a valid California Cigarette and Tobacco
Products Retailer's License issued by the State Board of E ualization. in
accordance with State law.
5.24.120.E(2)(c)
Each tobacco shop shall hold a valid Tobacco Retailers License issued b
the City oFTeniecula.
5.24.120.E(2)(d)
Each tobacco shop shall hold a valid Tobacco Shop Permit issued by the
City ofTemecula.
5.24.1_201(2)(g)
No person or persons shall be allowed to live inside the tobacco shop at
any time. Beds, mattresses, waterbeds, futons, sofa bids, or anytype of
portable or convertible beds are not perinitted on the premises.
5.24.120.E.(2)(Ii)
No erson shall enter, be in or remain in gE it Qfa tobacco shop Mh_i_ic
in possession of C011SL1niiJjg, USiJ19 or under the influence of ariv alcoholic
beverag,e, recreational drugs or controlled substance. The operator and on-
dutyier shall be responsible to ensure that na such person shall enter
or remain upon the tobacco shop. Service of alcoholic beverages or
recreational -drugs shall not be allowed to include all substances located in
Chapter 8.56 (Psychoactive Bath Salts, Psychoactive Herbal Incense, and
20
other Synthetic l7rugsL A tobacco shop is not permitted to sell stoles
distribute, lr•ade or give for no charge alcolloi.
Level 2 VIOLATIONS
Code Section
Per TMC 5.24.120.H(I)(1)(b) - Any three violations in a 12
month period of the provisions below are grounds to revoke a
Tobacco Shop Permit
L22L 20. E(l )[c)
'I'obacco shops shall at all times dish lay in a cons icuous and Prominent
manner, visible upon entrance to the tobacco shop all permits, licenses, or
any other approval regc uired for die operation of a tobacco shop. L xpii-ctl
enn its .do not satlsl"y E131s re ll II BFnent.
5.24.120.E(l)(d)
All tobacco sly si is shall comply with all provisions of Chapter 17.28
(Sign Standards) or the appropriate SpOCiiIG Plan Or Planned Development
Overlay (PDO). When there is a conflict between standards, the more
restrictive standard shall be followed. Tobacco shops shall not have
signage on doors, windows or storefronts except as provided for in
Chapter_l 7.28.0501SiM. No signs shall be closer than eighteei (I 8)
inches from all exterior doors, windows and storefront. No signs depicting
tobacco use shall be able to be seen from the PLIblic right of way. Each
sign violating this section shall be counted as a violation.
5.24.120.E(1)(e)
Tobacco shops shall be internally illuminated with white or soft white
lights only. No lighting for andpurpose shall be placed around or on
windows or doors, to include frames.
5.24.120_E( 1)(g)
Customers shall be prohibited from Utilizing any bathroom facilities on
site.
5.24. ] 20.E(2)(e)
The owner must advise the city, in writing, at the time of applicationfor a
F?umit of the business hours, and any change in ItoUi•5 OCCurdIIA thereafter.No
person small operate a tobacco shop between the hours of nitre p.m. anti
seven a.m.
5.24.120.E(2)(fl
No person under the age of twenty-one (2 1 ) years, at the time of
application, shall operate or be employed by a tobacco sho .
5.24.120.E(2)(i)
There shall be no tobacco use or consumption at any tobacco sho.
5.2�1. ! 0.E(2)(I)
Tobacco shops are prohibited from providing samples of any tobacco
product or accessory whether free or for charge.
5.24.120.E(2)(k)
Tobacco shops cater specifically to adult customers over the age of
twenty-one (2 1 ) to Pirchase tobacco products, accessories, etc. not the
ggneral ub]ie. As such, entrances/exits shall remain closed, not locked,
during the hours of operation and employees shall not congregate. ag_ her
or loiter in such areas.
5.24.120.E(2)(1)
Tobacco Products, and Paraphernalia shall not be kept within ten 10
linear feet from any building entrance or check-out counter. This
prohibition shall Itot app ly if the displl y is not ph_ysica�accessible to
customers.
5.24.120.E(2)(m)
A tobacco shop, or any of the tobacco shops agents or employees, shall
not sell, offer for sale, or possess with the intent to sell or offer for sale, a
flavored tobacco grodLICt or a tobacco product flavor enhancer as defined
21
in Health and Safety Code § 104559.5. This includes the storage of
5.24.120.E(2)(n) No tobacco shopsmall sell single or individual ci arettes sometiill es
-_r__- a __ ,�
No person sliall display tobacco rp odugLs rsr tobg co paraplieriviiija by
means of a self-service display or to en a e in tobacco retailing by means
of a self-service dis la . A tobacco retailer who chooses to dis la
5.24.120.E(2)(o) tobacco products or tobacco paraphernalia in a locked cabinet, case or
similar structure must post a clear and conspicuous sign on or within five
feet ofthe display stat ing that the cabinet, case or structure is locked at all
'This is a summary of violations only. Phrase see the referenced code sections for
Mete details. An omission from this table does not remove the burden of compliance.
3. Violations that are not specifically identified in this section such as 5.24.120(E)(2)(q) shall
be classified at the sole discretion of the chief of police on a case -by -case basis.
J. Revocation Permit Denial and Appeal.
1. Violation and Noncompliance. The chief of police may refuse to issue a permit, renew a
permit, or may revoke an existing permit, on die grounds that the applicant or permit holder
has failed to comply with the permit conditions or other requirements of this chapter, or
any requirement of state law. In any such case, the applicant or permit holder shall have
the right to appeal in the time and manner set forth in this section.
For ❑urvoses of this section, if an administrative citation is contested. and is held to be
invalid or rescinded b„y an independent bearing officer appointed pursuant to this chapter,
or by any court of law, the violations identified in the administrative citation shall not form
the basis for revoking or refusing to renew a tobacco shop permit. If any administrative
citation is contested and is upheld by an independent hearing officer appointed pursuant
to this chapter, or by any court of law, that administrative citation can form the basis for
the revocation or refusal to renew a tobacco shop permit.
2. Notice. When the chief of police concludes that erounds for denial of a new permit or
permit renewal. or permit revocation exist. the chief of police shall serve the applicant or
permit holder, either personally orby_certified mail, addressed to the business or residence
address of applicant or permit holder, with a notice of denial of permit, or notice of intent
to revoke or deny renewal. This notice shall state the reasons for the decision the effective
date of the decision. the right of the applicant or permit holder to appeal the decision to a
hearing officer. and that the decision will be final if no written aDDeal is tiled within the
tintin�e _permitted.
3. Appeal.
a. The right to file a written appeal of a revocation or denial of new permit or renewal of
a pernnit shall terminate upon the expiration of fifteen (15) days of the clate of ipailin
by the chief of police of the notice specified in subsection J(2) of this section. The
written appeal shall be filed with the city clerk of the city or l'emecula and shall be
22
accompanied by an appeal free in an amount as set by city council resolution, and the
city clerk shall promptly forward a copy of the appeal to the chief of police.
b. In the event an appeal is timely {tied. the denial of the permit, or renewal or revocation
of the permit, shall not be effective until a final decision has been made on the_appeal.
Notwithstanding the foregoing, if the chief of police finds and determines that
permitting a tobacco shop to continue to operate, pendingthe he appeal hearing, would
present an unreasonable and immediate risk to theublic health and safety. the denial
of renewal or revocation may take effect immediately. If no timely appeal is filed the
denial of renewal or revocation shall become effective upon expiration of the period
for filing, appeals_
c. Upon receipt of a timely appeal. the city clerk shall refer the al2peal to the Califomia
Office of Administrative Hearings "OAH" for the assignment of an administrative
law lucij,;e to serve as the hearing officer.
i. Not less than fifteen 15 da s prior to the appeal hearing,the city clerk shall notify
the chief of police and the appellant of the names of three qualified attorneys or
retired Superior Court or Appellate Court judges submitted to the city clerk by a
reputable firm providing mediators and arbitrators to serve as a panel from which
the hearing officer will be selected.
ii. Within five days of the date of mailing the notice of the available panel, the chief
of police and the appellanl may notify [lie city clerk in writing that lie or slie elects
to remove one of the three potential hearing officers.
iii. The city clerk shall then request the mediation and arbitration firm to select one of
the remaining names on the list as the designated hearing officer for the appeal
hearing.
iv. The hearing officer shall be fair and impartial and shall have no bias for or against
the chief of oIice or the gppelIant.
d. At the appeal hearing, the hearing officer shall receive oral and written evidence from
the chief of police and the appellant. The hearing officer shall have authority to
administer oaths to those persons who will provide oral testimony. The evidence
presented deed not comply with the strict rules of evidence set forth in the California
Evidence Cocci, but shall be the type of evidence J)011 which reasonable and prudent
people rely upon in the conduct of serious affairs. The hearing officer shall have broad
authority to control the proceedings and to provide for cross examination of witness in
a fair and impartial manner. The chief of police shall have the burden of proof to
establish by clear and convincing evidence the Facts upon which his or her decision is
based. The appeal hearing shall be recorded by audio recording. Anyparty_may at its
sole cost and expense, utilize the services of a certified court reporter to prepare the
verbatim record of the hearing. if a court reporter is used, the transcript prepared shall
be made available for purchase to both parties. The hearing officer may continue the
appeal hearing from time to time, but only upon written motion of a party showing
good cause for the continuance.
e. The hearing officer may uphold, modify or reverse the decision of the chief of police.
Within thirty 30 days or as otherwise determined by OAH of the conclusion of the
23
appeal hearing the hearing officer shall render his or her decision and make written
findings supporting the decision. He or she shall send the decision to the city clerk.
Upon receipt of the hearing officer's decision, the city clerk shall send a copy of it to
the chief of police and the appellant along with a proof of mailing.
f. Within ten 10 days from date of the city clerk's mailing of the decision, either party
tz7a gppeal the decision to the city nianagg:r. The appeal shall he in writing and tiled
with the city clerk. and shall state the grounds of the appeal and specify the errors in
the hearing officer's decision. Upon receipt of the a peal the city clerk shall schedule
the appeal for review by the citmanager to occur within thirty days.
g. The city manager's review of the appeal shall be limited to determining whether the
evidence received at the appeal hearing supports the findings and decision of the
hearing officer. The city manager shall be limited to considering the evidence presented
at the appeal hearing. No public hearing shall be required and no new evidence shall
be taken by the city manager. The city manager's decision on the appeal shall be set
forth in a written opinion. The city clerk shall mail a copy of the city, manager'spinion
to the chief of police and the appellant along with a proof of service. Any legal action
challenging the city manager's decision shall be filed within ninet , 90 . da ys of the
date of the proof of service of mailing of the city manager's o inion, ursuant to Section
I094.5, et seq., of the California Code of Civil Procedure. The city manager's decision
shall be final and effective a OII ivailin g of [lie opinion. If the appellant prevails
following a final decision the appeal fee shall be returned.
K. Application to -Existing Businesses.
1. All re uirements set forth in this chapter are deemed to be necessM for the protection of
the public health, safety, and welfare and shall be applicable to and govern all existing and
proposed tobacco shops immediately upon the date the ordinance is eodi_fied in this chapter.
and shall become effective.
Section 13. Section 5.24.030 (Definitions) of Chapter 5.24 (Licensure of Tobacco
Retailers) of Title 5 (Business Licenses and Regulations) of the Temecula Municipal Code is
hereby amended to add a definition for "chief of police" to read as follows with all other provisions
of Section 5.24.030 remaining unchanged:
"Chief of police" means the head of the agency or division which at the time involved has
responsibility for performing the police function for, or within, the city, or his or her designee.
Section 14. Subsection E of Section 5.24.040 (Tobacco license prerequisite —
Application process) of Chapter 5.24 (Licensure of Tobacco Retailers) of Title 5 (Business
Licenses and Regulations) of the Temecula Municipal Code is hereby amended to read as follows
(with deletions appearing in strikethrough text and additions appearing in underlined text) with all
other provisions of Section 5.24.040 remaining unchanged:
E. All applications shall be submitted on a form supplied by the eity managef chief of police
and shall contain the following information:
1. The name, address, email, website, and telephone number of each proprietor;
24
2. The business name, address, email, website, and telephone number of the single fixed
location for which tobacco retailer's license is sought;
3. The name and mailing address authorized by each proprietor to receive all license -
related communications and notices (the "authorized address"). If an authorized
address is not supplied, each proprietor shall be understood to consent to the provision
of notice at the business address specified in subsection (E)(2) of this section;
4. Proof that the location for which a tobacco retailer's license is sought has been issued a
valid state tobacco retailer's license by the California Board of Equalization;
5. Whether or not any proprietor is a person who has been determined to have violated this
chapter or has been a proprietor at a location that has been determined to have violated
this chapter and, if so, the dates and locations of all such violations;
6. Such other information as the eky manager chief of police deems necessary for the
administration or enforcement of this chapter;
Section 15. Subsection B of Section 5.24.050 (License Issuance — Standards) of Chapter
5.24 (Licensure of Tobacco Retailers) of Title 5 (Business Licenses and Regulations) of the
Temecula Municipal Code is hereby amended to read as follows (with deletions appearing in
strikethrough text and additions appearing in underlined text) with all other provisions of Section
5.24.050 remaining unchanged:
B. Upon the receipt of an application for a tobacco retailer's license and the license fee, the
^_'_y HianageF chief of police shall issue a license unless substantial record evidence
demonstrates that one of the following bases for denial exists:
1. The application is incomplete or inaccurate.
2. The application seeks authorization for tobacco retailing at a location for which
a prohibition on issuing licenses is in effect pursuant to Section 5.24.100(B) of this chapter.
However, this subsection shall not constitute a basis for denial of a license if the applicant
provides the city with documentation demonstrating by clear and convincing evidence that
the applicant has acquired or is acquiring the location or business in an arm's length
transaction.
3. The application seeks authorization for tobacco retailing for a proprietor for
which a prohibition on issuing licenses is in effect pursuant to Section 5.24.100(B) of this
chapter.
4. The application seeks authorization for tobacco retailing that is prohibited
pursuant to subsection A of this section, that is unlawful pursuant to any other city chapter,
or that is unlawful pursuant to any other local, state, or federal law.
Section 16. Item 1 of Subsection B of Section 5.24.090 (License Violation) of Chapter
5.24 (Licensure of Tobacco Retailers) of Title 5 (Business License and Regulations) of the
Temecula Municipal Code is hereby amended to read as follows (with deletions appearing in
strikethrough text and additions appearing in underlined text) with all other provisions of Section
5.24.090 remaining unchanged:
25
B. License Compliance Monitoring.
1. Compliance with this chapter shall be monitored by the eity managef chief of police.
Any peace officer may enforce the provisions of this chapter.
Section 17. Subsection C of Section 8.36.030 (Prohibition of smoking in public places,
places of employment and other areas.) of Chapter 8.36 (Smoking in Public Places of Title 8
(Health and Safety) of the Temecula Municipal Code is hereby amended to read as follows (with
deletions appearing in strikethrough text and additions appearing in underlined text):
C. Unless otherwise prohibited by law, smoking is permitted in the following locations:
1 Sig n_i fieanttr.ty cee rretailers, :f n itiot'-a le prohibited 11 tiF es ffom entering the store;
12. By performers during theatrical productions, if smoking is a part of the theatrical
production;
23. Private residential property, except when designated as nonsmoking under
Chapter 17.30 of this code or used as a childcare or health care facility subject to licensing
requirements and children, patients, or employees are present;
34. Up to twenty-five (20) percent of hotel and motel guest rooms, if the hotel or motel
permanently designates particular guest rooms as nonsmoking rooms such that 6ghty sevenly five
or more of its guest rooms are nonsmoking and ashtrays and matches are permanently
removed from such nonsmoking rooms. Permanent "no smoking" signage shall be posted in
nonsmoking rooms;
45. Outdoor dining areas of businesses operating under an on -sale license for public
premises issued by the California Department of Alcoholic Beverage Control.
Section 18. Table 17.08.030 (Schedule of Permitted Uses Commercial/Office/Industrial
Districts) of Section 17.08.030 (Use Regulations) of Chapter 17.08 (Use Regulations) of Title 17
(Zoning) of the Temecula Municipal Code is hereby amended to read as follows (with additions
appearing in underlined text):
Table 17.08.030
Schedule of Permitted Uses
Commercial/Office/Industrial Districts
Description of Use
NC
CC
HT
I SC
I PO BP
I LI
T
Tailorshop
P
P
-
-
P
-
Taxi or limousine service
-
P
P
P
C
Tile sales
-
P
-
P
-
Tobacco shop !'
E
P!'
PI'
P'
-
_
-
Haas:
1 1. Subject to the renuirenteiits cmitained in Section 5.24.120 of this code.
Section 19. Table 17.22.106 (Schedule of Permitted Uses Pala Road Planned
Development Overlay District -1) of Section 17.22.106 (Use Regulations) of Article 2. (Pala Road
Planned Development Overlay District-1) of Chapter 17.22 (Planned Development Overlay
26
Zoning District (PDO-)) of Title 17 (Zoning) of the Temecula Municipal Code is hereby amended
to read as follows (with additions appearing in underlined text):
Table 17.22.106 Schedule of Permitted Uses
Pala Road Planned Development Overla District-1
Description of Use
PDO-1
T
Tailor shop
P
Taxi or limousine service
P
Tile sales
P
Tobacco sho 6
P
Tool and die casting-
Transfer, moving and storage
Transportation terminals and stations
-
Truck rentals no sales or/service)
C5
TV/VCR repair
P
Notes:
1. The CUP will be subject to Section 17.10.020(B), special standards for the sale of alcoholic beverages.
2. Subject to citywide antenna standards.
3. See Section 17.10.020(L), special standards for indoor swap meets.
4. See Section 17.10.020(N), special standards for self -storage or mini -warehouse facilities.
5. Subject to the special setback provisions contained in Section 17.22.108.
6. Subject to the requirements of Section 5.24.120
Section 20. Table 17.22.13613 (Schedule of Permitted Uses Temecula Creek Village
Planned Development Overlay District -4) of Section 17.22.136 (Use Regulations) of Article V.
(Temecula Creek Village Planned Development Overlay District-4) of Chapter 17.22 (Planned
Development Overlay Zoning District (PDO-)) of Title 17 (Zoning) of the Temecula Municipal
Code is hereby amended to read as follows (with additions appearing in underlined text):
Table 17.22.136B
Schedule of Permitted Uses
Temecula Creek Village Planned Development Overlay District-4
Description of Use
PDO-411
PDO-4V6
T
Tailor shop
P
P
Taxi or limousine service
P
-
Tile sales
P
-
Tobacco shop'
P7
Tool and die casting
-
Transfer, movin and storage
-
Transportation terminals and stations
-
-
27
Table 17.22.136B
Schedule of Permitted Uses
Temecula Creek Village Planned Development Overlay District-4
Description of Use
PD04R
PDO-4V6
Truck rentals no sales or service
-
-
TV/VCR repair P P4
Notes:
1. The CUP will be subject to Section 17.10.020(B) special standards for the sale of alcoholic beverages.
2. Subject to the requirements of Chapter 17.40 of the Temecula Municipal Code.
3. In PDO-4, all senior housing residential projects shall use the development and performance standards
for the high density residential zone and the provisions contained in Section 17.06.050(H).
4. The size of the use or activity is limited to 5,000 square feet.
5. Outdoor entertainment in conjunction with an eating establishment is permitted provided that the
outside noise levels do not interfere with off -site conversation.
6. Drive through facilities are not allowed in the village planning area.
Retail/support commercial planning area is identified as PDO-4R.
Village commercial planning area is identified as PDO-4V.
Multifamily planning areas A and B use the high density column in Table 17.06.030.
7. Subject to the requirements of Section 5.24.120
Section 21. Severability. If any section or provision of this Ordinance is for any reason
held to be invalid or unconstitutional by any court of competent jurisdiction, or contravened by
reason of any preemptive legislation, the remaining sections and/or provisions of this Ordinance
shall remain valid. The City Council hereby declares that it would have adopted this Ordinance,
and each section or provision thereof, regardless of the fact that any one or more section(s) or
provision(s) may be declared invalid or unconstitutional or contravened via legislation.
Section 22. Certification. The Mayor shall sign and the City Clerk shall certify to the
passage and adoption of this Ordinance and shall cause the same or a summary thereof to be
published and posted in the manner required by law.
Section 23. Effective Date. This Ordinance shall take effect thirty (30) days after
passage.
PASSED, APPROVED, AND ADOPTED by the City Council of the City of
Temecula the 22nd day of August 2023.
28
Zak Schwank, Mayor
ATTEST:
Randi Johl
City Clerk
[SEAL]
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing
Ordinance No. 2023- was duly introduced and placed upon its first reading at a meeting of the
City Council of the City of Temecula on the 22°a day of August, 2023, and that thereafter, said
Ordinance was duly adopted by the City Council of the City of Temecula at a meeting thereof held
on the day of , 2023, by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
29
Randi Johl
City Clerk
Notice of Public Hearing
THE CITY OF TEMECULA
41000 Main Street
Temecula, CA 92590
A PUBLIC HEARING has been scheduled before the CITY COUNCIL to consider the matter(s)
described below.
Case No.: Long Range Project No. LR23-0050
Applicant: City of Temecula
Location: Citywide
Proposal: Adopt an ordinance of the City Council of the City of Temecula
amending Titles 5, 8, and 17 of the Temecula Municipal Code to (1) amend massage establishment
regulations, (2) add definitions for tobacco shop, tobacco shop permit and update definitions of
tobacco product and tobacco paraphernalia, (3) implement a tobacco shop permit program to
include structural and operational requirements, (4) update tobacco retailers license processes, (5)
amend regulations on smoking in hotel rooms, (6) remove tobacco shop as a conditionally permitted
use in table 17.08.030, (7) implement tobacco shop permit requirements in planned development
overlay zoning designations 1 and 4, make other clerical revisions to the Municipal Code.
Environmental Action: In accordance with the California Environmental Quality Act ("CEQA"),
the proposed ordinance is exempt from further environmental review and a Notice of Exemption will
be adopted in compliance with CEQA (Section 15061(b)(3)).
PLACE OF HEARING: 41000 Main St., Temecula, CA 92590, City of Temecula, Council
Chambers
DATE OF HEARING: August 22, 2023
TIME OF HEARING: 6:00 PM
Any person may submit written comments to the City Council before the hearing or may appear and
be heard in support of or opposition to the approval of the project at the time of hearing.
Any petition forjudicial review of a decision of the City Council shall be filed within the time required
by, and controlled by, Sections 1094.5 and 1094.6 of the California Code of Civil Procedure. In any
such action or proceeding seeking judicial review of, which attacks or seeks to set aside, or void any
decision of the City Council, shall be limited to those issues raised at the hearing or in written
correspondence delivered to the City Clerk at, or prior to, the public hearing described in this notice.
The proposed draft ordinance may be viewed at the public information counter, Temecula Civic
Center, Community Services Department, 41000 Main Street, Mondaythrough Friday from 8:00 a.m.
until 5:00 p.m. Questions concerning the project(s) may be addressed to Mark Collins, City of
Temecula Community Development Department, (951) 506-5172.
City of Temecula
Community Development
41000 Main Street • Temecula, CA 92590
Phone (951) 694-6400 • Fax (951) 694-6477 • TemeculaCA.gov
VIA -ELECTRONIC SUBMITTAL
CEQAProces sing_gasrclkrec. com
August 23, 2023
Supervising Legal Certification Clerk
County of Riverside
P.O. Box 751
Riverside, CA 92501-0751
SUBJECT: Filing of a Notice of Exemption for Long Range Application No. LR23-0050,
Quality of Life Ordinance
Dear Sir/Madam:
Enclosed is the Notice of Exemption for the above referenced project. In addition, pursuant to
Assembly Bill 3158 (Chapter 1706) please find a receipt in the amount of $50.00, for the County
Administrative fee to enable the City to file the Notice of Exemption required under Public
Resources Code Section 21152 and 14 California Code Regulations 1507. The City of
Temecula is paying the $50.00 filing fee under protest. It is the opinion of the City that the
administrative fee has been increased in a manner inconsistent with the provisions of State Law.
Under Public Resources Code Section 21152 and 14 California Code Regulations 1507, the
County is entitled to receive a $25.00 filing fee.
Also, please email a stamped copy of the Notice of Exemption within five working days after
the 30-day posting to the email listed below.
If you have any questions regarding this matter, please contact Mark Collins at email
Mark. CollinskTemeculaCA. gov.
Sincerely,
Luke Watson
Deputy City Manager
Attachments: Project Notice of Exemption Form
County Administrative Filing Fee Receipt
City of Temecula
Community Development
Planning Division
Notice of Exemption
TO: County Clerk and Recorders Office FROM: Planning Division
County of Riverside City of Temecula
P.O. Box 751 41000 Main Street
Riverside, CA 92501-0751 Temecula, CA 92590
Project Title: Long Range Application No. LR23-0050, Quality of Life Ordinance
Description of Project: An ordinance of the City Council of the City of Temecula amending Titles 5, 8, and 17 of the
Temecula Municipal Code to (1) amend massage establishment regulations, (2) add definitions
for tobacco shop, tobacco shop permit and update definitions of tobacco product and tobacco
paraphernalia, (3) implement a Tobacco shop permit Program to include structural and
operational requirements, (4) update tobacco retailers license processes, (5) Amend regulations
on smoking in hotel rooms, (6) remove tobacco shop as a conditionally permitted use in table
17.08.030, (7) implement Tobacco shop permit requirements in planned development overlay
zoning designations 1 and 4.
Project Location: Citywide
Applicant/Proponent: City of Temecula
The City Council approved the above described project on August 22, 2023 and found that the project is exempt from the
provisions of the California Environmental Quality Act, as amended.
Exempt Status: (check one)
❑ Ministerial (Section 21080(b)(1); Section 15268);
❑ Declared Emergency (Section 21080(b)(3); Section
15269(a));
❑ Emergency Project (Section 21080(b)(4); Section
15269(b)(c));
❑ Statutory Exemptions (Section Number: )
® Categorical Exemption; (Section Number 15061 (b)(3))
❑ Other: Section 15162 Categorical Exemption
Statement of Reasons Supporting the Finding that the Project is Exempt:
In accordance with the California Environmental Quality Act (CEQA), the proposed ordinance has been deemed to be
exempt from further environmental review as there is no possibility that the proposed ordinance would have a significant
impact on the environment pursuant to State CEQA Guidelines Section 15061(b)(3). The proposed ordinance amends Titles
5, 8, and 17 of the Temecula Municipal Code to (1) amend massage establishment regulations, (2) add definitions for
tobacco shop, tobacco shop permit and update definitions of tobacco product and tobacco paraphernalia, (3) implement a
Tobacco shop permit Program to include structural and operational requirements, (4) update tobacco retailers license
processes, (5) Amend regulations on smoking in hotel rooms, (6) remove tobacco shop as a conditionally permitted use in
table 17.08.030, (7) implement Tobacco shop permit requirements in planned development overlay zoning designations I
and 4. The Ordinance does not permit any physical changes to the environment and no construction of any kind will occur
due to the passage of this Ordinance.
Contact Person/Title: Mark Collins/Assistant Planner Phone Number: (951) 506-5172
Signature:
Luke Watson, Deputy City Manager
Date received for filing at the County Clerk and Recorders Office:
Date:
Item No. 18
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Luke Watson, Deputy City Manager
DATE: August 22, 2023
SUBJECT: Community Development Department Monthly Report
RECOMMENDATION: That the City Council receive and file the Community Development
Department monthly report.
The following are the highlights for Community Development for the months of June and July 2023.
CURRENT PLANNING ACTIVITIES
Planning processed seventy-eight (78) new applications and conducted five (5) Public Hearings in June and
July 2023. A detailed account of planning activities is attached to this report.
Planning Statistics
Dime
July
Long Range
1 1
12
Conditional Use Permit
1
1
Development Plan
1
D
Entertainment License
0
1
General Plan Amendment
1
D
Histroical.1ppropriatenen
1
4
Minor Exception
4
1
Modifications
9
12.
Planned Deyelopment Overlay
4
1
Pre -Application
7
6
Public Conyenience or Necenity
1
0
Sign Program
2
0
Temporar- U,e Permit
3
2
Zoning Letter
3
1
Tort l
41
37
Paseo Del Sol Tentative Tract Map No. 36483 (PA14-0087): The City is processing a Tentative Tract
Map (No. 36483) for 168 single-family homes and 11 open space lots located at the northwest corner of
Temecula Parkway and Butterfield Stage Road. (COOPER)
Temecula Valley Hospital Master Plan Update (PA21-1525): The City is processing a Modification to
the previously approved Temecula Valley Hospital Master Plan. The updated Master Plan, at buildout will
include the existing 237,305 square foot hospital building and 5,180 square foot storage building along with
an approximately 130,000 square foot, four story Behavioral Health Building in Phase 2, an approximately
10,000 square foot expansion to the emergency department, a 125,000 square foot, five story second hospital
tower, a 80,000 square foot medical office buildings, and a 14,000 square foot utility plant in Phase 3, and
an approximately 125,000 square foot, five story third hospital tower, a 80,000 square three story foot
medical office building, and a four story parking structure with the existing helipad relocated to the roof of
the structure in Phase 4. The project is located at 31700 Temecula Parkway. A public scoping meeting for
the Subsequent Environmental Impact Report (SEIR) was held on March 23, 2022, at the Ronald H. Roberts
Temecula Public Library. The public review period for the SEIR has ended. The Final SEIR has been
completed by the consultant and meetings have taken place with the City Council and Planning Commission
Subcommittee's. A tour of a similar Behavioral Health Facility took place on June 6, 2023, for the City
Council and Planning Commission. (COOPER)
Temecula Resort and Spa (PAs 22-0035, 22-0037): The City is processing a Development Plan and
Tentative Parcel Map for an approximately 474,137 square foot, seven (7) story, 90-foot high full service
hotel that includes a parking garage, conference facilitiesiballrooms, gallery/event space, full service spa,
restaurants, bars/lounges, retail outlets, workout facility, outdoor pool area, and a wedding garden located
on the east side of Front Street between First Street and Second Street. The project was presented to the Old
Town Steering Subcommittee on July 26, 2022, September 27, 2022, April 25, 2023, and May 23, 2023, and
the Old Town Temecula Planning Commission Subcommittee on October 19, 2022. (COOPER)
Seraphina Tentative Tract Map No. 38267 (PA22-0830): The City is processing a Tentative Tract Map
(TTM 38267) for the creation of 39 single family lots and two (2) open space lots on 12.77 acres located on
the southwest corner of Joseph Road and Rita Way (APN: 957-080-027). (COOPER)
Boutique Luxury Hotel (PAs 22-0929, 0930, 0931): The City is processing a Development Plan for an
approximately 54,699 square foot, four-story, 45 room hotel that includes retail spaces, a gym, meeting
space, and a rooftop restaurant and pool area. The project is located on the west side of Old Town Front
Street approximately 400' south of Santiago Road adjacent to the U-Haul dealership. The application
package also includes requests for a Minor Exception for the height of the building to accommodate
architectural tower elements and a Variance to allow for parking within the setback due to the narrow width
of the project site. The project is scheduled for Planning Commission on September 6, 2023. (COOPER)
Parker Medical Center II (PA22-0987): The City is processing a Development Plan for an approximately
35,601 square -foot, three story, medical office building located on the west side of Avenida De Missiones
approximately 425 feet south of Temecula Parkway. (COOPER)
Rally's Burgers (PA22-1012): The City is processing a Modification to a previously approved
Development Plan (PA15-1572) for an approximately 998 square foot drive thru restaurant located on the
southwest corner of Temecula Parkway and Mahlon Vail Road. (COOPER)
Paradise Chevrolet (PAs 22-1124, 1125): The City is processing a Development Plan and Conditional
Use Permit for an approximately 47,727 square foot, two story structure that includes rooftop parking for a
commercial and fleet truck dealership that includes maintenance and repair services for Paradise Chevrolet.
The project is located on an undeveloped site at 42105 DLR Drive. An environmental consultant has been
selected and is under contract to prepare an environmental document for the project. (COOPER)
FORE Temecula (PA23-0057): The City is processing a Development Plan for a 213-unit apartment
community built on 6.6 acres located at 27468 Ynez Road in the Temecula Town Center Shopping Center.
The project is taking advantage of a mixed -use overlay within the City of Temecula General Plan. The
project applicant met with the City Council General Plan Update Ad Hoc Subcommittee on March 14, 2023.
(COOPER)
U-HAUL (PA23-0056): The City is processing a Development Plan for an approximately 40,883 square
foot four story self -storage facility located on the southwest corner of Las Haciendas Street and Jefferson
Avenue. (COOPER)
Linfield Christian School PDO Amendment (PA23-0260): The City is processing a Planned Development
Overlay Amendment for Linfield Christian School to adjust the boundaries of three (3) of the Planning
Areas. The project does not propose any development within the Linfield Christian School Planned
Development Overlay District. The project is scheduled for Planning Commission on August 16, 2023.
(COOPER)
Rancho-12 Tentative Tract Map (PA22-0047): A Tentative Tract Map for a 12-lot single-family
development located at 31670 Rancho California Road. (JONES)
Starbucks Ynez Road Modification (PA22-0722): A Major Modification application to allow revisions to
an existing commercial site. Revisions will include fagade and site improvements. The project is located at
27425 Ynez Road. (JONES)
White Barn Development Plan (PA22-0874): A Development Plan Application for a proposed 9,100
square -foot daycare facility on the vacant 2.46-acre parcel located at 39970 Cantrell Road. (JONES)
Be Good Hotel (PA22-0995): A Development Plan Application to review a four-story hotel featuring nine
rooms, restaurant and subterranean parking. The project is generally located on the northwest corner of
Fourth Street and Mercedes Street. (JONES)
Amazon Delivery Van Parking Lot (PA22-1025): A modification application to allow a parking lot
expansion to accommodate delivery van parking. The project is located at 27731 Diaz Road. (JONES)
Better Buzz/Ono BBQ Development Plan (PA23-0030): A Development Plan to allow the construction
of two commercial structures totaling approximately 4,414 square feet. Structures will be used for a
restaurant and coffee shop. The project is located at 29540 Rancho California Road. (JONES)
Old Town Townhomes Development Plan (PA22-0941): The City is processing a Development Plan
Application for the construction of 14 multifamily residential units on the vacant .68-acre parcel located at
42146 Sixth Street. (CARDENAS)
LONG RANGE PLANNING
General Plan Update: The Long Range Planning Division has developed a four -phase, multi -year process
to update the General Plan. Phase I is complete and included updates to Housing and Public Safety Elements.
Phase I also included an update to the City's Traffic Impact Analysis (TIA) Guidelines to analyze Vehicle
Miles Travelled (VMT) for the California Environmental Quality Act (CEQA). Phase II is in process and
includes an update to the Quality of Life Master Plan (QLMP), reconciling the City's GIS Maps on a parcel
by parcel basis, a baseline EIR analysis of the City's Circulation Element, and developing a Complete Streets
Policy document. Phase III will include a Fiscal Land Use Study to analyze the City's remaining
development capacity and market absorption potential for residential, commercial, and industrial
development. The final phase is to work with a General Plan Advisory Committee to update to the General
Plan and EIR over an 18 to 24-month timeframe. (PETERS)
Quality of Life Master Plan Update: On April 27, 2021, the City Council established a Blue Ribbon
Committee (BRC) to update the Quality of Life Master Plan (QLMP). The QLMP identifies the City's six
core values, including: 1) Healthy and Livable City; 2) Economic Prosperity; 3) Safe and Prepared
Community; 4) Sustainable City; 5) Transportation Mobility and Connectivity; and 6) Accountable and
Responsive City Government. Projects and programs proposed in the City's Annual Operating Budget and
Capital Improvements Program must be consistent with the City's Core Values. Performance measures
(indicators) are measured annually to track progress and the completion of goals and objectives. The last
BRC meeting was held on July 21, 2022. The Preliminary Draft document was presented to all the
Commissions in October and November. The Final Draft QLMP was approved by the City Council on
November 15, 2022. The QLMP will serve as the foundation for the General plan update. The final
document is available online and hard copies have been distributed to the City Council, City Staff, Boards,
and Commissions. (PETERS)
QLMP Website for Measuring Progress (Dashboard): As part of the Quality of Life Master Plan Update,
Planning staff is working with a consultant, MIG, and the IT Department to develop a website for the QLMP.
The intent of the website is to provide a "dashboard" to display the seven Core Values and eventually
incorporate the goals and policies of the updated General Plan. The website will also be used to measure the
city's progress towards achieving the Citizen's 20-Year Priorities identified in the QLMP. The dashboard
will be displayed on a third -party website and will incorporate links and useful indicators intended for user-
friendly navigation. MIG is currently working on finalizing the website and addressing final comments.
(GARCIA)
Uptown Temecula Specific Plan Amendment (LR19-1458): An amendment to the Uptown Specific Plan
to implement the following changes: modify graphics to reflect consistency with text regarding allowable
frontage types, amend street cross sections (graphics), amend plant pallet and Silva cell requirements for
street trees, implement a street naming convention, amend streetlight spacing and other typographical errors.
Staff has reached out to Spurlock Consulting for assistance in updating the Sidewalk and Streetscape
Standards and is awaiting a scope of work and timeline. Public Works is drafting new street sections for the
Specific Plan. Spurlock Consulting has provided a scope of work for the proposed changes to the streetscape
and sidewalk standards and staff has executed the agreement for services and will begin updating the
graphics as requested. Planning and Traffic Engineering have been working on updated street cross sections
and a map to identify cross section placements. (COLLINS)
Transportation Discovery and Existing Conditions Analysis (LR20-1071): The City received an SB 2
Grant from the State Department of Housing and Community Development (HCD) to prepare an internal
document for staff to identify potential transportation focused areas as part of Phase 2 of our General Plan
Update process and timeline. The City has retained Fehr & Peers (F&P) Transportation Consultants to
document existing transportation conditions in the City, provide benchmarking information on how
transportation facilities, transportation use and policies compares to other peer agencies (through
benchmarking) and will evaluate how much of the current Circulation Element has been implemented. Staff
worked with F&P to identify methodology, thresholds, and mitigation to address VMT for the California
Environmental Quality Act evaluation, which the City Council adopted in May 2020. On July 19, 2021,
Staff has a scheduled internal meeting with Fehr & Peers, they present to staff the Data Collection Status.
Currently, the consultant is developing the three scenario runs to be reviewed by staff prior to conducting a
full model run. (PETERS)
Old Town Parklets (LR22-1112): The previous Old Town Outdoor Dining Program was a project intended
to make the Temporary Expanded Dining/Retail Program (TED) permanent that was sparked by the COVID-
19 pandemic restrictions. However, due to the potential barriers that came to light such as loss of parking,
ADA requirements, outside agency fees and more, the decision was made by City Council and staff to end
the outdoor dining program when the license agreements expired on July 1, 2022. With that, other outdoor
dining amenities were explored for Old Town which led to the Old Town Parklet Project. Parklets are the
conversion of parking spaces on urban streets into a small public `park' or enclosed seating area. The intent
of the Parklet Project is to provide an additional amenity to the community and promote an increase in
pedestrian activity and convenience. Staff is working with a consultant, Placeworks, to design and
implement the Old Town Parklets. Locations and design themes will be determined throughout the process
with direction from the Old Town Steering Subcommittee. The consultant is currently working on parklet
designs to present at a community workshop that will be held on October I Ith in the Conference Center.
(GARCIA)
Complete Streets (LR23-0043): This project will draft a citywide policy for the city to ensure transportation
infrastructure is designed to enhance safety, accessibility, and mobility for all users. A Complete Streets
Checklist will be developed to be used internally to ensure that transportation infrastructure projects are
implementing Complete Streets where practical by considering the feasibility of Complete Streets
improvements and ensuring consistency with other planning documents. The City has retained Fehr & Peers
Transportation Consultants to draft the Complete Streets Policy, implementation checklist, and mid -block
crosswalk criteria. This project is being funded by the Local Early Action Planning (LEAP) grant that was
awarded by the State Department of Housing and Community Development (HCD). The consultant is
currently drafting the Resolution and Complete Streets Checklist to be adopted by City Council in November
2023. (GARCIA)
Climate Action Plan (CAP) Baseline Evaluation (LR23-0083): The City was awarded funds from the
Local Early Action Planning (LEAP) grant opportunity by the State Department of Housing and Community
Development (HCD) to prepare an internal report of the city's baseline Greenhouse Gas Emissions (GHG)
inventory. The intent is for the City to have full documentation of a baseline emissions inventory that can
be used as the City develops a Climate Action Plan. The City has hired WSP to collect data needed to
estimate GHG emissions and include vehicle fuel economy standards, electric vehicle mandates, renewable
electricity standards, waste reduction targets, and water use restrictions. The project kickoff meeting with
city staff is scheduled for June 13, 2023. (GARCIA)
Wayfinding Guide (LR23-0167): The city is working with a consultant, Alta Planning + Design, Inc., to
implement a bicycle wayfinding system for the bike lanes and trails throughout the city. Alta will draft a
wayfinding strategy memo that outlines best practices for destination selection, sign placement, and sign
programming. The Multi -Use Trails and Bikeways Master Plan that was adopted in 2016 will act as an
implementation and style guide to create an interconnected network designed to encourage more residents
to use active transportation. The project kickoff meeting was held on July 24th with city staff and the
consultant. (GARCIA)
Bicycle Friendly Community Application (LR23-0220): The City was awarded a Bronze Level Bicycle
Friendly Community Award in 2021. One of the aspirations in the Quality of Life Master Plan (QLMP) is
to strive for a Gold Level. Staff is currently working on the application that will be submitted to The League
of American Bicyclists. The League's Bicycle Friendly America program provides advocates and change
makers with a roadmap and hands-on assistance to build places more welcoming to people who bike. The
application is due August 30, 2023.
Land Use Economic Opportunity Study (LR23-0078): In preparation for the General Plan Update staff
has engaged Keyser Marston Associates (KMA) to complete a new Land Use Economic Opportunity Study.
Staff is presently working on the agreement, funded through a LEAP Grant and services will commence
once executed. Staff is working to provide KMA with the requested documents to complete the fiscal land
use study. (COLLINS)
Temecula Creek Wildfire Risk Reduction Community Plan (LR21-1331): Temecula applied for and
was awarded a $300,000 grant to develop Temecula's first Community Wildfire Protection Plan (CWPP).
The grant has a $78,000 match (staff time), the remainder is to onboard a consultant to draft the plan. RFP
has closed and SWCA Environmental was selected as the winning candidate. The contract was approved at
the January 1 Oth City Council Meeting and a kickoff is scheduled for February 61h in the conference center.
The kickoff meeting was held with 18 in attendance, the Development Team has been assigned and
consultant is planning for fieldwork in the coming weeks. Fieldwork was performed on March 281h and
associated studies will be provided in due time. Consultant continues fieldwork and fire modeling with maps
to be presented early this fall. (COLLINS)
Housing Element Implementation Ordinance (LR22-0664): An agreement between WRCOG and the
City to provide consultation services to provide analysis of required municipal code updates as they relate
to the new slate of housing laws, such as SB-9, ADU Laws, etc. Additionally, would evaluate changes to the
municipal code required after the adoption of the 6th Cycle Housing Element. The cost is included as a
benefit to member agencies of WRCOG. WSP is the consultant selected by WRCOG to assist the city review
its Municipal Code in relation to the new housing bills passed. Staff has bi-weekly meetings with the
consultant to address the changes and will discuss proposed changes at a future date in consultation with the
City Attorney's Office. Staff has received the draft analysis and will be reaching out for policy direction.
Staff approached the consultant to include recently approved legislation in their analysis, and was unwilling.
For this reason, staff with the assistance of the City Attorney's office will draft the Ordinance and the
consultant has been released from the agreement through WRCOG. Staff has worked with the City Attorneys
Office to complete the Draft Ordinance, and is currently preparing supporting documents and is scheduled
for PC Subcommittee on August 16th and CC Subcommittee on August 22nd. (COLLINS)
Old Town Parking Management White Paper (LR22-0857): The project will allow for the creation of a
white paper discussing various technology solutions designed to track and report on parking in Old Town in
real time. The project encompasses the entire Old Town Specific Plan area. Staff has retained Fehr & Peers
to create the document and recommend technology for monitoring parking in real time. (JONES)
Quality of Life Ordinance (LR23-0050): An Ordinance to address some concerns in 4 key areas that Staff
has public safety concerns, 1) Massage Businesses attempting to circumvent the exemptions provided for in
the Municipal Code and address some operational concerns raise by RSO, 2) Tobacco or "Smoke" Shops
increasing number within the City and the process of licensing such establishments, 3) Smoking along public
sidewalks with a focus on Old Town and the impacts to the walkable family feel the City and business
owners have worked so hard to create, Staff met with the City Council Public Safety Ad Hoc Subcommittee
(JA/BK) on 4/25 to discuss the proposed scope of the ordinance and to obtain Councilmembers feedback
and direction on the proposed ordinance. The Draft Ordinance will be presented to Planning Commission
Municipal Code Maintenance Subcommittee on June 7th and City Council Public Safety Ad Hoc
Subcommittee on June 13th with PC and CC Hearings to follow. The Planning Commission passed
Resolution No. 2023-14 recommending the City Council adopt the proposed ordinance and will be presented
to the City Council on August 22"d. (COLLINS)
Annual Title 17 Cleanup (LR23-0180): An annual effort of Community Development to identify areas of
the code that need clarification, correction or an update. This is also performed to implement various
components of state law. Staff has begun compiling the proposed changes and an ordinance will be drafted
shortly thereafter. (COLLINS)
HOUSING
Las Haciendas Affordable Housing Project: The City has approved the construction of a 77-unit
affordable multi -family housing community consisting of two residential buildings, a community building
and tuck -under parking located at 28715 Las Haciendas. Community HousingWorks (CHW), the developer,
has closed their interest list to the public, the lottery has taken place, and the property management company
ConAm Management is working on getting future tenants approved before the move in date. The project is
currently under construction in Uptown Jefferson. (URIAS)
Old Town Temecula Town Homes: The City is reviewing a Development Plan application for the
construction of 14 multi -family residential units on the vacant .68-acre parcel located at 42146 Sixth Street.
(CARDENAS)
Habitat (6) Homes Affordable Project: The City has approved and executed the Disposition and
Development agreement for the construction of six (6) homes that will be available for purchase to families
that qualify under low income or very low-income homebuyer income qualifications. The developer is
Habitat for Humanity Inland Valley, Inc., a California nonprofit developer, the City is working with the
developer to get escrow opened in the upcoming weeks. (URIAS)
Request For Proposal (RFP) of the Jefferson Ave/Uptown Vacant Parcel: The City is working on
starting the process to RFP the vacant parcel located in Uptown on Jefferson Avenue to the South of the
French Valley Interchange exit. This parcel has an Affordable Housing Overlay Zone and The City plans to
build affordable housing on this parcel. (URIAS)
BUILDING & SAFETY
Building and Safety statistics for June and July 2023 are highlighted in the following table.
Building & Safety Statistics
.Tune
July
Permits
509
445
New Single Family Unity
36
44
Acces�,onr Dwelling Units (ADLr)
4
3
New Commercial Building
0
0
Phot>voltaic
215
1453
Tenant Emprovement
12
9
Non Constructioa G of O
34
38
Number of Asti-,-e Plan Checks
312
259
-Lieber of�eiv Plan Checks
30
93
Number of Finaled Permits
300
323
Inspections
3086
3307
Inspections Per Dad-
16s
165
Inspections Per Per sor. Per Dat-
34
33
Stops Per Mcmth
1246
1336
Vixitofs to Counter
54 i
671
Non -Construction Certificate of Occupancy
❑ Great Harvest Bread Company (2,261 SF)
❑ Synergy Orthopedic Specialists (1,424 SF)
Tenant Improvement
❑ Kompoocha Brewing (2,116 SF)
❑ HOTWORX Fitness Studio (12,751 sq ft)
❑ Crown Dental (1,054 SF)
❑ BioLife Plasma Services (16,940 SF)
CODE ENFORCEMENT
During the months of June and July, Code Enforcement responded to 192 web inquiries. In addition, the
division opened 316 code cases, conducted 660 regular inspections and forwarded 64 referrals.
Code Enforcement Statistics
June
July
Abandoned or Inoperable Vehicle
2
1
Vacant Home/ Prop. Maintenance :Infestation Mold
6
Business or Home Occupation w. o license CUP
5
4
Trash and Debris ,' Dumping
22
Overgrown Vegetation . �1-'eeds :' Fire Hazard
20
51
Green Pool:: Vector Control.: Stagnant Water
7
Graffiti
7
5
Itioim'Nuisance.-Animal. Control
7
13
Trailer :' lam' Stored Boat. Parking
6
23
Construction w o Permit Building Cade
35
Encroach Public ROW. Trash Cans
15
2
ToningiSigns
Public Safety- & Health
3
8
Total Number of Cases
173
Foreclosure Tracking: Code Enforcement works with the local real estate community to monitor
foreclosures, defaults and real estate owned properties.
Foreclosure Statistics
July
Residential - Default
—Jmb�
36
33
Residential - Foreclo5ure
2.2
Residential - REO
12
9
Total - Residential
Commercial - Defauh
commercial - Foreclosure
2
2
Commercial - REO
Total - Commercial
2
2
ATTACHMENT: Current Planning Activity Report
PLANNING ACTIVITY REPORT
Assigned Planner Approval
PA Number Project Address APN Apply Date Date Applicant
PA23-0227 42974 Roick Dr 909-320-056 Eric Jones 06/01/2023 Sherrie Munroe
Temecula, CA 92590
Case Title / Description: Sailhouse Temecula Development Plan: A Development Plan for an approximately
7,066 square foot warehouse building with office space. The project is located at 42974 Roick Drive.
Company Owner Plan Type Status
Copan PL Development Out
Diagnostics Inc. Plan
PA23-0229 43195 Business Park Dr 921-020-072 Jaime Cardenas 06/01/2023 06/14/2023
Taylor Menge
saed
PL Zoning or
Completed
Temecula, CA 92590
investments
Planning Letter
Case Title / Description: 43195 Business Park Drive ZL: a zoning verification letter for the property located
at 43195 Business Park Drive (APN 921-020-072).
PA23-0231 916-400-043 Jaime Cardenas 06/02/2023 06/22/2023
Stacey Burdick
LANTERN
PL Zoning or
Completed
Temecula, CA
CRESTAT
Planning Letter
TEMECULA
Case Title / Description: 916400043 ZL: a Zoning Letter for the property associated with the Assessor
Parcel Number 916-400-043.
PA23-0234 29750 Rancho California Rd 921-760-001 Yannin Marquez 06/05/2023
Richard
Jeff Hilton
PL Sign Program
Out
Temecula, CA 92591
Guadamuz
Case Title / Description: 7 Eleven Sign Program: A New Sign Program application for 7 Eleven
convenience store located at 29750 Rancho California Road.
PA23-0235 33320 Temecula Pky 965-410-003 Yannin Marquez 06/05/2023 07/05/2023
Rose Corona
Corona Family
PL Temporary
Approved
Temecula, CA 92592
LTD Partnership
Use Permit
Case Title / Description: Annual Corn Maze & Harvest Festival TUP: a Temporary Use Permit (Major) for a
corn maze and harvest festival with food and alcohol from September 30, 2023, to October 31, 2023, from
10:00 AM to 5:00 PM, Monday through Sunday, located at 33320 Temecula Parkway.
PA23-0236 28588 Old Town Front St 922-033-021 Eric Jones 06/05/2023 Jose Bahena Ronald Darling PL Modifications Out
Temecula, CA 92590
Case Title / Description: Kalaveras CUP MOD: A Modification Application to revise previously approved
Conditional Use Permit Conditions of Approval related to operating hours for a new restaurant. The project is
located at 28588 Old Town Front Street.
Page 1 of 9
Assigned Planner Approval
PA Number Project Address APN Apply Date Date Applicant
PA23-0238 27340 Nicolas Rd 920-100-019 Scott Cooper 06/06/2023 06/13/2023 Daniel Bowman
Temecula, CA 92591
Case Title / Description: Vineyard Ranch MOD: A Modification to a previously approved Development Plan
(PA15-0172) to revise Phase II to increase the size of the basin, reduce the fire lane distance while increasing
the amount of landscaping, and reduce the amount of provided parking spaces from 79 to 76 which meets the
amount of required parking spaces for the project. The project is located at 27350 Nicolas Road.
PA23-0240 27590 Jefferson Ave 910-310-004 Jaime Cardenas 06/07/2023 Marcus Paris
Temecula, CA 92590
Case Title / Description: Camping World MOD: a Modification Application to include 'Parcel 2' to the
existing CUP and to modify the site with new security fencing, parking, landscaping a service building
conversion, and demolition of the former restaurant building located at 27600 Jefferson Avenue.
PA23-0241 43890 Butterfield Stage Rd 966-010-013 Yannin Marquez 06/08/2023 07/10/2023 Stephanie
Temecula, CA 92592 Silen-Flood
Case Title / Description: Les Schwab Tires Temecula Solar MOD: a Modification Application (Planning
Review Only) for the installation of 139 roof -mounted solar modules located at 43890 Butterfield Stage Road.
PA23-0246 31634 Loma Linda Rd 961-101-008 Yannin Marquez 06/09/2023 07/10/2023 Alfonso
Temecula, CA 92592 Buitrago-Jimenez
Case Title / Description: Arredondo Residence Addition MOD: a Modification Application (Planning Review
Only) for a 451.48 square foot one-story addition to the rear of the residence located at 31634 Loma Linda
Road.
PA23-0249 42433 Avenida Alvarado 909-290-001 Yannin Marquez 06/12/2023 08/01/2023 Michael Asaro
Temecula, CA 92590
Case Title / Description: MS Mountain View Bldg 1 MOD: A Modification Application (Planning Review
Only) to a previously approved development plan (PA20-0533) for the addition of two parking spaces located
at 42433 Avenida Alvarado. This project includes a Minor Exception (PA23-0276).
Company Owner Plan Type Status
Irwin Partner PROTEA PL Modifications Approved
Architects SENIOR LIVING
TEMECULA
PA23-0250 30237 Corte Cantania 921-690-007 Yannin Marquez 06/14/2023 07/03/2023 Steven Hill Seven Hills
Temecula, CA 92591 Engineering
Case Title / Description: Carr Addition MOD: A Modification Application (Planning Review Only) for anew
73 square foot addition for a bathroom and closet at the front west end of the existing residence located at
30237 Corte Cantania
Prime Steaks & PL Modifications Corrections
Spirits
Les Schwab Tire PL Modifications Approved
Center #571
Chris Arredondo PI -Modifications Approved
Tim Hoag PL Modifications Approved
David Carr PL Modifications Approved
Page 2 of 9
Assigned Planner Approval
PA Number Project Address APN Apply Date Date Applicant Company Owner Plan Type Status
PA23-0251 45100 Redhawk Pky 962-040-012 Eric Jones 06/15/2023 James Wood RAINBOW PL Conditional Plan Review
Temecula, CA 92592 BRIDGE Use Permit
MANAGEMENT
Case Title / Description: Redhawk Event Center CUP: A Conditional Use Permit to allow an event center to
be operated as part of an existing golf course. The project is located at 45100 Temecula Parkway.
PA23-0252 28717 Pujol St 922-062-008 Eric Jones 06/15/2023
Al Aguirre LAIRD PL Historical Out
Temecula, CA 92590
CAMERON Appropriateness
Case Title / Description: McCoy Historical Structure Certificate of Historical Appropriateness: A Certificate
of Historical Appropriateness to demolish a historic structure (Al Otto House). The project is located at 28717
Pujol Street.
PA23-0255 29375 Rancho California Rd 944-330-015 Yannin Marquez 06/20/2023 06/23/2023
Chansler SRA Ventures PL Temporary Approved
Temecula, CA 92592
Skousen Use Permit
Case Title / Description: Girls Day Out Market TUP: a Major Temporary Use Permit for a vendor market
with 40 vendors with no outside food or alcohol on June 25, 2023, from 11:00 AM to 3:00 PM located on the
east side parking lot of Oscars Brewing Company located at 29375 Rancho California Road.
PA23-0256 27165 Madison Ave 910-272-022 Scott Cooper 06/21/2023 07/13/2023
Philip Powers Temecula TEMECULA PL Modifications Approved
Temecula, CA 92590
Extended Stay, EXTENDED
LLC STAY
Case Title / Description: Everhome Suites MOD: A Modification (Planning Review Only) to a previously
approved Development Plan (PA21-1350) for the addition of a ADA lift and exterior door without adding square
footage to the project located at 27165 Madison Avenue.
PA23-0257 31845 Temecula Pky, , 106 961-080-008 Jaime Cardenas 06/21/2023
Tiffany Del Gatto GALILEO VAIL PL Sign Program Corrections
Temecula, CA 92592
RANCH LP
Case Title / Description: Vail Ranch Center Sign Program Amendment: a Sign Program Amendment
application to modify the existing sign program to accommodate a converted multitenant building located at
31845 Temecula Parkway.
PA23-0258 27500 Jefferson Ave 910-310-007 Jaime Cardenas 06/21/2023 07/03/2023
Dyana Tucker Heritage Inn of PL Zoning or Completed
Temecula, CA 92590
Temecula, LLC Planning Letter
Case Title / Description: 27500 Jefferson Avenue ZL: a zoning verification letter for the property located at
27500 Jefferson Avenue.
Page 3 of 9
Assigned Planner Approval
PA Number Project Address APN Apply Date Date Applicant Company Owner Plan Type Status
PA23-0260 31950 Pauba Rd 955-020-019 Scott Cooper 06/23/2023 Deanna Elliano Linfield Christian PL General Plan Hearing
Temecula, CA 92592 School Amendment
Case Title / Description: Linfield Christian School PDO-A: A Planned Development Overlay Amendment for
Linfield Christian School to adjust the boundaries of three (3) of the Planning Areas.
PA23-0267 32273 Daybrook Terrace 964-750-007 Scott Cooper 06/28/2023
Dena Upp escrow acct SHAWOOD
PL Temporary
Plan Review
Temecula, CA 92591
5074 authorized COMMUNITIES
Use Permit
user
Case Title / Description: Sommers Bend SHAWOOD Construction Trailer TUP: A Temporary Use Permit to
allow for a temporary construction trailer on site throughout the construction of Sommers Bend SHAWOOD
PA23-0269 28636 Old Town Front St 922-034-036 Eric Jones 06/30/2023
Andrew Doty Front & Main
PL Modifications
Plan Review
Temecula, CA 92590
Case Title / Description: Old Town Blues Club Modification: A Modification application to review an existing
awning located on the north side of an existing structure. The project is located at 28636 Old Town Front
Street.
PA23-0270 28636 Old Town Front St 922-034-036 Eric Jones 06/30/2023
Andrew Doty Front & Main
PL Public
Plan Review
Temecula, CA 92590
Convenience or
Necessity
Application
Case Title / Description: Old Town Blues Club PC&N: A PC&N for the Old Town Blues Club. The project is
located at 28636 Old Town Front Street. Related application PA23-0182 (CUP Modification to Obtain a Type
990 ABC License).
PA23-0271 26469 Ynez Rd 910-300-014 Yannin Marquez 07/03/2023
Chad Williams KIMCO PALM
PL Conditional
Out
Temecula, CA 92591
PLAZA
Use Permit
Case Title / Description: Portals Entertainment Center CUP: A Conditional Use Permit for an arcade, laser
tag, mini golf course and restaurant located at 26469 Ynez Road.
PA23-0274 26478 Ynez Rd 910-320-048 Yannin Marquez 07/05/2023
Chris Krstevski ART OF DEV
PL Modifications
Plan Review
Temecula, CA 92591
Case Title / Description: Express Carwash Solar MOD: A Modification Application (Planning Review Only)
for 76 solar panels to be mounted on the roof of the building and 235 solar panels to be mounted on the two
carports located 26476 Ynez Road.
Page 4 of 9
Assigned Planner Approval
PA Number Project Address APN Apply Date Date Applicant Company Owner Plan Type Status
PA23-0275 43223 Business Park Dr 921-710-010 Yannin Marquez 07/05/2023 Vicki Ayala EPX Group LLC NORDEEN PL Modifications Applied
Temecula, CA 92590 LIVING TRUST
DATED
8/23/2010
Case Title / Description: Business Park Solar MOD: A Modification Application (Planning Review Only) for
269 roof mounted solar panels located at 43223 Business Park Drive.
PA23-0276 42433 Avenida Alvarado 909-290-001 Yannin Marquez 07/07/2023 08/01/2023
Michael Asaro JT-BRESSI PL Minor Approved
Temecula, CA 92590
Exception
Case Title / Description: MS Mountain View - Bldg 1 ME: A Minor Exception for a15% reduction in required
parking spaces from a total of 21 required spaces to 19 required spaces. The project is located at 42433
Avenida Alvarado.
PA23-0277 32937 Temecula Pky 960-030-043 Jaime Cardenas 07/12/2023
Gregory Cary UG2 TEMECULA PL Modifications Plan Review
Temecula, CA 92592
Case Title / Description: Smart & Final MOD: a Modification Application to allow facade changes for Smart
& Final to occupy the former 'Best Buy" building located at 32937 Temecula Parkway.
PA23-0280 922-210-042 Eric Jones 07/12/2023
Brandon Humann Catalyst PL Planned Plan Review
Temecula, CA
Commercial Development
Group, LLC Overlay
Case Title / Description: Car Wash and Coffee Shop Planned Development Overlay: A Planned
Development Overlay to provide development standards for a proposed coffee shop and car wash. The
project is located approximately 160 feet south of the Temecula Parkway and Bedford Court intersection at
APN: 922-210-042.
PA23-0283 27725 Jefferson Ave 921-400-031 Eric Jones 07/14/2023
Salvador Herrera JEFFERSON PL Entertainment Plan Review
Temecula, CA 92590
PLAZA CENTER License
Case Title / Description: Salud Lounge Entertainment License: An Entertainment License application to
allow Salud Lounge to conduct indoor entertainment. The project is located at 27725 Jefferson Avenue.
PA23-0284 27624 Jefferson Ave 921-480-074 Yannin Marquez 07/17/2023
Alan Ibarra Rocket Roofing Philip Chang PL Modifications Plan Review
Temecula, CA 92590
Case Title / Description: 27624 Jefferson Avenue MOD: A Modification Application (Planning Review Only)
for the installation of new roof materials located at 27624 Jefferson Avenue. The roof materials are changing
from wood shakes to forest brown shingles.
PA23-0285 43223 Business Park Dr 921-710-010 Yannin Marquez 07/17/2023
Vicki Ayala EPX Group LLC Richard Nordeen PL Modifications Plan Review
Temecula, CA 92590
Case Title / Description: EPX Group, LLC Solar MOD: A Modification Application (Planning Review Only)
for the installation of 269 roof -mounted solar modules located at 43223 Business Park Drive.
Page 5 of 9
Assigned Planner Approval
PA Number Project Address APN Apply Date Date
Applicant Company Owner Plan Type Status
PA23-0286 32381 Daybrook Terrace 964-740-001 Scott Cooper 07/17/2023 08/02/2023
Dena Upp escrow acct SHAWOOD PL Modifications Approved
Temecula, CA 92591
5074 authorized COMMUNITIES
user
Case Title / Description: Sommers Bend PAs 19, 20B, & 21 Shawood MOD: A Modification to previously
HPRs (PA22-0494, PA22-0495, PA22-0496) for revisions to the elevations including window locations, sizes,
and type, optional sliding doors, extending veneer wrap, and front door options within Planning Areas PAs 19,
20B, & 21 of Sommers Bend.
PA23-0289 41915 Business Park Dr 921-020-043 Jaime Cardenas 07/18/2023 07/27/2023
Cory Hudson International PL Zoning or Completed
Temecula, CA 92590
Rectifier Co Planning Letter
Case Title / Description: International Rectifier Corp ZL: a Zoning Verification Letter for International
Rectifier Corporation located at 41915 Business Park (APN 921-020-043).
PA23-0290 33320 Temecula Pky 965-410-003 Yannin Marquez 07/19/2023
Karin Corona Family PL Temporary Plan Review
Temecula, CA 92592
Raubenheimer LTD Partnership Use Permit
Case Title / Description: ABC Tree Farms, LLC TUP: ATemporary Use Permit to allow a pumpkin patch
event from September 29, 2023 to October 31, 2023 and a Christmas Tree Lot sales and event from
November 24, 2023 to December 24, 2023.The project is located at 33320 Temecula Parkway.
PA23-0291 42661 Avenida Alvarado 909-290-078 Scott Cooper 07/20/2023 07/25/2023
Mario Calvillo MS -MOUNTAIN PL Modifications Approved
Temecula, CA 92590
VIEW
Case Title / Description: MS Mountain View - Bldg 19 MOD: A Modification (Planning Review Only) to a
previously approved Development Plan (PA22-0595) to add two (2) access doors located at 42661Avenida
Alvarado
PA23-0292 27562 Via Industria 909-290-048 Scott Cooper 07/20/2023 07/25/2023
Mario Calvillo MS -MOUNTAIN PL Modifications Approved
Temecula, CA 92590
VIEW
Case Title / Description: MS Mountain View - Bldg 15 MOD: A Modification (Planning Review Only) to a
previously approved Development Plan (PA22-1034) to add one (1) access door located at 27562 Via
Industria
PA23-0293 27550 Via Industria 909-290-023 Scott Cooper 07/20/2023 07/25/2023
Mario Calvillo MS -MOUNTAIN PL Modifications Approved
Temecula, CA 92590
VIEW
Case Title / Description: MS Mountain View - Bldg 16 MOD: A Modification (Planning Review Only) to a
previously approved Development Plan (PA22-1035) to add one (1) access door located at 27550 Via
Industria
Page 6 of 9
Assigned Planner Approval
PA Number Project Address APN Apply Date Date
Applicant Company Owner Plan Type Status
PA23-0298 27473 Ynez Rd , 1A 921-270-055 Yannin Marquez 07/20/2023
Pearl Bfar Temecula Plaza PL Modifications Applied
Temecula, CA 92591
Center
Case Title / Description: 85 Degrees Bakery MOD: A Modification Application (Planning Review Only) to
remove and relocate one exterior door at the rear south end of an existing building. This project is located at
27473 Ynez Road, Suite 1A.
PA23-0300 41892 Motor Car Pky 921-680-003 Yannin Marquez 07/21/2023
DANIEL FLORES Oremor Of PL Modifications Plan Review
Temecula, CA 92591
Temecula LLC
Case Title / Description: Temecula Toyota Inventory Solar MOD: A Modification Application (Planning
Review Only) for the installation of 144 roof -mounted solar modules on an existing building located at 41892
Motor Car Parkway.
PA23-0304 28676 Old Town Front St 922-044-009 Yannin Marquez 07/27/2023
Dean Norris Front Street Dean Norris PL Temporary Plan Review
Temecula, CA 92590
Holdings, LLC Use Permit
Case Title / Description: Swing Inn TUP: A Major Temporary Use Permit application for an anniversary
celebration that consists of one person providing live music entertainment on August 18th, 2023, through
August 20th, 2023, from 5:00 PM to 9:00 PM located at 28676 Old Town Front Street.
PA23-0307 42624 Avenida Alvarado 909-290-071 Eric Jones 07/28/2023
Dave Mason Dave Mason PL Modifications Plan Review
Temecula, CA 92590
Case Title / Description: Tri-State Mezzanine Modification: A Modification application for an approximately
3,200 square foot mezzanine. The project is located at 42624 Avenida Alvarado.
PREAPP23-0 28645 Old Town Front St 922-036-011 Scott Cooper 06/01/2023
Heidi Luerra PL Plan Review
228 Temecula, CA 92590
Pre -Application
Case Title / Description: The Bold Pre-App: A Pre -Application for a restaurant, cocktail bar, and live music
and performance menu located at 41915 3rd Street
PREAPP23-0 32937 Temecula Pky 960-030-043 Jaime Cardenas 06/02/2023
Gregory Cary UG2 TEMECULA PL Plan Review
233 Temecula, CA 92592
Pre -Application
Case Title / Description: Smart & Final Preapp: a Pre -Application to review new facade, signs, and tenant
improvements for Smart & Final to occupy the former "Best Buy" building located at 32937 Temecula Parkway.
PREAPP23-0 40695 Winchester Rd 910-290-007 Yannin Marquez 06/07/2023 06/29/2023
Nima Noorzad Winchester PL Completed
239 Temecula, CA 92591
Marketplace Pre -Application
Case Title / Description: Earth Bistro outdoor seating Pre-App: a Pre -Application for a modification to add a
patio at the front of the storefront located at 40695 Winchester Road.
Page 7 of 9
Assigned Planner Approval
PA Number Project Address APN Apply Date Date Applicant Company
PREAPP23-0 31709 Temecula Pky 961-080-004 Yannin Marquez 06/08/2023 06/22/2023 Noelia Santiago Valerio
242 Temecula, CA 92592 Architects
Case Title / Description: Cava CUP Pre-App: a Pre -Application for the modification of a Conditional Use
Permit (PA01-0082) and exterior of the building for a future dine -in restaurant located at 31709 Temecula
Parkway
Owner Plan Type
New Plan Excel PL
Realty Trust Inc. Pre -Application
Status
Completed
PREAPP23-0 945-090-001 Scott Cooper 06/08/2023 Bill Parker PL Out
243 Temecula, CA Pre -Application
Case Title / Description: Parker Ridge Pre-App: A Pre -Application for nine (9) single family lots on 11.4
acres located on the south side of Pauba Road approximately 600 feet of Showalter Road
PREAPP23-0 940-310-015 Scott Cooper 06/09/2023 Colin Koch PL Out
247 Temecula, CA Pre -Application
Case Title / Description: Altair Villages A, B, Cn Pre-App: A Pre -Application for Plotting of Villages A, B, and
Cn of Altair
PREAPP23-0 921-020-044 Eric Jones 06/30/2023 07/13/2023 Ryan Grove
268 Temecula, CA
Case Title / Description: Parcel 6 - Business Park Drive: A Pre -Application to review an approximately
135,000 square foot warehouse/distribution spec building. The project is located approximately 1,300 feet
north of the Single Oak Drive and Business Park Drive intersection at APN: 921-020-044.
PREAPP23-0 921-280-002 Eric Jones 07/05/2023 07/20/2023 Richard Finkle
272 Temecula, CA
Case Title / Description: Temecula Mixed Use: A Pre -application to review a three-story mixed -use
structure consisting of retail and parking on the first floor and residential on the second and third floors (44
units total). The project is located approximately 240 feet from the Vincent Moraga Drive and Felix Valdez
Drive intersection at APN: 921-280-002.
PREAPP23-0 27635 Diaz Rd 921-030-043 Eric Jones 07/12/2023 07/20/2023 Christopher
278 Temecula, CA 92590 Arnold
Case Title / Description: Telsa Collision and Repair Center Pre-Applicaiton: A Pre -Application to review a
proposed automobile collision repair center (Tesla). The project is located at 27635 Diaz Road.
PREAPP23-0 41975 4Th St 922-033-012 Eric Jones 07/12/2023 07/27/2023 Kellie Patry
279 Temecula, CA 92590
Case Title / Description: The Dram Pre -Application: A Pre -Application to review a proposed restaurant and
bar that will be located within an existing building. The project is located at 41975 4th Street.
International PL Completed
Rectifier Cc Pre -Application
SPX PL Completed
INVESTMENT Pre -Application
DIAZ RE PL Completed
HOLDINGS Pre -Application
PL Completed
Pre -Application
Page 8 of 9
Assigned Planner Approval
PA Number Project Address APN Apply Date Date Applicant Company
PREAPP23-0 921-020-067 Scott Cooper 07/13/2023 Brendan Smith
281 Temecula, CA
Case Title / Description: Temecula RV Storage Pre-App: A Pre -Application for an RV and mini storage
facility consisting of 172 outdoor parking storage spaces and a office building on the vacant lot on Business
Park Drive at the terminus of Rancho Way.
Owner Plan Type Status
PL Cancelled
Pre -Application
PREAPP23-0 957-080-027 Scott Cooper 07/21/2023 Christopher PL Plan Review
299 Temecula, CA Shiota Pre -Application
Case Title / Description: Seraphina Pre-App: A Pre -Application for the creation of 120 single family lots and
2 open space lots on 17.55 acres located on the southwest corner of Joseph Road and Rita Way (APN:
957-080-027)
PREAPP23-0 921-280-002 Eric Jones 07/28/2023 Dan Morrar SPX PL Plan Review
306 Temecula, CA INVESTMENT Pre -Application
Case Title / Description: Temecula Daycare Pre -Application: A Pre -Application to review an approximately
12,000 square foot day facility. The project is located at APN: 921-280-002 and is approximately 250 feet east
of the Vincent Moraga and Felex Valdez intersection.
Page 9 of 9
Item No. 19
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: John Crater, Division Chief
DATE: August 22, 2023
SUBJECT: Fire Department Monthly Report
PREPARED BY:
RECOMMENDATION:
Report.
Wendy Miller, Management Analyst
That the City Council receive and file the Fire Department Monthly
CITY OF TEMECULA
FIRE DEPARTMENT
Operations Prevention I Training I Emergency Management
MONTHLY REPORT I JULY 2023
j P .
M/Mj Ilf"
Y/K
5 Stations 7 Engines I USAR 12 Truck I I Squad Population - 112,194
TYPE:
iCOMMERCIAL FIRE
MULTI -FAMILY FIRE
RESIDENTIAL FIRE
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"VEHICLE FIRE
OTHER FIRE
at
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FALSE ALARM
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JULY CALL BREAKDOWN
5
.0
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82
3
L: 107
'Other
TYPE:
Fires
--APR1..L'21123
False Alarm
TRAFFIC COLLISION 5E
MEDICAL EMERGENCY B55 TE
OTHER MISCELLANEOUS H
PUBLIC AS.SI ST 38
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ru
1 \%01ffibPb\\\\\\\1
2 17,1�5
ina Calls for Service in 2022
Q�Ztlql� - ��_7
Year to Date Calls
CITY OF TEMECULA
FIRE DEPARTMENT
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MONTHLY REPORT JULY2023 "r i
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CHECKS/REVIEWS
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MONTHLY REPORT JULY2023
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CITY OF TEMECULA
FIRE DEPARTMENT
••`� Operations Prevention I Training I Emergency Management a
9 �
MONTHLY REPO 2023
PROGRAM H I G H LI G HTS:-,,.,,,,''''i,,;,;,,��irrir}ff PLAN N ED COMMUNITY EVEI,,LJPPD RTE D: b
r. 1111 f Illlllllll
• OEM attended the Access and Functional Needs (AFN) Symposium with CalOES and other
V'��_:regional partners regarding the new requirements for emergency planning and inclusion ����
4PREPAREDNESS TRAINING / EVEN�S�
• OEM executed a full EOC Activation Functional Exercise — planning process for a high visibility
dignitary visit
Conducted 3 pre -exercise training sessions on our EN Management System via MS Te0ms" .
• Participated in the Riverside County EMD After Action Review of the 2023 Winter Storms
response
The 2023 City of Temecula Local Hazard Mitigation Plan (LHMP) has been adopted and remaifis
Community Presentations:)
-_• Participated in an Emergency Manageff -_ _
Student Interview for Grand Canyon University
Community Preparedness Backpacks: o
YTD: TotaE �~
effective until 2028 -„ - —�— 1,. �,..# �: �.�:. r
GRANTS D CLAIMS.
f.
Winter Storms 2023 DR-4E83: Package eaIDES for decision
• Recovery pictures taken at the request of CalOES and entered into the package as supplementa
information
CDVID Emergency Reimbursement Package: Under Review by FEMA
Fairview Fire Management Assistance Grant (FMAG) Package: Under Review by FEMA
EMERGENCY OPERATIONS CENTER
CtA ivationS'- +�
Current Status: Level 4 — Normal ns
4 -
CITY OF TEMECULA
FIRE DEPARTMENT
Operations I Prevention I Training I Emergency Management
Center
c '
�e
®�
-A
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Chris Durham, Captain
DATE: August 22, 2023
SUBJECT: Temecula Sheriff's Monthly Report (July 2023)
PREPARED BY: Chris Mattson, Sergeant
RECOMMENDATION: That the City Council receive and file monthly report.
The following report reflects the activity of the Temecula Sheriff's Station for July 2023.
PATROL SERVICES
Overall calls for police service.................................................................................................6,186
"Priority One" calls for service......................................................................................................81
Average response time for "Priority One" calls.........................................................................5.19
VOLUNTEERS
Chaplain..................................................................................................................................108.50
Community Action Patrol (CAP) hours..................................................................................561.55
Reserve officer hours (patrol)........................................................................................................18
Explorer..........................................................................................................................................63
Station/Administration ...................................................................................................................22
Total Volunteer hours.............................................................................................................773.05
OLD TOWN STOREFRONT
Total customers served.....................................................................................701
Fingerprints/Live Scan.....................................................................................138
Policereports filed.............................................................................................10
Citationssigned off..........................................................................................13
Totalreceipts...........................................................................................................................$7,176
CRIME PREVENTION
Crime prevention/Neighborhood watch meetings...........................................................................0
Safety presentations/Training................................................................................0
Specialevents...................................................................................................................................7
Residential/Business security surveys conducted............................................................................0
Residences/Businesses visited for past crime follow-up.................................................................0
StationTours....................................................................................................................................0
Planning Review Projects.......................................................................................3
Temp Outdoor Use Permits....................................................................................6
SPECIAL TEAMS (CORE)
ReportsWritten...............................................................................................17
Onsight felony arrests..................................................................................................................... I
On sight misdemeanor arrests................................................................................7
Felony arrest warrants served.................................................................................2
Misdemeanor arrest warrants served.............................................................................................14
AreaChecks.....................................................................................................71
CampChecks................................................................................................................................16
PedestrianChecks.....................................................................................................59
Traffic Stops/Vehicle Checks..................................................................................................... 2/5
Outreachattempts / Success........................................................................................................ 1/3
SPECIAL TEAMS (Metro District Team)
Onsight, felony arrests......................................................................................12
On sight, misdemeanor arrests.......................................................................................................14
Felony arrest warrants served..........................................................................................................8
Misdemeanor arrest warrants served
.............................................................................................78
Bar/Business checks........................................................................................................................8
D.U.I. Arrests..................................................................................................................................7
Traffic/Parking citations.............................................................................................................151
FirearmsSeized................................................................................................
I
SPECIAL TEAMS (Special Enforcement Team)
Onsight felony arrests......................................................................................................................5
On sight misdemeanor arrests...........................................................................................................9
Felony arrest warrants served...........................................................................................................4
Misdemeanor arrest warrants served..............................................................................................16
Follow-up investigations/search warrants....................................................................5
Parole/Probation Searches...............................................................................................................8
PedestrianChecks.................................................................................................12
Traffic Stops/Vehicle Checks...................................................................................................17/20
Marijuana Dispensary Checks.........................................................................................................0
ROBBERY/BURGLARY SUPPRESSION TEAM
BeginningCaseload.......................................................................................................................58
TotalCases Assigned....................................................................................................................20
TotalCases Closed........................................................................................................................22
Search Warrants prepared/served.................................................................................................14
Arrests..............................................................................................................................................7
Outof Custody Filings............................................................................................3
TRAFFIC
Citations issued for hazardous violations..................................................................................1029
Non -hazardous citations...............................................................................................................112
Parkingcitations...........................................................................................................................224
Stop Light Abuse/Intersection Program (S.L.A.P.) citations.........................................................49
Seatbelts.........................................................................................................................................17
CellPhone Cites...........................................................................................................................240
Injurycollisions.............................................................................................................................25
D.U.I. Arrests.................................................................................................................................25
Grant -funded D.U.I. Traffic safety checkpoints/saturation enforcement........................................0
Grant -funded traffic click it or ticket/traffic enforcement.............................................................. I
INVESTIGATIONS
BeginningCaseload.....................................................................................................................125
TotalCases Assigned....................................................................................................................31
TotalCases Closed........................................................................................................................42
Search Warrants prepared/served
.................................................................................................21
Arrests..............................................................................................................................................
I
Outof Custody Filings............................................................................................
I
Sex Offenders Processed....................................................................................13
PROMENADE MALL TEAM
Callsfor service...........................................................................................................................136
Felonyarrest/filings.........................................................................................................................3
Misdemeanor arrest/filings..............................................................................................................7
TrafficCitations..............................................................................................8
Total customers served................................................................................................................953
Fingerprints/Live Scans...............................................................................................................250
Totalreceipts............................................................................................ $7,403
SCHOOL RESOURCE OFFICERS (Out of session for the summer)
Felonyarrest.....................................................................................................................................0
Misdemeanor arrests........................................................................................................................0
Reports.............................................................................................................................................0
Citations...........................................................................................................................................0
Meetings/Presentations....................................................................................................................2
Item No. 20
CITY OF TEMECULA
AGENDA REPORT
TO: City Manager/City Council
FROM: Patrick Thomas, Director of Public Works/City Engineer
DATE: August 22, 2023
SUBJECT: Public Works Department Monthly Report
RECOMMENDATION: That the City Council receive and file the Public Works Department
Monthly Report for Capital Improvement Projects, Maintenance Projects, and Land Development
Projects. This report may also be viewed on the City's website at:
hl!p://temeculaca.gov/270/Cgpital-improvement-Projects-CIP
ATTACHMENT: Project Status Report
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
CAPITAL IMPROVEMENT PROJECTS
CIRCULATION PROJECTS
Cherry Street Extension & Murrieta Creek Crossing, PW19-15
Description: Preliminary design of the Extension of Cherry Street from Adams Avenue to Diaz Road, including a new
crossing of Murrieta Creek.
Cost: $37,831,090
Status: The City has received a general plan for a two -span bridge and a general plan for a bridge with a 500-foot
long viaduct. Environmental agencies have stated that a low -flow crossing is a non -starter. The two -span
bridge will exacerbate flooding. Consultant will prepare 30% design drawings of 2-span bridge.
Diaz Road Expansion, PW17-25
Description Improve Diaz Road to meet the roadway classification of Major Arterial (4 Lanes Divided), between Cherry
Street and Rancho California Road. The 2.2-mile stretch will be widened, extended, and/or improved to
create a contiguous Major Arterial segment. The project will be developed and constructed in two phases.
Phase 1 will include improvements on Diaz Road from Winchester Road to Rancho California Road. Phase
2 will include improvements on Diaz Road from Cherry Street to Winchester Road.
Cost: $14,255,991
Status: The environmental Initial Study has been approved, Mitigated Negative Declaration adopted, and Notice of
Determination filed in May 2022. Design is 90% complete. Regulatory permit applications have been
submitted for USACE 404 Nationwide Permit and CDFW Streambed Alteration 1602. Current activities
include consultant review of 90% plan check comments, design coordination with utility purveyors (SCE,
RCWD, and EMWD) and City project PW16-05 Murrieta Creek Bridge at Overland Drive, Riverside County
Flood Control review of 90% design plans and Encroachment Permit application, and preparation of
regulatory permit applications for SWRCB 401 Water Quality Certification and USACE Section 408.
Construction previously anticipated to start in Spring of 2023 is now delayed to Spring/Summer of 2024 due
to EMWD sewer line project on Diaz Rd starting construction in Q2 of 2023.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
CIRCULATION PROJECTS (Continued)
French Valley Parkway/Interstate 15 Improvements- Phase 11, PW16-01
Description: Design and construction of the two-lane northbound collector/distributer road system beginning north of the
Winchester Road interchange on -ramps and ending just north of the Interstate 15/Interstate 215 junction
with connection to Interstate 15 and Interstate 215.
Cost: $138,736,346
Status: Project is under construction May 2023 — May 2025. For detailed information, please visit the project
website at TemeculaCA.gov/FVP2.
1-15 Congestion Relief, PW19-02
Description Design and construction of a single auxiliary lane, northbound Interstate 15 connecting the Temecula
Parkway on -ramp to the Rancho California Road off -ramp.
Cost: $8,971,710
Status: Design and environmental studies were completed in July 2023. City is preparing the construction contract
bid package. Target for advertisement is August 2023, award September 2023, and begin construction
December 2023. The selection process for RFP 272 Construction Management Services is complete and
the City is conducting professional negotiations with the Most Qualified Proponent. Upon completion of
negotiations, staff will recommend Council approval of the agreement.
Rainbow Canyon Road Pavement Rehab, PW22-15
Description Design and construction of pavement rehab for Rainbow Canyon Rd from Pechanga Parkway to southern
City Limits.
Cost: $2,900,000
Status: The design consultant, SB&O, is in the conceptual design phase of the project where they are analyzing
guardrail heights, plotting existing cross sections, looking at areas for potential placement of AC berms
where there may be drainage issues, and analyzing turnouts for slower traffic and other problem areas. All
of this will dictate the final design of the plans for construction. Construction anticipated to begin in spring
2024.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
CIRCULATION PROJECTS (Continued)
Murrieta Creek Bridge at Overland Drive, PW16-05
Description: Design and construction of a new bridge crossing over Murrieta Creek between Rancho California Road
and Winchester Road.
Cost: $26,073,374
Status: The City applied and was approved to receive Federal Highway Bridge Program (HBP) funds. City Council
approved the design agreement with CNS Engineers Inc. at the March 12, 2019, meeting. Preliminary
Environmental Study (PES) approved by Caltrans on August 15, 2019. Plans are 65% complete. RCA
JPR Conformance is approved. Biological monitoring in Temecula Creek for potential mitigation site is
complete as of July 2021. Project has received MSHCP conformance. Staff continues to work with Caltrans
to advance HBP Grant Funds to earlier fiscal years. Caltrans HBP Program management had proposed
reducing the curb -to -curb width of the bridge that is considered "participating" for grant funding purposes.
Staff has been able to address this issue with Caltrans and the majority of the bridge width will remain as a
participating cost. 2022 HBP Bridge Update was submitted in August. NEPA approval is anticipated in
August of 2023, Caltrans review time has been longer than anticipated. Construction start is anticipated
mid to late 2025 depending on availability of HBP funds.
Overland Drive Widening, PW 20-11
Description This project includes widening Overland Drive from Jefferson Avenue to Commerce Center Drive, to two
lanes in each direction, and the completion of missing segments of sidewalk, streetlights, and installation
of the traffic signal at Commerce Center Drive and the modification of the traffic signal at Jefferson Avenue.
Cost: $2,894,420
Status: 90% plan check submittal package was submitted in July 2023 and it is under staff review.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
CIRCULATION PROJECTS (Continued)
Pavement Rehabilitation Program — Ynez Road, Solana Way, Nicolas Road and
Winchester Road, PW 21-10
Description: Pavement rehabilitation project on Ynez Road, Solana Way, Nicolas Road and Winchester Road.
Pavement rehabilitation includes full width and/or edge grinding of existing asphalt, localized dig outs,
preparation of grade, and placement of rubberized asphalt concrete pavement. Work also includes
reconstruction of ADA curb ramps, removal and replacement of curb and gutter, adjustment of existing
utilities to grade, installation and removal of temporary video detection and restoration of existing striping,
and detector loops.
Cost: $4,796,426.16
Status: Project is complete, finalizing last CCO. Anticipating to file NOC in September 2023.
Pavement Rehabilitation Program- Meadowview/ Paloma Del Sol, PW21-06
Description: Rehabilitation of roads in interior streets in the Meadowview tract, and Paloma Del Sol tract Amarita Way,
Montelegro Way, and Santiago Rd.
Cost: $4,732,266.70
Status: Project is complete. Process of close out in progress.
Rancho California Median Improvements, PW23-04
Description: Design and construction of missing raised concrete medians with landscaping between Humber Drive and
Butterfield Stage Road. In addition, there will also be construction of missing improvements on the north
side of Rancho California Road, between Riesling Court and Promenade chardonnay Hills. The
improvements will include median curbs, curb and gutter, sidewalks, and landscape and irrigation.
Cost: $3,855,000
Status: The City is planning on posting an RFP to PlanetBids in August for design services. Design is anticipated
to begin in October 2023.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
INFRASTRUCTURE PROJECTS
Traffic Signal Installation — Citywide, Rancho California Road and Tee Drive, PW19-19
Description: This project includes the installation of a traffic signal on Rancho California Road at Tee Drive.
Cost: $483,035
Status: Project is complete. Anticipating to file NOC in September 2023.
Traffic Signal and Park & Ride Access Improvements, PW18-11
Description: This project includes the installation of a traffic signal on Temecula Parkway at Wabash Lane. The project
also includes relocating the access to the Park and Ride facility on Temecula Parkway at La Paz Road from
Vallejo Avenue to Wabash Lane.
Cost: $1,347,674
Status: The traffic signal and the new access road to the Park and Ride are fully operational. Access to Park and
Ride from Vallejo Avenue has been closed and a permanent block wall was constructed. Project is in the
close out phase. Filing the Notice of Completion is scheduled for the August 22, 2023 City Council meeting
Traffic Signal- System Upgrade (Protective/Permissive Signal Heads), PW19-09
Description: This project will modify traffic signals at three (3) locations in the City to provide protected/permissive signal
operations. The three (3) intersections include Margarita Road/Verdes Lane, Redhawk Parkway/Paseo
Parallon-Overland Trail, and Winchester Road/Enterprise Circle.
Cost: $481,900
Status: Project is currently out to bid.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
INFRASTRUCTURE PROJECTS (Continued)
Bike and Trail Program — Great Oak Trail Lighting, PW21-16
Description: Project includes the installation of solar lights along the Great Oak Trail adjacent to the northeast side of
Pechanga Parkway from Deer Hollow Way to Loma Linda Road.
Cost: $828,600
Status: Project is currently in design.
Citywide Drainage Master Plan, PW19-16
Description: Project will prepare a report that shows all drainage courses within the City. Also includes a master
hydrology study showing the anticipated storm flows at build -out.
Cost: $600,000
Status: GIS database has been 90% updated and is being used by staff. Consultant is working on citywide
hydraulic model, to be completed by the end of September.
Community Recreation Center (CRC) Renovations, PW19-07
Description: The project facilitates the rehabilitation, improvement, and reconfiguration of the Community Recreation
Center. This project includes expansion and reconfiguration of teen center; conversion of office space to
accommodate a dedicated police substation; renovation of key components of the building including safety
features, flooring, roof, and restroom facility access; ADA compliance; renovation and expansion of existing
office space and rec rooms including AV upgrades; expanded storage space and upgraded kitchen
equipment.
Cost: $10,708,232
Status: Construction contract for Phase 1 was awarded at the 9/27/2022 City Council meeting. Construction started
11/21/2022. The facility was opened to the public mid -June, 2023. Design for Phase 2 started in February
2023.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
INFRASTRUCTURE PROJECTS (Continued)
Fiber Optic Communication System Upgrade, PW 18-05
Description: This project will install fiber optic communication system upgrades including conduit, cable, CCTV cameras,
traffic signal controllers, and related communication equipment to improve safety and operations with
optimized traffic signal timing coordination. Various signalized intersections will be improved along the
Winchester Road, Rancho California Road, and Temecula Parkway corridors.
Cost: $1,208,200
Status: All communication infrastructure and traffic signal cabinet equipment has been installed. Project is in fiber
optic communication testing stage.
Fiber Optic Communications Systems- Citywide, PW 22-03
Description: This project will develop a communications masterplan that will provide a strategic plan outlining the
approach and buildout design of fiber optic cable and conduit throughout the City. The masterplan
document will provide a roadmap to connect all existing and future traffic signals, traffic monitoring devices,
surveillance cameras, and City facilities to City -owned fiber communication lines. The ultimate project goal
is to enhance the City's existing fiber optic communication system to ensure it can handle the future needs
of the City.
Cost: $120,150
Status: The project has just commenced, and the consultant is working on an existing systems assessment.
Fire Station 84 Renovation, PW19-14
Description: This project includes the design, construction, and renovation to Fire Station 84. The renovations include,
adding a Wellness Room, expanding the Storage Room, and upgrading the Training Room. Also, the
upgrades include, electrical, windows, flooring, paint, tile, HVAC, cabinets, plumbing fixtures, garage bay
doors and any necessary improvements needed to conform to ADA accessibility access.
Cost: $1,641,028
Status: Preparing cost estimate for new design requests from Fire. After that, plans and specifications will be
revised by end of 2023, anticipate to re -advertise the project in early 2024.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
INFRASTRUCTURE PROJECTS (Continued)
Interstate 15 / State Route 79 South Interchange Enhanced Landscaping, PW17-19
Description: Landscape beautification of the Interstate 15 corridor between French Valley Parkway and Temecula
Parkway, including each interchange, in association with Visit Temecula Valley and the Pechanga Tribe.
This project includes the design and construction of enhanced landscaping, hardscape, and irrigation
between the freeway and ramps on the west side of the Interstate 15 / State Route 79S (Temecula Parkway)
interchange.
Cost: $3,558,483
Status: Design and environmental studies August 2019 — July 2023. Current activities include environmental
revalidation and design of new power and irrigation water service. Estimated construction start in Fall 2023.
Margarita Recreation Center, PW17-21
Description: Demolition and Reconstruction of New Margarita Recreation Center Building and Pool
Cost: $12,601,508
Status: The Design -Build Contract was awarded at the March 9, 2021, City Council Meeting to De La Secura
Builders, Inc., for a Guaranteed Maximum Price of $8,680,459.00. Major demolition activities commenced
mid -March 2022. City Groundbreaking occurred on March 31, 2022. Roofing is near complete. Contractor
is currently installing millwork inside the building and working on pool.. Anticipate building to have
permanent power installed by July 21, 2023. Due to unforeseen supply issues with major components of
the main building electrical system, the scheduled grand opening has been pushed back from July to
October 2023.
Mary Phillips Senior Center Enhancement and Renovation, PW20-13
Description: The project includes the enhancement and renovation of the Mary Phillips Senior Center. Work includes
new exterior siding, painting, replacement of perimeter soffits, fascia boards, eaves, and select doors &
windows.
Cost: $1,262,025
Status: City Council awarded the construction contract at the 02/14/2023 meeting. Construction started 3/29/2023
and is anticipated to last for 5 months.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
INFRASTRUCTURE PROJECTS (Continued)
Mary Phillips Senior Center Outdoor Recreational Area, PW22-08
Description: The project includes the design and construction of a shuffleboard court area adjacent to Mary Phillips
Senior Center. In addition, the HVAC units will be replaced.
Cost: $650,000
Status: Construction is underway. Estimated completion is end of August.
Sidewalks — Citywide (Ynez Road, Rancho Highland to Tierra Vista Road), PW17-28
Description: New sidewalks on the west side of Ynez Road from Rancho Highland to Tierra Vista Road.
Cost: $164,997
Status: ADA Access Ramps have been revised and currently being reviewed. The project is scheduled to be
advertised for construction bids in Summer 2023.
Sidewalks — Citywide (Pauba Road, Elinda Road to Showalter Road), PW 19-20
Description: New sidewalks and street widening on the South side of Pauba Road from Elinda Road to Showalter Road.
Cost: $639,295
Status: Project is at 95% design stage. Consultant is re -designing project to eliminate retaining wall. Design is
anticipated to be completed by end of August 2023.
Traffic Signal- Promenade Mall Ring Road, PW 21-15
Description: The project includes the installation of a traffic signal on Ring Road at Promenade Mall East.
Cost: $412,206
Status: Construction contract was awarded by City Council on September 13, 2022. The construction of the traffic
signal is nearly complete. The contractor is waiting for SCE to provide power. Anticipated signal turn on is
early September.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
PARKS AND RECREATION PROJECTS
Murrieta Creek Improvements — Trail Lights, PW21-13
Description: This part of the project involves installing 27 solar lights along the Murrieta Creek trail on the east side of
the creek from Rancho California Road to First Street.
Cost: $200,000
Status: Riverside County Flood Control Permit submitted as of January 4, 2023. A US Army Corps of Engineers
(USACE) 408 permit is required and an application has already been submitted
Community Recreation Center Splash Pad & Shade Structures, PW21-07
Description: This project provides for the conversion of the CRC's wading pool into a splash pad, and the addition of
shade structures in the area.
Cost: $1,100,000
Status: Public bidding was suspended pending confirmation that design meets City's needs.
Dog Park Renovation, PW21-14
Description: Design and construct a dog park including a small dog pen and large dog pen at Michael "Mike" Naggar
Community Park.
Cost: $430,000
Status: The City received additional funding through American Rescue Plan Act (ARPA) on July 26, 2023. Contract
documents will be updated to satisfy requirements set forth by the federal funding. With the additional
funding, a concrete sidewalk that surrounds the outer perimeter of the dog park will now be included. Project
is anticipated to be posted on PlanetBids in September 2023. Construction is anticipated to start in by the
end of 2023.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
PARKS AND RECREATION PROJECTS (Continued)
Park Restroom Renovations, Expansion and Americans with Disabilities Act (ADA), PW17-06
Description: Renovation of various park site restroom facilities, including Ronald Reagan Sports Park North/South Ball
Field (new roof, cabinets, fixtures, and other building improvements), Vail Ranch Park and Long Canyon
Creek Park.
Cost: $1,127,800
Status: Project is ongoing. Ronald Reagan Sports Park North/South Ball Field Restroom building is currently in the
design phase. Vail Ranch Park is in the scoping phase.
PICKLEBALL COURTS, PW21-03
Description: Design and construct new, dedicated pickleball courts at Ronald Reagan Sports Park.
Cost: $3,300,878
Status: Project is at 60% design stage. Construction bidding is anticipated to be early 2024.
Playground Equipment Enhancement and Safety Surfacing
Description: Re -design, enhancement of playground equipment, and safety surfacing to comply with current state and
federal regulations and enhance the quality of the parks.
Cost: $800,000
Status: An RFP is being prepared for the design, purchase & installation for three playground project sites —
Redhawk Community Park, Long Canyon Creek Park & Temecula Creek Park.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
PARKS AND RECREATION PROJECTS (Continued)
Ronald Reagan Sports Park Pump Track Shade Structure, PW22-14
Description: Installation of shade structure adjacent to the Ronald Reagan Sports Park Pump Track and launch pad
area.
Cost: $75,000
Status: Installation of shade structure will begin on August 21, 2023 and be completed on August 25, 2023. Pump
track will be open on Friday August 25, 2023 at 5 PM.
Ronald Reagan Sports Park Hockey Rink Improvements, PW22-06
Description: This project will include the renovation of the existing hockey rink to install new flooring material and arena
style roof structure and also address ADA noncompliance.
Cost: $1,200,000
Status: A Request for Qualification is being drafted to compile a list of qualified design -builders. RFP to go out to
qualified finalists. A list of improvements and performance standards has been drafted by DEA to include
in the RFQ. Construction anticipated to start in Q1 of 2024.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
LAND DEVELOPMENT OVERSIGHT PROJECTS
American Tire Depot
Description: A 7,303 square foot building to be used for tire retail and repair, as well as minor auto repair services,
located at the southwest corner of Ynez Road and DLR Drive.
Status: Parking lot has been paved. Wet utility tie-in construction has commenced.
Arrive @ Rancho Highlands
Description: A 270-unit multi -family community built on 12.32 acres that includes 55 affordable units. The project is
located adjacent to the Temecula Duck Pond approximately 775 feet southeast of Rancho California Road
on the north side of Ynez Road.
Status: Grading and onsite storm drain permits were issued in October 2021. Grading and onsite storm drain
construction has commenced. Overflow parking lot has been paved.
Heirloom Farms
Description: A Development Plan for a 321-unit single family residential community built on 27.86 acres consisting of
detached homes and attached townhomes located on the southwest corner of Date Street and Ynez Road.
Includes the installation of a new Traffic Signal at the intersection of Ynez Rod and Waverly Lane/Temecula
Center Drive.
Status: Rough grading permit has been issued in July 2021, the offsite and private onsite street and storm drain
improvements permits were issued in October 2021 and the traffic signal permit was issued in September
2021. Precise grading is approved and in progress. Street Improvements in progress.
Las Haciendas Apartments
Description: A Development Plan to construct a 77-unit affordable housing project located at 28715 Las Haciendas
Street in Uptown Temecula.
Status: Precise grading permit was issued in December 2021. Grading has commenced in January 2022 and is
ongoing.
City of Temecula
DEPARTMENT OF PUBLIC WORKS
PROJECT STATUS REPORT
August 22, 2023
LAND DEVELOPMENT OVERSIGHT PROJECTS (Continued)
Mountain View
Description: Thirteen industrial buildings on Avenida Alvarado
Status: Thirteen precise grading permits have been issued and construction has commenced. Improvements on
Avenida Alvarado, along with street light installations is in process. Onsite storm drain installation has
commenced.
Solana Assisted Living
Description: A 90,000 square foot, two-story, Senior Assisted Living Facility located on the southeast corner of the
Margarita Road and Solana Way.
Status: A rough grading permit was issued in January 2022. Grading began on February 7, 2022. Street
improvements and precise grading plans are near approval.
Sommers Bend
Description: Land Development has provided oversight of the following submittals for plan check and inspections: final
maps, Community Sports Park, and recreation lots, precise grading; street and storm drain improvements;
traffic signals; street lighting; and signing & striping.
Status: The mass grading permit was issued in September 2018. Sommers Bend has been paved with streetlights
installed. The community sports park, Ranch at Sommers Bend, construction is complete and has been
accepted at the February 8, 2022, Council Meeting. The Sommers Bend recreation center construction is
complete. Installation of streets, storm drains and streetlights on east end of project is in process. Grading
has been completed in the Density Core, currently installing sewer. Installation of Santa Gertrudis Creek
Channel improvements northwest end of project is in process.
REQUEST TO SPEAK
FORMS AND DOCUMENTS
SUBMITTED FOR
THE RECORD
REQUEST TO SPEAK
CITY OF TEMECULA
1989
Date:
Public Comment: Non -Agenda Item: Agenda Item: ❑ Future Agenda Item:
Item Description or Item No.
Request to Speak forms for Public Comments or items listed on the Consent Calendar may be submitted to the City
Clerk prior to the City Council commencing the Public Comment period. For all Public Hearing or Council Business
items on the Agenda, a Request to Speak form may be submitted to the City Clerk prior to the City Council
addressing that item. Once the speaker is called to speak, please come forward to the podium and state your name
for the record.
Name-.//J �RT'I v Phone Numberw��
Address:
Email address: (
If you are representing an organization or group, please give �Ae name: —.
Please note that all information presented at a City Council meeting becomes public record.
All information provided is optional.
Public Comment: Non -Agenda Item: e
Item Description or Item No 0-y C
REQUEST TO SPEAK
CITY OF TEMECULA
Date: as a �
Agenda Item: ❑ Future Agenda Item:
f-�o g-,-�
Request to Speak forms for Public Comments or items listed on the Consent Calendar may be submitted to the City
Clerk prior to the City Council commencing the Public Comment period. For all Public Hearing or Council Business
items on the Agenda, a Request to Speak form may be submitted to the City Clerk prior to the City Council
addressing that item. Once the speaker is called to speak, please come forward to the podium and state your name
for the record.
Name: ��wx�--/ `f Phone Number:
Address
Email adc
It you are representing an organization or group, please give the name:
c6-tZ G/IGL
Please note that all information presented at a City Council meeting becomes public record.
All information provided is optional.
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