Episode 15 – COVID-19 | Governmental Fund Relief Part 2
COVID-19 Podcast Episodes

 
 
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Ensuring your government entity is taking the right steps to stay afloat during the COVID-19 pandemic can be very difficult. Join us for Part 2 as CRI Partners Robert Lemmon, Ray Roberts, and Jason Harpe answer some of our clients most frequently asked questions regarding governmental fund relief during the current economic climate.


 

Intro:

From Carr, Riggs & Ingram, this is It Figures: The CRI Podcast, an accounting, advisory, and industry focused podcast for business and organization leaders, entrepreneurs, and anyone who is looking to go beyond the status quo.

Robert Lemmon:

Hello, and welcome to another episode of the It Figures Podcast. This is a COVID-19 government questions version of the podcast. And my name is Robert Lemmon. I’m an audit partner in the Gainesville office in Florida. If you’ve listened to podcasts on this subject with us before, you’ll recognize my voice. And you’ll also recognize my first guest, which is Ray Roberts. Ray, do you want to give a quick intro for people who haven’t tuned in before?

Ray Roberts:

You bet. Thanks Rob. My name is Ray Roberts. I’m the government industry line leader for Carr, Riggs & Ingram. And I live out in Albuquerque, New Mexico. And so out West here, we welcome all of you all to the podcast and we appreciate you showing up.

Robert Lemmon:

Thank you, Ray. Ray’s always a wealth of knowledge and wealth of good information, he’s going to knock out the park a lot of these governmental questions on COVID-19. And my other host, my other guest, is also going to do the same. Jason Harpe is with us today. It’s his second podcast. So he’s an old professional at it by now. Jason, you want to do a quick intro for anyone who’s not listened to before?

Jason Harpe:

Thank you, Rob. I’m an audit partner in our Birmingham, Alabama office and I do a good bit of work auditing governments, cities, and school boards. So certainly live in this area a lot and there’s been a lot to digest related to the CARES Act, certainly over the past month, and stuff continues to roll out. So thank you for having me today.

Robert Lemmon:

Thank you, Jason. Jason’s being modest. He’s one of the smartest guys I know. One of the best guys I work with and call often when I’ve got questions. I’m really glad he’s here today because we’re going to be talking about CARES Act funding. He is one of the guys who’s been researching this better than anyone I know. So definitely know he’s going to give us some good information. Like I say, we’re going to be talking CARES Act governmental questions, because the funding for the big governments has started to come through and everyone’s keeping an eye on what they can spend it on and things like that. And what we found is that on the treasury website, there is some really good guidance. So what we’re going to try and do is summarize that in questions today and give a little bit of information based on that treasury guidance.

Now I want to give a warning off the beginning. There isn’t a ton of information yet. You’ll find that there’s still not tons of clarity and specific guidance for some subjects, but on some things we’re starting to get some clarity. So that’s what we’ll try and provide today, is clarity as much as we can. So I want to dive in with the first question here. This one just asks. the guidance says that funding can be used to meet payroll expenses for public health and safety employees who are substantially dedicated to responding to the COVID-19 emergency. So what qualifies as substantially dedicated? Anyone want to take a shot at this and jump on that grenade?

Jason Harpe:

Yeah, I will, Rob. This is Jason. I think this question’s come up a good bit because there, again, guidance is this a little lacking. But I do think keying in on the term substantially dedicated, I know in the Q&A their main thing is to provide ready funding just for unforeseen financial needs and risks created specifically by the COVID-19 crises, and they specifically call out payroll costs for public health and public safety employees. But I think that’s the key thing is that substantially dedicated to mitigating or responding to COVID-19. So you have to be careful. I don’t know that this necessarily is something that would supplant normal payroll costs. I know we’ve been over, and probably people are familiar, especially if you’ve listened to previous podcasts, there’s three main items that is called out that would be qualifying expenditures and one of those really relates to budgeted cost prior to March the 27th of 2020. So in most cases, probably a lot of your public health and public safety employees were already budgeted for. I think you have to be able to carve out costs that they’re performing that’s directly related to COVID-19 emergency issues. So I think that’s the thing about the documentation, and being able to define that and carve out the piece of that that you could use these revenues or funds for, would be very important. So I think you just have to be careful and make sure you’re meeting those thresholds related to the definitions. But there again, they’ve called out public health and public safety. So I think that’s two areas of employees, or classifications, that certainly you would want to look into using some of these funds to replace those costs or expenditures that you have related to that.

Robert Lemmon:

Yeah, and I really like what you mentioned there, Jason, I should have said it at the beginning, to be honest. All of this CARES Act funding can be used on things that meet the following three hurdles. It’s got to be something that’s deemed unnecessary expenditure incurred due to the public health emergency. It’s got to be something that wasn’t budgeted before March 27th, 2020, like you said. And also it’s got to have incurred between 1st of March and December the 30th of 2020. So you got to hit all those three hurdles. And what we’re mostly talking about here is that first one, that was it a necessary expenditure, but can’t forget about those other two. So I’m glad you didn’t and you reminded me that there’s all those three hurdles.

So with that, I’m going to dive into a similar question that I’ve seen. And again, we’re talking about that substantially dedicated definition, but this one just asks a little bit differently. It says, the guidance states that the funding may be used for parallel expenses for several classes of employees whose services are substantially dedicated to mitigating or responding to COVID-19. What are some types of covered employees? So we talked about defining substantially dedicated, now let’s put it into practice and talk about specific types of covered employees. Anyone got any thoughts on those?

Ray Roberts:

Hey, Rob, I’ll help out on that one. This one, it goes along with just what Jason said, there’s really classes. In the law there’s really classes of employees included, public safety for on that, that Jason… Public health. There’s also healthcare, human services, and similar employees who services are substantially dedicated to mitigating or responding to the COVID-19 emergency crisis. So anything like that. Now, something that might be easily forgotten is let’s say you have the library, which is now closed, and you could have laid that person off, or you could have furloughed them, one of those two, but you decided to repurpose them to start cleaning things up, or start doing something related to eligible expenses under the act. You can count their costs as substantially related, substantially dedicated, to responding to the COVID-19. So also for instance, that’s would be on a city or a county, you also might add the benefits and costs related to educational support staff or faculty responding, developing online learning capabilities to continue the educational instruction. So, like we mentioned in the previous podcast, if it’s different developing that new material would also be that. And of course you got to follow the three criteria and make sure it wasn’t budgeted originally before March 27th, 2020.

Robert Lemmon:

Excellent. Thank you, Ray. Let’s talk a little bit about unemployment insurance, because there’s been questions I’ve heard about unemployment insurance. Are states permitted to use their CARES Act funding and their CARES Act payments to support any state unemployment insurance funds?

Ray Roberts:

Yeah, I’ll go ahead and finish up with that one. Yeah, clearly they’re able to do that. The intention of the federal government is not to bankrupt the states and not allow them to use this stimulus money, or this federal money, to, as they see fit. The huge increases in unemployment is a direct result of the healthcare crisis. So it is just fine for them to use some of this money, if it goes through the proper approval process, to supplement their unemployment fund and make sure it doesn’t go bankrupt along the way, because there are a lot of unemployed people out there and they need this money.

Robert Lemmon:

So that’s one where we actually do have a straight answer. Some good clear guidance. Yes, that’s allowed. So I’m glad that we got some clarity on that one. Ray, I like the way you jumped in and that softball. Took the easy one.

Ray Roberts:

Yeah, thanks.

Robert Lemmon:

What about this one then? Who wants a shot at this one? Can funding be used to assist individuals with enrolling in a government benefit program for those who’ve been laid off due to COVID-19 and have lost their health insurance? Have we’ve got clear guidance on that one?

Jason Harpe:

Yeah, I’ll take you that, Robert. The answer to that, the short answer, is yes. This reminds me a little bit of, I think, the cousin of this funding, the PPP loans and probably people I’m sure by now I’ve heard about that, and I think the main thing related to all of this, ultimately this is put in place to help individuals out. So in this case enrolling in a government benefit program, any expenses related to that, yes, the reason that the government’s doing this is to help people out and those expenses related to any enrollment cost to get individuals in a benefit program would qualify. There, again with that caveat that they originally meet those three requirements that you threw out. And I would think in this case, those would be probably easy to qualify. The answer is yes, you could use these funds to cover those expenses. So again, this one, like before, is pretty straightforward answer on this luckily and the answer is yes.

Robert Lemmon:

Excellent. We’re on a roll here. We’ve actually got some good clear guidance on a few of these specific things. And I like the way Jason, you jumped on that softball as well. You didn’t let Ray take them all. Let’s see what else we got. I got another question specific to stipends to employees. I’m getting a bit more tricky on you guys now. Can recipients provide, this is recipients of the CARES Act funding, can they provide stipends to employees for eligible expenses? For example, to improve that telework capabilities and rather than requiring the employees to incur the cost and then submit it for reimbursement. Can they do a stipend directly?

Ray Roberts:

Yeah, I’ll take that one, Rob. And I got to tell you, I really enjoy your accent and how you say telly and stuff like that. So I’ll just go on the record.

Robert Lemmon:

Thank you.

Ray Roberts:

I’m this one, as long as you meet the criteria, which is the expenditures must be paid from the fund are limited to those necessary due to the public health emergency. But they put the caveat in there, if the government wants to, and they think there’s really good reason to give a stipend, then of course you could, if it’s administratively necessary. But why would you want to? Because that’s just another word you would have to define. What is administratively necessary? Then you have to worry about was it spent in there like it was supposed to. Then later on you have to go back and say, okay, now I got somebody questioning me if that was all spent properly. So although you can, if you think it’s administratively necessary, I think that along with some of the Q&A at the treasury, that the best practice there would be do it on a reimbursement basis and ensure, as much as possible, the funds were spent like they should have been. So although you can, why would you put yourself into that trouble of possibly having somebody questioned that later on?

Robert Lemmon:

Good advice, there. What about this last question? The guidance includes workforce bonuses as a specific example of something ineligible. So bonuses not allowed. But it provides hazard pay as eligible if otherwise deemed to be necessary, as we keep saying, it’s got to meet the three criteria, but if it’s necessary, hazard pay as eligible. I’m struggling, and a lot of my clients are struggling. Is there a specific definition that either you guys are aware of, of hazard pay?

Jason Harpe:

Rob, and I’ll make up for the softball question I had a minute ago, we probably could spend an entire podcast covering just this concept, because I’ve had several clients implement and also pay hazardous duty pay. And the guidance says that you could use that, you could use these funds for hazard pay. In the definition, they say just basically performing hazardous duty or work that involves a physical hardship. But now I think in that, there probably is a lot of interpretation. Obviously, I go back to what we mentioned a minute ago about public health and public safety employees. That type hazardous duty may be easier to define than others. I know there could be situations where, for whatever reason, you may have an existing policy that covers what hazardous duty is. That certainly would be helpful, I think, in evidence for asking or requesting or having documentation related to these type expenditures. But I don’t know how, I guess, the government, or the funding agency would view maybe hazardous duty related to somebody that may not be necessarily a public safety employee. And I guess something that comes to mind may be if you’ve got a billing clerk that may be interacting frequently with the public, I don’t know how they would necessarily view that related to hazardous duty. If a government said you’re having to interact with the public frequently, so that obviously, in this case, would increase your potential exposure to a virus. And if that employee got some type of hazardous duty compensation… Some of that, it may be a little hard. I think there could be some validity certainly to that in this situation versus maybe other more, I guess, customary hazardous duty. But anyway, there is a clause that allows for that. So unlike a clear bonus, that it doesn’t allow for, it does mention hazard pay. So it’s certainly something to explore and certainly something to, I think, get more advice on and have deeper discussions, but it is there. So they’re not totally counting that out. So those are my thoughts with it.

Robert Lemmon:

I respect you taking that one, because that was the least soft ball of the lot of them. But yeah, I really liked your summary though, because there are some things, like you say, hazardous pay clearly allowed. They claim they’ve defined what it constitutes, but it’s such a vague definition it leaves interpretation. And some of the instances, like you said, the people on the front lines, health workers out there, it’s easy to get over that hurdle, but like you were saying, there’s other people who might feel like their role has now become hazardous. But let’s be honest, I don’t think hazard pay was ever defined with this scenario in mind. Not a lot of people, I think, had planned and defined things expecting this kind of a scenario to play out. So probably those roles don’t meet typical hazards pay scenarios or classic definitions, because it’s not a classic situation, but I think your advice is good, which is if you’re going to be in that uncertain category, you’re leaving yourself open to questions. So if you can charge your expenses to the ones that clearly meet the hazard definitions, like the guys on the front line, then stick with those and charge those expenditures first, I guess, is what saying, before trying to get into the ones that are maybe in the gray area. My advice is always to stay away from the gray area, if possible.

Tough questions are finished with that, Jason. So I really appreciate you taking a shot at that one. Ray was unusually silent there. Ray, what happened?

Ray Roberts:

That’s too tough for the old guy.

Robert Lemmon:

Rather tall. Hey, well-

Jason Harpe:

Hey, Rob.

Robert Lemmon:

Yeah?

Jason Harpe:

Related to that and for this end too while we’re talking about it, I think there’s been some discussion on, just back to that, what would be eligible for hazardous duty? And I think several other governments have come back to the concept of exposure and the amount of duration. So that could be a rule of thumb, is that if you’re really exposed to anything for a long, long time or you’re exposed to something particularly hazardous for a short amount of time, that could be a baseline for trying to determine something. An event that could be considered hazardous duty.

Robert Lemmon:

That’s good advice. Yeah, and if that can be tracked and proven, defends your position of charging these expenditures as hazardous, it moves you a little bit more away from that gray area that I was talking about and closer to that defendable position. So I like that. I like that a lot.

Ray Roberts:

Hey, Rob, there’s a good article that Jason wrote on our website about hazard pay and how certain cities have worked through that whole process. So if anybody have any questions on hazard pay, that’d be a good place to start on that article on our website, cricpa.com.

Robert Lemmon:

Excellent. Well, Hey, I think that’s probably a good place to wrap it up here guys. Because that was a tough question. And that’s been some really good answers. I think Ray’s correct to refer everyone to the cricpa.com website, there’s a bunch of additional resources on there and articles and extra information. We’re going to be updating that constantly as we keep on top of the latest information and guidance as it comes out. So with that, I’ll thank Ray and Jason for joining me. And I’ll thank you all for listening and we’ll see you again next time. Thanks, goodbye.

Outro:

If you want more CRI insights or are interested in learning about our firm, please visit our website cricpa.com. Thanks for listening to this episode of It Figures, the CRI Podcast. You can subscribe to It Figures on iTunes, Spotify, or wherever you prefer to listen to your podcasts. If you liked what you heard today, please leave us a review.