The arc git repo is cloned under app-root/data, but it's not used as the root directory for the web application in case the user has other files they want to load.
I'll admit, the readme isn't the best. I mostly copied it from the original and changed the relevant bits.
Unfortunately, certain files like adminfile* should probably not be relative to the repo directory, because it's likely to get wiped. I'm not sure where the right place to put it would be though. Maybe data/config?