To recap: The Coronavirus Local Fiscal Recovery Fund will provide $19.53 billion to support tens of thousands of non-entitlement units (NEUs) of local government as a part of the American Rescue Plan Act (“ARPA”) funding passed through New York State. The funding was allocated to NEUs using a specified formula based on population. The allotment is capped at 75% of the annual total operating budget in effect as of Jan 27, 2020. By now, all of the NEUs should know their allocation and have received the first traunch.

The second payment will be made no earlier than 12 months later, expected in July 2022

Generally, funds must be spent by December 31, 2024. Alternatively, contract funds obligated by December 31, 2024, may be spent through December 31, 2026, meaning that contracts should be signed, and funds encumbered by December 31, 2024, if not already spent. Funding can be used for eligible costs beginning March 3, 2021.

Now that the Final Rule has been issued, determining eligible costs can be much simpler. The Final Rule included a $10M safe harbor or minimum cap on eligible spending for government purposes. This broadens eligible costs and simplifies documentation. Above and beyond this limit, there are options to improve your community. Specific eligible uses include:

• Respond to the COVID-19 public health emergency or its negative impacts
• Respond to workers performing essential services during the COVID-19 public health emergency by providing premium pay to eligible workers or grants to eligible employers
• Replace lost public sector revenue
• Invest in water, sewer, and broadband infrastructure (water includes stormwater)

For reference, ineligible uses include:

• Directly or indirectly offset a reduction in revenue due to tax cuts enacted from March 3, 2021, through last day of fiscal year in which funds have been spent
• Deposit to a pension fund (extraordinary contribution)
• Debt service

While you may still be working through the planning process, keep in mind that, as a NEU, you have reporting responsibilities to the U.S. Treasury. NEUs who receive more than $10 million in ARPA funding must follow the quarterly reporting schedule and NEUs receiving less than $10 million will follow an annual reporting schedule. As it is named, the Project and Expenditure Report requires information to be provided pertaining to project description and status, such as not started, completed less than 50%, more than 50% or completed. Some of the items included in the report are current period and cumulative obligations, and current period and cumulative expenditures. In addition, NEUs will be required to submit a copy of the signed terms and conditions agreement and the signed assurances of compliance with Title VI of the Civil Rights Act of 1964, both of which had to be submitted to NYS when the application for funding was made. A copy of the actual budget documents validating the top-line budget total provided to NYS must also be included.

In December the Treasury Department issued a guide to accessing the Treasury portal, setting up the municipality’s account and submitting documentation. The current version of Treasury’s guidance is available at set up guidance. Reporting guidance is contained in the SLFRF Compliance and Reporting Guidance, the most recent version of which was issued February 28, 2022.

For NEUs receiving less than $10 million in funding, the first annual Project and Expenditure Report is due April 30, 2022 and covers the period from March 3, 2021 through March 31, 2022. The Project and Expenditure Report is required to be filed annually; however, it is important to note that, while the first report covers slightly more than a year, the following annual reports cover the fiscal year which ends on March 31.  It is critical, then, to make sure that your accounting system can provide the information within that time frame and that appropriate accruals are made through March 31 and reversed in the following month to avoid over-inflating the expenditures at the following May 31 or December 31, depending on your fiscal year.

Finally, be aware that this funding is subject to Single Audit Act (“Uniform Guidance”) requirements. Your municipality may never have had a single audit before. If you expend $750,000 or more of federal funding from ALL sources in a fiscal year (including ARPA), you will be required to have a single audit. Expenditures are determined on an accrual basis, meaning that the expenditures are evaluated based on when the cost was incurred, not when the payment was actually made.  Note that the period under consideration is your fiscal year, not the federal fiscal year. Also note that when you receive the funds is not part of the determination.

ARPA funding is a tremendous chance to invest in your community. Proper accounting and reporting is key to maintaining compliance, and maximizing the impact of this once in a lifetime opportunity. Give RBT CPAs a call to partner with you on all your ARPA funding matters.