Tribal Fiscal Recovery Funds: Key Documents, Deadlines and Takeaways

Please note: This alert was updated with deadline extensions from the U.S. Department of the Treasury. The new deadlines are highlighted.

The $1.9 trillion American Rescue Plan Act allocated $20 billion in Fiscal Recovery Funds (FRF) to tribes. The law required $1 billion to be allocated equally among the federally recognized tribes, and the remaining $19 billion to be allocated according to a formula established by the U.S. Department of the Treasury (Treasury Department).

On May 10, 2021, the Treasury Department announced that FRF would be allocated based on a formula that takes into account each tribe's enrollment and number of employees. On that date, the Treasury Department also released several key documents that address how FRF can be used.

This Holland & Knight alert addresses the latest FRF developments, important deadlines and some key takeaways for tribal governments to consider as they decide how to prioritize their spending of these funds.

Tribal Allocation Formula and Important Deadlines

After receiving feedback from tribal leaders through formal consultations and comment letters, the Treasury Department announced that it will allocate the $19 billion based on tribal enrollment and employment numbers. Sixty-five percent ($12.35 billion) will be allocated pro rata based on each tribe's self-certified enrollment data. The remaining 35 percent ($6.65 billion) will be allocated pro rata based on each tribe's total government and business employees. The Treasury Department will release the FRF allocations to tribes in two tranches, the first in May and the second in June.

The first payment will include 1) an amount in respect of the $1 billion allocation that is to be divided equally among eligible tribal governments, and 2) the tribal government's pro rata share of the allocation based on enrollment.

For the first payment, the Treasury Department will use self-certified enrollment numbers submitted to the Bureau of Indian Affairs in April 2021. Tribes do not need to resubmit this information in order to receive a payment. However, tribes must request the payment through the Treasury Department's portal. The deadline to request funding for the first payment is June 7, 2021.

The second payment will include the pro rata share of the employment allocation for each tribal government that confirms or amends its 2019 employment numbers.

The deadline to confirm or amend 2019 employment numbers is June 21, 2021. The Treasury Department made clear during the consultations that tribes that fail to confirm or amend their 2019 employment numbers by June 21 will not receive a payment from the employment allocation.

Background on American Rescue Plan

The American Rescue Plan provides that FRF must be used for the following costs incurred by Dec. 31, 2024:

1. Responding to COVID-19: 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
2. Premium Pay for Essential Workers: to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the tribal government that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work
3. Lost Revenue/Government Services: for the provision of government services to the extent of the reduction in revenue of such tribal government due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year of the Tribal government prior to the emergency, or
4. Infrastructure: to make necessary investments in water, sewer, or broadband infrastructure.

FRF Guidance Issued to Date

On May 10, 2021, The Treasury Department issued several documents related to the implementation and administration of FRF. Four of the documents are specific to tribal governments, while the others apply to state, local and tribal governments. The documents are linked individually below and can also be accessed on the Treasury Department's website.

Tribal-Specific Documents

• Tribal Government Allocation Methodology: describes formula used for allocation of FRF
• Tribal Government Checklist: step-by-step instructions for obtaining funds
• Dear Tribal Leader Letter: summarizes the documents released
• Summary of Tribal Consultations: summarizes the consultations the Treasury Department held with tribal governments prior to releasing the FRF allocation formula

General Documents (Applicable to States, Tribes and Localities)

• Interim Final Rule: 151-page guidance on eligible uses of FRF
• Fact Sheet: provides an overview of funding amounts and uses
• Quick Reference Guide: two-page, easy-to-read background
• Frequently Asked Questions: initial set of 60 FAQs that the Treasury Department plans to update as it receives questions

Permissible Uses of Fiscal Recovery Funds as Outlined in the Treasury Department's Guidance

In the Interim Final Rule and Frequently Asked Questions, the Treasury Department elaborated on the four categories of permissible uses of FRF as set forth in the American Rescue Plan. Below is a summary of the permissible uses within each category as announced by the Treasury Department, but it is not an exhaustive list. The permissible uses are also subject to modification, as the Treasury Department may modify the Interim Final Rule and Frequently Asked Questions. The Treasury Department is accepting comments on the Interim Final Rule until July 16, 2021.

1. Responding to COVID-19

FRF may be used to respond to the COVID-19 public health emergency or its negative economic impacts. Permissible uses include:

• Delivering assistance to workers and families, including aid to unemployed workers, as well as aid to households facing food, housing or financial insecurity.
• Supporting small businesses, helping them to address financial challenges caused by the pandemic, and to make investments in COVID-19 prevention and mitigation tactics.
• Speeding the recovery of the tourism, travel and hospitality sectors.

The Treasury Department will also presume the following additional activities to address health disparities are eligible uses when provided by tribal governments:

• Addressing health disparities and the social determinants of health through funding for community health workers.
• Investing in housing and neighborhoods, such as affordable housing development, housing vouchers and housing navigation assistance to facilitate moves to neighborhoods with high economic opportunity.
• Addressing educational disparities through new or expanded early learning services, providing additional resources to high-poverty school districts, and offering educational services such as tutoring or afterschool programs, as well as service to address social, emotional and mental health needs.
• Promoting healthy childhood environments, including new or expanded high-quality childcare, home visiting programs for families with young children, and enhanced services for child welfare-involved families and foster youth.

2. Premium Pay for Essential Workers

FRF may be used to provide premium pay to eligible workers of the tribal government that are performing essential work. This category includes premium pay to a broad range of essential workers whose work requires regular in-person interactions including, among others:

• staff at nursing homes, hospitals and home-care settings
• public health and safety staff
• childcare workers, educators and school staff
• social service and human services staff

Premium pay that would increase a worker's total pay above 150 percent of the greater of the state or county average annual wage requires specific justification. Retroactive spending is permissible for this category, meaning essential workers could receive premium pay for hours worked during the duration of the COVID-19 pandemic.

3. Lost Revenue/Government Services

Tribal governments may use FRF to provide government services to the extent of the tribe's reduction in revenue experienced because of the COVID-19 public health emergency. Reduction in revenue is measured relative to the revenue collected in the most recent full fiscal year prior to the COVID-19 public health emergency (2019).

The Interim Final Rule prescribes the methodology to be used, and compares actual revenue to anticipated revenue in 2020, 2021, 2022 and 2023. The methodology allows tribes to include all revenue from tribal enterprises, including gaming. The calculation assumes at least 4.1 percent growth annually. Once the reduction in revenue is identified, tribes can use FRF with broad latitude to support government services.

4. Infrastructure

FRF may be used to make necessary investments in water, sewer or broadband infrastructure. These include:

• Investments in improvements to water and sewer infrastructure, including projects that address the impacts of climate change.
• Building or upgrading facilities and transmission, distribution and storage systems, including the replacement of lead service lines.
• Investments in broadband for areas that are currently unserved or underserved.
• Assistance to households to support internet access or digital literacy.

Although tribes have broad discretion within the above categories of infrastructure, the Treasury Department clarified in the Interim Final Rule that general infrastructure spending (roads, energy, etc.) is not permitted under this category. However, general infrastructure spending may be allowed under another category of FRF (e.g., government services).

Reporting Requirements

The Treasury Department's guidance previewed several reporting requirements that tribes will need to satisfy as they spend FRF. Few details on the specific requirements are known at this time. The Treasury Department will release additional guidance on reporting requirements at a later date.

Interim Report – Due Aug. 31, 2021

The interim report will include a summary of the tribal government's expenditures by category from date FRF is received to July 31, 2021.

Quarterly Project and Expenditure Reports – Due Oct. 31, 2021

Quarterly reports will include financial data, information on contacts and sub-awards more than $50,000, the types of projects funded and other information regarding utilization of FRF. The reports will include the same general data (e.g., obligations, expenditures, contracts, grants and sub-awards).

The first quarterly report will cover from date FRF is received to Sept. 30, 2021.

Remaining quarterly reports will cover one calendar quarter and must be submitted 30 days after the end of each calendar quarter.

Key Takeaways

The Treasury Department's guidance provides tribal governments broad discretion in spending FRF and recognizes the disproportionate impact COVID-19 has had on tribes. Unlike with the Coronavirus Relief Funds tribal governments received last year, tribes also have several years to spend FRF. This allows time for tribes to plan projects with potential for generational impacts.

Although FRF is a substantial capital infusion, tribes should not lose track of other potential sources of funding through the American Rescue Plan and other legislative packages that may be passed this year. Tribes will need to be strategic about which funding source to use for each project.

Importantly, although the American Rescue Plan requires costs to be incurred by Dec. 31, 2024, the Treasury Department has interpreted "incurred" as meaning that FRF must be obligated by Dec. 31, 2024. The Treasury Department's guidance clarifies that performance/delivery may occur until Dec. 31, 2026. This provides tribal governments an additional two years to use FRF.

Although tribal governments have an additional two years to utilize FRF, the Treasury Department also clarified that FRF generally cannot be spent retroactively. Except for premium pay to essential workers, the Treasury Department's Interim Final Rule states that FRF cannot be used for costs incurred prior to March 3, 2021.

Further, infrastructure projects other than water, sewer and broadband are not permissible uses of FRF unless 1) related to COVID-19 or 2) provided as government services to the extent of the tribal government's lost revenue. Accordingly, the lost revenue/government services category is the broadest and most flexible.

The Treasury Department will finalize the interim rules and continue to publish additional FAQs on FRF that will require monitoring. The Treasury Inspector General could perform audits and retains the right to recoup FRF that is unspent or improperly used. Accordingly, it is very important that tribes spend FRF consistent with law and the Treasury Department's guidance.

For additional information or questions on FRF or the American Rescue Plan, please contact the authors or another member of the Native American Law Team.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the authors of this alert for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.