ARPA funding requirements center on one hard date: every dollar of State and Local Fiscal Recovery Funds must be spent by December 31, 2026, and any money still sitting in an account after that goes back to the federal government. The obligation deadline has already passed (December 31, 2024), so the work now is finishing projects, spending only on eligible categories, avoiding the prohibited ones, filing the required reports, and keeping the records long enough to survive an audit.
The Four Eligible Use Categories
Treasury’s Final Rule allows SLFRF spending in four categories, and every expenditure has to trace back to one of them.1U.S. Department of the Treasury. Eligible Uses
- Replacing lost public sector revenue and using it for general government services like police, fire, parks, and roads.
- Responding to the public health and economic impacts of the pandemic, including household assistance for food, rent, and utilities, aid to hard-hit industries, small business support, and vaccination and testing programs.
- Providing premium pay to essential workers who faced elevated health risks, such as healthcare workers, grocery employees, and first responders.
- Investing in water, sewer, and broadband infrastructure.
Revenue Loss Standard Allowance
Most recipients skip the revenue-loss formula and elect a standard allowance of up to $10 million, capped at the total award, that they can treat as revenue replacement.2U.S. Department of the Treasury. Quick Reference Guide: Using SLFRF Funds to Replace Lost Revenue and Provide Government Services It is the most flexible bucket because those dollars can go to virtually any government service. Recipients who elect it still have to report those expenditures under Expenditure Category 6 in Treasury’s portal.
Broadband Speed Thresholds
Broadband projects have to meet specific speed thresholds to count. The default is symmetrical 100 Mbps download and upload. Where that proves impractical because of cost or terrain, the project can deliver 100 Mbps download and 20 Mbps upload, but the infrastructure has to be designed to scale up to full 100/100 service.3Department of the Treasury. Coronavirus State and Local Fiscal Recovery Funds Final Rule
What You Cannot Spend the Money On
The most closely watched restriction applies only to states and territories: they cannot use SLFRF money to offset a reduction in net tax revenue caused by changes in their own laws or regulations.4Federal Register. Coronavirus State and Local Fiscal Recovery Funds A state cannot cut taxes and then quietly backfill the lost revenue with federal stimulus dollars. This restriction does not apply to local or tribal governments.5U.S. Department of the Treasury. Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance
No recipient, at any level, can use SLFRF funds for:
- Extraordinary deposits to reduce unfunded pension liabilities.4Federal Register. Coronavirus State and Local Fiscal Recovery Funds
- Interest or principal on outstanding debt.
- Deposits into rainy day funds or financial reserves.
- Settlements, consent decrees, or court judgments.
- Lobbying to influence members of Congress, congressional staff, or agency officials on federal grants.6Office of the Law Revision Counsel. 31 USC 1352 – Limitation on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions
Money spent on any of these can be clawed back.
Obligation and Expenditure Deadlines
SLFRF runs on two deadlines, and it helps to keep them straight.
The obligation deadline was December 31, 2024. By that date, recipients had to commit their funds through contracts, subawards, or similar binding agreements.7eCFR. 31 CFR Part 35 Subpart A – Coronavirus State and Local Fiscal Recovery Funds Obligation is not the same as payment. Signing a construction contract obligates the funds even if the contractor has not yet been paid.
The expenditure deadline is December 31, 2026. Every obligated dollar has to be fully spent by that date. Anything obligated but not spent goes back to Treasury.7eCFR. 31 CFR Part 35 Subpart A – Coronavirus State and Local Fiscal Recovery Funds Slow-moving projects are the exposure. If work drags past year-end 2026, the remaining balance is forfeit.
Recoupment: What Treasury Is Doing Now
In March 2025, Treasury issued a formal notice stating its intent to vigorously monitor how recipients obligated funds by the December 31, 2024 deadline and to recapture any money that was not properly committed.8U.S. Department of the Treasury. Notice to Recipients of SLFRF on Compliance Reviews and Related Recoupment Efforts
The process works in a set sequence. Treasury reviews obligation data from the latest reports. It then sends “Financial Instructions to Return Unobligated Funds” to recipients whose awards are not fully obligated. Those instructions state the amount owed and a repayment deadline, and direct the recipient to Pay.gov. If the recipient misses that deadline, Treasury establishes a formal debt, and interest and penalties begin to accrue.8U.S. Department of the Treasury. Notice to Recipients of SLFRF on Compliance Reviews and Related Recoupment Efforts
Recoupment is not limited to unobligated balances. Treasury has said it will also pursue funds spent in violation of SLFRF rules, meaning on prohibited uses or outside the eligible categories.9U.S. Department of the Treasury. Reporting and Compliance Recipients should expect Information Document Requests from Treasury and are expected to respond promptly.
Reporting Obligations
SLFRF recipients file Project and Expenditure Reports through Treasury’s online portal. Frequency depends on the recipient’s tier, which reflects award type and size. Larger recipients (generally states, territories, and local governments with bigger allocations) report quarterly. Smaller recipients with awards of $10 million or less typically report annually, with those annual reports due by April 30.9U.S. Department of the Treasury. Reporting and Compliance
States, territories, and metropolitan cities and counties with populations over 250,000 have an added requirement: they publish and submit a Recovery Plan Performance Report describing how they are using their funds and the outcomes they expect.5U.S. Department of the Treasury. Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance
Reporting does not end when the award is fully spent. Recipients keep filing until Treasury formally closes out the award.
Records, Registration, and Documentation
Under the Uniform Guidance at 2 CFR 200.334, recipients have to retain all federal award records for at least three years from the date they submit their final financial report.10eCFR. 2 CFR 200.334 – Record Retention Requirements That covers financial records, supporting documents, and statistical records tied to the award. Any pending litigation, audit, or unresolved claim pauses the clock until the matter is resolved. For property and equipment purchased with SLFRF funds, records run three years past final disposition of the property, which can land well after the award itself closes.
Any entity receiving or applying for SLFRF funds needs a Unique Entity Identifier assigned through SAM.gov.11SAM.gov. Entity Registration Direct recipients bidding on contracts or applying for federal assistance need full SAM.gov registration. Sub-awardees may need only the Unique Entity Identifier without the full registration.
Beyond registration, documentation has to satisfy the Uniform Guidance under 2 CFR Part 200, which governs how federal award dollars are tracked and accounted for.12eCFR. 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards In practice that means detailed project budgets, expenditures tied to specific eligible use categories, and a paper trail that can trace every dollar from award to final payment. Local governments passing money to sub-recipients are on the hook for verifying that documentation before the money moves.