ARPA funds offer opportunity for public sector digital investments 

Signed into law in March of 2021, the American Rescue Plan Act (ARPA) allocates $1.9 trillion of economic stimulus to aid in the recovery from the COVID-19 pandemic. Of that, $350 billion is allocated for states, counties, municipalities, tribes and territories. But not all government entities have applied for ARPA funds, particularly with the intent of digital transformation. 

Why did so many government organizations need assistance during the pandemic, and how does digital transformation fit in? As they responded to public health emergency and economic impacts, many government entities saw increased costs to provide services, while at the same time experienced declining revenues. Facing budget challenges, many were forced to cut their services, workforces and investments in technology. As many government leaders focused on the safety of their people and struggled to keep their organizations running to provide services to the public, most weren't thinking of using ARPA funds for digital transformation. 

At the same time, people across the nation reflected on how they were spending their time at work. Many government organizations looked at how to do more with less, and considered ways technology could improve employee morale by reducing time spent on tedious tasks, allowing employees to work on more valuable, strategic initiatives. Digital transformation would allow government organizations to improve efficiency with processes, positively impacting the public with better services, products and outcomes.

ARPA funds are one answer to digital transformation. Initially, many government entities overlooked technology infrastructure in ARPA applications. To encourage more liberal use of ARPA funds, in May of 2021 the U.S. Department of Treasury released the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) fact sheet, providing examples and guidance on how funds could be used in the overall spend categories. The fact sheet highlighted the importance of access to universal, high-speed, reliable, and affordable broadband coverage, noting ARPA funds could help remedy broadband shortfalls that affect more than 30 million Americans. The 2022 Final Rule for ARPA took effect April 1, 2022, providing clarity on how funding can be used for technology infrastructure and impact evaluations for rebuilding public sector capacity. A December 2022 amendment provides additional ARPA grant flexibility to respond to natural disasters, build critical infrastructure and support community development.

Today a wide array of public sector digital projects can be supported with ARPA funding. The guidance allows funding for broadband enhancements, like boosting internet connectivity in public libraries or parks, improving internet coverage for students, and implementing public safety improvements. ARPA money can also be used for cybersecurity investments and tools to support remote work. The stimulus funds can also be used to digitize government services and modernize legacy IT systems and support the evaluation and selection of enterprise resource planning or management systems. In some cases, it means government organizations can finally standardize different sources of data and optimize data processes with automation or artificial intelligence.

How can ARPA funds be used for technology? ARPA spending criteria were written broadly to allow governments the ability to address their unique challenges using the guidance. The SLFRF fact sheet says that funding may be used for technology infrastructure to help rebuild public sector capacity. Recipients could use the funding to build their internal capacity to implement economic relief programs with investments in data analysis, targeted outreach, technology infrastructure and impact evaluations. 

For example, King County, Washington, applied $995,000 in ARPA funds toward a variety of overdue digital upgrades. The county plans to use some of the allocation for employee training, focusing on supported employee work transformation and out-of-state legal review. They will also use the ARPA funds to digitize Human Resources records, acquire digital tools for on-boarding and off-boarding employees, and digitize performance management and grievance tracking. The remaining funds will be used to help monitor and support the overall workforce transition into the digital realm. 

What if they don't know where to start? For some government organizations, it may be challenging to decide which digital projects to pursue. ARPA funds may be used to pay administrative costs, including services to consultants and/or payroll to assist with an assessment process to work with stakeholders and build a digital transformation roadmap or with the implementation of ARPA projects already identified. This includes the costs of consultants to ensure effective project management and assist with the adoption and enablement of new technology, as well as adherence to legal and regulatory compliance. Depending on how the ARPA funds are designated there can be procurement requirements related to contracting for projects and or services. Funds may also be used to increase staff capacity to stabilize government operations. 

While ARPA funding has been available for more than two years, it's not too late for government organizations to request their allocation and dedicate a portion of it to digital transformation as they plan for their future. If they have not done so already, they should apply for ARPA funds now. SLFRF funding must be obligated by Dec. 31, 2024, and jurisdictions have until Dec. 31, 2026, to fully expend their funds. Spending should be used for costs incurred after March 3, 2021. 

Seth Cooper is a director and Brandi Riggle is an experienced manager with the Baker Tilly Digital Solutions team. The team assists companies in successfully navigating the complexities of enterprise-wide digital transformation initiatives.