CARES Act Funding Q&A with Crowe Risk LLP

Written by CivicPlus

A CARES Act funding Q&A guide provided by our partners at Crowe Risk LLP

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Webinar Recording

What local governments need to know about CARES Act funding.

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On July 15, CivicPlus® hosted a webinar with special guest Bert Nuehring, Partner, Consulting, Crowe, LLP Risk Consulting, to address what local governments need to know about CARES Act funding. As a follow-up to our live event, we are pleased to share the content of the question and answer session that followed.

Q. Are recipients required to use other federal funds or seek reimbursement under other federal programs before using CARES Act Fund (“Fund”) payments to satisfy eligible expenses?

A. Per the U.S. Treasury, no. Recipients may use Fund payments for any expenses eligible under section 601(d) of the Social Security Act outlined in the guidance. Fund payments are not required to be used as the source of funding of last resort. However, as noted below, recipients may not use payments from the Fund to cover expenditures for which they will receive reimbursement.

Q. May funds be used to satisfy non-federal matching requirements under the Stafford Act?

A. Per the U.S. Treasury, yes, payments from the Fund may be used to meet the non-federal matching requirements for Stafford Act assistance to the extent such matching requirements entail COVID-19-related costs that otherwise satisfy the Fund’s eligibility criteria and the Stafford Act. Regardless of the use of Fund payments for such purposes, FEMA funding is still dependent on FEMA’s determination of eligibility under the Stafford Act.

Q. Can a City that doesn’t manage health services utilize Funds for reimbursement for personal protective equipment (PPE)?

A. Yes. Both the COVID-19 Relief Fund and reimbursement through the Stafford Act is allowable for PPE.

Q. May a unit of local government that is receiving a Fund payment transfer funds to another unit of government?

A. Per the U.S. Treasury, yes. For example, a county may transfer funds to a city, town, or school district within the county and a county or city may transfer funds to its state, provided that the transfer qualifies as a necessary expenditure incurred due to the public health emergency and meets the other criteria of section 601(d) of the Social Security Act outlined in the guidance. For example, a transfer from a county to a constituent city would not be permissible if the funds were intended to be used simply to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify as an eligible expenditure.

Q. Is a Fund payment recipient required to transfer funds to a smaller, constituent unit of government within its borders?

A. Per the U.S. Treasury, no. For example, a county recipient is not required to transfer funds to smaller cities within the county’s borders.

Q. What Funds can be spent on technology?

A. The CARES Act provides that payments from the Fund may only be used to cover costs that—

1. Are necessary expenditures incurred due to the public health emergency with respect to
the Coronavirus Disease 2019 (COVID–19); and
2. Were not accounted for in the budget most recently approved as of March 27, 2020 (the
date of enactment of the CARES Act) for the State or government; and
3. Were incurred during the period that begins on March 1, 2020, and ends on December 30,
2020.

Q. Do Funds have to be expended by December 30, or can we obligate them by that date (i.e., through a contract) and expend the money in 2021?

A. The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020 (the “covered period”). Putting this requirement together with the other provisions discussed above, section 601(d) may be summarized as providing that a state, local, or tribal government may use payments from the Fund only to cover previously unbudgeted costs of necessary expenditures incurred due to the COVID–19 public health emergency during the covered period.

According to the Treasury, for a cost to be incurred, “performance or delivery must occur during the covered period, but payment of funds need not be made during that time (though it is generally expected that this will take place within 90 days of a cost being incurred.) Furthermore, in all cases, it must be necessary that performance or delivery takes place during the covered period. Thus, the cost of a good or service received during the covered period will not be considered eligible under section 601(d) if there is no need for receipt until after the covered period has expired.

Q. The guidance provides that funding may be used to meet payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency. May Fund payments be used to cover such an employee’s entire payroll cost or just the portion of time spent on mitigating or responding to the COVID-19 public health emergency?

A. Per the U.S. Treasury, as a matter of administrative convenience, the entire payroll cost of an employee whose time is substantially dedicated to mitigating or responding to the COVID-19 public health emergency is eligible, provided that such payroll costs are incurred by December 30, 2020. An employer may also track time spent by employees related to COVID-19 and apply Fund payments on that basis but would need to do so consistently within the relevant agency or department.

We also recommend contacting your State Administrative Agency (SAA) for eligibility of these costs under the CARES Act Supplemental Emergency Management Performance Grant (EMPG) Program administered by FEMA.

Q. Do the reporting requirements include the Coronavirus Relief Funds? Was the reporting quarterly or monthly?

A. Yes. NLT 10 days after the end of each calendar quarter, each covered recipient shall submit to the agency and the Committee a report that contains:

  • The total amount of large covered funds received from the agency
  • The amount of large covered funds that were expended or obligated for each project/activity
  • A detailed list of all projects or activities for which large covered funds were expended or obligated, including:
    • The name of the project or activity
    • A description of the project or activity
    • The estimated number of jobs created or retained by the project or activity, where applicable
    • Detailed information on any level of subcontracts or subgrants awarded by the covered recipient or its subcontractors or subgrantees, to include the data elements required to comply with FFATA allowing aggregate reporting on awards below $50,000 or to individuals, as prescribed by OMB

Q.  Are any provisions of the CARES Act targeted toward energy and infrastructure? Fiber, electric, or water?

A. Below are the only provisions we are aware of in the Coronavirus Relief Fund that targets energy and infrastructure:

May recipients use Fund payments to remarket the recipient’s convention facilities and tourism industry?

Yes, if the costs of such remarketing satisfy the requirements of the CARES Act. Expenses incurred to publicize the resumption of activities and steps taken to ensure a safe experience may be needed due to the public health emergency. Expenses related to developing a long-term plan to reposition a recipient’s convention and tourism industry and infrastructure would not be incurred due to the public health emergency and, therefore, may not be covered using payments from the Fund.

May recipients use Fund payments to expand rural broadband capacity to assist with distance learning and telework?

Per the U.S. Treasury, such expenditures would only be permissible if they are necessary for the public health emergency. The cost of projects that would not be expected to increase capacity to a significant extent until the need for distance learning and telework has passed due to this public health emergency would not be necessary due to the public health emergency and thus would not be eligible uses of Fund payments.

Q. Is there a repository or list of approved purchases via CRF? Our state has rejected some expenses we thought were logical and legal.

A. Not that we know of; we only have the guidance that was provided to us:

The CARES Act provides that payments from the Fund may only be used to cover costs that:
1. Are necessary expenditures incurred due to the public health emergency with respect to
the Coronavirus Disease 2019 (COVID–19); and
2. Were not accounted for in the budget most recently approved as of March 27, 2020 (the
date of enactment of the CARES Act) for the State or government; and
3. Were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020.

The Department of the Treasury understands “necessary” broadly to mean that an expenditure is reasonably necessary for its intended use in the reasonable judgment of the government officials responsible for spending Fund payments. Thus, this is a subjective determination—different government officials may have conflicting views on what is necessary for their entities.

Q. The guidance provides that funding may be used to meet payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency. May Fund payments be used to cover such an employee’s entire payroll cost or just the portion of time spent on mitigating or responding to the COVID-19 public health emergency?

A. Per the U.S. Treasury, as a matter of administrative convenience, the entire payroll cost of an employee whose time is substantially dedicated to mitigating or responding to the COVID-19 public health emergency is eligible, provided that such payroll costs are incurred by December 30, 2020. An employer may also track time spent by employees related to COVID-19 and apply Fund payments on that basis but would need to do so consistently within the relevant agency or department.

Q. Are you able to provide a link on how to apply/get information on CARES?

A. Yes, please visit the U.S. Treasury Department here.

Q. May recipients use Fund payments to provide emergency financial assistance to individuals and families directly impacted by a loss of income due to the COVID-19 public health emergency?

A. Per the U.S. Treasury, yes, if a government determines such assistance to be a necessary expenditure. Such assistance could include, for example, a program to assist individuals with payment of overdue rent or mortgage payments to avoid eviction or foreclosure or unforeseen financial costs for funerals and other emergency individual needs. Such assistance should be structured in a manner to ensure as much as possible, within the realm of what is administratively feasible, that such assistance is necessary.

Q. May Fund payments be provided to non-profits for distribution to individuals in need of financial assistance, such as rent relief?

A. Per the U.S. Treasury, yes, non-profits may be used to distribute assistance. Regardless of how the assistance is structured, the financial assistance provided would have to be related to COVID-19.

Q. Is there a way to request preapproval for one of these purchases since it is a judgment call? Are governments required to submit proposed expenditures to the U.S. Treasury for approval?

A. Per the U.S. Treasury, no. Governments are responsible for making determinations as to what expenditures are necessary due to the public health emergency with respect to COVID-19 and do not need to submit any proposed expenditures to Treasury.

Q. What is an example of what has been deemed an appropriate use of CARES?

A. We cannot legally provide a list of expenses that are not appropriate. We can only provide this description of covered costs:

The CARES Act provides that payments from the Fund may only be used to cover costs that:
1. Are necessary expenditures incurred due to the public health emergency with respect to
the Coronavirus Disease 2019 (COVID–19); and
2. Were not accounted for in the budget most recently approved as of March 27, 2020 (the
date of enactment of the CARES Act) for the State or government; and
3. Were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020.

Q. The Guidance includes workforce bonuses as an example of ineligible expenses but provides that hazard pay would be eligible if otherwise determined to be a necessary expense. Is there a specific definition of “hazard pay?”

A. Per the U.S. Treasury, hazard pay means additional pay for performing a hazardous duty or work involving physical hardship; in each case, that is related to COVID-19.

Q. May payments from the Fund be used to cover across-the-board hazard pay for employees working during a state of emergency?

A. Per the U.S. Treasury, no. The Guidance says that funding may be used to meet payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency. Hazard pay is a form of payroll expense and is subject to this limitation, so Fund payments may only be used to cover hazard pay for such individuals.

For more information, review our CARES Act FAQs.

Please note, this content is not a substitute for legal advice. Please direct specific questions to your administration or state leaders.