Put ARPA Funds to Work Today
The ARPA established the Coronavirus State Fiscal Recovery Fund and Coronavirus Local Fiscal Recovery Fund, which together make up the Coronavirus State and Local Fiscal Recovery Funds (“SLFRF”) program. The two funds have similar but slightly varied provisions.
The law’s text, the Interim Final Regulation (“IFR”), and the Guidance on Recipient Compliance and Reporting Responsibilities, issued on June 17, provide increasing levels of detail on using, managing, and reporting for SLFRF. Eligible expenditures have been a natural focus of interest for most governments. The bill text includes four brief expenditure categories but left it to the rule-makers to clarify and expand on this language.
What may be most unique is how ARPA turns the normal grant funding paradigm upside down. Instead of first crafting plans and budgets, justified with demonstrations of need, and proof of ability to perform the recommended actions, SLFRF provides a pot of money upfront. It asks local governments to put it to work as they see best, with broad flexibility to provide for equitable and effective pandemic response and economic recovery in their communities.
While the official documents deserve your attention, a good place to start is with a conceptual overview of the program. This simple workflow illustrates a straightforward path from receiving initial funding through planning, execution, and reporting:
While each of these work phases contain many elements, deliverables, and tasks, they each deliver a key output milestone that helps the government keep moving forward.
As available funding comes into focus, and project needs start to emerge, the eligible use cases are becoming more clear. Responding to negative economic impacts is a broad category allowing many pandemic and recession-related responses. In contrast, funding used to replace lost revenue can be used more generally for government services and administrative expenses, including pay-go infrastructure funding, without the need to tie back to recession or pandemic responses.
As we listen to leading government practitioners and the recommendations of our professional organizations we see four emerging best practices:
We recommend that lost revenue calculations be performed at least annually and SLFRF funds be allocated first to this allowable use. This expenditure category provides governments with the maximum flexibility to use funds for virtually any government purpose, with few restrictions.
Second, rehiring Covid-impacted staff is an allowable use included in negative economic impacts. The Treasury recommends this positive and equitable usage, emphasizing that rehires often include significant numbers of disadvantaged-group and female staff.
Third, we join GFOA in recommending the use of these one-time funds for one-time expenditures (we will discuss GFOA’s recommendations in greater detail in future posts):
- For example, we recommend that governments use a small slice of this funding to modernize their technology, move to the Cloud to meet the needs and expectations of their communities, and increase the sustainability and security of their systems and data.
- However, we do not recommend that the governments use SLFRF for ongoing annual SaaS contract payments.
- Instead, use SLFRF to engage in the substantial professional services investment needed to fully implement new systems and refine current procedures to gain the full value and ROI generated by deep usage of superior technology.
Fourth, modern technology can help governments distribute subrecipient funding to the best advantage for their particular community. Grant, loan, award, and other assistance programs to local businesses, impacted industries, community-serving nonprofits, individuals and families, and even local special-purpose governments are all valuable uses of SLFRF. But all require proper documentation, equitable and efficient application processes, and good internal controls.
While we have heard some pushback around complex federal rules and difficult reporting requirements, we are convinced that this unique opportunity is much more positive than negative for our residents, communities, and governments. As we have discussed here, the basic process is clear and work can begin immediately. We will analyze reporting requirements next week and then into use-cases and other recommendations in later posts.
Want to learn more?
Click HERE to read our eBook covering what you need to know about ARPA (and also how to use it).
Category: OpenGov Updates