As we approach the December 31, 2024 State and Local Fiscal Recovery Funds (SLFRF) obligation deadline, grant managers across local, state, and Tribal governments are working to make sure their remaining funds are properly obligated, and they don’t miss out on any eligible funding. If you’re working toward that goal too, this article offers valuable guidance.
Scroll down to ensure you:
- Know what counts as an obligation
- Are clear on deadlines
- Can easily access reference documents
- Take steps to catch missing obligations
- Recognize red flags indicating issues that could prevent proper obligation
Check Your Definition of “Obligation”
Misunderstanding what counts as a proper obligation can be a common mistake when obligating SLFRF funds. An obligation isn’t just setting aside money or having a plan for it. Instead, it’s creating a binding commitment. Here’s what actually counts as an obligation:
- Signed contracts (even if work starts later) (see FAQ #17.6)
- Binding purchase orders (see FAQ #17.1)
- Signed interagency agreements (including MOUs that meet Treasury requirements) (see FAQ #17.6)
- Documented staff positions (even if not yet filled) (see FAQ #17.7)
If you’re unsure if something counts as an obligation, ask yourself: “Would this stand up in an audit as a binding commitment to spend these funds?”
For a detailed breakdown of the Treasury’s updated definition of “obligation,” check out our SLFRF Explainer.
Understanding the SLFRF Obligation Timeline
The Department of the Treasury has established two key deadlines:
● December 31, 2024: All SLFRF funds must be obligated
● December 31, 2026: All obligated funds must be expended
U.S. Treasury Documents to Reference
- Obligation Interim Final Rule (November 2023)
- Updated SLFRF FAQs (March 2024)
- SLFRF Compliance and Reporting Guidance (October 2024)
Three Steps to Catch Missing Obligations
1. Review Your Current Activities
Look at everything your organization is already doing that might qualify. Common missing pieces might include:
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- Administrative costs for managing SLFRF funds (see FAQ #17.10)
- Staff time spent on eligible projects (see FAQ #17.7)
- Existing contracts that could be expanded(see FAQ #17.16)
- Current programs that align with SLFRF goals (see FAQ #4.1)
Tip: You might consider pulling your current fiscal year budget and identifying anything related to pandemic recovery, infrastructure, or community support. These might be obligation opportunities you’ve overlooked.
> Bonus Resource: Need help calculating administrative costs? Learn more about the methods you can use to calculate indirect costs in our Indirect Cost Explainer.
2. Track Down “Hidden” Eligible Costs
Many organizations leave money on the table by missing eligible costs hiding in plain sight:
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- Indirect costs (using your negotiated rate (NICRA) or the 10% de minimis rate) (see FAQ #17.10)
- Technology needs for program management, such as a grant management system (GMS) (see FAQ #17.10; Compliance and Reporting Guidance §D(2)(a))
- Training and capacity building (see FAQ #17.19)
- Program evaluation costs (reference the FAQ and Reporting Guidance for potential program evaluation options)
- Documentation and reporting expenses (see Compliance and Reporting Guidance §B(3)(k)(15))
Tip: Consider scheduling a meeting with your finance team to review all support costs for your SLFRF programs. These are often forgotten but are actually eligible for obligation.
3. Double-Check Your Documentation
You need to ensure you have proper documentation for all eligible costs. For each obligation, check you have:
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- Written agreements or contracts
- A clear scope of work
- Defined dollar amounts
- All required signatures
- Explicit connection to SLFRF-eligible uses
Tip: Consider creating a shared folder structure that mirrors the Treasury’s reporting categories. Organizing your documentation this way makes it easier to find what you need for both upcoming reports and audits later on.
Red Flags That Could Cost You
Watch out for these common issues that could prevent proper obligation:
- Unsigned agreements (all parties must sign before December 31) (see FAQ #17.6)
- Vague scope of work (be specific about what’s being delivered) (see FAQ #17.6)
- Missing dollar amounts (estimated costs are allowed, but they must be documented) (see FAQ #17.8)
- Unclear project timelines (projects can extend to 2026, but the obligation must be clear now) (see FAQ #17.16)
- Insufficient documentation of eligibility (always connect back to specific SLFRF categories) (see Reporting and Compliance Guidance §B(3))
> Bonus Resource: Use the SLFRF Compliance Checklist to verify you’ve addressed potential compliance risks.
Before You Submit: SLFRF Obligation Check
If you’re stuck on whether something qualifies as an obligation, ask yourself:
1. Is it a binding commitment?
2. Is it for an eligible use?
3. Is it properly documented?
4. Will it be spent by 2026?
If you answered “yes” to all four, you’re probably on the right track. If not, you need to shore up that obligation before the deadline.
Additional Resources
Proper obligation is just the first step of the SLFRF funding journey. Our SLFRF Reporting Guide will help you maintain compliance through 2026. Use the Guide, along with our detailed compliance resources, to catch everything you can properly obligate before December 31st. Your community is counting on these funds, and we can help you make them count!
