When fundraising for your nonprofit, it is important to take into account all costs and grab every opportunity for funding. Nonprofits provide essential services, support, and resources to members of the community that would not otherwise be available if those services were provided solely by private business enterprises or other government agencies. Fortunately, the US government understands the importance of nonprofits and is ensuring that nonprofits are first in line to receive ARPA grant funding.

This blog will provide you with the necessary information in accordance with ARPA guidelines, such as funding requirements, eligibility, and the registration process.

What does ARPA stand for?

ARPA stands for the American Rescue Plan Act. The ARPA funding’s objective is to offer nonprofit organizations assistance in the form of competitive grants so they can address the detrimental economic effects of the COVID-19 public health emergency. A one-time grant will be provided by the rescue plan to eligible organizations. Although the grant is only given out once, the funds can be used throughout multiple fiscal years.

Nonprofit corporations, associations, agencies, or faith-based organizations with Internal Revenue Service Code 501(c)(3) or 501(c)(6) nonprofit status in the United States are eligible to apply for the grant.

What is ARPA money?

On March 11, 2021, President Joe Biden signed the $1.9 trillion package. It is the most recent federal stimulus program to promote public health and economic recovery from the COVID-19 epidemic. The proposal included the Coronavirus State and Local Fiscal Recovery Funds, which totaled $350 billion in emergency aid for state, local, territory, and tribal governments.

On January 6, 2022, the Treasury Department published the final rule. The decision, which took effect on April 1, 2022, adds more precision to certain criteria of ARPA grant funding, such as financial investments and increasing capacity and staffing in the public sector, paying premiums for important tasks, etc. The distribution of the funds is the responsibility of local governments and community foundations. In Omaha, Nebraska, for example, funding flows through the Omaha Community Foundation and United Way of the Midlands.

When do ARPA funds need to be spent?

According to ARPA guidelines, funding must be spent by the end of the calendar year 2026, which is great news for you and your organization! The funds can help build a financial foundation for your programming. That being said, you will need to put together a solid plan on how you intend to use the funds.

What can ARPA money be used for?

The ARPA grant funding can be used to: 

  • respond to a public health emergency, 
  • to stimulate economic recovery, 
  • to replace lost revenue, 
  • to invest in water, sewer, and broadband infrastructure.

A lot of candidates are wondering whether they can use this funding for internal reasons or not. Fortunately, ARPA money may be utilized to cover administrative expenses, such as payments to consultants and/or wages, to aid in the implementation of ARPA initiatives. This includes consulting fees to ensure effective project management as well as legal and regulatory compliance. To stabilize government operations, ARPA grant funding may also be used to increase employee capability.

ARPA Funding Categories

According to ARPA guidelines, a nonprofit organization can receive financing in two ways: as a beneficiary or as a subgrantee. You are a beneficiary if the government provides funds to your organization to address the health or economic effects of COVID. You are a subgrantee if the government pays you to do actions that will benefit individuals, families, or communities affected by COVID.

How to Apply for ARPA Funds

You need to follow certain steps to apply for ARPA grant funding.

You have to submit the “Application for Federal Domestic Assistance/Short Organisation Form” to Grants.gov. This form will gather very basic information about your company. Then, Fill out the “Grant Application Form (GAF).” This is the web form where you will enter the majority of your application information (e.g., project description, timelines, budget information).

When applying, you will be asked to describe how the requested ARPA money would alleviate financial hardship caused by the COVID-19 public health emergency and its economic consequences. You will also have to provide a description of how the new program or activities planned by your organization address needs produced by the COVID-19 epidemic.

Applications will be submitted in two groups: one for organizations with legal names that begin with A-L and another for organizations with legal names that begin with M-Z. The timing of grant review will not be affected by the varied submission windows.

ARPA grant funding distributions will be determined by the total number of applicants, the completeness of applications, the eligibility of expenses, the organizational need, the benefit to the community, and the size of the organization’s operating budget.

Are funds taxable?

According to the IRS, emergency grants from ARPA are not taxable and are not recorded on US tax returns.

However, some uses of the funds could have tax consequences. For example, if a grant recipient uses the funds to pay eligible employees premium pay during COVID-19, this type of payment is regarded as gross income and is consequently taxable. The reason behind this is that payments made as compensation for services are not qualified as disaster relief payments. Read more here.

ARPA Grant Compliance/ Reporting Requirements

Nonprofits that receive ARPA money, must meet compliance and reporting requirements. This promotes openness, accountability, and equity in the utilization of these critical resources.

In accordance with ARPA guidelines, you need to report the following: 

  • Accountability: In order to increase accountability, raise public awareness, and ensure that eligible uses are being used as intended, the grant program requires recipients to report. Each dollar of ARPA money spent must be reported, and recipients must give specific information about how the money was used.  
  • Transparent: To ensure that the public is aware of how ARPA grant funding is being used and results are being achieved, major recipients will publish a thorough Recovery Plan each year. The Treasury will also provide thorough public transparency reports on a quarterly basis for all recipients.  
  • Focused on Recovery: The SLFRF reporting guidance focuses on areas that are important for a robust economic recovery, such as provisions that emphasize equity, concentrate on economically struggling areas, support community empowerment, support good labor practices, and highlight evidence-based interventions.

Receiving and sharing ARPA money is an efficient way of assisting individuals who suffered losses as a result of the COVID-19 pandemic in recovering from this exceptional occurrence. This financing, however, comes with the obligation of ensuring that it is properly administered. Here are a few of the important items of paperwork that you should take note of.

  1. Uniform Guidance (2 CFR §200)

    Each federal grant has specific requirements outlined in “The Uniform Administrative Requirements Cost Principles, and Audit Requirements for Federal Awards”. Chances are you’ve heard this referred to as the Uniform Guidance. This beefy resource puts together a cohesive framework on the things needed to receive federal funding. 

  1. Universal Identifier and System for Award Management (2 C.F.R. Part 25) 

If you want to qualify for government contracts or grants, you must register with the System for Award Management (SAM). After doing so, you will be given a SAM number and be included in a large database with other nonprofit organizations that receive federal funding.

  1. Reporting Subaward and Executive Compensation Information, 2 C.F.R. Part 170

The federal government demands transparency from the organizations that it works with. In order to qualify for a grant, you will need to provide information on the compensation of your organization’s executives and any other entities that you intend to work with.

These 3 resources are just the beginning of the required documents for receiving a federal grant. It’s a headache! At Velu, we acknowledge that it can be overwhelming to process all of the federal grant accounting. That’s why we’re here. Our accounting experts will make sure that you’re well informed and ready for ARPA grant funding. Let’s connect!

Tyler Wilcox, CPA

Tyler has worked with businesses and nonprofits from small to large. His expertise in accounting, tax, consulting, and auditing set the foundation for his outsourced accounting solutions. Now, Tyler works exclusively with nonprofits by providing CFO (Chief Financial Officer) services. Want to work with Tyler? Get started today.