Regulatory and Tax Updates
American Rescue Plan Act — Evaluating the Impact on States and Governments
- More than $350 billion of new COVID-19 relief has been directly allocated to states, counties, cities, and tribal governments.
- Funds can be used for more wide-ranging purposes than what was allowed previously under the CARES Act.
- Governments must spend the funds by December 31, 2024.
- Develop a detailed plan to help you administer programs, meet compliance requirements, and manage new complexities.
Do you need help making a plan to manage relief funds?
On March 11, 2021, the American Rescue Plan Act of 2021 (Rescue Plan) was signed into law. The Rescue Plan expands existing COVID-19 relief programs and provides additional funding to states and local governments that had not been included in prior relief packages.
The American Rescue Plan Act
Many funding purposes established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Coronavirus Relief Fund (CRF), and Consolidated Appropriations Act, 2021, still exist under the Rescue Plan. However, the Rescue Plan is significantly larger than prior relief packages, and considerably expands the ability of states, local governments, and tribes to respond to and recover from the COVID-19 pandemic. Some of the key impact areas are:
- State and local fiscal aid — $350 billion has been directly allocated to states, counties, cities, tribes, and territories, with a broad definition of allowable uses, and added purposes like recoupment of lost revenue and investments in water, sewer, and broadband infrastructure. While governments have flexibility in using these funds, they cannot use them to make a deposit into a pension trust or to offset or delay a tax increase. These funds must be used by December 31, 2024.
- Emergency rental and housing assistance — An additional $21.6 billion is allocated to allow governments to continue stabilizing homeowners, renters, and landlords through direct support of mortgage, rental, insurance, and utility costs. These funds are available until September 30, 2027.
- Education stabilization — $122.8 billion of funds will be provided to state education departments to give local education agencies tools to open schools safely and bring teachers and students back into the classrooms.
- Transportation and infrastructure — More than $90 billion in funds are available to governments for vaccine deployment, protecting public transit workers, and stabilizing airport and aerospace operations.
- Emergency paid sick leave credits — Governments are now able to access the paid sick time and paid family leave payroll tax credits under the Families First Coronavirus Response Act, originally only available to non-governmental entities.
Take steps now to plan ahead
At the onset of the pandemic, governments faced the challenge of managing the complexities and oversight of new programs in a difficult and fluid environment. They learned numerous lessons that could be applied to the new funding from the Rescue Plan. Some examples are:
- Grant management plan — Create a plan for grant management to help you spend funds effectively and follow applicable federal regulations. Establish a management team to oversee and coordinate the administration of your funding. Remember that grant management does not stop once the funding is in hand; it is a continual process from the receipt of the funds to the final closeout.
- Internal controls — Once you have your grant administration plan, review your internal control structure to verify that controls are in place and operating effectively. A strong internal control environment clearly conveys who is responsible, authorized, and qualified to make determinations, and includes procedures to properly maintain documentation required by auditors.
- Subgrant agreements — Many state, local, and tribal governments used subrecipients to efficiently assist their communities during the pandemic. Government entities that hadn’t used subrecipients before may find it challenging to understand and comply with the Uniform Guidance stipulations. Pass-through agencies may be required to document risk assessments, verify that grant agreements contain the required components, and properly plan monitoring procedures. CLA’s risk assessment tool can help you document the likely requirements.
- Accounting for the funding — Before you start spending, consider how you will account for and record transactions in your accounting system. Comingling costs could result in problems when reporting on or compiling data for your year-end audit. Creating separate funds, object codes, business units, or a similar tool to disaggregate the data in your financial systems is highly recommended.
How we can help
CLA’s experienced professionals can help you navigate the complexities of COVID-19 funding by:
- Performing funding opportunity research and analysis
- Assisting in the grant application process
- Working with you to develop effective strategies for implementing grant management policies and procedures
- Offering resources to ease the burden of grant compliance
- Helping you prepare for federal program audits
- Providing risk management services to assist you with the steps after COVID-19
- Assisting in the application processing and eligibility determination for renters
CLA is here to support you through this challenging time, so you can continue to provide valuable services to your community.