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Managing, Altering the Use of, or Disposing of Real Property, Equipment, or Supplies Purchased with ARP/SLFRF Funds

Published for Coates' Canons on March 09, 2026.

We are five years into the grant period, and some local governments are considering whether they can change the use of, sell, or otherwise dispose of, real property, equipment, or supplies purchased with American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Fund (ARP/SLFRF) monies.

Before taking any of those steps, it is important to understand how federal property management rules apply. When ARP/SLFRF funds are used to fully or partially fund the purchase of supplies, equipment, or real property, federal law generally requires the recipient or subrecipient to track and manage that property and ensure it continues to be used for authorized purposes, even after the grant period ends. These rules apply not just to the local governments that received funds directly from the U.S. Department of the Treasury, but also subrecipients — organizations or agencies that received ARP/SLFRF funds passed through from a local government.

The applicable property management requirements are found in the Uniform Guidance, specifically 2 C.F.R. §§ 200.310 through 200.316. However, Treasury modified some of these rules for the ARP/SLFRF program. Those modifications are discussed in more detail below.

One key modification is particularly important. The federal property management rules do not apply to property purchased with funds spent under the Revenue Replacement (government services) category. Treasury treats those funds as general government revenue. See Treasury SLFRF Final Rule FAQ 13.15.

The rules discussed below apply when ARP/SLFRF funds were used under the other eligible use categories, including:

  • Responding to COVID and its negative economic impact
  • Water, sewer, and broadband infrastructure
  • Emergency relief from natural disasters
  • Surface transportation projects
  • Certain Title I projects

To help local governments implement these requirements, this post also includes a sample property management policy that can be adapted to local procedures.

How Treasury Modified the Standard Federal Property Management Rules

Most federal grant programs follow the property management rules in the Uniform Guidance, 2 C.F.R. §§ 200.310 through 200.316, which address ownership, use, recordkeeping, inventories, and disposition of federally funded real and personal property.

For ARP/SLFRF, in addition to exempting the Revenue Replacement category from the property management rules, Treasury created an important distinction between the grant period and the period after it ends. During the grant period there is broader flexibility. After the grant period ends, the property generally must remain within the same eligible use category that was reported to Treasury in the final report. See Treasury ARP/SLFRF Final Rule FAQs 13.15 and 13.16.

During the Grant Period (through December 31, 2026)

During the award period, property purchased with ARP/SLFRF funds generally may be used for any eligible ARP/SLFRF purpose, even if that use falls in a different expenditure category than what was originally reported to Treasury. Treasury approval is not required for this type of change, as long as the new use remains eligible. See Treasury SLFRF Final Rule FAQ 13.16.

Recipients and subrecipients should document any change in use and keep project reporting accurate. If the change occurs during the period of performance, they also must ensure that the new use complies with any applicable federal requirements tied to the project. (In addition, certain project categories have their own federal rules. For example, SLFRF-funded Surface Transportation projects may be subject to U.S. Department of Transportation property use and disposition requirements, including the right-of-way rules in 23 C.F.R. Part 710. Under the streamlined “Pathway Two” framework, recipients may change the use of property to another eligible streamlined use.) 

However, if property is sold, transferred, or converted to an ineligible use during the grant period, the Uniform Guidance disposition rules apply and the federal government may be entitled to its proportional share of the property’s value. The disposition rules are discussed below.

After the Grant Period Ends

Once the grant period ends, the rules become more restrictive. Property must continue to be used for an eligible ARP/SLFRF purpose and typically should remain within the same eligible use category reported to Treasury in the final project report. See Treasury SLFRF Final Rule FAQ 13.16.

The permitted post-period uses vary by category:

  • Public health and assistance to households. Property last reported as supporting public health response or services to households may continue to be used for any eligible activity within those portions of the public health and negative economic impacts category. 31 C.F.R. § 35.6(b)(3)(i) and § 35.6(b)(3)(ii)(A).
  • Assistance to small businesses, nonprofits, and impacted industries. Property last reported in this category may be used for any eligible activity within the broader public health and negative economic impacts category. 31 C.F.R. § 35.6(b)(3)(ii)(B)–(D).
  • Water, sewer, or broadband infrastructure. Property last reported in this category must continue to be used for water, sewer, or broadband infrastructure purposes. 31 C.F.R. § 35.6(e).
  • Emergency relief from natural disasters. Property last reported in this category may continue to be used for eligible activities within the emergency relief category. 31 C.F.R. § 35.6(g).
  • Surface transportation projects. For projects under Pathway One or Pathway Three, recipients must follow U.S. Department of Transportation rules. For projects under the streamlined framework (Pathway Two), property may continue to be used for any project meeting that framework’s requirements. 31 C.F.R. § 35.6(h)(1)(ii)(B)(2).
  • Title I projects. Property last reported as supporting Title I projects may continue to be used for any eligible activity within the Title I category, as long as it continues to meet the applicable program objectives. 31 C.F.R. § 35.6(h)(2).

Ongoing Property Management Requirements

In addition to the use rules, the Uniform Guidance imposes several ongoing property management requirements on recipients and subrecipients, including:

  • Maintain detailed records for each item of federally funded equipment, including a description of the property, identification numbers, funding source, acquisition date, cost, the federal share of the purchase price, location, current condition, and any disposition information. 2 C.F.R. § 200.313(d).
  • Conduct a physical inventory of equipment at least once every two years and reconcile it with property records. Id.
  • Maintain internal controls to safeguard property, investigate any loss or damage, and keep property in good working condition. Id.
  • Insure federally funded property at levels comparable to other government property. 2 C.F.R. § 200.310.
  • Avoid placing liens, mortgages, or other security interests on federally funded property without federal authorization. 2 C.F.R. §§ 200.311, 200.313, and 200.315.

Disposition Rules: Selling, Transferring, or Repurposing Property

If property is sold, transferred, or converted to a use outside the eligible category reported to Treasury, the Uniform Guidance disposition rules apply. These rules vary depending on the type of property.

Real Property

Real property includes land, buildings, and improvements to land. 2 C.F.R. § 200.1. Title vests in the recipient or subrecipient, but the federal government retains an interest. If the property is no longer needed for its federally supported purpose or is converted to an ineligible use, the recipient must request disposition instructions from Treasury. If a subrecipient holds the property, it must work through the recipient to obtain those instructions.

Treasury may require one of the following:

  • The recipient or subrecipient retains the property and pays the federal government an amount equal to the federal share of the property’s current fair market value; or
  • The property is sold and the federal government receives its proportional share of the proceeds after deducting reasonable selling expenses; or
  • Title is transferred to the federal government or to a third party it designates.

See 2 C.F.R. § 200.311(d).

Equipment

Equipment generally means tangible personal property with a useful life greater than one year and a per-unit cost of $5,000 or more, unless the government uses a lower capitalization threshold.[1] 2 C.F.R. § 200.1. 

When equipment acquired with federal funds is no longer needed for the original project or for other federally supported activities:

  • If the fair market value is $5,000 or less, the equipment may be retained, sold, or otherwise disposed of with no further obligation to the federal government.
  • If the fair market value exceeds $5,000, the entity may retain or sell the equipment but must compensate the federal government for its proportional share of the current fair market value or sale proceeds. If the equipment is sold, the entity may retain up to $500 from the federal share of the proceeds to cover selling and handling expenses.
  • If the federal agency or pass-through entity provides specific disposition instructions, those instructions must be followed. These rules apply whether the equipment is held by the recipient or a subrecipient. 

See 2 C.F.R. § 200.313(e).

Supplies

Supplies include all tangible personal property that does not meet the definition of equipment. 2 C.F.R. § 200.1. Title to supplies acquired under a federal award vests in the recipient or subrecipient upon acquisition. 2 C.F.R. § 200.314(a).

If a project ends with a residual inventory of unused supplies exceeding $5,000 in total aggregate value,[2] and those supplies are not needed for another federally supported program, the recipient or subrecipient may retain or sell the supplies but must compensate the federal government for its proportional share of the current market value or sale proceeds. If the supplies are sold, the recipient or subrecipient may retain up to 10 percent of the proceeds (up to $500) from the federal share to cover selling and handling expenses. 2 C.F.R. § 200.314(a).

Why a Written Property Management Policy Helps

Federal grant rules require recipients to maintain internal controls sufficient to ensure compliance with federal award requirements. See 2 C.F.R. § 200.303. A written property management policy is one of the most practical ways to meet that requirement. A good policy helps ensure that your organization:

  • Identifies property purchased with ARP/SLFRF funds
  • Maintains the records required by the Uniform Guidance
  • Performs physical inventories on schedule
  • Follows the correct federal process if property is sold or repurposed
  • Ensures that subrecipients understand and comply with the same requirements

If your local government expended funds outside of the Revenue Replacement category and has not yet adopted a property management policy, the sample policy below can help you get started. Review it carefully and modify it to reflect your own procedures and organizational structure. (Note that even if your unit did not adopt a property management policy before making the expenditures, the property management rules applied to both the local government and its subrecipients by virtue of the grant terms and conditions.)

UG_Sample-Property-Management-Policy_SOG_2023Download

[1] In 2024, the Office of Management and Budget revised the Uniform Guidance and increased several property-related thresholds. Among other changes, the definition of equipment increased from $5,000 to $10,000, and the disposition threshold for equipment was likewise increased from $5,000 to $10,000, with a corresponding increase in the amount a recipient may retain from sale proceeds to cover selling expenses. See 2 C.F.R. §§ 200.1 and 200.313 (2024). However, these revisions do not automatically apply to existing federal awards. To date, Treasury has not indicated in ARP/SLFRF guidance that it has amended the ARP/SLFRF award to incorporate the 2024 Uniform Guidance revisions (other than applying the new Single Audit threshold). Accordingly, recipients should assume that the pre-2024 Uniform Guidance provisions, including the $5,000 thresholds, continue to govern ARP/SLFRF equipment requirements unless Treasury provides direction otherwise.

[2] The 2024 revisions to the Uniform Guidance increased the residual inventory threshold for supplies from $5,000 to $10,000 and increased the allowable selling-expense amount. As discussed above, these revisions do not automatically apply to the ARP/SLFRF award, and Treasury has not indicated that it has amended the ARP/SLFRF award to incorporate the updated thresholds. Accordingly, recipients should assume the pre-2024 Uniform Guidance thresholds apply unless Treasury provides direction otherwise.

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