In the blink of an eye, key State and Local Fiscal Recovery Fund (SLFRF) deadlines are approaching. SLFRF recipients have until December 2024 to obligate SLFRF allocations and until December 2026 (September 30, 2026 for Surface Transportation and Title 1 projects) to spend them. In the meantime, the annual reporting deadline of April 30 is approaching. With an Obligation Interim Final Rule; updated FAQs; Compliance and Reporting Guidance; and a Project and Expenditure Report User Guide introduced in recent months, following is a quick review of some important highlights.
In November of 2023, the Treasury Department issued the “Obligation Interim Final Rule,” providing clarifications and flexibilities related to the Treasury’s 2022 Final Rule. The Final Rule defined obligation as an “order placed for property and services and entry into contracts, subawards and similar transactions that require payment.” While the original definition stands, the U.S. Department of Treasury’s Obligation Interim Final Rule Webinar provided this summary of the Obligation IFR clarifications:
- Revision to the definition of “obligation” at 31 CFR 35.3
– The definition if obligation is unchanged but a recipient is also considered to have incurred an obligation by December 31, 2024, when the recipient incurs costs related to the legal and administrative requirements of SLFRF award funds.
– Recipient appropriation, budget or allocation processes do not provide a standard that could be applied consistently to the definition of obligation.
– Recipients can continue charging indirect cost rates to the SLFRF throughout the period of performance. - Application of the obligation deadline (December 31, 2024) to subrecipients. Subrecipients aren’t subject to the obligation deadline; it only applies to SLFRF recipients.
- Amending or replacing contracts and subawards after the obligation deadline. Generally, recipients cannot re-obligate funds or obligate additional funds after the obligation deadline. As noted on the Federal Register: “After December 31, a contract or subrecipient can only be replaced if it defaults; goes out of business or can’t carry out award terms; the SLFRF recipient and subrecipient agree to terminate the contract; or the if the initial reward was improperly made.”
(The webinar provides a lot of details and includes case studies. If you haven’t watched it, now may be a good time.)
While the big focus is on the December 31 obligation deadline, there’s an earlier one to keep in mind. If a recipient plans on using funds beyond December 31, 2024 for reporting and compliance; single audit costs; record retention and internal control requirements; property standards; environmental compliance requirements; or civil rights and nondiscrimination requirements, it must submit a report to the Treasury by April 30, 2024.
As noted on the Federal Register: “To take advantage of this additional flexibility, recipients must (1) determine the amount of SLFRF funds the recipient estimates it will use to cover such expenditures, (2) document a reasonable justification for this estimate, (3) report that amount to Treasury by April 30, 2024, with an explanation of how the amount was determined, and (4) report at award closeout the final amount expended for these costs.”
RBT CPAs’ Audit professionals can provide estimates for audits and internal control requirements to help you meet the April 30th reporting requirement.
Remember, funds not obligated by December 31, 2024 and any estimated amount not expended by December 31, 2026 must be returned to Treasury. No doubt, there’s more information to come.
In the meantime, if you’re looking for SLFRF information, refer to the U.S. Department of Treasury SLFRF website. For compliance and reporting information, visit the US Department of Treasury Compliance and Reporting Responsibilities webpage. Information specific to NEUs can be found here. Finally, the NYS Open Budget Website provides an overview of the SLFRF in New York.
Also, if you need estimates for the single audit and reporting control requirement expenses for the April 30 report, email smannese@rbtcpas.com for more information.
RBT CPAs is also available to meet all of your accounting, tax, audit, or advisory needs. We’ve been proudly serving municipalities, businesses, non-profits, and individuals in the Hudson Valley for over 50 years. Please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.
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