Treasury Issues Final Rule (Guidance) on ARPA Funding

Posted By: GP McLeer Speaking Together,

Treasury Issues ARPA State & Local Funding Final Rule

Back in May of 2021, US Treasury issued their “Interim Final Rule” on American Rescue Plan Act (ARPA) State & Local Government Coronavirus Relief Fund. Every state, county, and city in the nation received funding through this fund and each unit of government was given, through the Interim Final Rule, guidance on what eligible uses of the funds could be considered. We gave you a breakdown of that Interim Rule and how it related to nonprofits back then.

This past week, Treasury released its “Final Rule” on these funds - the final version after months of public comment and tweaks. These are the final regulations that must be followed when spending these state and local government funds. 

If you didn’t read our May update on this, we recommend you check it out as we’re detailing major changes in this post. 

Today, we want to bring you a couple major changes or clarifications that impact nonprofits in the Final Rule document. 

First up, some resources.

> Final Rule (full text)

> Final Rule Summary

> Overview by Route Fifty

Next up, the major changes to note:

  1. Nonprofits are businesses. In the Final Rule, Treasury has added “nonprofits” in most cases whenever “small businesses” are mentioned as eligible for funding. Some units of governments were using the omission of “nonprofits” in these eligible use areas as reasons to not support nonprofit organizations. The updated guidance confirms that, in most every instance, when small businesses are eligible for support, so are nonprofits, because nonprofits are businesses too.

  2. Summary Doc Breakdown. The Final Rule Summary document, meant to help navigate the 400+ page Final Rule’s full text, includes a dedicated section on nonprofits (page 23) which provides great clarity on overall eligibility of nonprofits if units of government choose to provide relief-focused support.

  3. Beneficiaries vs. Sub-Recipients. Related to our previous point to some degree - the Final Rule clarifies that nonprofits can receive funds from governments in two general ways: as a beneficiary, or as a sub-recipient. 
    1. Beneficiaries are organizations (including businesses) that receive financial assistance to rectify economic harm to the entity itself (e.g. relief funding).
    2. Sub-Recipients are entities that receive funds to from the government to provide a service that helps address the negative impacts of COVID-19.

      In short, governments can use ARPA money to support nonprofits directly and can hire nonprofits to provide services to others. (Ref: Final Rule, p171)
  4. Local Government Flexibility. In perhaps the most sweeping flexibility given to local governments in the Final Rule, and one that could pose a challenge to nonprofits seeking funding - Treasury will now allow local governments to opt for a “standard allocation” for calculating revenue loss of up to $10 million. Previously, local governments had a formula to follow to calculate revenue loss, one of the eligible uses of their ARPA funds. Now, Treasury will allow local governments (not states) to claim up to $10 million without doing any data crunching. Yes, this means that cities who received less than $10 million in ARPA funding can now claim 100% of their funds as Revenue Loss. This is important because, once claimed as Revenue Loss, local governments have much greater flexibility on how to spend these funds - including on expanded infrastructure items like roads, and even underwrite other governmental services not eligible under other ARPA uses.

    Together SC will host a member briefing on ARPA on Wednesday, January 19 at 11am. You can register by clicking here.