|Yesterday, the U.S. Treasury Department published the framework for reallocation of Emergency Rental Assistance (ERA) program funds authorized by the Consolidated Appropriations Act of 2021 (ERA 1). That legislation, which provided the first $25 billion in ERA resources, requires Treasury to identify “excess funds” from amounts grantees have not obligated beginning September 30, 2021, and reallocate those resources to grantees who have obligated at least 65 percent of their initial ERA 1 allocation.
For the first time, Treasury has published a definition of the term obligated for purposes of ERA. Treasury will consider funds to be obligated if they have been spent to provide financial assistance or housing stability services under ERA; are needed to pay for assistance promised in a commitment letter issued to induce a landlord to enter a rental agreement with an eligible household; or are needed to make good on a contractual obligation between a grantee and a third party. Contractual obligation only refers to an instance in which assistance has been approved but the payment has not yet been disbursed, including a bulk payment arrangement with a larger landlord or a utility company. A grantee agreement with a subrecipient to administer ERA funding does not count as a contractual obligation unless the assistance has been approved for an eligible household but not yet paid.
Each grantee must provide Treasury with an “Obligated Funds Certificate” specifying how much they have obligated as of September 30, 2021. If the grantee has obligated less than 65 percent of its allocation, it also is required to submit a program self-assessment and improvement plan for Treasury’s approval by November 15.
To determine the “excess” fund amount, Treasury will consider a grantee’s expenditure ratio as of September 30. A grantee’s expenditure ratio is the proportion of their total assistance expended compared to 90 percent of the grantee’s full grant (the total grant reduced by 10 percent to account for the fact a grantee may use up to 10 percent of total funds for administrative expenses). It is unclear how Treasury will account for expenditures on housing stability services, as those expenditures are not collected in the monthly data reports grantees provide to Treasury. NCSHA and other national organizations representing grantees had argued to Treasury that grantees’ expenditure ratios should be adjusted to reflect the fact that Treasury does not have monthly data on housing stability services expenditures.
For the first assessment, a grantee who has an expenditure ratio of less than 30 percent (the minimum expenditure ratio) will be considered to have excess funds, defined as the difference between the grantee’s expenditure ratio and the minimum expenditure ratio. Treasury will evaluate grantees’ expenditure ratios approximately every two months, increasing the minimum expenditure ratio by five percent for every calendar month. Treasury will conduct the final assessment based on data reported through March 31, 2022.
If Treasury determines, based on this process, that a grantee has excess funds, Treasury may still reduce or eliminate the amount to be recaptured in the following circumstances:
- For the first assessment only: If a grantee did not meet the 30 percent minimum expenditure ratio as of September 30 but is able to meet that minimum expenditure ratio or obligate 65 percent of its grant by November 15, the grantee may submit to Treasury a certificate signed by an authorized official of the grantee with that updated information, in which case, Treasury will not recapture funding.
- For the first assessment only: As noted above, a grantee who does not meet the 65 percent obligation threshold must submit a program improvement plan to Treasury identifying policies and practices recommended by Treasury the grantee has already implemented, whether the grantee has adopted any policies or practices Treasury has discouraged, the key obstacles the grantee is facing in the delivery of ERA, actions the grantee will take to improve performance, and the grantee’s projection of ERA expenditures for the next four months. If Treasury approves the plan, it will limit recapture to no more than 15 percent of the grantee’s funds.
- Applicable to all assessments: If the grantee has suffered from exigent circumstances, such as a natural disaster, Treasury may reduce or eliminate the recapture amount.
A grantee also may request to transfer some or all of their allocation to another grantee in the grantee’s state if the transferee has obligated at least 65 percent of its own allocation by the time of the transfer.
Grantees who have obligated 65 percent or more of their ERA 1 grants may request additional reallocated funds from Treasury as of October 15. Treasury will evaluate each request based on the requesting grantee’s demonstrated capacity to meet and exceed the expenditure ratio and on indicators of need in the grantee’s jurisdiction. When possible, Treasury will reallocate funding from grantees within the same state. A grantee who receives reallocated funding may request an extension for spending those dollars through December 29, 2022; however, the grantee’s original grant must be expended by September 30, 2022.