Three of our team members who serve our government clients including state and local governments, as well as public and charter school systems, recently sat down and compiled a list of questions and answers to help these agencies decipher recently enacted legislation related to the COVID-19 epidemic. You can view the webinar on-demand. Here are a few of the things they covered:
Jodi Woodward, CPA // Government Market Leader:
In addition to leading the government team, Jodi has more than 25 years of experience in public accounting, focusing mainly on local governments, including cities, counties and school districts; ERISA plans; commercial real estate, including HUD audits; and colleges & universities.
Q: If an event that we registered for and paid using federal funds has been canceled and either an allocated refund or no refund is received, can we still charge the costs to the federal award?
A: Yes, awarding agencies may allow recipients to charge full cost of cancellation when the event, travel or other activities are conducted under the auspices of the grant. However, awarding agencies must advise recipients that they should not assume additional funds will be available should the charging of cancellation or other fees result in a shortage of funds to eventually carry out the event or travel. Also, remember to maintain appropriate records and cost documentation.
Q: Do we need to get a new approved indirect cost rate?
A: No, awarding agencies may allow grantees to continue to use the currently approved indirect cost rates to recover their indirect costs on Federal awards. Agencies may approve grantee requests for an extension on the use of the current rates for one additional year without submission of an indirect cost proposal.
Q: Do I need to do anything to get the 6-month extension on the single audit submission due date?
A: No further action by awarding agencies is required to enact this extension. This extension does not require individual recipients and subrecipients to seek approval for the extension by the cognizant or oversight agency for audit; however, recipients and subrecipients should maintain documentation of the reason for the delayed filing.
Q: If our entity decides to delay our filing by the 6-month nowextension, do we automatically become a high risk auditee?
A: No, recipients and subrecipients taking advantage of this extension would still qualify as a “low-risk auditee” if they meet the other requirements of a low-risk auditee.
Andy Grice, CPA // Audit Manager:
Andy’s main area of focus is government entities, specifically cities, school districts, charter schools and special districts.
Q: How should entities consider the impact of COVID-19 on their financial statements related to fair value of investments?
A: With the COVID-19 outbreak impacting financial markets and interest rates going down, there are several things to consider. Depending on what type of investments and securities an entity is invested in, the impact can vary. We expect that there will be a significant impact on the fair value of investments. It’s important to look at investments subsequent to yearend as well as the value of other assets until the audit report is issued to consider impairment. The financial statement is as of specific date in time and your impairment evaluation should consider outcomes of a particular asset. Thing to consider include likely outcomes, whether the entity plans to sell a certain asset, and whether the value of the asset is likely to recover. Some securities entities don’t plan on selling and just planned on collecting the regular coupon payments. It will really depend on the type of investments and what the entities plans were for those investments.
Q: What other areas of the financial statements could be impacted by COVID-19?
A: With COVID-19 also impacting the economy and employment, we also expect there to some issues with collectability of certain accounts. Some entities provide small business and economic development loans and depending on how those businesses have been impacted, they may not be able to pay back their loans. There also could be an impact on the collectability of utility payments in the near term or on taxes and special assessments. Entities will be required to look at significant accounting estimates and see how they should be updated for the changing environment. One area would be the allowance for doubtful accounts and updating that estimate or creating one based on the entity’s projections.
Q: What if we know there will be an impact on our financial statements but do not have enough information to determine a reasonable estimate or adjustment to the financial statements?
A: This might be a common theme as we deal with a pandemic like this for the first time. The important thing to consider here is that if we are not able to determine a reasonable estimate or adjustment to the financial statements, we must disclose that in the financial statements. Subsequent event disclosures require that entities evaluate whether the COVID-19 outbreak provides additional evidence about conditions that existed at the balance sheet date, including the estimates used to prepare financial statements. All information that becomes available before the financial statements are issued or available to be issued should be considered in the evaluation of the conditions on which financial statement estimates are based on. Entities should consider disclosing the nature of the event and an estimate of its effect on the financial statements, or a statement that such an estimate cannot be determined at this time.
Chuck Herdegen //Senior Financial Manager:
Chuck specializes in charter school finance and business management. He has spent his entire career working for both charter schools and public-school districts in Minnesota, providing him with experience in the areas of school finance, board governance, and employment matters that he uses when working with schools.
Q: Will regular state aid payments continue during the planning and delivery time for distance learning?
A: Yes. Schools will continue to be paid state aids based on the number of students in average daily membership during this time. The state recognizes that the education of students will continue, albeit in a different format than a traditional classroom. School staff will be required to record attendance during distance learning to ensure that students are still engaged with the school and therefore are still enrolled.
Q: Are there new leave benefits available to staff as part of the Family First Coronavirus Response Act (FFCRA).
A: Yes. Employees may be eligible for emergency paid sick leave due to a COVID-19 related case for themselves or if they are caring for another individual with a COVID-19 related quarantine. Emergency Family Medical Leave Act benefits are available to eligible employees that need to care for a child whose school or place of care is closed due to COVID-19 related reasons.
Q: If an employee is laid off or has hours greatly reduced due to COVID-19 and they file for unemployment benefits, will the amount of benefits paid be charged to the employer?
A: No. First of all, an employer does not have to notify MN UI or raise an issue to be relieved of charges related to COVID-19. Any benefits that workers collect will not be used in computing a future UI tax rate, and presumably reimbursing employers will not be charged.
Q: We have an employee that is collecting benefits under the Emergency Paid Sick Leave provision of the FFCRA. Are those benefits subject to withholdings for retirement (i.e. PERA or TRA)?
A: Yes. COVID-19 paid sick leave pay is considered the same as sick time, paid-time off (PTO), or vacation pay, which is eligible pay when used to replace scheduled hours.
Q: Are schools required to pay hourly employees the same amount of pay that the employee would have received?
A: Maybe. While schools are encouraged to maintain the same working staff and pay hourly employees the same amount of pay, the layoff of hourly paid employees is not precluded if sufficient work cannot be found for them. Subject to a collective bargaining agreement with hourly staff, the school may be able to reassign duties to these employees within the school (i.e. supervision in child care provided for children of emergency workers, bus aide to help with the delivery of meals and/or instructional materials, assist custodial staff with cleaning/sanitizing the building, etc.). Some accommodations may be required for your staff.
Q: Do we have to pay contractors and contracted service providers during our distance learning planning and now delivery time?
A: Yes. Schools will continue to receive the full amount of their state aids for operating its programs, and they are encouraged to continue paying contractors for their services so that they are not harmed by the implementation of distance learning.
Q: Can school buildings be open during the distance learning period for tutoring or small group instruction?
A: No. During the distance learning period, public school buildings and facilities must be closed for typical in-school instruction. Regular school staff are allowed to be in the building. Only child care programs for children of emergency workers may be operated in a school building.
Our teams at BerganKDV are rallying together and working around the clock to ensure we’re up and running so you can be up and running. Whatever situation you’re faced with, at any time – you can call our task force and we’ll get you the answers, the listening ear and/or the quick support you need: 888-356-2295 or info@bergankdv.com.
