Most ARPA funds had to be obligated by December 31, 2024, but recipients can spend these allocated amounts until December 31, 2026.
Local governments and state agencies continue to manage the massive influx of capital from the American Rescue Plan Act (ARPA). With the obligation deadline now in the rearview mirror, confusion often arises regarding the difference between assigning funds and actually writing the check. The short answer depends on which phase of the funding cycle you examine.
Money is no longer available for new allocations if a recipient failed to obligate it by the end of 2024. However, for projects already approved and contracted, the cash remains available for expenditure. Understanding this distinction saves finance officers and project managers from panic as they approach the final closeout dates.
Current Status Of ARPA State And Local Fiscal Recovery Funds
The State and Local Fiscal Recovery Funds (SLFRF) program served as the backbone of the rescue plan. It delivered $350 billion to eligible governments. As we navigate through late 2025, the window for “obligating” these dollars has closed. The U.S. Department of the Treasury set a strict cutoff. Recipients had to incur an obligation—a binding legal agreement to use the funds—by December 31, 2024.
This means cities and counties cannot simply decide to start a brand-new, unplanned park project today using leftover ARPA cash unless they already created a binding contract or order for it prior to that deadline. If a recipient missed that date, those specific funds effectively expire and must return to the Treasury.
However, the spending window remains wide open. You have until the end of 2026 to complete the work and pay out the cash. This two-year gap between obligation and expenditure allows for construction delays, supply chain issues, and the natural pace of government procurement.
Key Dates And Compliance Timeline
Visualizing the schedule helps clarify where your jurisdiction stands. The timeline below breaks down the major phases of the SLFRF program.
| Milestone Phase | Deadline Date | Action Required |
|---|---|---|
| Obligation Cutoff | Dec 31, 2024 | Funds must be assigned to specific orders or contracts. |
| Expenditure Deadline | Dec 31, 2026 | All work must be completed and funds fully paid out. |
| Final Reporting | Mar 31, 2027 | Submission of final closeout reports to Treasury. |
| Record Retention | Dec 31, 2031 | Keep all financial records and support docs for audit. |
| Asset Monitoring | Varies (5+ Years) | Track real property or equipment bought with funds. |
| Audit Period | Ongoing | Single Audits required if spending >$750k/year. |
| Revenue Loss Cap | Dec 31, 2024 | Calculation of revenue loss tied to fiscal year ends. |
Are ARPA Funds Still Available For New Contracts?
Technically, no. You cannot originate a completely new obligation now. The definition of “obligation” is strict. It generally requires an order placed for property and services or a contract entered into. It also includes similar transactions that require payment.
This creates a tight spot for project managers. If a contractor backs out today, or a project falls through, you might lose the ability to re-obligate those specific dollars to a totally different project. The Treasury rules generally do not allow you to shift funds to a new purpose after the 2024 cutoff. The funds were meant to be “spoken for” by that date.
Exceptions For Administrative Costs
One nuance exists for administrative expenses. Recipients can still use funds to cover the costs of managing the program itself. This includes compliance reporting, audit fees, and consulting needed to close out the grant. These costs often occur after 2024 but support the underlying compliance of the obligated projects.
Understanding The Expenditure Deadline
The “period of performance” runs through December 31, 2026. This is the date by which the liquid cash must leave the government’s bank account and land with the vendor, contractor, or beneficiary. Projects must wrap up by this time.
Construction projects often face delays. If a road repair project funded by ARPA hits a snag, the town must accelerate the work. If the work is not done and paid for by the end of 2026, the local government might have to cover the remaining bill with its own general funds. The Treasury will likely recoup any ARPA dollars sitting unspent after this deadline.
Eligible Use Categories And Restrictions
While new obligations are halted, reviewing what these funds supported helps in reporting and audit preparation. The Treasury defined four main buckets for use. Most spending occurring now falls into one of these established categories.
Public Health And Economic Impacts
This category covered COVID-19 mitigation and broader economic aid. It included small business grants, household assistance, and tourism support. If you obligated funds for a small business grant program in 2024, you can continue disbursing those monthly grant checks throughout 2025 and 2026, provided the recipients were identified and the obligation was recorded.
Premium Pay For Essential Workers
Local governments could offer extra pay to workers who faced heightened risks. While most premium pay programs have concluded, retroactive payments were allowed in certain contexts. Any remaining payouts must strictly adhere to the cap of $13 per hour above regular wages, up to a maximum of $25,000 per worker.
Revenue Loss Replacement
This was the most flexible category. Governments could claim a “standard allowance” of up to $10 million in revenue loss without doing complex math. Funds categorized here could pay for “government services.” This included road building, cybersecurity, school services, and police salaries. Because “government services” is broad, many towns moved their ARPA allocation into this bucket to simplify compliance. Once categorized as Revenue Loss by the 2024 deadline, the spending pressure eased slightly, as it essentially reimbursed the general fund.
Water, Sewer, And Broadband Infrastructure
Infrastructure projects take time. A sewer plant upgrade obligated in 2024 might not break ground until mid-2025. This is permitted. The U.S. Department of the Treasury specified that these long-term capital investments fit the timeline as long as the binding commitment existed before the cutoff.
What Counts As A Valid Obligation?
Audit risks often center on this definition. An obligation is not just a budget line item. The city council voting to “allocate $1 million to parks” in November 2024 might not be enough if they didn’t sign a contract with a vendor. A mere internal plan does not always meet the federal standard for obligation.
Valid obligations usually include:
- Signed contracts for goods or services.
- Purchase orders issued to vendors.
- Grant agreements signed with sub-recipients (like a local non-profit).
- Similar legally binding transactions.
If you relied on an informal resolution without a binding external agreement, you should consult legal counsel immediately. Auditors will look for the paper trail that proves the liability existed before January 1, 2025.
Reporting Requirements For 2025 And Beyond
Even though the obligation phase ended, the paperwork burden continues. The Treasury requires Project and Expenditure (P&E) reports. The frequency depends on the size of the recipient.
States and major metropolitan cities report quarterly. Smaller entities, known as Non-Entitlement Units (NEUs), generally report annually. These reports must show exactly how the obligated funds are turning into actual expenditures. You must track every dollar.
Accuracy here prevents future clawbacks. If a project comes in under budget in 2025, the “savings” cannot be moved to a new project because the obligation deadline passed. Those savings likely return to the federal government. This rigid rule surprises many finance directors who are used to shifting budget surpluses freely.
Navigating The Audit Process
The Single Audit Act applies to this funding. If your organization spends more than $750,000 in federal awards in a fiscal year, you trigger a Single Audit. This is a rigorous review of your internal controls and compliance.
Auditors will test specifically for the timeline. They will pull contracts to verify dates. They will check that the goods were received and paid for within the eligible period. They will also verify that you checked the “SAM.gov” status of your contractors to ensure they weren’t debarred or suspended.
Common Pitfalls To Avoid In The Expenditure Phase
As you spend down the remaining balance, stay alert for these errors. Mistakes now are harder to fix because you cannot re-obligate the funds to correct a category error.
Sub-recipient Monitoring Gaps
If you passed money to a local food bank or non-profit, you are responsible for their behavior. You must monitor how they spend the cash. If they buy ineligible items, the Treasury holds you, the prime recipient, liable. Ensure you collect their receipts and performance data regularly.
Procurement Policy Conflicts
You must follow federal procurement rules (Uniform Guidance, 2 CFR Part 200) or your local rules, whichever are stricter. A common error is failing to competitively bid a contract. Just because it is “emergency” money doesn’t mean you can skip the bid process for a standard construction job in 2025.
Strategic Spending Of Remaining Balances
For funds correctly obligated, the goal is efficient execution. Project managers should closely monitor burn rates. If a contractor is moving too slowly, you risk hitting the 2026 wall with unfinished work.
Review your contracts for termination clauses. If a vendor underperforms, you need to know if you can replace them without losing the “obligation” status of the funds. In some limited cases, replacing a contractor for the same scope of work is allowed, but this is a complex legal area. Do not assume you can simply fire one vendor and hire another without checking the Treasury’s latest FAQs.
Detailed Breakdown Of Spending Categories
Different rules apply to how you finalize spending in each sector. This table outlines specific considerations for the major expenditure types active right now.
| Category | Compliance Focus | Audit Risk |
|---|---|---|
| Payroll & Benefits | Time & effort tracking sheets. | Missing timesheets or ineligible employees. |
| Capital Construction | Davis-Bacon Act (wages), NEPA (environmental). | Labor compliance and environmental reviews. |
| Small Business Grants | Beneficiary eligibility proof. | Lack of documentation on business loss. |
| Revenue Replacement | Government services definition. | Spending on debt service or reserves (banned). |
| Broadband | Speed standards (100 Mbps up/down). | Installing outdated/slow technology. |
| Water & Sewer | Alignment with Clean Water State Revolving Fund. | Projects outside eligible project types. |
| Premium Pay | Justification of “essential work”. | Exceeding hourly caps or total caps. |
Are ARPA Funds Still Available For Homeowners?
Many individuals ask if they can personally apply for ARPA money. The direct stimulus checks ended years ago. However, local programs funded by ARPA might still be active. A city might have obligated $500,000 for a “Home Repair Assistance Program” in 2024. That program could still be accepting applications from residents in 2025 to spend down that balance.
Residents should check with their county or municipal housing departments. Do not search for a federal application portal; these funds are managed locally. If your town has an active program, the money is available until their specific allocation runs out or the 2026 deadline hits.
Handling Unspent Funds
What happens if you reach December 2026 and have $50,000 left over? You must return it to the U.S. Treasury. There is no rollover. The process for returning funds involves specific instructions in the Treasury portal.
Smart finance directors are reviewing projections now. If it looks like a project will come in under budget, they review their obligation records. While you cannot create a new project, you might be able to cover cost overruns on another existing, obligated project within the same scope, depending on how the original obligation was written.
The Impact Of The Debt Ceiling Deal
In 2023, the Fiscal Responsibility Act clawed back some unobligated federal COVID funds. This created anxiety about ARPA SLFRF. Fortunately, the SLFRF was largely shielded from immediate rescission, provided the funds were obligated by the statutory deadline. The “Are ARPA funds still available?” question often stems from headlines about these clawbacks.
For the average local government, the funds remain safe as long as they met the 2024 obligation test. The federal government did not sweep these accounts blank overnight. The contract remains valid: you do the work, you keep the funding.
Preparing For Final Closeout
The closeout phase is administrative heavy lifting. You will need to certify that all obligations were liquidated. You will also need to ensure all property acquired with the funds is tracked. If you bought a fire truck with ARPA money, that truck is subject to federal interest tracking for its useful life.
Documentation is your only defense. Scan every invoice, contract, and council minute. Store them in a redundant digital archive. Federal auditors can knock on your door years after the money is gone.
The American Rescue Plan Act provided a historic level of investment in local communities. While the era of “free money” via new obligations has ended, the work of spending, building, and reporting continues at full speed. Managing the Uniform Guidance requirements during this expenditure phase is the final hurdle to success.