Can a municipality alter its use of ARP funds after it has designated a project in quarterly reporting to Treasury? Would this be allowable if ARP funds expended on the originally planned project were reimbursed with city funds?

The U.S. Department of the Treasury’s (“Treasury”) Final Rule on the American Rescue Plan Act’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) does not expressly permit or prohibit changes in project plans, nor does it address a jurisdiction’s internal or regulatory fiscal processes concerning approval by a legislative body in activities such as budget amendments, change orders, and other actions.

Treasury’s Project and Expenditure Report User Guide for CSLFRF states:

Treasury understands that recipients may use different budget processes. For example, a recipient may consider a project budgeted once a legislature has appropriated funds; whereas another recipient may consider a project budgeted at the moment the funds have been obligated.[1]

While nearly all federal grants require approval on most every component of a project and its associated budget and expenditures, Treasury specifically states that this is not the case with respect to the use of CSLFRF funds:

Treasury is not approving or pre-approving projects or budgets. Treasury will use this information to better understand the intended impact, identify opportunities for further engagement, and understand the recipient’s progress in program implementation. Treasury is also collecting additional descriptive information about the budget process to better understand the context of recipients’ budget processes.[2]

The Project and Expenditure Report User Guide also provides the following information to address steps that must be taken when project plans change on a quarterly or annual basis. This guidance acknowledges that awardees may find it necessary to alter project plans, including changes to previously budgeted and expended project line items.

Treasury’s Project and Expenditure Report User Guide states in relevant part:

Certain data fields may be updated in Treasury’s Portal. In addition, if projects were previously reported under an Expenditure Category that changed or no longer exists, or additional programmatic data is needed, the Project Profile screen will show a yellow pencil icon.[3]

Once a new project is identified and vetted, municipalities should consider thoroughly reviewing Section V. Editing and Revising Your Data, with the proposed project in mind, to better understand the steps required to report project changes, including project updates, revisions, and cancellations.[4] Section V provides instructions to edit and revise data through either manual entry or bulk upload depending upon which method is preferred or previously followed by the recipient.   

Manual entry utilizes the Treasury portal’s web-based forms to edit or change fields individually. Bulk upload functionality would be appropriate when dealing with larger sets of data or records. Using this process, recipients will have the ability to delete any new projects that have been created during the current reporting cycle.[5]   

Projects submitted in prior reporting periods may be removed through cancelling and setting obligations and expenditures to $0.00, and/or creating offsetting entries to capture the project changes. Appropriate edits of subrecipient(s) and subrecipient data can also be made.[6] Further, it may be reasonable to assume that a fully vetted project alteration would likely be allowable provided it complies with all other applicable Treasury guidance. Finally, because Treasury does not provide budget guidance, a municipality may appropriately rely on its own internal procedures and processes as well as any other relevant regulatory provisions regarding budget amendments to reflect changes in use of funds or project allocations.

Last Updated: July 6, 2022