ARPA SLFRF: Navigating the Updated FAQs and Ensuring Compliance
The U.S. Department of Treasury released new Frequent Answers and Questions (FAQs) on March 29, 2024, that clarify important aspects of the ARPA State and Local Fiscal Recovery Fund (SLFRF) program. The updated FAQs address critical questions regarding personnel costs, subrecipient obligations, revenue loss, and handling excess funds. A thorough understanding of these details is essential for maximizing the impact of your entity’s ARPA funding prior to key deadlines.
Future Personnel Costs
A major concern for many recipients has been the use of ARPA funds for personnel costs. The new FAQs clarifies the following issues:
Eligible Positions: Personnel costs can be covered by SLFRF funds for any eligible position filled by December 31, 2024. Personnel costs remain eligible in cases where the position is subsequently filled by a new hire.
Reporting Requirements: Recipients are required to estimate the amount of SLFRF funds they intend to allocate for personnel costs. This estimate, along with a reasonable justification, must be reported to the Treasury by designated deadlines (January 31, 2025, for quarterly filers and April 30, 2025, for annual filers). Actual personnel expenditures must be reported by the final deadline of December 31, 2026. If expenditures are less than the projected estimates, the unexpended amount is subject to recoupment. Tracking staff time and effort on SLFRF-funded activities is a vital way to protect against recoupment.
Subrecipient Obligations and Deadlines
The new FAQs clarify that subrecipients are not subject to the December 31, 2024, obligation deadline. This reduces the burden for local governments managing projects with subrecipients and ensures there is sufficient time to complete activities before the final expenditure deadline.
Handling Excess Funds and Reclassification
The possibility of having unspent but obligated funds after the December 31, 2024, obligation deadline is addressed in the FAQs. The good news is that entities now have the option to reclassify these excess funds to other approved projects. This allows you to redirect resources to areas with a greater funding need, optimizing the use of your ARPA allocation.
The FAQs now permit the city to withdraw the obligated SLFRF funds from that project and reclassify them to a different program. This alternative program could be one the city initially funded with local dollars but qualifies under the Final Rule. In this scenario, the city can leverage the excess funds for the new program as long as they had incurred an obligation (such as, through a contract) by December 31, 2024.
Program Income and Permissible Uses
The new FAQs also cover questions regarding program income generated from ARPA-funded activities between December 31, 2024, and December 31, 2026. This program income can be used for a variety of purposes, including:
Direct Funding of Eligible Uses: Supporting approved activities outlined in the Final Rule.
Covering Permissible Upward Cost Adjustments: Addressing unforeseen cost increases in existing contracts or subawards.
Legal and Administrative Requirements: Funding essential costs associated with record retention, internal controls, and other compliance measures mandated for SLFRF projects.
Personnel Costs Obligated by December 31, 2024: Supporting payroll expenses for eligible positions even after the obligation deadline.
Important Details Regarding Revenue Loss
The FAQs reiterate that all funds allocated for revenue loss must be obligated and expended by the established deadlines. To meet these requirements, entities can utilize various mechanisms, including:
Contracts and Orders: Entering into formal agreements for approved projects or services.
Personnel Costs: Using SLFRF funds to cover payroll expenses for eligible positions.
Federal SLFRF Compliance Costs: Incurring costs directly tied to adhering to federal regulations governing the use of ARPA funds.
However, the FAQs state that subrecipient agreements do not qualify as obligations for revenue loss purposes.
Delivering Results for Residents
BRONNER knows managing ARPA SLFRF funds effectively requires careful attention to guidelines and deadlines. BRONNER’s expertise in federal grant management competencies like performance measurement, subrecipient monitoring, financial reporting, and regulatory analysis can ensure your local government maximizes the impact of these critical funds while adhering to all compliance requirements. Reach out to discuss your ARPA SLFRF needs.