American Rescue Plan Act
U.S. Treasury Non-entitlement Community ARPA Guidance
The Coronavirus Local Fiscal Recovery Fund will provide $19.53 billion to support tens of thousands of non-entitlement units of local government, which are local governments typically serving a population under 50,000. The following links provide information on implementation, compliance, and reporting for ARPA non-entitlement community recipients.
This list will be updated with some common questions asked by member governments in the UCPCOG service region.
Use of FundsQ. Can our town use some of our ARPA funds for closing costs on a USDA loan?
A. No. ARPA local recovery funds may not be used to incur debt or pay off debt. “Debt service” is one of the expenditures specifically prohibited by the Final Rule on use of ARPA local recovery funds. The School of Government has determined that closing costs on a loan fall under the meaning of “debt service.”
Q. What other uses of ARPA funds are prohibited?
A. Funding underfunded pension obligations, creating or replenishing a “rainy day fund,” paying off legal judgments or legal settlements, and debt service. (Normal payroll contributions to pensions that are part of salaries and benefits for current employees are allowed.)
Q. Can we use our ARPA funds to pay salaries and benefits to our local government employees?
A. Yes. ARPA funds may be used to pay the salaries and benefits (including normal pension contributions that are part of payroll) of local government employees. Allowable payroll costs also include FICA taxes and other normal costs that are part of the payroll costs for local government employees.
More information about how to use ARPA funds for employee salaries is provided further below.
Q. What about premium pay and bonuses to local employees? Can we include that as part of salaries and benefits?
A. Premium pay is an allowable use of ARPA funds, but it is in a separate category (not allowable as a “Revenue Replacement” expenditure, but allowable under the “Premium Pay” category.)
Premium pay has its own particular rules and limitations. For example, premium pay must not exceed $13/hour or $25,000 per employee. Also, premium pay must be used for employees who are defined as low- to moderate-income employees (making less than 150% of the average wage in the state or county).
There is a blog post on the School of Government website that explains Premium Pay in more detail. (https://canons.sog.unc.edu/2022/01/american-rescue-plan-act-coronavirus-state-and-local-fiscal-recovery-funds-final-rule-premium-pay-for-local-government-employees/)
Q. We would like to use ARPA funds to pay for many kinds of things that the Town needs – for example, supplies and maintenance for Town buildings, a new structure in our town park, and employee salaries. Is it OK to spend our funds on these things?
A. All of those items are allowable with ARPA funds. However, “allowable” is not the same as “advisable”. A town can undertake as many projects as it likes, but bear in mind that each project will have to be set up by the Town with its own paperwork, accounting, and tracking over time.
For each and every project, the town will have to create paperwork and records, follow federal policies, and comply with federal guidance. Some types of projects require more paperwork than others. (For example, a purchase of equipment that is later disposed of through sale will likely require that the Town keep track of the equipment until its disposition out of the Town’s hand and then account for the proceeds of the sale.)
To minimize the burden of paperwork and compliance, it is a good idea to select a single project that has the lowest burden of compliance paperwork and try to spend the ARPA funds on that one item.
Paying town employee payroll costs can be set up as a single project and has a lower burden than many other types of projects. If you reimburse your General Fund for employee salaries and benefits going back to March 3, 2021 (the first date on which costs can be allowed), and for a couple of years, it may use up the entire amount of the ARPA award. That would then free up an equivalent amount of money of the General Fund for other projects. With this approach, the town would only need to do federal compliance tracking and reporting on the salary project, since that is how ARPA funds were used.
If employee salaries don't use up the entire ARPA fund, then it would be good to select one additional project with manageable compliance requirements to try use up all the rest of the funds that are not used up by salaries.
Q. Our town would like to expend ARPA funds on a design-build contract to design and build public infrastructure, as allowed by North Carolina law. What do we need to know and do to comply with the federal rules of ARPA pertaining to procurement of these services, in addition to N.C. law?
A. There is a blog post from the School of Government that explains the rules and considerations of procurement of design-build services in particular. Please see the link below:
It would likely be easier to use the town's ARPA funds for employee salaries and benefits under the "Revenue Replacement / Standard Allowance" option. Then you could use the fund balance in your General Fund to do a design-build contract and you would only need to comply with North Carolina's procurement requirements, instead of having to comply with federal rules pertaining to ARPA as well.
A. The Town Board will need to pass a Grant Project Ordinance. This Grant Project Ordinance will be for a project of paying employee salaries. The ordinance will include a budget amount that covers the project cost. This project cost will be the employee payroll costs for a period of time. The period can extend retroactively to reimburse the town for payroll expenses starting March 3, 2021, and it and can also extend into the future for a stated time (it is recommended to expend all funds by December 31, 2024). Choose a time period that will (ideally) use up the entire ARPA award amount. The Grant Project Ordinance will contain a budget that should cover the salary costs for the decided-upon period of time.
An example of such a Grant Project Ordinance for a project to cover town employee salaries can be found here. https://arpa.sog.unc.edu/document-share/ (scroll down to “Sample Grant Project Ordinance for Revenue Replacement and Supplanting”
Please note that other documentation and policies will also need to be adopted by the Town. These can be found at that same link.
Once the Grant Project Ordinance and the related policies are adopted, the adopted budget in the Grant Project Ordinance authorizes the Town staff to make transfers in and out of the ARPA fund pursuant to the project budget. For example, the Town can make transfers of ARPA funds to reimburse its General Fund for salaries already paid, retroactive to costs incurred starting March 3, 2021 (the period should be specified in the Grant Project Ordinance – see the example).Q. Our town chose the “Revenue Replacement” option for some or all of our ARPA monies. Is there a training that will train our Town staff members on how to take the steps needed to expend our ARPA funds?
A. Yes, there is a specific training offered by the School of Government that takes you through the exact steps needed to expend ARPA funds under the “Revenue Replacement” option (also known as the “Standard Allowance.”) It is located here. https://www.sog.unc.edu/courses/implementing-standard-allowance-american-rescue-plan-act-coronavirus-state-and-local-fiscal-recovery
The training took place live on April 11, 2022, but the class recording and materials are available now if you register for the course. The training length was a full day, so it may be convenient for a Town Clerk or Finance Officer to view the recording one module at a time, as their time becomes available or as they need to know about each component.
Revenue Replacement (Standard Allowance)Q. Is the “Revenue Replacement” use category the same as the “Standard Allowance” category?
A. Yes. “Lost public-sector revenue,” “standard allowance,” and “revenue replacement,” “lost revenue presumption up to $10 million” all refer to the same category.
These are all just shorthand ways of referring to the rule that localities may claim up to $10 million (up to the amount of their total award, whichever is less) as presumed lost revenue.Q. Why should my locality choose the “revenue replacement” option on the April 30 report?
A. There are many very good reasons to choose this category.
- The “revenue replacement” option gives your local government the maximum flexibility in deploying the funds, because they can be spent on any legitimate governmental services. It also GREATLY reduces the amount of tracking and paperwork, compared to the other three options.
- If there is any chance your locality wants to choose the “revenue replacement” option now or in the future, YOU MUST ELECT IT ON THE TREASURY REPORT and submit the report by the April 30 deadline. Your locality can change to any combination of the other three options later, but if you select those options for the April 30 report, it is our understanding that you CANNOT go back and select “revenue replacement” later. To maintain flexibility and reduce paperwork, select “revenue replacement.”
More information on the reasons to choose this option is found at: https://canons.sog.unc.edu/2022/04/american-rescue-plan-act-of-2021-coronavirus-state-and-local-fiscal-recovery-funds-arp-cslfrf-the-standard-allowance/
U.S. Treasury Guidance
FACT SHEET: The Coronavirus State and Local Fiscal Recovery Funds Will Deliver$350 Billion for State, Local, Territorial, and Tribal Governments to Respond to theCOVID-19 Emergency and Bring Back Jobs
Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (FAQs)
Compliance and Reporting Guidance - State and Local Fiscal Recovery Funds
NC Pandemic Recovery Office