American Rescue Plan FAQ

By Gregg Evans, CPA, Partner, The Bonadio Group

The American Rescue Plan Act of 2021 is providing $350 billion to state, local, territorial, and tribal governments. The United States Department of the Treasury has issued the Final Rule related to ARPA funds. Here are some frequently asked questions we have heard from our clients.

When is the Final Rule effective?

The final rule is effective April 1, 2022, but recipients can take advantage of the new provisions now. Any funds expended prior to the adoption of the Final Rule comply if the recipient followed the guidance of the Interim Final Rule.

Are there areas I should avoid in spending ARPA funds?

Yes. Avoid the following: • Replenishing reserve funds • Making payments on outstanding debt • Making extraordinary payments to pension funds • Paying judgments

Do I need pre-approval before I start a project?

No. Governments do not need approval from the Treasury to expend funds. Eligible use guidelines are detailed in Section II of the Final Rule. Also, consider that written justification is required for capital expenditures over $1 million. Capital project expenditures should be in response to the pandemic.

How long do I have to use ARPA funds?

Recipients must use funds for costs incurred after March 3, 2021. All funds must be obligated by December 31, 2024 and expended by December 31, 2026.

Should I take the time to calculate revenue loss?

Recipient governments may choose from two options under the Final Rule. The first option allows recipients a standard allowance of up to $10 million to be used under the lost public sector revenue category. If revenue loss is expected to exceed $10 million, recipients should calculate the revenue loss comparing actual revenue to counterfactual revenue. The Final Rule has increased the standard growth factor from 4.1% to 5.2% used in calculating the counterfactual revenue. In addition, utility revenues may now be included in the calculation. If you reported zero revenue loss in the Interim Report, you may recalculate using the new guidance and report revenue loss in your next report.

Expenditures under this category should be used for services traditionally provided by governments, but recipients must avoid expending funds on ineligible expenses as defined above.

What reports do I need to file with the Treasury and when are they due?

Most counties needed to file the Project and Expenditure report by January 31, 2022. Local governments with fewer than 250,000 residents, Tribal governments, and non-entitlement units of local government are not required to file interim or performance reports but are required to file quarterly project and expenditure reports with the first one being due by April 30, 2022. The Treasury has issued detailed guidance on using their portal to file reports.

Is administrative cost an eligible expenditure?

Yes. Fortunately, the guidelines allow governments to support program implementation including hiring a consultant to help administer the expenditure of the ARPA funds. Funds may also be used to address government backlogs created by the pandemic and to modify government operations including adding equipment like video-conferencing equipment and software.