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.
Q: We received our ARPA funds, and we are ready to get started spending them. How do we start?
A: If your locality chose “Revenue Replacement” when it filed its Treasury report in Spring 2022, the answer is relatively simple. First, you much choose government services or expenses that you want to use your ARPA funds for. Then, your governing board must adopt required policies and a grant project ordinance (with a specific budget and purposes in it). Once that is done, you can begin to make expenditures or reimburse for prior expenditures.
To get started on your PROJECT ORDINANCE and REQUIRED POLICIES, go here and scroll down to "Supplanting Salaries: A Checklist (added 7/7/22)". Click on that link, which will give you a checklist that can be used for supplanting/reimbursing salary and benefit costs. It can also be used to supplant/reimburse for the other costs of governmental services.
Use of Funds
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. Can we spend some of the funds for something we need, and then keep the rest in reserve?
A. No. Rainy day funds are not allowed under the Treasury final rule.
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. Is there a program supporting local and regional food systems that our community could participate in, using our local or ARPA funds?
A. Yes! Upper Coastal Plain COG is working with partners to support and develop food systems in our region. Learn more at https://www.ucpcog.org/planning_and_development/food_and_agriculture.php
The regional food system includes farm production, distribution and sales, culinary use, and even how food waste is managed.
If you or someone in your community has a special interest in this topic, or is a practitioner in the food system who would like to be part of this effort, please let us know!
Reach out to Mary Jane Lyonnais to learn more about the regional food systems planning effort and find ways to participate: MLyonnais@ucpcog.org
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. We are going to reimburse our General Fund and/or Enterprise Funds for already-incurred expenses of providing governmental services. (For example, we spent $6,000 in 2021 to pay a contractor to mow the grass on town-owned properties.) How far back can we go?
A. Expenses for governmental services can be reimbursed as far back as March 3, 2021. You can reimburse for the costs that were incurred from that date forward.
Q. (Follow-up to the question above) What must we do to reimburse ourselves for those expenses?
A. Identify the expenses you wish to reimburse. If possible, keep it to a few large expenses to avoid generating multiple paperwork burdens.
Then put the expenses into a Grant Project Ordinance. Each category of expense will be a "project." (For example, mowing will be one project, the utility bill for street lighting may be another, and the bill for accounting and auditing services would be another.) Have your governing board adopt the Grant Project Ordinance.
You must also adopt the 5 required policies, and you must comply with the policies as you expend the funds for each of the items in your Grant Project Ordinance.
Here is a visual “Roadmap” with check boxes for each step in the process and links to the templates for the ordinance and policies: https://canons.sog.unc.edu/wp-content/uploads/sites/1175/2022/09/Roadmap-for-Revenue-Replacement-Expenditures-Fillable-PDF-FINAL51.pdf
Q. Having selected the “Revenue Replacement” option, we will use our ARPA funds to reimburse our budget for government services. After we reimburse our General Fund or other funds from the ARPA monies, we will have freed-up funds in our budget to spend. We understand that these freed-up funds will be non-ARPA monies.
What does that mean for compliance with the federal Uniform Guidance? And what can we spend our freed-up funds on?
A: If you chose “Revenue Replacement” and then you expend ARPA funds on things you would have otherwise paid for with local funds such as your General Fund, you will likely have extra money in your General Fund or other fund account.
Likewise, if you reimburse your General Fund for past expenditures that are eligible under “Revenue Replacement,” your General Fund will have a larger balance than it would have had without the reimbursement.
Many are referring to these extra monies as “freed-up” funds.
It is correct that freed-up funds, as defined above, will not be subject to ARPA spending rules (that is, federal Uniform Guidance). That will take a lot of compliance burden off of your local staff!
However, note that freed-up funds will still be subject to the normal North Carolina laws that specify what local governments can spend money on and how it is budgeted.
Therefore, your board must still follow state law in making non-ARPA expenditures (the same way that it always has had to follow state law).
For example, your expenditure of freed-up funds (non-ARPA local funds) must still follow state law bidding and contracting laws.
Also, your locality must be sure to update (amend) its fiscal year budget (or other applicable budget ordinance) to authorize the expenditures from freed-up local funds, just as you would for any other expenditure that goes beyond the budget ordinance as adopted.
Q: Can we give our freed-up funds to a non-profit group in the community?
A. Possibly yes, as long as it is for the purpose of providing a public service that the local government itself could lawfully carry out.
The North Carolina Constitution and state law allow a local government to provide funds to a recipient as long as it is to “carry out any public purpose that the [local governments are] authorized by law to engage in." See this blog post from the UNC School of Government for more information.
Also, the private entity that receives the money must meet certain requirements: see this blog post for more details.
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