Knowledge and Insights
The Coronavirus Relief Fund, a product of the Coronavirus Aid, Relief and Economic Security (CARES) Act, distributed $150 billion of payments for specified uses to state and certain local governments. The governments that receive funding have flexibility when determining who to disperse the funds to, however the funds must be used on eligible expenses. Additionally, other areas of local government, including counties, municipalities, towns, townships, villages, parishes, boroughs and any other unit of government below the state level with a population that exceeds 500,000, were eligible to apply for direct payments from the relief fund. It is required that these payments are used to only cover the following:
- Necessary expenditures incurred due to the public health emergency, which includes COVID-19 related:
- Medical expenses (e.g. costs of providing COVID-19 testing)
- Public health expenses (e.g. acquisition and distribution of medical and protective supplies)
- Payroll expenses
- Actions to facilitate compliance with public health measures
- Expenditures 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 other area of government, such as:
- Expenses associated with the provision of economic support in connection with the public health emergency
- Any other necessary COVID-19 related expenditures incurred during the period of March 1, 2020 – December 30, 2020.
If the funds are not used for the eligible expenses listed above by December 30, 2020, they must be returned. States and local forms of government that received funding must keep documentation to support the funds were used as part of their response to the COVID-19 pandemic in case of an audit.
Now that we discussed what the eligible expenses are, let’s clarify what the ineligible expenses are. Any funding received will not cover the following:
- Expenses for the state share of Medicaid;
- Damages covered by insurance;
- Payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 public health emergency;
- Expenses that have been or will be reimbursed under any federal program, such as the reimbursement by the federal government pursuant to the CARES Act of contributions by states to state unemployment funds;
- Reimbursement to donors for donated items or services;
- Workforce bonuses other than hazard pay or overtime;
- Severance pay; and
- Legal settlements.
Mercadien’s COVID-19 Task Force can work with your governmental entity to help you understand the compliance elements related to the Coronavirus Relief Fund, assist with grant management and prepare your organization for an audit, along with other COVID Consulting services to help you manage through these uncertain times. If you have any questions relating to the Coronavirus Relief Fund or any of the services listed above, please feel free to reach out to me at 609-689-2333 or via email at email@example.com.
DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.