On April 22, 2020, the US Department of the Treasury (Treasury) issued additional guidance and a frequently asked questions (FAQ) document around the use and expenditure of Coronavirus Relief Funds (CRF) established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
An overview of the guidance and its impact on tribes follows.
The CRF guidance for state, territorial, local, and tribal governments provides additional assistance to tribes evaluating what expenditures can be considered allowable under the requirements of Title V of the CARES Act.
Permissible Uses and Programs
The guidance notes that necessary expenditures incurred due to the public health emergency:
- Must be used for actions taken to respond directly to the public health emergency
- Can include activities incurred to address medical or public health needs as well as second-order effects of the emergency, such as providing economic support to those suffering from employment or business interruptions
- Can’t be used to fill shortfalls in government revenue to cover expenditures that wouldn’t otherwise qualify under the statute
Revenue Shortfalls and Economic Support
It’s clear that the Treasury guidance falls short of tribal requests to specifically allow for use of the CRF to cover gaming and other tribal business revenue shortfalls. However, it allows tribes to provide economic support for business interruption.
Tribes should work with their legal counsel to determine if this allows economic support to businesses owned and operated by the tribe itself, in addition to providing such economic assistance to businesses owned by the tribe’s citizens.
Additionally, the guidance appears to allow assistance payments to tribal citizens needing economic support.
The CRF permits costs to be reimbursed by the fund if those costs weren’t previously accounted for in the tribe’s most recently approved budget that was approved as of March 27, 2020. Costs will meet this CRF requirement if:
- The cost can’t lawfully be funded using a line item, allotment, or allocation with that budget
- The cost is for a substantially different use from any expected use of funds in such a line item, allotment, or allocation
A cost isn’t considered to have been accounted for in a budget merely because it could be paid from a budgetary stabilization fund, rainy day fund, or similar reserve account.
The guidance doesn’t define or provide additional detail to help determine when a budget requirement would prohibit a cost from being funded. However, adopting lawfully binding budgets that restrict fund deficits could meet this requirement and allow CRF funds to reimburse costs that were originally budgeted in one fund to be paid out of another fund. Tribes should seek the advice of legal counsel to determine when costs are lawfully restricted.
For example, if your budget ordinance restricts the ability to incur a fund deficit—and there’s now a significant decline in the revenues received to finance a fund’s activities—those costs might be allowed under CRF.
Keep in mind that such costs would still need to meet the other criteria in the CARES Act to be permissible. Additional guidance will be necessary to assist tribes that don’t adopt a lawfully binding budget or only adopt budgets for certain funds or departments.
Nonexclusive Examples of Eligible and Ineligible Expenditures
Eligible expenditures in the CRF include:
- Medical expenses
- Public health expenses
- Payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to COVID-19
- Expenses incurred to facilitate compliance with COVID-19-related public health measures such as food delivery; distance learning; telework; paid sick, family, and medical leave; maintaining jails; and caring for homeless populations
- Expenses associated with the provision of economic support in connection with COVID-19 such as grants to small businesses to reimburse the costs of business interruption caused by required closures, payroll support programs, and unemployment insurance costs not otherwise reimbursed by the federal government
Ineligible expenditures include:
- Damages covered by insurance
- Payroll or benefits expenses for employees whose work duties aren’t substantially dedicated to mitigating or responding to COVID-19
- Expenses reimbursed under any federal program
- Workforce bonuses other than hazard pay or overtime
- Severance pay
- Legal settlements
The guidance appears to allow broad flexibility to determine the appropriate use of the CRF and for tribes to use CRF to cover the 50% of unemployment costs that some tribes could owe to states as a result of layoffs or furloughs.
Unfortunately, the guidance indicates that only the costs of employees directly responding to the public health emergency are considered eligible payroll costs. Other employees, who are indirectly supporting the tribe’s response, generally won’t be considered substantially dedicated to mitigating or responding to the pandemic.
Many employees, like your finance staff, are likely assisting the tribe with their response. However, if they’re performing those activities in addition to their normal functions, it’s not clear whether the cost will meet the requirements referenced above.
However, employees not directly responding to the crisis could be reimbursed from other sources. Tribes should determine whether those employee costs could be covered by other sources such as the Bureau of Indians Affairs funding received through the Tribe’s Aid to Tribal Government programs.
CRF Frequently Asked Questions
The FAQ document addresses the following items by:
- Confirming that unspent funds must be returned to the Treasury
- Providing that states can transfer funds to a local government under certain circumstances
- Acknowledging that assets purchased with CRFs can be retained by a tribe
- Indicating that sufficient records should be retained to demonstrate that the amounts incurred were in accordance the guidance noted above
As tribes and other governments review these guidelines and formulate their plans to expend CRF, the Treasury will need to clarify additional questions and likely expand the guidance.
Notable questions that still need to be addressed in further detail include:
- What definition should be used for a small business?
- How can the CRF be used to fund tribal business operating costs as a result of state-mandated stay-at-home orders?
- What are allowable economic support costs?
We’re Here to Help
We’ll continue to monitor the CARES Act’s impact to tribes and provide guidance as additional guidelines and notices are finalized. To learn more about how your tribe or business can receive relief from the CARES Act, contact your Moss Adams professional.