Emerging issue: How to calculate lost revenue for use of federal coronavirus funds

The American Rescue Plan Act (ARPA) established the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) program, administered by the U.S. Treasury, Assistance Listing Number 21.027. One eligible use of these program funds allows governments to replace lost revenue in order to avoid cuts in their services.

Treasury's Interim Final Rule established a methodology that each recipient can use to calculate its reduction in revenue. Specifically, you must compute the extent of the reduction in revenue by comparing your actual revenue to an alternative sum that represents what you might have been expected to receive if the pandemic had not happened.

Once you receive CSLFRF money, you may immediately calculate the reduction in revenue that actually occurred in 2020 and deploy the funds to address any shortfall.

If you are considering calculating your government's lost revenue, please be sure to read carefully Treasury's Interim Final Rule and CSLFRF FAQ (see FAQs 3.1 through 3.15 regarding revenue loss). Both the Government Finance Officers Association (GFOA) and Municipal Research & Services Center (MRSC) have developed a free revenue-loss calculator tool for governments to use. MRSC's tool was set up based on the revenue categories in the BARS Manual.

You must decide whether to use one of these tools, or create your own. SAO has not reviewed either tool, and cannot advise you what your best path forward might be. However you proceed, remember it is extremely important that you document both the data that goes into the calculation and your interpretations of the guidance.

If you have any questions about calculating lost revenue, please contact Treasury at SLFRP@treasury.gov and/or consult your legal counsel.