American Rescue Plan

Eligible uses of ARP, as outlined in the Interim FEligible uses of ARP, as outlined in the Interim Final Rule provide parameters on spending. There are also additional boundaries on ARP use, which give force to Congress’s judgment that  pension deposits do not fall within these eligible uses (see Interim Final Rule, pages 26806-26812)

• Sections 602(c)(2)(B) and 603(c)(2) prohibit any recipient from using Fiscal Recovery Funds for deposit into any pension fund.  
• While counties have broad latitude to spend ARP funding from revenue loss on a variety of government services, expenses related to financing existing or new debt or replenishing financial reserves would not be eligible (See Interim Final Rule, page 26796-26797).  
• ARP funds cannot be used to satisfy any obligation arising under or pursuant to a settlement agreement, judgment, consent decree, or judicially confirmed debt restructuring in a judicial, administrative, or regulatory proceeding, except if the judgment or settlement required the provision of government services (see Interim Final Rule, pages 26796-26797). 
• Additionally, ARP monies also may not be used as “non-Federal match for other Federal programs whose statute or regulations bar the use of Federal funds to meet matching requirements.” (See Interim Final Rule, page 26811). 

• If the county does not have statutory authority under North Carolina law to undertake a particular activity, it may not use its ARP funds to finance the program (see G.S. 160A-20.1 & G.S. 153A-449). 

Other federal ARP programs – NACo developed an interactive tool that helps counties navigate the roughly $1.5 trillion in county related funding from the American Rescue Plan Act of 2021. Programs that may provide counties with additional funding are denoted as “county eligible.” Click here to access the tool. American Rescue Plan Act Funding Breakdown (naco.org). 

HOPE – The Housing Opportunities and Prevention of Evictions Program (HOPE) provides rent and utility assistance to low-income renters that are experiencing financial hardship due to the economic impacts of COVID-19. The program helps prevent evictions and utility disconnections to promote housing stability during the ongoing COVID-19 pandemic. Click here for more information. 

LIWAP – The Low-Income Household Water Assistance Program was funded by both the Consolidated Appropriations Act (December 2020) and the American Rescue Plan Act (March 2021) to assist low-income households that pay a high proportion of household income for drinking water and wastewater services. The priority of LIHWAP is to provide continuity of service to customers whose water and/or wastewater service has been disconnected or is in danger of being disconnected. Click here to learn more.  

Childcare Stabilization Grants – NCDHHS is Investing $806 Million in the Childcare Stabilization Program to Support Providers, Teachers and Staff, and Children and Families. Click here for more information. 

Hometown Strong Initiative – Hometown Strong creates a partnership between state agencies and local leaders to champion rural communities. The effort leverages state and local resources, identifies ongoing projects and community needs, and implements focused plans to boost the economy, improve infrastructure and strengthen North Carolina’s hometowns. Click here for more information. *Hometown Strong is not a funding source. It is a mechanism for local leaders to collaborate with state agencies on community needs.  

• lick here for U.S. Treasury Quick Reference Guide on eligible uses: PowerPoint Presentation (treasury.gov) 

• Click here to review U.S. Treasury’s Interim Final Rule for details on eligible uses: 2021-10283.pdf (govinfo.gov) 
• See U.S. Treasury FAQ document on eligible uses: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf  
• See U.S. Treasury Fact Sheet outlining examples of eligible uses: SLFRP-Fact-Sheet-FINAL1-508A.pdf (treasury.gov) 
• Click here to review Expenditure Categories as outlined in U.S. Treasury’s Compliance and Reporting Guidance Appendix 1: See Compliance and Reporting Guidance Appendix 1: Expenditure Categories 

Support Public Health Response – COVID-19 mitigation, medical expenses, behavioral healthcare, certain public health, and safety staff (see Interim Final Rule, pages 26790-26791). The Interim Final Rule identifies a broader range of services and programs that will be presumed to be responding to the public health emergency when provided in low-income and Native American communities. Specifically, Treasury will presume that certain types of services are eligible uses when provided in a Qualified Census Tract (QCT) or other households, businesses or populations disproportionately impacted by COVID-19. 

Replace Public Sector Revenue Loss – Use funds to provide government services to the extent of the reduction in revenue experienced due to the pandemic (see Interim Final Rule, pages 26799-26801, 26816, 26822-26823).  

According to the Interim Final Rule, “government services can include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services.” (See Interim Final Rule, page 26801). However, these “lost revenue” monies may not be used for debt issuance or debt service, legal settlements, or judgements, or to make deposits to rainy day funds or other financial reserves. 

The categories that define eligible uses for public health response, addressing economic impact, premium pay and infrastructure are more prescribed than the revenue loss category. The Revenue Loss category allows for much more flexibility to provide government services – to the extent of the reduction in revenue due to the pandemic. 

• Click here to access the revenue loss calculator developed by NACo and the Government Finance Officers Association. 

• Review UNC School of Government blog post American Rescue Plan Act of 2021 (ARP): Local Government Expenditures of ARP funds for General Government Purposes – Coates’ Canons Coates’ Canons (unc.edu) 

Water and Sewer Infrastructure – make necessary investments to improve access to clean drinking water and invest in wastewater and stormwater infrastructure (see Interim Final Rule, pages 26802-26803. The Interim Final Rule aligns eligible Water and Sewer uses of Fiscal Recovery Funds with a wide range of projects allowed under Environmental Protection Agency’s (EPA) Clean Water State Revolving Fund (CWSRF) or Drinking Water State Revolving Fund (DWSRF).  

• Water infrastructure projects over $10 million are subject to Davis-Bacon (or similar) fair labor requirements See FAQ 6.17 and the Reporting and Compliance pg. 21. 
• Click here to access an Overview of CWSRF Eligibilities (epa.gov) 
• Click here to access the Drinking Water State Revolving Fund Eligibility Handbook (epa.gov) 

Address Negative Economic Impacts – Respond to economic harms to workers, families, small businesses, impacted businesses, impacted industries, and the public sector. (See Interim Final Rule, pages 26794-26796).  

• The Interim Final Rule identifies a broader range of services and programs that will be presumed to be responding to the public health emergency when provided in low-income and Native American communities. Specifically, Treasury will presume that certain types of services are eligible uses when provided in a Qualified Census Tract (QCT) or other households, businesses or populations disproportionately impacted by COVID-19. Click here to access a tool provided by U.S. Department of Housing and Urban Development to locate Qualified Census Tracts. 
• If a county has statutory authority under state law to finance a particular program, then it may contract with a private entity to perform that program. However, the county has an obligation to ensure the subrecipient carries out the public purpose it was obligated to undertake.  
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• Local governments have very limited authority to fund projects that benefit small businesses and non-profits. Click here to review UNC School of Government blog post on Aid for Small Businesses and Non-Profits with ARP Fiscal Recovery Funds. 

Premium Pay for Essential Workers – Offer additional support to those who have and will bear the greatest health risks because of their service in critical infrastructure sectors (see Interim Final Rule, pages 26797-26799). 

Review UNC School of Government blog post American Rescue Plan Act of 2021: Using ARP/CLFRF to Provide Premium Pay for Local Government Employees. 

Additional justification is needed if premium pay would increase a worker’s total pay above 150 percent of their residing state’s average annual wage for all occupations, as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics, or their residing county’s average annual wage, as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics, whichever is higher, on an annual basis. 

Broadband Infrastructure – Make necessary investments to provide unserved or underserved locations with new or expanded broadband access (see Interim Final Rule, pages 26804-26806).  

• North Carolina state law restricts a county’s ability to use ARP funds for broadband infrastructure. According to § 153A-459 a county may provide grants to unaffiliated qualified private providers of high‑speed Internet access service, as that term is defined in G.S. 160A‑340(4), for the purpose of expanding service in unserved areas for economic development in the county. The provision also states, that “the county shall use only unrestricted general fund revenue for the grants,” which means ARP funds cannot be used for this purpose. 
• NCACC is seeking legislative relief from the General Assembly to allow for more flexibility in using ARP funds to expand broadband access.  

What Do North Carolina Cities and Counties Do? | UNC School of Government 

A local government cannot engage in any activity unless it has statutory authority to do so. In North Carolina, counties are required by the state to offer a range of mandated services including law enforcement, jails, medical examiner, courts, building code enforcement, social services, public health, mental health, deed registration, election administration and tax assessment.   

In addition, counties may also provide for fire protection, water, sewer, solid waste collection and disposal, land use regulation, community colleges, public libraries, hospitals, parks and recreation programs and facilities, and tax collection. 

Counties have broad authority to undertake programs that benefit its citizens. There are many sources of state law authority that allow counties to use ARP monies to fund its own programs that will aid its community members in responding to COVID-19 and mitigating its financial impact.  

• Review North Carolina General Statutes Chapter on Counties: § 153 A  
• § 160A-17.1 authorizes the governing body of any city or county to make contracts for and to accept grants-in-aid and loans from the federal and State governments and their agencies for constructing, expanding, maintaining, and operating any project or facility, or performing any function, which such city or county may be authorized by general law or local act to provide or perform.  

• § 160D-1311 outlines state authority for local governments to engage in certain community development programs and activities to provide for the “welfare needs of persons of low and moderate income. 
• § 160A-497 gives local governments broad authority to assist senior citizens. 
• Review UNC School of Government blog post: American Rescue Plan Act of 2021: Local Government Authority to Expend their Allocations. 
• The North Carolina Constitution, states that “Beneficent provision for the poor, the unfortunate, and the orphan is one of the first duties of a civilized and a Christian state.”  
• The North Carolina Constitution requires all expenditures of public funds to be “for public purposes only.” It also prohibits “emoluments or privileges” (gifts) unless a public service is provided in return.  

• § 153A-459 states that the county shall use only unrestricted general fund revenue for the broadband grants, meaning ARP funds cannot be used for this purpose.  

ARP allows transfers of funds to nonprofits and other private entities as subrecipients for ARP eligible uses. North Carolina state law provides broad authority for a county to contract for services that it has statutory authority to undertake (see § 153A-449). Under state law, there also is broad authority for a local government to enter into an interlocal agreement with another government entity to accomplish a public purpose that the local government has statutory authority to undertake (see G.S. 160A, Article 20).  

• If the county does not have statutory authority to undertake a particular activity, it may not use its ARP funds to finance the program. 
• Subrecipient requirements should be spelled out clearly in a contractual or subrecipient agreement between the county and the grantee. The county must perform a noncompliance risk assessment, and manage and monitor subrecipients to ensure compliance, reporting, and record keeping as required by BOTH federal and state law. 

Most of the provisions of the Uniform Guidance (2 CFR Part 200) apply to this program, including the Cost Principles and Single Audit Act requirements. State requirements under the Local Government Budget and Fiscal Control Act (G.S. Ch. 159, Art. 3), state procurement and contracting and process requirements also apply. Recipients are responsible for effective administration of the federal funds and are accountable to Treasury for oversight of their subrecipients. This includes ensuring subrecipients comply with the fiscal recovery fund statute, fiscal recovery fund Award Terms and Conditions, Treasury’s Interim Final Rule, and reporting requirements as applicable. 

• Review all requirements including written policies, record retention, documentation, monitoring, internal controls, procurement, bidding, contracting, and auditing, fiscal management and control, budgeting, expenditure control, and accounting. 

• Review U.S. Treasury Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds 
• Review Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (also known as the Uniform Guidance or UG). 
• Click here to review the 2021 OMB Compliance Supplement, which provides additional information on compliance requirements as outlined in the Uniform Guidance. 
• Review state requirements under The Local Government Budget and Fiscal Control Act 
• Click here to review UNC School of Government blog post on the American Rescue Plan Act of 2021 (ARP): Accepting Funds, Budgeting & Cash Management. 

• Treasury’s Interim Final Rule, guidance, and UG outline types of costs that are allowable including certain audit costs for administering ARP funds. 
• Recipients may use funds for consultants to support effective management and oversight, including consultation for ensuring compliance with legal, regulatory, and other requirements. Costs must be reasonable and allocable as outlined in 2 CFR 200.404 and 2 CFR 200.405. 
• County Reporting Requirements – All 100 NC counties must complete the one-time Interim Report, due August 31, 2021 (counties that did not receive FRF until after July 15, 2021, may submit an Interim Report within 60 days of receiving funds 60-days after receiving ARP funds). 
• All counties also will complete the Project and Expenditure Report, beginning January 31, 2022, although some will submit it annually and others quarterly. A handful of counties (those over 250,000 population) must submit the yearly Recovery Plan Performance Report. 
• Click here to watch a step-by-step video walkthrough of the Treasury Portal for the Interim Report and Recovery Plan.