Are expenses related to building or enhancing a municipality’s data and innovation capacities an eligible use of ARP funds?

Expenses related to building or enhancing a municipality’s data and innovation capacities may be eligible uses of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) under the Negative Economic Impact category related to the Public Sector Capacity and Workforce sub-category to ensure effective service delivery of municipal operations.

The U.S. Department of the Treasury’s (“Treasury”) Interim Final Rule provided municipalities “substantial flexibility to determine how best to use payments from the CSLFRF program to meet the needs of their communities.”[1] The Final Rule, released on January 6, 2022, has adopted the Interim Final Rule and amended it to provide “broader flexibility and greater simplicity in the program, in response to public comments.”[2]

In response to public comments about the use of CSLFRF for data and technology upgrades, Treasury recognized in the Final Rule that “collecting high-quality data and developing community-driven, evidence-based programs requires resources to hire and build the capacity of staff, adopt new processes and systems, and use new technology and tools in order to effectively develop, execute, and evaluate programs.”[3]

The Final Rule provides a non-exhaustive list of investments in public sector capacity and workforce that qualify as eligible uses of CSLFRF in response to the negative economic impacts of the public health emergency, including payment for program evaluation and evidence resources, data analysis resources, technology infrastructure, community outreach and engagement, and capacity building.[4]

Examples of eligible uses for improving technology described in the Final Rule include:

resources to improve access to and the user-experience of government information technology systems, including upgrades to hardware and software as well as improvements to public-facing websites or to data management systems, to increase public access and improve public delivery of government programs and services (including in the judicial, legislative, or executive branches).[5]

Examples of eligible uses for capacity building described in the Final Rule include:

resources to support using data and evidence in designing, executing, and evaluating programs, including hiring public sector staff, contractors, academics, consultants, and others with expertise in evaluation, data, technology, and community engagement as well as technical assistance support for public sector staff, staff of subrecipients, and community partners to support effective implementation of SLFRF-funded programs and programs that respond to the public health emergency and its negative economic impacts, or which households, small businesses, or impacted industries are accessing during the pandemic that are funded by other sources.[6]

Examples of eligible uses for data analysis described in the Final Rule include:

resources to gather, assess, and use data for effective policy-making and real-time tracking of program performance to support effective implementation of SLFRF-funded programs and programs that respond to the public health emergency and its negative economic impacts, or which households, small businesses, or impacted industries are accessing during the pandemic that are funded by other sources. These resources include but are not limited to data gathering, data cleaning, data analysis, data infrastructure, data management, data sharing, data transparency, performance management, outcomes-based budgeting, outcomes-based procurement, and other data needs. 

Treasury further clarified that the enhancement of public health data systems could include:

investments in “software, databases, and other information technology resources that support responses to the COVID-19 public health emergency but also provide benefits for other use cases for long-term capacity of public health departments and systems.

Last Updated: January 31, 2022