S1:E22 – COVID-19 | Governmental Fund Relief Part 4
COVID-19 Podcast Episodes

 
 
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Ensuring your government entity is taking the right steps to stay afloat during the aftermath of the COVID-19 pandemic can be very difficult. Join us for Part 4 as CRI Partners Robert Lemmon, Ray Roberts, Becky Hammond, and David Alvarez answer some of our clients most frequently asked questions regarding government fund relief during the current economic climate.

CRI’s COVID-19-focused episodes are vetted for accuracy at the time of recording, but changes may have occurred. For the most up-to-date information, please contact your local advisor.


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 CRI It Figures podcast. This is going to be another governmental episode where we’re addressing some COVID-19 related Q and A’s. My name is Robert Lemmon. I’m an audit partner in the Gainesville office, and I’ve done a lot of government work and I’ve done a lot of research on this COVID subject. And with me today, I’ve got three assistants. First one is Ray Roberts. Ray, for people who haven’t listened before. Do you want to introduce yourself, please?

Ray Roberts:

Sure. My name is Ray Roberts from the Albuquerque, New Mexico office of Carr, Riggs & Ingram. And I happen to be the industry line leader for the government practice and we’re the furthest out west of anybody in Carr Riggs, but we do feel part of the team and I’m glad that Rob invited me to this podcast today.

Robert Lemmon:

Thank you, Ray, and we are glad to have you. You’ve always got some excellent answers and information, so thank you for joining. Back with us as well, Ray, is as you know, Becky Hammond, she was on one of our first podcasts and has been very busy working on this COVID stuff for a while, but she’s found a bit of time to join us. So, Becky, for people who haven’t listened before, do you want to quickly introduce yourself, please?

Becky Hammond:

Thanks, Rob. This is Becky Hammond. I am a audit partner in the New Orleans office. I’ve spent most of my career doing primarily governmental audits and single audits and lots of governmental consulting. I’ve also been one of the first in our firm to do some CARES Act funding consulting. So I’m excited to be here today.

Robert Lemmon:

Thank you, Becky. And we’re excited to have you because we know you’ve been really working very hard and getting very involved with all the CARES Act work, so we know you’ve got some good stuff to share with us here today. Last person with us today is David Alvarez. David, do you want to quickly introduce yourself?

David Alvarez:

Yeah, sure. My name is David Alvarez. I’m an audit partner in our Tampa, Florida office. I lead our government practice in our Tampa Bay region. Rob, as you know, you and I kind of combine work with a lot of our Florida governments on COVID consulting and there’s been a lot of movement there. So happy to be a part of the team today.

Robert Lemmon:

Awesome. Well, I am really pleased too. Got some really smart people that are going to educate me a little bit today because I’ve got some Q and A’s that I want to fire at you guys to get more informed about how this Coronavirus Relief Fund money is being administered and distributed in the various places. And, Becky, excited to have you, so I want to start with you and tell us a little bit about what you’ve learned from all the work you’ve been doing. And what’s the latest with the Coronavirus Relief Fund distributions in your state of Louisiana?

Becky Hammond:

So here in Louisiana, we got about $1.8 billion and originally 800 million of that was basically going to be passed down to municipalities and local governmental units. However, the legislature here decided to take about 300 million away and give it to small businesses in the form of grants. So at this point, we basically have only 525 million left that is being passed out and allocated to all of the parishes in our state. They basically did an allocation using COVID case counts using 70% of that information, plus 30% by population, and allocated that out across the state in several windows or tranches as we’re calling them.

So at this point, the second tranche window just closed, so we’ve basically included all expenses from March 1st or June 30th in two different tranches. Those results aren’t back yet on the second tranche, but in the first tranche of 236 million allocated to all the various parishes, they only approved 147 million.

So we are going to have to look closely at how much money is going to be remaining through the rest of the tranches. The initial expectations are that this second tranche is going to be a lot larger than the first because of the timing delays and concerns with getting all of this information requested and all pulled together. It’s been a challenge to get it done this quickly. So I think Louisiana is kind of further along than most other States at this point having already gone through two different windows of reimbursement requests.

Robert Lemmon:

Yeah, it does sound like you guys at the forefront in terms of the States. So, I mean, David, do you want to talk through a little bit about what we’re seeing here in Florida?

David Alvarez:

Sure, rob. So like Becky said, Louisiana was definitely out front, and out front of Florida, that’s for sure. But it’s really ramped up in this last month or so. All States got their money at the same time from the Department of Treasury. And at that same time, governments with populations over 500,000 also got direct payments from the treasury. And that, it did impact Florida because we have a handful of governments that do exceed that 500,000 population limit.

So the total amount that Florida received 8.3 billion, 55% was kept at the state level, same as Louisiana, same as our other States. So the remainder 3.7 billion went to other local governments and included in that was the large governments. So once you take the large governments out, there was then $1.3 billion left. For a while in Florida where there was a lot of confusion of how’s that 1.3 going to happen. Some of the smaller counties were saying, our larger counterparts have already received their money. They’re doing great work in their counties, but what about us?

And then mid-June, the state of Florida did start to put out information and made it clear how they were going to handle it. And one of their first things that they said is, “We’re only going to deal directly with the remaining counties.” So it was about 55 counties or so that they were going to deal directly with. And they were going to allocate purely based on population and it was going to be an application process. So those counties would complete an initial application and they would get the first 25% of their money. And then for the remaining, it was going to be on a cost-reimbursement basis for those counties. Now what’s important to point out is, that money is going for the county and all local and all municipalities within that county and the state of Florida said, “It’s up to the… The County has discretion in how they want to allocate it further.”

So the state’s only going to deal with the county and the counties are responsible for how it’s going to work from there, whether they pass any money further onto municipalities is really up to them. One other kind of nuance here is that the larger counties that got money directly from the Treasury received their money back in late April. And there wasn’t really communication at that point that this is also meant to serve to provide funds to the municipalities within. So, in our state, we’re dealing with kind of the local governments’ kind of battling the county level to say, “Well, some of that money should come to us. We have eligible expenditures that qualify under the CARES Act.” And there’s a little bit of back and forth on how to deal with that funding. So, it’s something that we’re really dealing with in Florida at this point.

Robert Lemmon:

Yeah. Just in comparing those two states, I’m seeing a huge amount of differences. I mean, for one, Louisiana, I think I heard Becky say they allocated not only on population but also on the number of positive cases. Is that correct, Becky?

Becky Hammond:

Yeah. It was 70% on COVID cases so that the hottest spots got that money first.

Robert Lemmon:

Yeah, and that’s not something I’ve heard in other places very much, so that’s a difference. I think Louisiana didn’t have any of those large direct payments. So, that was a little bit of a difference in Florida, obviously. 12 of our counties got direct payments in March which wasn’t happening in Louisiana. But I think I also heard… So, Becky, in Louisiana, the state will deal directly with municipalities, right? Not just the counties, but the municipalities will also apply themselves to the state, or are they having to go through the counties like in Florida?

Becky Hammond:

So in Louisiana, the direct filers are the parishes themselves, as well as any cities, towns. So district attorney’s offices, clerks of court, coroner’s offices, and assessor’s office. Those are all considered direct filers. Any other agency has to go through the parish.

Robert Lemmon:

Okay. So vast majority of cases here, people… The vast majority of dollars will be applied for directly at the state level, whereas in Florida it’s just the counties dealing with the states and everyone else has to go through the county. So that’s a lot of burden Florida are putting on the counties. To me though, that comparison, Louisiana to Florida, just those two states you already see a vast variation in how it’s being handled. So, Ray, let’s come to you. Yeah, very different. Ray, let’s come to you. I know you work in New Mexico primarily, but also a lot in Texas. So what are those states doing?

Ray Roberts:

We’re kind of sitting back thinking, “Man. I wish we were as far as long as Florida and Louisiana.” But New Mexico has… We had some budget problems out here in New Mexico when oil and gas… We set the 2020, we have a June year-end, we had a 2021 budget based on oil being mid-fifties a gallon, I mean a barrel. And then next thing we know it’s… You had to… Some people were… You’re having to pay to get rid of it. So now it’s settled in some but the budget was decreased an incredible amount and the state had to figure that out. They did get their money, they got $1.25 billion allocated to them. Of course, just like everybody else 45% of that goes to the local governments. Some of that… We’ve only had… We’re a pretty small state. Maybe just a touch over two million in the whole state, people.

And only two places, Albuquerque and Bernalillo County got any direct funding. And they got that a couple months ago and you’re starting to see some of that hit the streets. And the people at city of Albuquerque especially, are doing a great job on getting that out and helping the individuals. But the remaining $380 million, it’s kind of hard to find any information on what’s going to happen there. And like I said, I think the Department of Finance and Administration is doing a great job, they just had other things that were more pressing, i.e. the budget for the year that just started, what is it now? 16 days ago. So they got that hammered out and then got… I’m sure there’s some cleanup work on that part of it. But so that’s… New Mexico really hadn’t done a whole bunch on the local municipality level or the local county level, but I’m sure they’ll get to it here soon.

We do know of some places have got some direct funding from FEMA or some of the other organizations that had received some federal money on that. As in Texas, they’re ahead of New Mexico but behind Florida and Louisiana. They taken a different approach. They got a pot full of money and they’re going to pass out 20% of it to the eligible local governments upfront. And then you have an application process to get the rest of your 80%. So that process hadn’t started or they, if they have, it just barely came out the 20%. But the process is getting going, behind Louisiana and Florida, but not too far behind them. So, that’s the latest out west.

Robert Lemmon:

Good update that. I mean, again, we’re seeing two more states with very different approaches and very different status. So I mean, just in the four states we’ve discussed, no two are alike and I imagine that’s the case all over the place. And it is the case from what we’ve seen from speaking to other people. But it really just goes to show, a lot of variation, it’s really hard to track all the different procedures and requirements that the different states are applying. And this is just a really big burden, to be honest, that the governments are having to deal with. And I don’t envy them, I’ll say that.

But as we always do on our podcast, I always like to talk about the FAQ documents that the treasury have put out, and since our last podcast, there’s been a couple of updates. So a couple of questions popped out to me that I thought were good to cover and see if you guys have got some good answers for these FAQs.

So I got a few here. Let’s see what you guys think about these ones. The first one talks about the guidance that the funding… The guidance provides that the funding may be used to meet payroll expenses for public safety, public health, healthcare, human services, and similar employees, right? So that’s what this Coronavirus Relief Fund is allowed to be used for. If those payroll services are substantially dedicated to mitigating or responding to the COVID-19 emergency.

So the question is, can the money be used to cover an employee’s entire payroll or do the governments have to allocate how much was for the public health emergency and figure out how much time was spent on COVID work versus non-COVID work, and kind of do an allocation and assign that payroll. So that was a bit of a garbled question, the way I asked it, so hopefully, someone understood what I was trying to get to, and anyone want to take a shot at answering that?

Becky Hammond:

I’ll take this one, Rob. I actually have some good experience with this in Louisiana, having gone through two different windows at this point. The FAQ answer to this question is that, in order to help with administrative convenience and not to overload the governments that are trying to capture this information, they basically said the entire payroll cost of an employee whose time is substantially dedicated is eligible provided that the costs were incurred December 30th. And basically for public safety and public health, that is presumed to be an automatic thing. Here in Louisiana, they went a step further to say that if there is an administrative personnel or duties involved in that department that we’re including as public health or public safety, that that’s not includable, but I believe that’s an interpretation based on the FAQ guidance that’s out there.

There’s really not a whole lot of guidance, really, other than the FAQ answer and so it’s kind of left up to interpretation, unfortunately, as to when you read it, what does that mean? So some places are saying, “Yeah, well, that means every stitch of public…” Anything that could possibly be public safety, including district attorney’s offices and clerks of court, and anything that would have some kind of element of them keeping criminals off the street. And Louisiana actually came in and said, “No, it doesn’t include that specifically.” They’re not allowing any of those additional type, what we might call public safety, but only the traditional fire department, police department, that kind of public safety.

So this is, I think, going to be an implementation question that’s out there for each of the different counties and municipalities to answer for themselves due to the lack of guidance. We encourage everybody to try to track this information as best as possible and be able to justify their position with whichever way they interpret it because there’s no guidance.

Robert Lemmon:

Okay. No, that’s a good answer. You answered a lot better than I asked the question. So to recap, so you’re saying that, “Hey, if somebody is substantially dedicated, then don’t worry about allocating the time to COVID and non-COVID. Assume it’s all COVID if they’re substantially dedicated. So, that’s easy, that helps, but-

Becky Hammond:

Yeah. So if you can support the position and explain why the position is substantially dedicated, you’ve repurposed that person or that kind of thing, then I take it to mean that you can use their entire payroll.

Robert Lemmon:

Right. And if we have a public health or public safety person, they are presumed to be substantially dedicated. So again, they’re kind of helping us out making that one kind of easy. Unless, some states that you said would say, if you’re public health or public safety administrative, then no, don’t make that assumption that they are substantially dedicated to COVID and therefore everything can be charged to the money. I think I’ve summarized that correctly Becky. Did I get that right?

Becky Hammond:

Yeah. Pretty, pretty right. To add to that, Rob, there’s also a little, a few extra words after that in the FAQ response that says, “Unless the executive of the agency deems that it’s not related to COVID.” So it still kind of puts the burden back on the individual government to make the decision of, do they feel like this really is eligible or not?

Robert Lemmon:

Got it. Okay. Well, that’s a really good thorough answer because that’s going to be a big chunk of dollars and it’s a complicated one so I’m very glad you’ve enlightened us. So thank you on that one. Next one I’ve got here. It asks, may recipients use the fund payments to remarket the recipients’ convention facilities and tourism industry? And this one kind of hit me out of the FAQs because, in Florida, tourism is a really big deal. So remarketing convention facilities in the tourism industry, is that an allowed expense? Does anyone know?

David Alvarez:

Yeah, Rob. So as you said in Florida, this is a really big deal. So it’s a question that we’ve been getting and really with all these questions the thing to first start with is the kind of the overarching purpose of the CARES Act is in a real high-level summarized kind of way is, it’s money that’s needed in response to the pandemic that kind of helps things get back on track in the short term.

So when we think of that with this question on convention facilities in the tourism industry. So if expenses are incurred to publicize that convention centers in tourism-related areas are back open, that’s absolutely allowed. If it’s expenses to prepare those facilities to deal with the public health emergency, kind of as an example, if you’re going to be partially open and there’s some personal protection equipment that needs to be installed to make that partial opening safe for visitors, that those expenses are allowed.

The FAQ kind of talks about some other things that are not allowed would be if a government kind of decides that they’re going to take a long-term plan, change their facility, change the convention center, repurpose things, and in the long-term that would not be an allowable use of those funds because it’s not in the real spirit of what the CARES Act money was for. Dealing with the public health emergency in the short term, prior to December 30th, and kind of try and get things back as much to normal as possible in that short term period.

Robert Lemmon:

That makes sense. That really does. Like you say, the spirit of the rule was… The spirit of the money was to get it out… The funding out there quickly and for immediate needs. That’s why they’ve put that deadline. It all must be spent between March the first and the end of December. So yeah, if you’re trying to incur longterm planning costs, I understand why that would not be allowed. So that makes sense. Good answer, thank you.

Robert Lemmon:

All right. I’m going to wrap it up with just one last one. And this is one we’ve had a lot from clients because we are working in helping a lot of different people administer their money and they’re wondering this. They wonder, can fund payments be used for expenditures related to the administration of fund payments? So, in our situation, it’s can the fees that we charge to help with the administration, can they be charged to the fund?

Ray Roberts:

Yeah. Hey, Rob, I’ll take that one. This is Ray. The answer to your question is, you bet. The payments that you get for the CARES Act, of course, is related to the CARES Act. And it’s also wasn’t budgeted before the March number of our March date. So just the threshold questions were answered correctly. So any money you spend dealing with the COVID crisis can be reimbursed. So you’re going to have administrative charges, you’re going to hire consultants to come in, or accountants to come in. Whatever it might be, any of those expenses that were related to the COVID and not budgeted in March can be used. So the fees that, for instance, Carr Riggs might charge to help on these projects would be able to be reimbursed through the CARES Act funds.

Robert Lemmon:

Excellent, nice clear answer, and I’m glad, I know my clients are that I’ve been helping with this consulting work, are very pleased that that is the answer that yes, the fees can all be charged and covered by the Coronavirus Relief Fund money. So that really wraps up all the questions I’ve got for this episode. And again, Becky, we were thrilled to have you back after you’ve been working so hard helping places in Louisiana for the last few months. So thank you for coming back. And Ray and David as always, fantastic answers, and thank you for joining.

I would just like to sign off by kind of reminding everyone that we do have a number of articles on the COVID funding questions and various COVID related matters on our website, cricpa.com. So feel free to check those out. There might be some useful info for you, but other than that, thank you everyone for listening and have a good one. Bye-bye.

Outro:

If you want more CRI insights or are interested in learning about our firm, please visit our website at 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.