ARPA SLFRF Funding: Assumptions, Challenges and Opportunities

Since two distributions of ARPA SLFRF funds were released in 2021 and 2022, local governments have faced erroneous assumptions and challenges to obligate, award, and spend funds. Local governments that quickly obligated and spent the funding took the opportunity to learn as much as possible to approve and implement projects and programs that would positively impact communities severely affected by the COVID-19 pandemic. While the positive impact can be documented, many local governments have not fully obligated the funding nor submitted required reporting to the Treasury.

The following assumptions and challenges have been responsible for ARPA funds not being obligated or used to address public health, community assistance, and government service delivery needed to recover from the pandemic.

Erroneous assumptions

Assumptions by local governments have prevented some governmental bodies from obligating funds. These are some of those problematic assumptions:

• The government understands federal grant processes, terminology, sub-award terms and conditions, monitoring, reporting, and meeting the requirements of Uniform Guidance.
• Governing body budget approval and appropriation of the funds serve as the obligation of funds.
• Every small business, nonprofit organization, or entity can be awarded funding.
• All expenses in the scope and budget of a sub-award are allowable costs.
• The obligation date of Dec. 31, 2024, will be extended to a later date.
• Little to no reporting is required for entities receiving a subaward.
• Reporting is unnecessary and only to be submitted to the Treasury when funds are fully spent.

Despite efforts by the Treasury to provide local governments with funding compliance and reporting guidelines and requirements (Interim Final Rule, Final Rule, FAQs, Obligation Interim Final Rule, Compliance and Reporting Guidance, and webinars), there has been significant confusion and understanding by local governments. Some local governments still need to obligate funds before Dec. 31, 2024, and to submit Treasury-required quarterly and/or annual reporting. Failure to obligate funds or submit reporting will result in the Treasury asking local governments to pay back the amount of funds not obligated or the total amount of funds for not submitting reporting.

Challenges

By now, local governments recognize that assumptions about the funding do not align with ARPA requirements and are experiencing challenges to meet compliance and spend funds. Challenges include but are not limited to:

• Limited elected officials and/or staff capacity, experience, and training to address funding requirements.
• Internal control constraints and lack of policies and procedures to meet compliance.
• Sub-award entities not understanding grant requirements in advance of awards.
• Sub-award implementation and monitoring plans developed only following award announcements.
• Delays in responsiveness of impacted small businesses, nonprofits, and organizations for sub-award to move forward.
• Local government and sub-award entity perceptions that compliance and reporting are burdensome.
• Adherence to draw down and reporting deadlines, particularly when funds have been advanced.

These challenges have caused misunderstandings between local governments and sub-award entities, deterring projects and programs from being implemented and completed. Some fallout from the challenges has resulted in the termination of sub-award agreements and re-obligation of funding.

Opportunities

While it may seem that the assumptions and challenges with ARPA funding have overshadowed opportunities, the impact on the community has been visible and reported. Many local governments have been collecting ARPA expenditure progress data and using the data to showcase projects and programs. Showcasing these ARPA-funded projects and programs has resulted in increased local government transparency and outreach to the community. This assures the public that funding measures and outcomes have adequately addressed recovery from the pandemic.

Local governments have made and are continuing to make efforts to use ARPA funds to respond to the needs of pandemic-impacted residents, organizations, and businesses, serving as a conduit to educate the community on the proper use of ARPA funding. Thanks to being beneficiaries or sub-awards of ARPA funds, more residents, businesses, nonprofits, and other organizations today have a clearer perspective and understanding of federal grant requirements. Without the influx of ARPA funding to local governments, community devastation from the pandemic would continue.

Should your local government need technical assistance and support on obligating funds, monitoring ARPA sub-awards, or reporting, please fill out the form on this page. Our National Government Practice is ready to help and guide you to ARPA compliance.