City counsel says Treasury guidance allows ARPA reallocations but warns of audit risk
Get AI-powered insights, summaries, and transcripts
Subscribe
Summary
Outside counsel told the council Treasury guidance permits certain reallocations of ARPA funds obligated by 12/31/2024 if the new use is eligible and funds are spent by 12/31/2026, but cautioned that inadequate documentation could force repayment; councilmembers and community leaders pushed for transparency about repurposing ARPA-funded programs.
The council received legal guidance that under current U.S. Treasury rules it can reallocate ARPA funds that were obligated by Dec. 31, 2024 to other eligible expenses if those expenditures are completed by Dec. 31, 2026. Chris Johnson of Jones Walker told the council the rules now permit some reallocations and cited other jurisdictions that have done so.
Johnson said the city has received $388 million in ARPA funds and that obligations entered into by Dec. 31, 2024 may be moved to other eligible uses — including certain public-safety salaries — provided that the reclassification and subsequent spending comply with Treasury guidance and final rules.
At the same time, several nonprofit leaders and consultants warned lawmakers that some ARPA-funded programs are reimbursement grants and that reallocating funds without careful documentation and timely expenditure risks federal audit findings and the need to repay the Treasury. An ARPA subrecipient expert told the council that repurposing some of the $14.75 million cited by council staff could trigger repayment obligations if reporting and audit trails are insufficient.
Quote: "That $14,000,000 that is included in your amendment, it is not the city's money... If they are repurposed after this point, they will have to be repaid to the US Treasury," said a consultant working with ARPA subrecipients who addressed the council.
Implications: Council members said they will rely on legal counsel and written memos from outside ARPA experts and will require clear documentation before finalizing reclassifications. The council also signaled interest in targeted safeguards for community programs funded through ARPA to avoid service disruptions for ongoing participants.