Coronavirus Relief Fund
Guidance for State, Territorial, Local, and Tribal Governments
Updated September 2, 2020 1
The purpose of this document is to provide guidance to recipients of the funding available under section
601(a) of the Social Security Act, as added by section 5001 of the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”). The CARES Act established the Coronavirus Relief Fund (the “Fund”)
and appropriated $150 billion to the Fund. Under the CARES Act, the Fund is to be used to make
payments for specified uses to States and certain local governments; the District of Columbia and U.S.
Territories (consisting of the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam,
American Samoa, and the Commonwealth of the Northern Mariana Islands); and Tribal governments.
The CARES Act provides that payments from the Fund may only be used to cover costs that—
1. are necessary expenditures incurred due to the public health emergency with respect to
the Coronavirus Disease 2019 (COVID–19);
2. were not accounted for in the budget most recently approved as of March 27, 2020 (the
date of enactment of the CARES Act) for the State or government; and
3. were incurred during the period that begins on March 1, 2020, and ends on December 30,
2020. 2
The guidance that follows sets forth the Department of the Treasury’s interpretation of these limitations
on the permissible use of Fund payments.
Necessary expenditures incurred due to the public health emergency
The requirement that expenditures be incurred “due to” the public health emergency means that
expenditures must be used for actions taken to respond to the public health emergency. These may
include expenditures incurred to allow the State, territorial, local, or Tribal government to respond
directly to the emergency, such as by addressing medical or public health needs, as well as expenditures
incurred to respond to second-order effects of the emergency, such as by providing economic support to
those suffering from employment or business interruptions due to COVID-19-related business closures.
Funds may not be used to fill shortfalls in government revenue to cover expenditures that would not
otherwise qualify under the statute. Although a broad range of uses is allowed, revenue replacement is
not a permissible use of Fund payments.
The statute also specifies that expenditures using Fund payments must be “necessary.” The Department
of the Treasury understands this term broadly to mean that the expenditure is reasonably necessary for its
intended use in the reasonable judgment of the government officials responsible for spending Fund
payments.

1

On June 30, 2020, the guidance provided under “Costs incurred during the period that begins on March 1, 2020,
and ends on December 30, 2020” was updated. On September 2, 2020, the “Supplemental Guidance on Use of
Funds to Cover Payroll and Benefits of Public Employees” and “Supplemental Guidance on Use of Funds to Cover
Administrative Costs” sections were added.
2
See Section 601(d) of the Social Security Act, as added by section 5001 of the CARES Act.

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 Costs not accounted for in the budget most recently approved as of March 27, 2020
The CARES Act also requires that payments be used only to cover costs that were not accounted for in
the budget most recently approved as of March 27, 2020. A cost meets this requirement if either (a) the
cost cannot lawfully be funded using a line item, allotment, or allocation within that budget or (b) the cost
is for a substantially different use from any expected use of funds in such a line item, allotment, or
allocation.
The “most recently approved” budget refers to the enacted budget for the relevant fiscal period for the
particular government, without taking into account subsequent supplemental appropriations enacted or
other budgetary adjustments made by that government in response to the COVID-19 public health
emergency. A cost is not considered to have been accounted for in a budget merely because it could be
met using a budgetary stabilization fund, rainy day fund, or similar reserve account.
Costs incurred during the period that begins on March 1, 2020, and ends on December 30, 2020
Finally, the CARES Act provides that payments from the Fund may only be used to cover costs that were
incurred during the period that begins on March 1, 2020, and ends on December 30, 2020 (the “covered
period”). Putting this requirement together with the other provisions discussed above, section 601(d) may
be summarized as providing that a State, local, or tribal government may use payments from the Fund
only to cover previously unbudgeted costs of necessary expenditures incurred due to the COVID–19
public health emergency during the covered period.
Initial guidance released on April 22, 2020, provided that the cost of an expenditure is incurred when the
recipient has expended funds to cover the cost. Upon further consideration and informed by an
understanding of State, local, and tribal government practices, Treasury is clarifying that for a cost to be
considered to have been incurred, performance or delivery must occur during the covered period but
payment of funds need not be made during that time (though it is generally expected that this will take
place within 90 days of a cost being incurred). For instance, in the case of a lease of equipment or other
property, irrespective of when payment occurs, the cost of a lease payment shall be considered to have
been incurred for the period of the lease that is within the covered period but not otherwise. Furthermore,
in all cases it must be necessary that performance or delivery take place during the covered period. Thus
the cost of a good or service received during the covered period will not be considered eligible under
section 601(d) if there is no need for receipt until after the covered period has expired.
Goods delivered in the covered period need not be used during the covered period in all cases. For
example, the cost of a good that must be delivered in December in order to be available for use in January
could be covered using payments from the Fund. Additionally, the cost of goods purchased in bulk and
delivered during the covered period may be covered using payments from the Fund if a portion of the
goods is ordered for use in the covered period, the bulk purchase is consistent with the recipient’s usual
procurement policies and practices, and it is impractical to track and record when the items were used. A
recipient may use payments from the Fund to purchase a durable good that is to be used during the current
period and in subsequent periods if the acquisition in the covered period was necessary due to the public
health emergency.
Given that it is not always possible to estimate with precision when a good or service will be needed, the
touchstone in assessing the determination of need for a good or service during the covered period will be
reasonableness at the time delivery or performance was sought, e.g., the time of entry into a procurement
contract specifying a time for delivery. Similarly, in recognition of the likelihood of supply chain
disruptions and increased demand for certain goods and services during the COVID-19 public health
emergency, if a recipient enters into a contract requiring the delivery of goods or performance of services
by December 30, 2020, the failure of a vendor to complete delivery or services by December 30, 2020,
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 will not affect the ability of the recipient to use payments from the Fund to cover the cost of such goods
or services if the delay is due to circumstances beyond the recipient’s control.
This guidance applies in a like manner to costs of subrecipients. Thus, a grant or loan, for example,
provided by a recipient using payments from the Fund must be used by the subrecipient only to purchase
(or reimburse a purchase of) goods or services for which receipt both is needed within the covered period
and occurs within the covered period. The direct recipient of payments from the Fund is ultimately
responsible for compliance with this limitation on use of payments from the Fund.
Nonexclusive examples of eligible expenditures
Eligible expenditures include, but are not limited to, payment for:
1. Medical expenses such as:
•

COVID-19-related expenses of public hospitals, clinics, and similar facilities.

•

Expenses of establishing temporary public medical facilities and other measures to increase
COVID-19 treatment capacity, including related construction costs.

•

Costs of providing COVID-19 testing, including serological testing.

•

Emergency medical response expenses, including emergency medical transportation, related
to COVID-19.

•

Expenses for establishing and operating public telemedicine capabilities for COVID-19related treatment.

2. Public health expenses such as:
•

Expenses for communication and enforcement by State, territorial, local, and Tribal
governments of public health orders related to COVID-19.

•

Expenses for acquisition and distribution of medical and protective supplies, including
sanitizing products and personal protective equipment, for medical personnel, police officers,
social workers, child protection services, and child welfare officers, direct service providers
for older adults and individuals with disabilities in community settings, and other public
health or safety workers in connection with the COVID-19 public health emergency.

•

Expenses for disinfection of public areas and other facilities, e.g., nursing homes, in response
to the COVID-19 public health emergency.

•

Expenses for technical assistance to local authorities or other entities on mitigation of
COVID-19-related threats to public health and safety.

•

Expenses for public safety measures undertaken in response to COVID-19.

•

Expenses for quarantining individuals.

3. Payroll expenses for public safety, public health, health care, human services, and similar
employees whose services are substantially dedicated to mitigating or responding to the COVID19 public health emergency.

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 4. Expenses of actions to facilitate compliance with COVID-19-related public health measures, such
as:
•

Expenses for food delivery to residents, including, for example, senior citizens and other
vulnerable populations, to enable compliance with COVID-19 public health precautions.

•

Expenses to facilitate distance learning, including technological improvements, in connection
with school closings to enable compliance with COVID-19 precautions.

•

Expenses to improve telework capabilities for public employees to enable compliance with
COVID-19 public health precautions.

•

Expenses of providing paid sick and paid family and medical leave to public employees to
enable compliance with COVID-19 public health precautions.

•

COVID-19-related expenses of maintaining state prisons and county jails, including as relates
to sanitation and improvement of social distancing measures, to enable compliance with
COVID-19 public health precautions.

•

Expenses for care for homeless populations provided to mitigate COVID-19 effects and
enable compliance with COVID-19 public health precautions.

5. Expenses associated with the provision of economic support in connection with the COVID-19
public health emergency, such as:
•

Expenditures related to the provision of grants to small businesses to reimburse the costs of
business interruption caused by required closures.

•

Expenditures related to a State, territorial, local, or Tribal government payroll support
program.

•

Unemployment insurance costs related to the COVID-19 public health emergency if such
costs will not be reimbursed by the federal government pursuant to the CARES Act or
otherwise.

6. Any other COVID-19-related expenses reasonably necessary to the function of government that
satisfy the Fund’s eligibility criteria.
Nonexclusive examples of ineligible expenditures3
The following is a list of examples of costs that would not be eligible expenditures of payments from the
Fund.
1. Expenses for the State share of Medicaid. 4
2. Damages covered by insurance.
3. Payroll or benefits expenses for employees whose work duties are not substantially dedicated to
mitigating or responding to the COVID-19 public health emergency.
3

In addition, pursuant to section 5001(b) of the CARES Act, payments from the Fund may not be expended for an
elective abortion or on research in which a human embryo is destroyed, discarded, or knowingly subjected to risk of
injury or death. The prohibition on payment for abortions does not apply to an abortion if the pregnancy is the result
of an act of rape or incest; or in the case where a woman suffers from a physical disorder, physical injury, or
physical illness, including a life-endangering physical condition caused by or arising from the pregnancy itself, that
would, as certified by a physician, place the woman in danger of death unless an abortion is performed.
Furthermore, no government which receives payments from the Fund may discriminate against a health care entity
on the basis that the entity does not provide, pay for, provide coverage of, or refer for abortions.
4

See 42 C.F.R. § 433.51 and 45 C.F.R. § 75.306.

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 4. Expenses that have been or will be reimbursed under any federal program, such as the
reimbursement by the federal government pursuant to the CARES Act of contributions by States
to State unemployment funds.
5. Reimbursement to donors for donated items or services.
6. Workforce bonuses other than hazard pay or overtime.
7. Severance pay.
8. Legal settlements.
Supplemental Guidance on Use of Funds to Cover Payroll and Benefits of Public Employees
As discussed in the Guidance above, the CARES Act provides that payments from the Fund must be used
only to cover costs that were not accounted for in the budget most recently approved as of March 27,
2020. As reflected in the Guidance and FAQs, Treasury has not interpreted this provision to limit eligible
costs to those that are incremental increases above amounts previously budgeted. Rather, Treasury has
interpreted this provision to exclude items that were already covered for their original use (or a
substantially similar use). This guidance reflects the intent behind the Fund, which was not to provide
general fiscal assistance to state governments but rather to assist them with COVID-19-related necessary
expenditures. With respect to personnel expenses, though the Fund was not intended to be used to cover
government payroll expenses generally, the Fund was intended to provide assistance to address increased
expenses, such as the expense of hiring new personnel as needed to assist with the government’s response
to the public health emergency and to allow recipients facing budget pressures not to have to lay off or
furlough employees who would be needed to assist with that purpose.
Substantially different use
As stated in the Guidance above, Treasury considers the requirement that payments from the Fund be
used only to cover costs that were not accounted for in the budget most recently approved as of March 27,
2020, to be met if either (a) the cost cannot lawfully be funded using a line item, allotment, or allocation
within that budget or (b) the cost is for a substantially different use from any expected use of funds in
such a line item, allotment, or allocation.
Treasury has provided examples as to what would constitute a substantially different use. Treasury
provided (in FAQ A.3) that costs incurred for a substantially different use would include, for example, the
costs of redeploying educational support staff or faculty to develop online learning capabilities, such as
through providing information technology support that is not part of the staff or faculty’s ordinary
responsibilities.
Substantially dedicated
Within this category of substantially different uses, as stated in the Guidance above, Treasury has
included payroll and benefits expenses for public safety, public health, health care, human services, and
similar employees whose services are substantially dedicated to mitigating or responding to the COVID19 public health emergency. The full amount of payroll and benefits expenses of substantially dedicated
employees may be covered using payments from the Fund. Treasury has not developed a precise
definition of what “substantially dedicated” means given that there is not a precise way to define this term

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 across different employment types. The relevant unit of government should maintain documentation of
the “substantially dedicated” conclusion with respect to its employees.
If an employee is not substantially dedicated to mitigating or responding to the COVID-19 public health
emergency, his or her payroll and benefits expenses may not be covered in full with payments from the
Fund. A portion of such expenses may be able to be covered, however, as discussed below.
Public health and public safety
In recognition of the particular importance of public health and public safety workers to State, local, and
tribal government responses to the public health emergency, Treasury has provided, as an administrative
accommodation, that a State, local, or tribal government may presume that public health and public safety
employees meet the substantially dedicated test, unless the chief executive (or equivalent) of the relevant
government determines that specific circumstances indicate otherwise. This means that, if this
presumption applies, work performed by such employees is considered to be a substantially different use
than accounted for in the most recently approved budget as of March 27, 2020. All costs of such
employees may be covered using payments from the Fund for services provided during the period that
begins on March 1, 2020, and ends on December 30, 2020.
In response to questions regarding which employees are within the scope of this accommodation,
Treasury is supplementing this guidance to clarify that public safety employees would include police
officers (including state police officers), sheriffs and deputy sheriffs, firefighters, emergency medical
responders, correctional and detention officers, and those who directly support such employees such as
dispatchers and supervisory personnel. Public health employees would include employees involved in
providing medical and other health services to patients and supervisory personnel, including medical staff
assigned to schools, prisons, and other such institutions, and other support services essential for patient
care (e.g., laboratory technicians) as well as employees of public health departments directly engaged in
matters related to public health and related supervisory personnel.
Not substantially dedicated
As provided in FAQ A.47, a State, local, or tribal government may also track time spent by employees
related to COVID-19 and apply Fund payments on that basis but would need to do so consistently within
the relevant agency or department. This means, for example, that a government could cover payroll
expenses allocated on an hourly basis to employees’ time dedicated to mitigating or responding to the
COVID-19 public health emergency. This result provides equitable treatment to governments that, for
example, instead of having a few employees who are substantially dedicated to the public health
emergency, have many employees who have a minority of their time dedicated to the public health
emergency.
Covered benefits
Payroll and benefits of a substantially dedicated employee may be covered using payments from the Fund
to the extent incurred between March 1 and December 30, 2020.
Payroll includes certain hazard pay and overtime, but not workforce bonuses. As discussed in FAQ A.29,
hazard pay may be covered using payments from the Fund if it is provided for performing hazardous duty
or work involving physical hardship that in each case is related to COVID-19. This means that, whereas
payroll and benefits of an employee who is substantially dedicated to mitigating or responding to the
COVID-19 public health emergency may generally be covered in full using payments from the Fund,
hazard pay specifically may only be covered to the extent it is related to COVID-19. For example, a
recipient may use payments from the Fund to cover hazard pay for a police officer coming in close
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 contact with members of the public to enforce public health or public safety orders, but across-the-board
hazard pay for all members of a police department regardless of their duties would not be able to be
covered with payments from the Fund. This position reflects the statutory intent discussed above: the
Fund was intended to be used to help governments address the public health emergency both by providing
funds for incremental expenses (such as hazard pay related to COVID-19) and to allow governments not
to have to furlough or lay off employees needed to address the public health emergency but was not
intended to provide across-the-board budget support (as would be the case if hazard pay regardless of its
relation to COVID-19 or workforce bonuses were permitted to be covered using payments from the
Fund).
Relatedly, both hazard pay and overtime pay for employees that are not substantially dedicated may only
be covered using the Fund if the hazard pay and overtime pay is for COVID-19-related duties. As
discussed above, governments may allocate payroll and benefits of such employees with respect to time
worked on COVID-19-related matters.
Covered benefits include, but are not limited to, the costs of all types of leave (vacation, family-related,
sick, military, bereavement, sabbatical, jury duty), employee insurance (health, life, dental, vision),
retirement (pensions, 401(k)), unemployment benefit plans (federal and state), workers compensation
insurance, and Federal Insurance Contributions Act (FICA) taxes (which includes Social Security and
Medicare taxes).
Supplemental Guidance on Use of Funds to Cover Administrative Costs
General
Payments from the Fund are not administered as part of a traditional grant program and the provisions of
the Uniform Guidance, 2 C.F.R. Part 200, that are applicable to indirect costs do not apply. Recipients
may not apply their indirect costs rates to payments received from the Fund.
Recipients may, if they meet the conditions specified in the guidance for tracking time consistently across
a department, use payments from the Fund to cover the portion of payroll and benefits of employees
corresponding to time spent on administrative work necessary due to the COVID-19 public health
emergency. (In other words, such costs would be eligible direct costs of the recipient). This includes, but
is not limited to, costs related to disbursing payments from the Fund and managing new grant programs
established using payments from the Fund.
As with any other costs to be covered using payments from the Fund, any such administrative costs must
be incurred by December 30, 2020, with an exception for certain compliance costs as discussed below.
Furthermore, as discussed in the Guidance above, as with any other cost, an administrative cost that has
been or will be reimbursed under any federal program may not be covered with the Fund. For example, if
an administrative cost is already being covered as a direct or indirect cost pursuant to another federal
grant, the Fund may not be used to cover that cost.
Compliance costs related to the Fund
As previously stated in FAQ B.11, recipients are permitted to use payments from the Fund to cover the
expenses of an audit conducted under the Single Audit Act, subject to the limitations set forth in 2 C.F.R.
§ 200.425. Pursuant to that provision of the Uniform Guidance, recipients and subrecipients subject to
the Single Audit Act may use payments from the Fund to cover a reasonably proportionate share of the
costs of audits attributable to the Fund.

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 To the extent a cost is incurred by December 30, 2020, for an eligible use consistent with section 601 of
the Social Security Act and Treasury’s guidance, a necessary administrative compliance expense that
relates to such underlying cost may be incurred after December 30, 2020. Such an expense would
include, for example, expenses incurred to comply with the Single Audit Act and reporting and
recordkeeping requirements imposed by the Office of Inspector General. A recipient with such necessary
administrative expenses, such as an ongoing audit continuing past December 30, 2020, that relates to
Fund expenditures incurred during the covered period, must report to the Treasury Office of Inspector
General by the quarter ending September 2021 an estimate of the amount of such necessary
administrative expenses.

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