Tribal Governments’ Flexibility with SLFR Funds

On Friday, March 29, the U.S. Department of Treasury published new FAQs that address the eligible uses of State and Local Fiscal Recovery Funds by Tribal Governments.

The American Rescue Plan Act provided $350 billion to state, territorial, local, and Tribal Governments to “support their response to and recovery from the COVID-19 public health emergency.” Although generated in response to COVID-19, Treasury’s guidance has made it clear that Tribal Governments have broad discretion to employ SLFR funds for a variety of eligible uses.

Under the act and Treasury’s guidelines, Tribal Governments must obligate SLFR funds by December 31, 2024, and expend obligated funds by December 31, 2026 (with the exception of projects under the Surface Transportation projects and Title I eligible use categories, on which funds must be expended by September 30, 2026). SLFR funds are “obligated” if an order is placed for property and services, or a contract requires payment.

Treasury has also explained that an “obligation” of SLFR funds “also means [expending funds pursuant to] a requirement under federal law or regulation or provision of the award terms and conditions to which a recipient becomes subject as a result of receiving or expending funds.” Treasury explained that this means Tribal Governments can use SLFR funds to cover the following types of expenses incurred by programs financed by SLFR funds:

- - Reporting and compliance requirements
  - Single audit costs
  - Record retention and internal control requirements
  - Property standards
  - Environmental compliance requirements
  - Civil rights and nondiscrimination requirements

The new guidance from Treasury issued on March 29, 2024 does not modify this definition of “obligation,” but it does provide some clarification regarding the expenditure of funds after the December 31, 2024 obligation deadline.

Legal and Administrative Expenses After 2024 (FAQ 17.10)

Treasury’s new guidance provides that Tribal Governments can expend SLFR funds on costs, including personnel costs, related to compliance obligations. In addition to the reporting and compliance requirements previously adopted, Treasury also notes that:

This is not an exhaustive list of requirements under federal laws or regulations or the SLFRF award terms and conditions to which recipients may be subject as a result of receiving or expending SLFRF funds. For example, Tribal governments building out water lines on trust lands may incur costs related to cultural monitoring or rights-of-ways consent that are necessary to comply with a requirement under a federal law or regulation.

The Treasury Department further noted that costs incurred in “monitoring the activities of a subrecipient to ensure that the subaward is used for authorized purposes” is an eligible expenditure, even if incurred after December 31, 2024.

In order to use SLFR funds to cover such compliance costs, Tribal Governments will have to submit an estimate of those costs to Treasury:

A Tribal Government may submit to Treasury an estimate of SLFRF funds it will use to cover the legal and administrative costs discussed above. It will not be required to submit estimates for all administrative costs associated with projects. Rather, a Tribal Government must submit such estimates if it wants to cover such legal and administrative costs. See FAQ 17.11.

Tribal Governments that are allocated more than $30 million in SLFRF funding should report their estimate for relevant legal and administrative costs in the July 31, 2024 quarterly Project and Expenditure Report. If they were allocated less than $30 million in SLFRF funding, they should report their estimate for relevant legal and administrative costs by April 30, 2025, in their Project and Expenditure Report that covers the period from April 1, 2023 to March 31, 2024.

Indirect Costs (FAQ 17.10)

Treasury’s updated guidance also notes that tribes may continue to charge their indirect cost rate (either their approved indirect cost rate if they have one, or the 10% de minimis indirect rate if they do not have an approved rate) to the compliance costs incurred and paid after December 31, 2024 and before December 31, 2026.

Payroll (FAQ 17.7)

Treasury also stated that positions created and filled prior to December 31, 2024, and that are dedicated to implementing programs funded by SLFR funds, will be considered “obligated” prior to December 31, 2024, such that SLFR funds can be used to pay for those positions through December 31, 2026.

Subrecipients (FAQ 17.8)

Treasury clarified that “subrecipients are not subject to the December 31, 2024, obligation deadline. The obligation deadline applies to the recipient of SLFR funds. Neither subrecipients nor contractors need to take additional steps to obligate SLFR Funds after entering into a subaward or contract with the recipient.”

Tribal Government Interagency Agreements (FAQ 17.6)

The new guidance further provides that “interagency agreements” between tribal government departments, agencies, or other instrumentalities constitute an “obligation” of SLFR funds for purposes of the December 31, 2024 obligation deadline. To be an eligible “interagency agreement,” the agreement must:

- - govern or condition the use of the SLFR funds
  - set forth specific requirements, such as a scope of work and project deliverables
  - be signed by the parties to the agreement, or otherwise evidence that each party has assented to the agreement
  - and not disclaim any binding effect or state that it does not create rights or obligations

Tribal Governments may therefore use SLFR funds in connection with tribal agency agreements and programs, provided they comply with Treasury’s guidelines.

Contract Change Orders, Contingencies, and Amendments (FAQ 17.16 and FAQ 17.17)

Finally, Treasury clarified that if a contract entered into by December 31, 2024 expressly provides for change orders or contract contingencies, the recipient may use SLFR funds to cover increased costs attributable to such change orders or contract contingencies. Treasury explained that “[s]uch increased costs are not considered new obligations but are instead attributable to a preexisting obligation to accommodate the change or contingency.”

Similarly, SLFR funds may be used to finance contract amendments executed after December 31, 2024, provided that:

- - the original contract was entered into by December 31, 2024, and
  - the amended contract is “within substantially the same scope and for substantially the same purpose as the contract” entered into by December 31, 2024.