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Archives for April 2020

COVID-19 And The Impact on Local Governments

By Bob Kaufmann, CPA

As most of us sit at our makeshift home offices and adjust to the new normal of working from home, it is already evident the immediate impact COVID-19 is having on our surrounding communities. Although there are some positives; being around loved ones, pets, and no traffic for those that still have to drive every so often, the majority is overwhelmingly negative. Small businesses and the hospitality industry have taken the brunt of the pandemic thus far, but what is the impact of COVID-19 on local governments?


Governments should anticipate a dip in revenue during the current year and amend budgets accordingly. With the increase in unemployment and many residents already living paycheck to paycheck prior to the pandemic, there will be decreases in revenue that are both recoverable and non-recoverable. For example, governments who charge an earned income tax should anticipate a decrease from the prior year as this is not a recoverable source of revenue. Additionally, it is very likely that transfer taxes take a dip as people work to secure existing homes and the housing market softens.

The good news is some of the decline in revenue can be recovered later. However, it is likely that this could take until next year or beyond. It can be anticipated that many residents will fall behind on their real estate taxes, sewer, and trash bills. The dilemma that management and board members will face is whether or not it is ethical to charge late fees, penalties, and interest on these past due fees. If this is not something already being discussed at your monthly meeting, now would be the time to consider bringing it up and considering policy amendments. We have seen examples of both Federal and State governments extending deadlines for taxpayer generated revenue collection, placing moratorium on foreclosures, and other out of the ordinary actions. Local governments may find it necessary to follow suit.

Federal assistance

Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), much needed assistance will be provided to local governments to supplement lost revenue and cover expenditures incurred as a direct result of the pandemic. The three areas of the CARES Act most beneficial to local governments are the economic stabilization fund, the COVID-19 relief fund, and education stabilization fund.

The CARES Act allocates $454 billion to the economic stabilization fund. The fund permits the US Treasury to purchase obligations of local governments – this will help governments that had planned on issuing debt that may have run into some trouble in the current market due to the impacts of the COVID-19. It only permits the Treasury to invest in securities that mature in greater than 6 months and therefore will not help with short term tax revenue anticipation notes.

The CARES Act allocates $150 billion to the COVID-19 relief fund. States can apply for aid and will receive no less than $1.25 billion each. Local governments will be able to apply to the state for pass through funding related to the costs incurred for necessary expenditures due to the public health emergency that were not accounted for in their most recent budget.

The CARES Act allocates $30.75 billion to the education stabilization fund with $13.5 billion earmarked for elementary and secondary education of which 90% must be passed through directly to the schools/districts. Application for these funds is more inclusive than the prior two mentioned above and include the following activities:

  • efforts by local schools that pertain to the coordination and preparation with State, local, Tribal, and territorial public health departments in responding to the COVID-19 (p. 758).
  • assisting principal’s/school leaders with necessary resources for the operation of schools.
  • assistance for low-income students, ethnic minorities, homeless students, and students of foster care.
  • training/professional development of local school staff regarding decreasing the spread of contagious diseases.
  • supplies for sanitizing facilities
  • planning for long-term closures (e.g. meals for students, technology for online learning, continuation of educational services etc.)
  • providing mental health services
  • activities for learning over the summer
  • other activities necessary for the continuation of educational services for local schools.

Federal expenditures

Many federal programs have issued guidance or Q&As about expenditures that are allowable under their program as it relates to COVID-19. It is recommended that management review these issuances for any federal awards the government has available help lessen the burden on operating budgets. Additionally, there is guidance for delays and reporting deadlines and audit due dates. As each federal program varies, it is imperative that management review each program to ensure they are still in compliance with their federal awards.

The professionals at Barbacane, Thornton & Company continue to follow the evolving nature of the issues noted above and we will update our information as it becomes available.

If you have questions or would like assistance with developing strategies to manage in a changing Covid-19 environment be sure to contact us and one of our skilled professionals will be happy to work with you.

Barbacane, Thornton & Company is a highly regarded, regional certified public accounting and consulting firm specializing in auditing and tax services for government agencies and nonprofits.

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The CARES Act and The Stafford Act and the Impact on Local Governments

By Timothy Sawyer, CPA, CGMA , Partner

As we navigate through these unprecedented times, practice our social distancing, and adapt to the changes associated with a more virtual work environment it is important to have access to information and resources.  The news has focused on the recent aid packages and what they can do for the economy, but what assistance is available for our local governments (Counties, Cities, Towns, Boroughs, Townships, School Districts, etc.)?

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act was signed into law on March 27, 2020.  The CARES Act provides relief to several groups impacted by the coronavirus pandemic and provides $2 trillion in aid, broken down as follows:

  • Individuals $560 billion
  • Big corporations $500 billion
  • State and Local governments $339.8 billion
  • Small businesses $377 billion
  • Public health $153.5 billion
  • Education/Other $43.7 billion
  • Safety net $26 billion

For state and local governments, the $339.8 billion in aid includes:

  • $274 billion toward specific COVID-19 response efforts, including$150 billion in direct aid for those state and local governments running out of cash because of a high number of cases.
  • $14 billion for higher education
  • $13 billion for K-12 schools
  • $5.3 billion for programs for children and families, including immediate assistance to childcare centers
  • $5 billion of Community Block Grants

In addition to the aid available to state and local governments through the CARES Act, for the first time in history, the Robert T. Stafford Disaster Relief and Emergency Assistance Act (“the Stafford Act”) has been invoked for a health pandemic to address the size and scale of COVID-19’s impact on the United States.  The Stafford Act provides federal funding to aid the response to the COVID-19 response.

At least ten Federal Agencies (DHS, HHS, DOE, DOC, HUD, FCC, DOA, DOJ, DOL, DOT) will issue COVID-19 related grants pursuant to HR6074, HR6201 and HR748 and the emergency declaration. The specific requirements for each grant will vary, but will be governed by cost principles and administrative requirements in Title II of the Code of Federal Regulations (2CFR), including:

  • Allowable and Unallowed Costs
  • Procurement Rules
  • Audit Requirements
  • Monitoring & Reporting
  • Indirect Costs

Under the Stafford Act, local governments, are eligible to receive federal grants under the act.  There are four categories of eligible areas under the Act that a local government can receive assistance from:

  1. Activities to reduce immediate threats to public health and safety – EOC Costs, Training, Disinfection of Public Facilities
  2. Emergency Medical Care – Temporary medical facilities, Hospital Surge Capacity, Treatment in a temporary facility, EM Transport
  3. Medical Sheltering – Only when existing facilities become or expect to be overloaded in the future and cannot meet needs
  4. Other Essentials – Pet shelters, Food-Water-Medicine, PPE, Security, Law Enforcement, Communication, Search and Rescue

Things for state and local governments to consider when seeking assistance under the Stafford Act include that the federal cost is set at 75% with the remaining to be covered by the state or local government. Most importantly, the request for public assistance must be made within 30 days of the disaster declaration.

Since state and local governments must react quickly in seeking federal assistance, remember these key steps:

  • Establish Program Governance
    • Get educated on available funding sources, compliance rules, and timelines.
    • Assess organizational capabilities and gaps.
    • Define staff roles and responsibilities
  • Funding Application
    • Evaluate funding sources, state/local shares and organizational impact.
    • Register and request public assistance.
    • Minimize duplication of benefits and audit risks.
  • Policies and Procedures
    • Develop grant management standard operating procedures.
    • Establish process and IT Controls.
    • Enable financial systems t track transactions by funding source.
  • Grant Operations
    • Execute and manage the reimbursement process
    • Maintain compliance with grant regulations
    • Perform financial reconciliations
    • Monitor and report KPIs
  • Reporting and Closeout
    • Organize grant files and compliance with grant rules.
    • Determine and document final claims.
    • Respond to OIG audits and grantee monitoring visits.

Finally, here are some tips and leading practices that can be done now to mitigate some of the long-term challenges of managing FEMA grants.

  • Track your costs by configuring your financial system to include “job codes” for COVID costs by site or projects.
  • Designate an interdepartmental COVID-19 team that understands the Stafford Act guidelines and compliance rules.
  • Track your inventory by pulling inventory records as of the date the entity began preparations for COVID-19
  • Segregate staff time between overtime related to COVID-9 response activities and regular time
  • Track time for temporary employees hired specifically for COVID-19 related activities
  • Do not duplicate efforts from FEMA grant funds with assistance received from HHS or CDC
  • Avoid cost plus percentage contracts, piggybacking, unreasonable procurements and prohibited contract clauses.
  • Prepare justification memo for noncompetitive procurements during the exigency period
  • Conduct cost analysis for procurements over the simplified federal acquisition threshold
  • Track direct administrative cost with sufficient level of activity level details to maximize grant reimbursements.
  • Follow the rules of HHS and CDC for medical sheltering and comply with EHP regulations.
  • Account for donated resources for cost share considerations.

If you have additional questions or need assistance, contact us at Barbacane, Thornton & Company and we will assist in any way that we can to answer your questions or help find answers.

Barbacane, Thornton & Company is a highly regarded, regional certified public accounting and consulting firm specializing in auditing and tax services for government agencies and nonprofits.

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CARES Act: Understanding the Paycheck Protection Provision (SBA 7(a) Loan Program

By Pamele W. Baker, CPA, CGFM 

CARES Act: Understanding the Paycheck Protection Provision (SBA 7(a) Loan Program

The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27 provides $349 billion in funding for the Small Business Administration (SBA) in an effort to provide assistance and relief to America’s nonprofits struggling under the weight of COVID-19. The Act included a paycheck protection provision  by providing additional funding to the SBA for specific areas of need and expanding the SBA’s 7(a) loan program.

What are the changes to the 7(a) Loan Program?

In an expansion of the SBA 7(a) loan program, the CARES Act allows the SBA to serve as temporary guarantor for 100% of 7(a) loans of up to $10 million for nonprofits and small businesses to maintain payrolls and pay off debts. Previously, the SBA could only serve as guarantor for 75% to 85% of 7(a) loans depending on the type of loan.

Who is eligible?

Those eligible for the paycheck protection program include small businesses, nonprofit organizations, veteran organizations, and tribal businesses with less than 500 total employees (including full-time, part-time, and any other status) in operation on February 15, 2020. For the hospitality and food industries where multiple locations may result in over 500 employees, an exception was made to allow for up to 500 employees per physical location.

Sole proprietors, independent contractors, and eligible self-employed individuals are also covered under this provision. Limitations apply for those making more than $100,000.

How do I qualify?

Nonprofits that qualify as a result of COVID-19 include those adversely affected by:

  • Supply change disruptions
  • Staffing challenges
  • A decrease in gross receipts or customers (donors)
  • Closure

Applicants must certify they have been adversely affected by COVID-19, that they intend to take out only one paycheck protection program loan, and that they will use it for the designated purposes.

How much can I receive?

Most eligible applicants should receive approximately two months-worth of payroll costs. Loans will be determined based on the average total monthly payments for payroll costs incurred in the 12 months preceding the date the loan is made and multiplied by 2.5. In the case of seasonal employers, the average will be based on the 12-week period beginning on February 15, 2019. For any employer who was not in business between February 19, 2019, and June 30, 2019, the calculations will be based on your average monthly payments for payroll between January 1, 2020, and February 29, 2020. The covered period for the loan is from February 15, 2020, ending June 30, 2020, and the maximum interest rate for these loans has been capped at 4%. 

What can I use loan money for?

Eligible recipients may use the loans to cover payroll costs, costs related to the continuation of health care benefits, such as paid sick, medical and family leave, employee salaries and commissions, rent, utilities, interest, or other debt obligations.

Am I required to provide a personal guarantee?

No, a personal guarantee will not be required, and no collateral shall be required for the loan.

Do I need to pay the loan back?

As outlined in the CARES Act, loans will be forgiven if the business or organization maintains the same number of average employees and as long as wages are not reduced by more than 25% during the covered period, which is the eight-week period beginning with the origination of the loan. The amount forgiven cannot exceed the principal amount of the loan.

Should there be any reduction in loan forgiveness, the recipient will be required to pay back the loan and may owe interest as outlined in their agreement.

Am I eligible if I rehire employees?

Yes. If a business or organization has laid off or furloughed employees and rehires them, they may still be eligible for the loan depending on the timing. If the timing of rehire falls outside of the covered periods, the amount of loan forgiveness may be adjusted.

How do I apply?

To apply for the 7(a) loan program, you must contact a bank, not the SBA. The SBA lists their most active 7(a) lenders on their website at If you have a current relationship with one of these lenders, start there. The loan will be issued at the bank’s discretion. Loan applications will be available through the lending institutions. The treasury and SBA expect to have this program up and running by April 3rd.

Loan Terms and Conditions

All loans under this program will have identical terms:

  • Interest rate of .5%
  • Maturity of 2 years
  • First payment deferred for six months
  • 100% guarantee by the SBA
  • No collateral or personal guarantees
  • No borrower or lender fees paid to the SBA

Once final application guidance is released, businesses can begin submitting applications for these loans. For assistance with this program contact Barbacane, Thornton & Company LLP.

Note: The SBA has several loans available. Many people have already applied for the Disaster Relief Loans already available. The 7(a) loans are different and separate from that loan.

Barbacane, Thornton & Company LLP is a highly regarded, regional

certified public accounting and consulting firm specializing in auditing and
tax services for government agencies and nonprofits. For more information about
Barbacane, Thornton & Company LLP, please call (302) 478-8940 or visit


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