Reminder: ARPA Funds Must Be Obligated Soon

Date Posted: Friday, November 1, 2024
Posted In: Legal Notes, Legal Notes - Featured

The deadline for grantees to “obligate” unspent American Rescue Plan Act State & Local Fiscal Recovery (ARPA) funds is fast approaching.

ARPA grant funds must be “obligated” by December 31, 2024 and most must be expended by December 31, 2026 (except for projects under the Surface Transportation Projects and Title I eligible use categories, for which funds must be expended by September 30, 2026).

Generally, obligating funds requires more than a budget appropriation. U.S. Treasury regulations define “obligation” as “an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment.” An obligation also means a requirement under federal law or regulation, or a provision of the ARPA award terms and conditions to which a recipient becomes subject as a result of receiving or expending ARPA funds. See 31 C.F.R. § 35.3.

The U.S. Treasury has updated its ARPA FAQs to provide more guidance on what constitutes an “obligation.” See the ARPA FAQs, section 17 for more information. For example, the FAQs clarify that interagency agreements may constitute an obligation if the agreement meets certain conditions (see FAQ 17.6). Some payroll expenses for positions existing and filled before 12/31/24 may be obligations (see FAQ 17.7). Also, certain future monitoring, legal and administrative costs may be deemed obligations (see FAQ 17.10).

In addition, U.S. Treasury has created a YouTube webinar and written slides with specific illustrations. For example, the webinar clarifies that the following are generally NOT considered obligations: an adopted budget or budget amendment; an appropriation of ARPA funds; an executive order or resolution; a written or oral intention to enter into a contract; a grant of legal authority to enter into a contract; merely claiming funds under the revenue loss category; or moving ARPA funds to a general fund as revenue loss but not further establishing an obligation with those funds by 12/31/24.

Note that if ARPA funds have already been expended for an eligible use, they have also been obligated.

Recipients are required to return unspent ARPA funds that have not been obligated by December 31, 2024. Funds that have been obligated by the deadline will be reported in the Project and Expenditure Report that (for annual reporters) is due by April 30, 2025.

For more information and links to all the resources mentioned above, visit MMA Legal Services’ ARPA Information Packet, available in the “Legal” section of MMA’s website. (By S.F.P.)