Treasury's Obligation Rule: Navigating the SLFRF Guidelines under ARPA

Late last year, the Treasury released an Obligation Interim Final Rule (IFR) which provides clarification on questions surrounding the State and Local Fiscal Recovery Funds (SLFRF) under the American Rescue Plan Act (ARPA) program.

Reallocating or re-obligating funds after the 12/31/24 deadline is allowed but in only specific circumstances.

So, what constitutes an obligation? An “obligation” which the Treasury defines as, “an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment”. Simply put, if payment must legally be made for some good or service, an obligation has been established. A governing body voting to allocate, dedicate, or earmark a purchase or expenditure is not necessarily an obligation – a legal order or contract must be established for an obligation to be made. However, the Treasury is now allowing some exceptions to this obligation rule and deadline of 12/31/24.

What are the exceptions and how can you take advantage of them?

Recipients may obligate and spend SLFRF money after 12/31/24 on the following eligible legal and administrative related costs:

• reporting and compliance requirements
• single audit costs
• record retention and internal control requirements
• property standards
• environmental compliance requirements
• civil rights and nondiscrimination requirements

Eligible costs in these categories would be for in-house staff time or consultant/contractor expenses to satisfy these Federal grants requirements.

Recipients of SLFRF funds can take advantage of this exception and utilize these funds for administrative costs by following a four-step process:

1. Estimating the amount needed,