ARP Funding Full Guidance - Nonprofit Perspective and Opportunities

This blog post contains portions pulled, with permission, from our friends at the SC Arts Alliance. Thank you SCAA!

Before diving in, be sure to read our quick overview of the ARP State/Local Funding in a recent blog post here, and view our webinar on this funding here. This blog assumes that you’ve done a little bit of homework by reviewing those resources!

On May 10, the US Treasury Department issued their “Interim Final Rule” document, along with a Fact Sheet and FAQ document in relation to the State/Local ARP Funding allocations. While tweaks are expected as Treasury receives feedback from the public through a public comment period, we now have a clearer understanding of how state legislatures and county / city councils can spend their cut of $350 billion sent to every unit of government in the nation. For South Carolina, $2.5 billion will be available for the Legislature to allocate (they’re coming back in the Fall to do that), and over $1.8 billion split among all 271 cities/towns and 46 counties in the state.

Quick Recap

ARP funds can be used for five broad eligible uses for local governments to spend:

1. Support public health expenditures, by, for example, funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff.
2. Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries, and the public sector.
3. Replace lost public sector revenue, using this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic.
4. Provide premium pay for essential workers, offering additional support to those who have and will bear the greatest health risks because of their service in critical infrastructure sectors.
5. Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet.

Remember that this funding is for state/local governments to spend - it is not a grant program unless your state/local government creates one under one of the five uses above. Advocates should be reaching out to their local elected officials and encouraging them to provide local recovery funds, using the guidance from Treasury as their tool to show eligibility.

Where Nonprofits Fit In

There’s good news for nonprofits in this guidance - nonprofits are explicitly eligible for support by state and local governments under numerous sections. We won’t get into the weeds on every item, but our goal is to help you narrow down your advocacy strategy at the local level.

Before we get to the list of sections that we’ve identified (you may identify more), one thing to take note of - how to determine if a use is eligible to be supported by ARP funds.

In short, to determine eligibility, a local or state government must identify whether there is a public health need that will be met, or an economic harm that will be mitigated with their funds. This “test” especially applies to instances where governments are funding businesses, nonprofits, individuals, or anything outside of personnel or infrastructure (although those two must be related to COVID-19 response and recovery as well). Therefore, to best position your community’s nonprofits for support under your city or county’s ARP funding allocation, you will need to be sure that your proposals meet this test. Governments will not be able to grant out funds without this justification.

All page numbers below are in reference to guidance issued on May 10, available at this link.

Section II, A(1) [p10] - Responding to COVID-19

Public Health: Nonprofits working in the healthcare sector have broad eligibility to receive funds from state and local governments. In particular, direct response to COVID-19 is the first eligible use of funds provided for in the guidance. While the primary eligible use is public sector response, governments are able to support mitigation efforts (including facility upgrades) in the healthcare sector. [p17]

Specifically, eligible uses under this section where nonprofits could find support include:

• COVID-19 Mitigation and Prevention [p18]
• Medical Expenses [p19]
• Behavioral Health Care
  Including mental health treatment, substance misuse treatment, hotlines, crisis intervention, overdose prevention, infectious disease prevention, and outreach services to promote access to health care. [p19]

Section II, A(2) [p23] - Responding to Negative Economic Impacts

This section provides the broadest areas of eligibility for nonprofits in the guidance. Not only does it provide eligibility explicitly for nonprofits, but many nonprofits could find their sectors eligible in various parts of the section and not among a sole “nonprofit grant program” for all nonprofits. Below are areas where nonprofits could benefit:

• Assistance to Unemployed Workers [p32]
  Specifically, job training services or other service programs related to helping unemployed individuals find work.
• Small Businesses & Nonprofits [p34]
  This is the most explicit area where nonprofits can find support. There is no restriction on the types of nonprofits (or businesses) in this section, however “nonprofit” is defined as only 501(c)3 organizations. Other than that, as long as the entity can demonstrate an negative economic impact due to COVID-19, then governmental entities could provide support to that entity. Governments can provide support, if they choose, a few ways:
• Loans or grants to mitigate financial hardship resulting from COVID-19 or impacts of periods of business closure.
• Loans, grants, or in-kind assistance to implement COVID-19 prevention or mitigation tactics.
• Technical assistance, counseling, or other services to assist with business planning needs.
• Aid to Impacted Industries [p36]
  This section could benefit many nonprofits operating in the hospitality, tourism, and travel industries. This section provides recognizes the economic harm these industries have endured and offers specific guidance to governments that, if they create a program to support nonprofits and small businesses, they should consider the disproportionate impact the hospitality, travel, and tourism industries have felt and use that as a measuring stick when funding other types of industries. 
• Building Stronger Communities through Investments in housing and Neighborhoods [p39]
• Services to address homelessness and to improve access to stable, affordable housing among unhoused individuals.
• Affordable housing development.
• Housing vouchers, residential counseling, or housing navigation assistance.
• Addressing Educational Disparities [p40]
• New, expanded, or enhanced early learning services.
• Providing assistance to high-poverty school districts to advance equitable funding.
• Evidence-based educational services and practices including tutoring, summer, afterschool, and other extended learning and enrichment programs.
• Evidence-based practices to address social, emotional, and mental health needs of students.
• Promoting Health Childhood Environments [p40]
• New or expanded high-quality childcare to provide safe and supportive care for children.
• Home visiting programs from health, parent educators, and social service professionals.
• Enhanced services for child welfare-involved families and foster youth to provide support and training on child development, positive parenting, coping skills, or recovery for mental and substance use challenges. 

Section II, B [p45] - Premium Pay

Governments can use their ARP funds to provide premium pay for essential workers. This can be done by providing pay for their staff that are eligible, but they can also grant funds to third-party employers with eligible workers performing essential work. Funding can be used to pay 100% of the salary and benefits of these workers (read guidance for more information). This includes, but is not limited to:

• Nursing homes, hospitals, and home care staff
• Food production and distribution staff (including farms, grocery stores and restaurants)
• Janitors and Sanitation workers
• Transit workers and warehouse workers
• Public health and safety
• Childcare workers, educators, and other school staff
• Social service and human services

Some Technical Notes

Beyond these eligibility notes, there a few key things you should keep in mind when thinking about how your nonprofit could benefit from these state/local funds.

1. There is a lot of flexibility.
   Governments are not required to distribute money to nonprofits. They are not required to divide their funds among the five eligible uses we listed at the top of this blog. They could put 100% of their funds into sewer infrastructure. It’s up to local advocates to make sure nonprofits get support. 
2. SC and its local governments will get their funding in two 50% tranches. The first one should hit in May, the second one twelve months later. Larger cities (populations over 50,000) and counties will get their money directly from the Treasury Department, smaller cities (<50,000) will get their funds from the State within 30 days (state acts as a pass through).
3. Funds have to be obligated by December 31, 2024. This does not mean funds have to be spent though. The “period of performance” will run until December 31, 2026. Guidance specifies that ARP State/Local funds are meant to be forward-looking. As such, Treasury anticipates, and encourages, longer-term projects and support.
4. Governments can also recoup lost revenue. This section (pg 51) gets a little complicated unless you’re big into government finances. But suffice it to say - if your local government took a hit, they can recoup some of that revenue back. They have to have shown a loss from FY19 to FY20.
5. Governments also have a lot of freedom in using funds to cover the cost of water, sewer, and broadband infrastructure. You name it, they can probably find a way to fund it.
6. Governments cannot use funds to pay pre-existing debt obligations. They can be used to pay debt that will be incurred due to major projects (like infrastructure), but it cannot be used for debt that’s been on the books.
7. Notes on Reporting
1. Larger cities (50,000+), counties, and states must submit quarterly reports, with the first one hitting October 31, 2021.
2. Smaller cities (50,000 and under) will have to submit one report by October 31, 2021, and then only an annual report each year after that.
3. Treasury is expected to release further data on what information specifically should be collected soon. This expected guidance will most likely govern what information is collected in any type of grant program. The burden rests on the governmental entity to ensure compliance with ARP guidelines in almost every situation.
4. Treasury does have the power to recoup any funds that are spent on non-eligible uses.

What Together SC is Doing

We at Together SC are focusing our advocacy efforts in three areas related to ARP State/Local Funding:

1. Distributing information and updates to local advocates.
   Much like this blog, our goal is to give you, local nonprofit leaders, the tools you need to effectively advocate for nonprofits at the local level.
2. Creating resources for local governments.
   Following the issuance of this full guidance from Treasury, Together SC will be crafting an overview of how to best support nonprofits that local governments can access. This will help them have some parameters around how to best grant funds to nonprofits, ask for proper reporting, and other items.
3. State-level support.
   We are actively working to push for support for nonprofits across the state with legislators and their staff. The Legislature will return to allocate their ARP funds ($2.5 billion) later this summer / early fall.