Questions abound regarding what expenditures of federal funds distributed to municipalities qualify under the American Rescue Plan Act (ARPA), which was signed into law on March 11, 2021. In June, the U.S. Treasury Department issued the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Guidance on Recipient Compliance and Reporting Responsibilities. The addendum to the Guidance notes that the deadline for non-entitlement units of government (NEUs) – generally, municipalities under 50,000 - to report on the use of SLFRF funds has been postponed until April 30, 2022. Larger municipalities must report by January 31, 2022. The U.S. Treasury issued broad guidance on the use of such funds, but noted that the Act provides flexibility within eligible use categories so as to meet local needs. In broad terms, eligible uses comprise:
Ameliorating stresses on public health and negative economic impacts;
Premium pay to essential workers;
Offsetting revenue loss due to the pandemic; and
Investments in water, sewer, stormwater, and broadband infrastructure.
SLFRF funds may not be used for depositing an extraordinary payment in a pension fund to reduce an unfunded, accrued liability, nor to offset, directly or indirectly, a reduction in net tax revenue. Misuse of funds may lead to recoupment by the federal government.
The Executive Office of Administration and Finance has issued further assistance to municipalities regarding the allowable uses of SLFRF funds. The eligibility reference sheet provides examples of expenditures that likely comply with the Act’s categories of use. A memorandum entitled, “Coronavirus Local Fiscal Recovery Fund Program Resources & Sample Next Steps” compiles useful online resources to consult when assessing the use of funds and the compliance and reporting obligations upon expenditure.
ARPA infused state and local governments with vital funds for critical governmental services, some of which have often been underfunded. Municipalities must balance the needs of the communities with the flexible but restrictive allowable uses of federal funds.
