|On September 24, Treasury Department Deputy Secretary Adewale O. Adeyemo sent a letter to Emergency Rental Assistance (ERA) program grantees providing preliminary information on how the department will conduct the statutorily required reallocation of ERA funding provided under the Consolidated Appropriations Act of 2021 (ERA 1). Congress requires Treasury, beginning September 30, 2021, to reallocate grantees’ unobligated funds that it determines to be “excess” to other ERA 1 grantees who have obligated at least 65 percent of their funds.
To identify excess funds, Treasury plans to consider each grantee’s “expenditure ratio,” which it plans to calculate based on the grantee’s total expenditures on assistance to eligible households divided by an amount equal to 90 percent of the grantee’s ERA 1 allocation. Treasury plans to recapture funding for redistribution in tranches. As a first step, Treasury will announce a “minimum expenditure ratio.” A grantee whose expenditure ratio is below the minimum expenditure ratio would be subject to recapture of the difference between their expenditure ratio and the minimum expenditure ratio. Treasury will give those grantees the opportunity to make a case for why Treasury should not recapture any or a portion of the amount of funds subject to recapture, including by presenting mitigating circumstances, such as a high rate of funding obligated to tenants that has not yet been expended. Treasury has committed not to recapture any ERA 1 funding a grantee already has obligated.
The first determination of expenditure ratios will occur after Treasury receives grantees’ September reports on ERA expenditures, due on October 15. After that, Treasury will repeat the process periodically, increasing the minimum expenditure ratio each time, with a final reallocation occurring in Spring 2022.
Only grantees who have obligated at least 65 percent of their funds as of September 30, 2021, are eligible to receive redistributed funds. At a later point, Treasury will issue more information on how eligible grantees can request these funds. Treasury will seek to reallocate ERA 1 funds within the same state to the greatest extent possible, consistent with need and program capacity. A grantee also may work with Treasury to voluntarily reallocate portions of their ERA 1 grant to other grantees within the same state. It is not clear whether such voluntary reallocations between grantees may be done without an official subrecipient relationship in place. NCSHA had previously urged Treasury to allow such reallocations between grantees in a state without the complexity of a subrecipient contractual obligation, given the complications of subrecipient reporting, but Treasury was not able to accommodate NCSHA’s request at the time.
Treasury has not yet provided information about how reallocation may or may not impact a grantee’s ERA administrative resources.
We expect Treasury soon to provide additional information, including what the initial minimum expenditure ratio will be and the processes for voluntary reallocation and requesting additional ERA 1 funds.