Ten impactful uses of American Rescue Plan funding

State and local governments have a significant opportunity to support their economic resiliency through the landmark funding of Fiscal Recovery Funds from the American Rescue Plan Act of 2021 (ARP). With the passage of the Final Rule in early January, the United States Treasury Department provided considerably more flexibility with the use of Fiscal Recovery Funds than previous guidance had allowed.

Having such a large, positive fiscal jolt to state and local budgets and the news of greater flexibility with the use of the funding, Baker Tilly recognizes the importance of wise investments, strategic planning and informed choices. To that end, we offer this list of ten impactful funding uses to help guide your journey.

1. Solicit stakeholder and resident input to prepare your ARP funding plans

Due to the flexibility of ARP funding, it is now more important than ever to make community outreach and stakeholder engagement a core component of your organization's approach to the allocation of Fiscal Recovery Funds. You can accomplish this by creating and implementing an outreach plan tailored to your community that includes a mix of stakeholder meetings, focus groups, online surveys, and community meetings – the expenses for which may be eligible uses of your Fiscal Recovery Funds.

2. Prepare a long-term “post-pandemic” financial plan

Fiscal Recovery Funds provide diverse financial opportunities for state and local governments, making it essential to have a plan that maps out ways to best allocate those resources and maintain services long after the relief funds are expended. This injection of shorter-term funding underscores the need for local units of government to extend planning horizons beyond one year. A long-term financial and capital planning approach provides a living document that is adjustable as new information becomes available. The long-term approach allows local governments to take the initiative to strategically identify, prioritize, and fund expenses and projects over the long-term.

3. Strengthen your local economy by preparing strategic economic development plans and housing strategies

As communities prepare for the post-pandemic economy, many are starting with an investment in an economic development and housing strategy. An impactful strategy defines priorities, coordinates stakeholders toward shared goals, defines actionable strategies to advance recovery and resilience, identifies catalytic sites for new investment, and aligns economic development and affordable housing tools. With this roadmap in hand, state and local governments are in the position to drive their post-pandemic futures towards an economically secure, innovative, efficient and vibrant community.

4. Improve your recruitment and compensation systems to address impacts of the “Great Resignation”

At the same time, recent job gains have been entirely in the private sector, leaving state and local governments nationwide balancing unprecedented job shortages with the need to provide uninterrupted services to their communities. This has public sector organizations competing for talent against the private sector now more than ever. Conducting a comprehensive market study gives actionable information to allow governments to remain competitive in the recruitment, talent development, and retention of workforce even while the job market continue to evolve.

5. Reduce operational costs by investing in technology

With their Fiscal Recovery Funds, many communities are considering making technology investments now to reduce operational costs in the future. Smart investment in technology – from automating manual processes to the implementation of cloud technology – provides several benefits to your organization, including streamlining processes and reducing operational costs; transitioning the organization from tactical to strategic; enabling remote interaction with employees, citizens and stakeholders; and improving data analytics and transparency. To make the right technology investment, communities must first start with an assessment of the current state of business processes and their supporting technology and outlining a prioritized roadmap for further investment.

6. Evaluate ARP funding proposals by analyzing project funding sources and fiscal/economic impacts

Receiving such a large and positive fiscal boost to state and local budgets means evaluating ARP funding proposals at a deeper level. With each funding proposal, state and local officials may seek professional expertise to:

• Break down individual components of a project plan and identify potential funding sources
• Perform a preliminary analysis of funding source feasibility
• Quantify revenue source (rate or tax) impacts needed to support any proposed financing plans
• Present funding alternatives or an optimized funding plan to maximize value

7. Address deferred maintenance through an infrastructure assessment and asset management plan

An infrastructure assessment and asset management plan steers communities to proactively manage their assets over the life cycle of each asset to maximize return on investment, financial responsibility, community engagement and community satisfaction. The plan provides communities with actionable planning and strategies to best fund the community’s assets and provide clear direction to all community members and staff. The overall goal is to provide a steady and known financial plan and the needed flexibility to pivot and respond to new information and the unknown.

8. Conduct a cybersecurity and/or IT risk assessment to safeguard your organization’s information

Cybersecurity has become a hot topic over recent years, including finding solutions to prevent falling victim to ransomware or wire fraud attacks. The public sector is a primary target for cyberattacks. In this environment, IT leaders face tough questions, such as:

• How secure are we?
• What is our risk?
• Are we compliant with the latest regulations?
• How do we measure our cybersecurity risk?
• How do we respond to a cybersecurity attack?

A cybersecurity assessment approach will strengthen your knowledge of your organization’s cybersecurity posture and risk exposure. The assessment will also provide actionable recommendations to remediate gaps in your cybersecurity program and ways to enhance overall effectiveness of your cybersecurity safeguards.

9. Prepare for your post-pandemic federal compliance audit

Along with the influx of federal funds coming to local governments, communities may need a federal compliance audit for the first time in a while or for the first time ever in your community. It is crucial to establish the right processes and controls early to ensure adherence to the compliance requirements and to get through a smooth audit process. We can help by reviewing what your organization currently has in place and provide recommendations to solidify internal controls over your grant management practices.

10. Seek support to identify and apply for additional state and federal funding for your strategic objectives

While the Fiscal Recovery Funds are significant, there are numerous other federal and state funding programs currently available to state and local governments for priority projects. To successfully secure funding from these other programs, communities need to adopt a strategic approach that includes developing a detailed list of priority projects and match these to the various federal and state funding opportunities. Many communities can use the Fiscal Recovery Funds for creating this strategic funding plan, support with grant writing, as well as potentially providing the required local matching funds.