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Federal Register/Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations 4435
<br /> Scope of a 603(c)(4)Transfer would contravene the purpose of SLFRF advancing funds to subrecipients,
<br /> Unlike in the case of a transfer under or(2)transfers to governmental and consistent with the various methods
<br /> sections 602(c)(3) or 603(c)(3),the non-governmental entities being treated permitted under the Uniform Guidance.
<br /> interim final rule SUPPLEMENTARY in a distinct and inconsistent manner. Given the broad flexibility that
<br /> INFORMATION specified that transfers That is, section 603(c)(3)transfers to recipients have in selecting eligible uses
<br /> from a local government to the state governmental entities would lead to and the broad variety of potential
<br /> under section 603(c)(4)will result in a award cancellation but section 603(c)(3) subrecipients,Treasury believes that
<br /> cancellation or termination of the award transfers to non-governmental entities specifying a single method of
<br /> on the part of the transferor local would lead to a recipient-subrecipient advancement or reimbursement would
<br /> government and a modification of the relationship.Therefore,in the final rule, add unnecessary administrative
<br /> award to the transferee state. Treasury maintains its distinct difficulty to program administration.
<br /> Public Comment:Two commenters treatment of a section 603(c)(3)transfer Recipients may determine the optimal
<br /> suggested that Treasury expand section and section 603(c)(4)transfer. payment structure for the transfer of
<br /> The final rule clarifies that a transfer funds (e.g.,advance payments,
<br /> 603(c)(4)beyond transfers from under section 603(c)(4)will result in a reimbursement basis, et from
<br /> localities to the state to include transfers )
<br /> from counties to their constituent local modification,termination, or recipients to subrecipients. Ultimately,
<br /> governments,which would incentivize cancellation of the award on the part of recipients must comply with the eligible
<br /> counties to augment funds to address the transferor local government and a use requirements and any other
<br /> the needs of local governments.These modification of the award to the applicable laws or requirements and are
<br /> commenters noted that counties are transferee state or territory.As detailed responsible for the actions of their
<br /> in the SUPPLEMENTARY INFORMATION to subrecipients.
<br /> disincentivized to make transfers under the interim final rule,the transferor p
<br /> section 603(c)(3), as is currently must provide notice of the transfer to E.Administrative Expenses
<br /> allowed,as such transfers would require Treasury in a format specified by
<br /> that counties provide oversight and Treasury. Until the local government The interim final rule permitted,
<br /> monitoringover its subrecipients. under the heading"[e]xpenses to
<br /> p provides such notice and Treasury improve efficacy f public health or
<br /> Treasury Response:Section 603(c)(4), provides confirmation of its acceptance p y o p „
<br /> by its terms, applies only to transfers of the notice,the local government will economic relief programs, use of funds
<br /> from local governments to states. remain responsible for ensuring that the for"[a]dministrative costs associated
<br /> Accordingly,the final rule must SLFRF award is being used in with the recipient's COVID-19 public
<br /> maintain the interim final rule's health emergency assistance programs,
<br /> accordance with the Award Terms and including services responding to the
<br /> limitation of section 603(c)(4)transfers g p g
<br /> Conditions, section 602 or 603 of the COVID-19 public health emergency or
<br /> as applicable only to transfers from local Social Security Act,the final rule, and g y
<br /> governments to states.Expansions of its negative economic impacts,that are
<br /> section 603 c 4 transfer authority program guidance including reporting not federally funded."
<br /> ( )( ) y on such uses of the award funds to
<br /> beyond transfers from local Treasury. Following release of the interim final
<br /> governments to states were not A state that receives a transfer from a rule,Treasury issued Compliance and
<br /> explicitly authorized by Congress.As local government under section Reporting Guidance that provided that
<br /> such,transfers under section 603(c)(4) 603(c)(4)will be bound,by statute,by "recipients may use funds for
<br /> may only be made by local governments all of the use restrictions set forth in administering the SLFRF program,
<br /> to the state in which they are located. section 602(c)with respect to the use of including costs of consultants to
<br /> Congress enumerated two separate those SLFRF funds,including the support effective management and
<br /> transfer provisions for local prohibitions on use of such SLFRF oversight,including consultation for
<br /> governments—section 603(c)(3) and funds to offset certain reductions in ensuring compliance with legal,
<br /> section 603(c)(4)—that use different taxes or to make deposits into pension regulatory, and other requirements.
<br /> language and were intended to operate funds. The state will be responsible as Further, costs must be reasonable and
<br /> differently. Section 603(c)(4) contains the prime recipient for the use and allocable as outlined in 2 CFR 200.404
<br /> prefatory language ("Notwithstanding reporting on any funds transferred and 2 CFR 200.405.Pursuant to the
<br /> paragraph(1)"—a reference to the under section 603(c)(4)by the local SLFRF Award Terms and Conditions,
<br /> eligible SLFRF uses)that section government. Such transferred funds will recipients are permitted to charge both
<br /> 603(c)(3) does not.In other words, be subject to the Award Terms and direct and indirect costs to their SLFRF
<br /> section 603(c)(4)transfers are not Conditions previously accepted by the award as administrative costs.Direct
<br /> required to constitute an eligible use of state in connection with its SLFRF costs are those that are identified
<br /> the funds from the perspective of the award. specifically as costs of implementing the
<br /> transferor local government,but section SLFRF program objectives, such as
<br /> 603(c)(3)transfers are required to Subrecipient Transfers contract support,materials, and
<br /> constitute an eligible use. A transfer to Public Comment:Commenters sought supplies for a project. Indirect costs are
<br /> accomplish an eligible use fits within clarification as to how funds may be general overhead costs of an
<br /> the recipient-subrecipient framework. transferred from a recipient to another organization where a portion of such
<br /> Further,treating section 603(c)(3) entity. For instance, one commenter costs are [sic] allocable to the SLFRF
<br /> transfers as leading to a cancellation of requested that recipients be able to award such as the cost of facilities or
<br /> the award for the transferor local advance funds to subrecipients as administrative functions like a director's
<br /> government would result in scenarios opposed to reimbursing subrecipients office."377 Several commenters
<br /> that are inconsistent with the statutory for expenses incurred.
<br /> language.An award cancellation Treasury Response:Treasury did not 377 U.s.Department of the Treasury,Recipient
<br /> pursuant to a section 603(c)(3)transfer specify in the interim final rule whether Compliance and Reporting Responsibilities,as of
<br /> would result in either(1)non- recipients may advance funds to November 5,2021;https://home.treasury.govl
<br /> policy-issues/coronavirus/assistance for-state-local-
<br /> governmental entities becoming award subrecipients. This omission was not and-tribal-governments/state-and-local fiscal-
<br /> recipients under the program,which intended to prevent recipients from Continued
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