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The American Rescue Plan Act: How to Manage Funding Allotted for Your Government

by Ronald Steinkamp
April 12, 2021

The American Rescue Plan Act (ARPA), recently signed into law, is the latest legislation aimed at providing economic relief to combat the effects of the COVID-19 pandemic.

The ARPA has allocated $350 billion to state and local governments, with the local funding of approximately $130 billion being divided equally between cities and counties. The new law provides extensive funding to state and local governments to give them the opportunity to rebuild lost reserves and regain financial stability, make strategic investments in long-lived assets and cover temporary operating shortfalls.

Eligible uses of the funds include:

  • Revenue replacement to mitigate the loss in revenue for COVID-19-related government services
  • Investments in sewage, water and broadband infrastructure
  • Premium pay for essential workers
  • COVID-19 expenditures
  • Economic recovery

Critical Steps for Managing Your ARPA Funds

Developing a prudent management strategy for your ARPA funds is crucial. To ensure that your funds are appropriately distributed and monitored, we recommend taking the following steps:

  1. Coordinate with the State
  2. Organize a task force to coordinate local needs, resources and messaging
  3. Identify compliance and reporting requirements
  4. Develop processes to identify and track:
    • Compliance requirements
    • Reporting requirements
    • Revenue replacement to mitigate the loss in revenue for COVID-19-related government services
    • Investments in sewage, water and broadband infrastructure
    • Premium pay for essential workers
    • COVID-19 expenditures
    • Funds used for economic recovery
  5. Build internal controls into each process to ensure compliance and to prevent and detect any potential errors, fraud, waste and abuse
  6. Identify and track eligible uses of ARPA funds
  7. Monitor to ensure compliance and prevent and detect errors, fraud, waste or abuse

Funds allocated to states cannot be used to directly or indirectly offset tax reductions or delay a tax or tax increase. Additionally, funds cannot be deposited into any pension fund and must be spent by the end of the calendar year in 2024.

Other Considerations to Keep in Mind

Though valuable and far-reaching, the relief funds provided by the ARPA are also accompanied by provisions that can be confusing and complex. Here are some other considerations from the Government Finance Officers Association to keep in mind as you assess the benefits that the ARPA may add to your organization.

  • Funding is not recurring. As ARPA funds are non-recurring, they should be used only on one-time expenses when possible. Avoid creating new programs or add-ons that involve ongoing financial commitment. When using the funds to cover deficits, ensure that those deficits are temporary; otherwise, restructure your budget as needed.
  • Stay cognizant of funding and partnership opportunities. State and local jurisdictions should be aware of plans for ARPA funding throughout their communities. Local jurisdictions should be aware of state-level ARPA efforts such as potential enhancements of state funding resources and existing or new state law requirements. Partnering with other ARPA recipients in your community and creating cooperative spending plans will help strengthen the financial condition of your local organizations.
  • Be thoughtful about how you use your resources. Local governments will receive ARPA funds in two separate portions. Consider how these funds can be most appropriately used to aid rebuilding and recovery efforts through the 2024 spending deadline. Whenever possible, expenditures related to the ARPA funding should be spread over the qualifying period to enhance budgetary and financial stability.

If you have questions or need assistance, contact our experts.

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