Episode 17 – COVID-19 | Governmental Questions Part 4
COVID-19 Podcast Episodes

 
 
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Is your government entity prepared for what is yet to come of the COVID-19 impact? Do you have questions about the steps you may need to take once the smoke clears? Join us as CRI Partners Robert Lemmon, Ray Roberts, Jason Harpe, and David Alvarez answer some of our clients most frequently asked questions regarding government entities and 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 an episode of the CRI It Figures podcast. Today, we’re going to be addressing some COVID-19 governmental questions for people who’ve listened before. They’ll recognize me. My name is Robert Lemmon. I’m an audit partner from the Gainesville office in Florida. And with me, as always, is Ray Roberts. Ray, do you want to introduce yourself for people who don’t know you?

Ray Roberts:

Thanks Rob. Yeah, my name is Ray Roberts. I’m the partner in charge of the government industry line and I live out in Albuquerque, New Mexico. I’ve been doing government audits for quite some time and been on a variety of different committees. And for some reason, they keep having me back for these podcasts. So, I’m glad to be here.

Robert Lemmon:

Thank you, Ray. We couldn’t do it without you. Also with me today is Jason Harpe. He’s done a couple before, but Jason, for people who haven’t heard your previous podcast, do you want to introduce yourself please?

Jason Harpe:

Yeah. Thanks. As Rob said, I’m Jason Harpe, I’m an audit partner in the Birmingham, Alabama office and do a good bit of government auditing and consulting and have played in this arena for a while. And certainly have been busy here in the last few weeks as things start rolling out related to funding. So, look forward to answering a few questions today.

Robert Lemmon:

Thank you, Jason. And we have a fourth member of the team today .as someone new to the team, David Alverez is joining us as well. Managed to corral him into this, because he is really, really knowledgeable on all of this COVID related funding stuff. So David, do you want to introduce yourself please?

David Alvarez:

Yeah, sure. My name is David Alvarez. I’m an audit partner in our Tampa Bay offices of Courage and Ingram. I have listened to plenty of podcasts in my life. However, this is my first time being on one. I’m very excited about today’s event.

Robert Lemmon:

And we are excited to have you David. This is a really strong team. Although I must say for listeners who’ve heard our previous podcasts and a wondering where has Becky gone? I should apologize. We’re going to try and get her back, but she’s really busy right now doing some excellent consulting work with a lot of her Louisiana clients, helping them deal with all this COVID funding. So she’s a little bit tied up, but we’re going to get Becky back once she gets through this busy period. But other than that, we’re going to do the usual format. I’ve got a bunch of questions here that I’ve been hearing from clients and other partners and team members. So I’m going to throw these questions out there and see who on the team wants to tackle some of them.

So I’m going to start off with one that I’ve seen in the news, and I’m not sure where it landed, but basically what is the latest in terms of additional funding and stimulus money that’s coming? I’ve heard the House has been approving things and that it’s not getting through the Senate, but does anyone know? I’ve heard big, big numbers about more stimulus packages come in through the House and the Senate, anyone know where that’s at and what the latest is?

Ray Roberts:

Hi Rob, this is Ray. I’ll take that one. It’s called the Heroes Act, that’s gained so much attention in the last week or so. The Heroes Act has actually been passed by the House, but it’s kind of ran up against a wall in the Senate. There’s $3 trillion. That’s just like real money there, but 500 billion directly to the States, 375 directly to local governments. 20 million, I mean 20 billions to tribes and 20 billion… See I’m not even used to using those words, to direct US territories. So it’s just a lot of money, Like I said, it passed the House. It had its first reading in the Senate, but it’s not going to go anywhere in this present form, for a variety of reasons. the Senate, it is a political year.

The Senate thinks it’s $3 trillion is just a little bit too much money. Okay? Maybe, maybe not. And especially since the last 3 trillion, between funding and loans, hasn’t even been implemented yet, so they don’t know how that’s going to react. So that’s the thought process, but more than likely, it’s not going to pass in the current form. Mitch McConnell, he, in the last day or two, has said something, maybe we’ll need some kind of additional funding, but it’s not going to be the Heroes Act in its present form. But, it’s just a lot of money and more money for PPP, more money for hazard pay, tax credits and deductions, COVID testing, another round of $1,200 stimulus to each individual.

Plus 14 other federal departments have been affected by this. So it’s kind of all over the barnyard. The big hangups for the Senate is it’s going to extend the $600 unemployment a week benefit. And they’re having trouble getting people to come back to work now because it’s too lucrative for them to stay home. And then also money going to non-citizens. That’s a hot political topic this year. So all said and done, will we, in my opinion, and it’s my own personal opinion, will we get more funding? You bet. Will it be the Heroes Act getting $3 trillion? Not a chance. So that’s where we’re at, but nothing’s new as we sit here today.

Robert Lemmon:

So it’s a case of watch this space, but something’s going to come most likely.

Ray Roberts:

I think you’re right.

Robert Lemmon:

So, Ray as well, I had to chuckle, because when you were tripping up with your millions and your billions, because I remember when a million bucks was a lot of money, but it doesn’t feel that way anymore with [crosstalk 00:06:00] getting thrown out. But that’s a good answer and good update. Everyone, watch this space for additional funding. The next question I’ve got written down is specific to a question I heard from a smaller Florida municipality. They’ve been hearing about new CDBG funding. That’s the hood to grant that provides a lot of funding. They’ve heard that there’s more CDBG funding. They haven’t received anything yet. They’re not sure what to expect. Trying to find information on it, on this specific CDBG funding source. And they just trying to figure out what’s going on and how do they get their CDBG money. So, anyone know much about CDBG funding?

Jason Harpe:

Yeah. Rob, Hey, this is Jason. I’ll take that. Interestingly and, I’ve had several questions similar to this also, but for this specific question, I know you could go to the HUD website and they actually have already, based on formulas, have allocations for 2020 for a lot of cities. And I’m actually looking at it now and I’m just scrolling down in Florida, has got a number of cities that already have their allocation related to CDBG. And where you’re sitting in Gainesville, it was around 1.3 million. So you can already find a lot of these amounts if you know where to look. And most cities, I would imagine, have somebody designated that could go out and search for these things.

I know I spoke with one yesterday and it was, I believe FEMA. And they had a representative in their city that checks that and they were aware of a couple of things that they were eligible for. So specifically, related to this particular CDBG question, you can certainly find that information at HUD’s website now. It’s an Excel spreadsheet that you can see and find your city on and see if anything’s been allocated. So, yeah, you can slowly, but stuff’s beginning to come out similar to what Ray was saying. You can start finding things now, which is great news, certainly as you budget and plan for your upcoming federal programs.

One thing too, and I would imagine, back to the old ARRA days, you probably would have questions related to compliance. And I would imagine any of these would be more high risk since they’re making special allocations and doing greater funding. So I would caution as you’re getting this and planning, be very careful related to compliance as you always should be, but know that these may be under the microscope even more than normal, just because of the environment we’re in. So, they’re out there and you can find them if you know where to look and if you don’t, contact one of us and we certainly could help you.

Robert Lemmon:

Yeah. That’s a really good point you had there at the end, because Ray and actually were chatting about this the other day, about how, if this is grant funding with an existing grant, you might feel, “Oh, I know the compliance requirements for this one”, but we don’t yet know whether there’s going to be extra strength attached to the new money this year or what the 2020 compliance supplement is going to look like. So yeah, that’s a good point you had in there and also what you’re saying about just the agency websites, like the hood website or the FEMA website. Takes a little bit of digging, but I found that there is some good info out there. So I’m glad for this big CDBG grant. You knew whether where the information specifically was and have given people good information to direct them there. So, that’s a good one. Thank you, Jason.

So what have I got next? Here’s the next on the list. And this is a short one, but a tricky one, I think. Does anyone know, has all of the CARES Act funding being paired out?

David Alvarez:

Yeah. Rob, this is David. I can try and answer this one and it’s, yeah… You say it’s a short question, but it definitely has a lot of pieces to it. And the first part is, not exactly. So the CARES Act did include a fund that was titled the Coronavirus Relief Fund and that fund included $150 billion for governmental entities. Now, the majority of this money has been initially paid out by the treasury. And the payments went first to states, to us territories, to tribal governments. Although tribal governments didn’t get all of their allocation as of yet, there’s still some coming to them. And then the US Treasury directly paid local governments, the populations over 500,000 residents. So while all the money’s been paid out, the easy question or the next question, as I’m kind of posing it to myself as well, what about local governments with populations under 500,000 people?

So, as I said, I’m in Tampa, Florida, an example from here, the state of Florida was allocated 8 billion from the total 150 billion. The state legislature here held back a portion of that for state specific activities. The amounts for governments over 500,000 in population, their amount was allocated. And that left about 1.3 billion. So that 1.3 billion is currently held by the state of Florida that, in theory is going to other local governments, but it’s not yet been allocated to the end user. So yeah, it’s been paid out, but not to really the person who’s going to be actually spending that money. So how has that 1.3 billion going to be dispersed to local governments? We don’t really know that yet. We’re starting to see some more information.

You know, for example, in Louisiana, I’ve seen that they’re planning to open a portal in June and they’ve laid out that, that that portal is going to open for two weeks and any government that has not yet received money through the CARES Act, or the Coronavirus Relief Fund, through this portion, they can apply for some money within that two week period. But if they miss that two week period, they’re going to be, just out of luck and maybe there’s additional funding down the road as Ray referenced earlier. I expect something similar to be in other states of how they deal with passing this money out. There’s another portion of the CARES Act that’s really going to be available to local governments. And this is money that went directly to healthcare providers.

And I just want to point out real quick for healthcare providers, kind of what I’ve seen with some of my clients that also it does include governmental health care providers. And also there’s some availability in there for healthcare service providers. And what’s important there is for local governments that provide EMS service they likely can get some funding through the CARES Act. And then the CARES Act also provided a bunch of funds to federal agencies. Some of that being about what Jason just talked about with the CDBG. So, the amounts are not yet fully paid out, but, what I’ve been advising people, and I just think it’s hugely important. We really saw it with the PPP loan process, is the money’s going to absolutely go fast. So really acting quickly, being prepared, staying updated with all the various information that’s coming out is very important. Maybe we’ll get more money, but there’s nothing guaranteed.

Robert Lemmon:

Excellent stuff. That’s a really narrow window, isn’t it? That Louisiana have gotten. Just think, I mean, if-

David Alvarez:

yeah. It’s pretty incredible. Yeah. Two weeks.

Robert Lemmon:

If Florida does the same thing, or something very similar. Two weeks to distribute 1.3 billion, that’s a hectic a couple of weeks. But Jason actually, in Alabama, I think you were feeling that it’s in a similar state as Florida where it’s currently… The money’s at the state level and we’re still waiting to see when the parcel opens and the request period opens up. Is that right from, from Alabama, Jason?

Jason Harpe:

Yeah. That’s that’s correct. I think as of today, we’re still on hold. Our governor’s already indicated that $250 million of Alabama’s CARES Act total allocation would go to local governments. And I think that’s what we’re waiting around on is what is the process going to be? And I guess my thoughts are, it would be similar to probably something like Louisiana. There would be some window of opening and closing that you would have to pretty much be prepared to timely jump on, what you want to submit if you’re a local government to potentially be reimbursed. So, I see it going probably like other states. A pretty short time period. You better have your ducks in a row and get prepared.

Robert Lemmon:

Yeah. That’s absolutely what I’m hearing a loss of. Because I know we’ve got a lot of guys in the firm who are working on this and helping clients and trying to be… They’re really on top of the game ahead of head of everything and it sounds like a lot of the states are in this holding pattern as of today. So we shall see, but it’s going to be, I suspect, a pretty mad scramble to get there everyone’s share of the money, but yeah, we’ll have to see.

Let’s move on to another question then. I’ve got another one here, which talks about… After the CARES Act, there was a newer act that gave a bit more funding. It was the PPP and Healthcare and Enhancement Act. And I’ve not heard as much about this as I have the CARES Act. So who’s familiar with this latest act and wants to share a little bit of information about how much is it and just about what it’s available for?

Ray Roberts:

I’ll take that one, Rob. It goes along with some funding here. As most everybody knows the PPP loans have just… They just went crazy that first round and ran out of money pretty quick. And so congresses knew they had to do something. And so they passed the PPP and Healthcare Enhancement Act. It was $484 billion. And the vast majority of that, 310 of it went to PPP loans and the EIDL loans, the emergency economic injury, disaster loans or grants. So that’s where most of it went. For the remaining part of the money though, 75 billions went for hospital and healthcare providers, and it can be used for revenue replacement, which is unusual so far through this process. Usually it’s just reimbursed for costs, but this is the first time, that I know of, that revenue replacement has been considered and it’s in the healthcare and hospital arena.

So there’s also 25 billion for testing. This is a pool where some of it, 11 billion, goes straight to states, localities and tribes. That part can’t be used for revenue replacement, but it is for testing and contract tracing. So, also a total of $100 billion in the healthcare enhancement part. So that’s real money and it does help, because most hospitals are really struggling now, although they got plenty of work as it relates to COVID, but the rest of the hospital, where they make some money are shut down. And so this money will come in as a replacement for the revenue they’ve lost while they’re closed down. One thing that’s come up here in New Mexico, we’re kind of weird in the fact that we have sales tax on all our services. So accounting services, legal services, and in some cases, medical services, and the taxation and revenue department here in New Mexico has determined that this stimulus money, that’s revenue replacement, will be subject to that sales tax or gross receipts tax as we call it out here.

So, more to come on that, but anyway, that’s out there. So you have to watch out for that. Some of these things will start popping up that you might not expect. On the PPP loans, it’s not taxable the income, but you can’t deduct the expenses related to it. So it’s a variety of different things. There’s little hidden tidbits here and there that you got to watch out for or might get you in trouble. But I think the PPP and Healthcare Enhancement Act is pretty straightforward. It’s just trying to continue on with what was issued and expand on in the CARES Act.

Robert Lemmon:

Yeah, but that is big news for healthcare providers. Isn’t it? Because I’m with you, this is the first time I’ve seen revenue replacement being allowed anywhere. So certainly big news for healthcare providers and just on a sidebar, my wife works at a large hospital and she’s been hearing how they’re losing millions of dollars a day. So, that goes hand in hand with what I’m seeing here locally and we’re experiencing. But, that’s some really good information, like I said, especially for healthcare providers.

Next question I’ll jump to here is… I think we’re all starting to see in our states that the economy is trying to get moving again and I’ve heard of some people asking questions about, are there are any funding sources that can specifically help with getting the economy moving again and strengthening the local economy. Has anyone heard anything about this kind of funding being available?

Jason Harpe:

Oh, Rob, this is Jason. I actually have. I guess it was a couple of weeks ago. The commerce secretary announced some grant funding coming through the Economic Development Administration and you can go to their website and get more information on that. It’s www.eda.gov and with the theme of what we’ve been talking about earlier, this one’s got a little bit different take on things that may be eligible for funding. For instance, if you’re doing any kind of economic recovery planning and preparing technical assistance strategies to address any kind of economic top dislocations caused by the pandemic, that could be eligible for this grant. Any kind of preparing a plan to respond to any kind of future pandemic. If you’re doing any of that, it would be eligible for some funding.

Also, just entrepreneurial support programs to diversify your economy. And I think interestingly in this one, it does some funding for constructing public works and facilities that could support economic recovery. So, and that even includes broadband. I know that’s been a big topic here in Alabama, as far as allocating some money to that. So these funds would address a lot of those and you could get details, like I told you, at the website. So there again, with a theme of what we’re talking about, this is a little bit different, but it’s certainly available and it’s a good bit of money. I know a billion here, a billion there.

So anyway, I think that’s one thing that you could look at for getting the economy moving in your local government. I would certainly visit that website and explore that. So anyway, I think that’s interesting.

Robert Lemmon:

I agree, yeah. And I think a lot of that money is going to… It could probably be spent now and it’ll help the economy in the short term and it’s designed to even help in the longer term, because I think it’s designed to strengthen infrastructure and economic development that will have longterm positive impacts, but obviously there’ll be a short term positive impact when you’re spending the money right now and getting people working on projects.

Again as well, you give another good reference to a useful site. So, there’s a lot of sites out there to try and keep on top of, but I think that’s another good one to steer people to. But, I’m going to wrap it up here with one final question. And this is again, what we’re dealing with right now is some schools are still out. We’re not sure when schools are going to be reopening and what school funding does anyone know is available to assist them with the disruption and that they’re suffering and trying to maintain the educational facilities whilst in this situation? Does anyone know of any school specific funding?

David Alvarez:

Yeah Rob, this is David. The CARES Act did include money for schools. There’s just about 28 billion. And they did split that between K through 12, and higher education institutions. And this money was intended to be spent in relation to school closures. I’ve got kids in the K through 12 system and it just compare it to our experience over these last couple of months. And I felt lucky that we were able to be able to support them in a distance learning environment, but there’s for large school districts here in Tampa, we have a lot of diverse amongst the population. So being able to support a distance learning process for the rest of the population and improve education technologies, where the portion of the K through 12 funding is really intended to go.

I will say that the Department of Education has put out a lot of information in this area. And I say it a lot in capital letters. I think it’s interesting to compare, kind of comparing… We’ve been doing a lot of comparing back to the PPP loan program, where the majority of the complaints that I had heard on that program was there’s not enough information. And now, in this area, I think some of the complaints is going to be, there is so much information. How do we even navigate this space? In K through 12, the main funding source, what they’ve called it, is the Education Stabilization Fund.

In this area and same thing in higher education, the payouts are or formula based. So it’s primarily based on populations, on enrollments and that kind of information that schools and higher education facilities are used to, but there is still an application process. For example, I was looking at it again today and the higher education piece on the front cover of their application process, it has a due date of June 29th. So again, another area with an end date and you mentioned this is before, but I discuss it. Every time I’m talking in these areas, is that acting fast is really key.

Robert Lemmon:

Yeah. And that is a message I’m hearing time and again, just on these podcasts and also just conversations that I’ve had. David, you said you’ve got children. Do you know when they’re going back?

David Alvarez:

We’ve been getting a lot… There’s been quite a few in the state of Florida. So through our education commissioner surveys, they’re now asking parents when they are comfortable. So, I don’t know for sure. We’re expecting a regular start in the fall, but this thing’s been unpredictable every step of the way.

Robert Lemmon:

Yeah. So it’s still no clear answers, but what about you, Jason? You’ve got a little one. Any definitive school return dates?

Jason Harpe:

I think they’re going to wait a little later and reevaluate. I don’t know anything’s been set in stone, so they’re kind of a wait and see sort of thing. But, as far as I know right now, hopefully they intend on starting back up like normal. I don’t know whether they may continue. The e-learning process or remote learning… In the end, I think Alabama did a great job of making that work. Of course it probably wasn’t quite as good as in a classroom, but I thought considering they basically had zero time to get it done, that it went off real well, at least in our school district. So, I think it’s still wait and see. Probably in Alabama, just as important, I think everybody’s holding their breath about college football, so that may be the number one priority right now. Is that going to happen? So, but I think that may be wait and see too, but, but anyway, hopefully it’ll all work out.

Robert Lemmon:

Yeah. I know in Gainesville, everyone wants to see a football starting because we were just starting to build some momentum the past few years and trending upwards. But hey, I don’t want to digress because we could talk forever on college football, but, what I’m hearing from all the questions definitely is, there’s still a loss of uncertainty and a lot of places to do the research. All the different agencies and the federal websites. It’s just a case of trying to keep up with the latest information and monitor all these sites. I guess that’s one of our biggest takeaways from today. So ,I think that’s a good place to sign off there.

Hey guys, I really, really appreciate you joining and answering those questions, David, terrific job for your first one. So thank you.

David Alvarez:

Thank you. It was a lot of fun. Glad to be here.

Robert Lemmon:

I’m glad you liked it. We’ll try and get you back and with that, I’m going to just thank everyone for listening. Please, if you need more information on any of these specific topics, please consider going to the CRI website. cricpa.com. There’s a COVID page there with a lot of topics and there’s a government specific section. Some good articles and webinars that you can watch the recordings of and just a bunch of stuff that might be useful. And of course, you’re welcome to contact us and if you’ve got specific questions, we’ll try our best to answer. So with that, thank everyone again for listening and have a good day, everyone. Goodbye.

Outro:

If you want more CRI insights or 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.