There is a lot of money out there right now. Everything from stimulus checks to PPP loans to CARES Act and the most recent American Rescue Plan Act (ARPA). If you work at a local government, and are involved with budgeting and finance, you have likely heard about the ARPA. Passed by Congress in March 2021, this latest round of money is poised to inject local governments with $350 billion, pun intended.
Much like the CARES Act money, local governments would like to know the effects this will have on their uniform guidance single audits. Last time we dealt with this; we were all told an addendum to the compliance supplement was going to arrive in early Fall of 2020 to provide guidance. I was among those who believed that. Turns out we didn’t get the guidance until late December 2020. This of course plays havoc on many government audits, financial planning and decision making necessary to use the money in an effective way. I can understand some of the delay, being that we were all dealing with the largest pandemic in the last 100 years. But the American Rescue Plan Act has even more time to start developing guidance then its predecessor CARES Act had, and somehow, I’m not going to be surprised if we are waiting longer then expected to have the direction needed this time around.
Our government audit clients are already asking if this money is going to be subject to single audit, and what can they spend it on. As of the date I’m writing this in early May 2021, even the AICPA Government Audit Quality Center (GAQC) is not sure what the effects this money will have on our upcoming single audits. Some of the questions on our minds are things like “which portions of the money are subject to single audit? Are there going to be new programs, or addendums to existing programs? Are we going to get guidance before the Fall of 2021? Will there be multiple versions of the compliance supplement in 2021?
What we do know: More money for the Emergency Stabilization Fund is coming, and it is going to be audited. This includes money for elementary and secondary schools. According to the Government Finance Officers Association (GFOA) local governments are going to receive two payments for their portion of the ARPA. The first half of which is slated to be disbursed to our cities, towns and villages (yes, the law says villages too) 60 days after the law is enacted. Government entities could reasonably expect that to happen before your June 30 year end. Just because the money is received before June 30, doesn’t mean it has to be spent before June 30. In fact, you might want to purposefully wait to spend it until after year end, in order to avoid the single audit implications on the June 30, 2021 SEFA. The second half of the disbursement is expected a year after that. If you want to know what your city’s estimated allocation will be, you can navigate to:
If you do want to spend it in fiscal year 2021-2022, entities should budget for it. The allowable use for this money is awfully vague and broadly defined as of now. For instance, local governments can use the money for “lost revenue” due to the pandemic relative to the year before the pandemic. It can also be used for negatively impacted industries in the local economy; how you prove those industries were negatively impacted is still something we are researching. If you don’t want to deal with proving lost revenue or negatively impacted industries in your city, you can also use the money for investments in water, sewer or broadband infrastructure. This is an area that many municipalities in Arizona might actually take advantage of.
Non-allowable expenditures for the American Rescue Plan Act funding are an offset to a tax cut your city implemented, or a delay in taxes. Local governments also can’t use it to help pay down those pesky pension liabilities, sorry. Clear as mud, right. If you are wondering how to budget for this money, you may want to consult your auditors and/or attorneys directly on some of the ideas your Council has come up with so far. I would suggest carving out a separate fund number or object code in your G/L to help track activity with this money. This will also help considerably when it comes time for the audit, to make sure funds are not comingled with other grants with this activity, until we know more. The best news is that expenditures can be incurred through December 31, 2024; period of performance really should not be an issue at this point.
Stay tuned for more information on this latest round of federal spending and how it will affect your city. If you have any questions, please contact your Henry+Horne advisor. For more information and resources on COVID-19, see our coronavirus page.
Brian Hemmerle, CPA, CFE