Strategies for Spending ARPA Funds Before Dec. 31 Deadline

Since the implementation of the American Rescue Plan Act (March 2021), UHY’s Grants Management Team within our National Government Practice has worked closely with more than 25 local government entities throughout the U.S. We’ve compiled these helpful steps for localities just beginning their journey to obligate ARPA funds effectively and efficiently by Dec. 31, 2024.

Some due diligence is involved, but it must be prioritized to ensure you don’t lose your ARPA funds because you missed the deadline.

1. Create a broad-based support program and publicize it widely.

Spending the remaining funds to create an assistance program for important groups, such as local businesses and not-for-profits, is an effective way to allocate ARPA resources. A local business program, like a capital equipment purchase support program or a façade improvement program, can be an essential economic development spur that supports small businesses still recovering from the effects of the pandemic. A not-for-profit support program can fund critical activities that provide in-demand services to residents. Examples of such programs that we have seen include utility payment assistance, community violence reduction programs, low-income housing rehabilitation, and general assistance to not-for-profits.

When you create such a support program, there are a few vital success factors:

1. 1. 1. 1. Publicize it widely. In addition to posting it on your website, get critical organizations like the local business chamber or the community foundations to help you publicize it.
         2. Set an application period and stick to it. We recommend a 30- to 60-day application window. Do NOT evaluate any applications until after the window closes. Otherwise, the program becomes a “race to the front of the line” to get funding before it runs out. You risk losing many worthy applicants with a first-in, first-awarded approach.
         3. Hold meetings/webinars to publicize pre- and post-award requirements. Hold at least two meetings where you discuss program requirements, what documents will be needed to support the initial application, and what documents will need to be provided after the applicant is awarded their funds. Many prospective applicants want “free money.” It would be best if you made it crystal clear that this money comes with strings attached. They must spend it how you want them to, or they won’t get the funds.
         4. Remind them of the post-award documentation requirements. Just to be safe
         5. Make them acknowledge, in writing, that they have read, heard, or otherwise understand all the requirements.
         6. Meet with the successful applicants immediately afterward. Go over the post-award documentation requirements with them. Make them acknowledge understanding again in writing, and don’t disburse funds until you hold the meeting and are provided with written acknowledgment.
2. Identify contingency reserves that you might need on projects already underway.

Treasury recently revised its guidance defining an “obligation” for ARPA purposes. Treasury is now permitting ARPA recipients to establish a contingency reserve for currently approved projects that will not be completed before Dec. 31, 2024. Treasury has recognized that many of these projects may experience cost overruns for supply chain issues, unanticipated increased labor costs, etc., after Dec. 31, 2024. To ensure that these projects are effectively and efficiently completed as intended, the Treasury will allow recipients to establish a reserve for overruns that may occur in 2025 and 2026. And don’t fear if you over-reserve; you can use those additional reserves on other projects that may have been under-reserved. You should be reasonable in your estimates and consider establishing such reserves.

3. Get senior leadership buy-in or establish a compliance culture.

Nothing will undermine the public’s confidence more than misusing these ARPA funds. Compliance with ARPA regulations must drive all business decisions. Be very transparent about your spending and follow all procurement policies. Sole source only as a last resort. Maintain all supporting documentation, including all payroll and purchasing documentation. And get senior leadership to set the tone by publicly committing to following all rules.

Recipients will initially resist providing the required documentation and call an elected official or a member of senior leadership to complain about how much ‘unreasonable’ documentation they have been asked to provide. The response is simple, “We just want the receipts supporting that they spent it on what they said they would.” Reiterate how bad it looks to the public or the press that a recipient would not provide supporting documentation.

4. Look inward and backward for allowable costs you have already incurred.

ARPA is flexible about how your funds can be spent. Maximize your allowable revenue loss, either the standard allowance (the lesser of $10M or the amount you received) or the actual calculated revenue loss permitted under the regulations. If you choose the actual revenue loss, update your calculation to take the maximum allowable calculated revenue loss. Using such revenue loss funds provides you with maximum flexibility in spending them. ARPA funds are flexible but may not be used for the following:

• Tax relief
• Pension and retiree healthcare payments
• Claims and judgment payments
• Debt service

All other “governmental activities” are allowable.

You can also cover costs previously charged to your local budget. Look at non-federal social service, public health, public safety (remember, community violence reduction from earlier), and water and sewer costs. These are some areas where you can identify ARPA allowable costs.

It’s not too late; UHY can help you get started or finish obligating your ARPA money. No matter where you are in your spending process, our Grants Management Team is ready to help you navigate the complexities of ARPA funding, maximize your community's potential for growth and resilience, and meet the Dec. 31, 2024, deadline. Fill out the form on this page to connect with a member of our National Government Practice.