We are about one minute to 11 So we'll just give a few more minutes I'm seeing additional people joining so give it just a few more minutes and then we will Begin
Well good morning everyone. It is 11 o'clock. So we'll go ahead and get started. My name is Sarah Peterson. I'm the deputy program manager for the AFN navigator program. Welcome to the last training of the series of trainings hosted by the Alaska Municipal League and AFN is part of the Navigator program. And today we have Chris sloty, a partner with Schwabe Williamson and Wyatt, who is going to be talking to us about the originally it was the finalizing your Cares Act expenditures and preparing for the your final Cares Act Report. But today we're going to be talking about the recently issued Treasury guidance and what that means with respect to the Cares Act and expenditures into 2022. So with that, I will turn it over to Chris. Good morning, Chris. Thank you, sir. And tell us what we need to know.
Yes, thank you, sir. I appreciate the opportunity to talk to the group through and the platform being provided by AFN. So we are going to talk today primarily about the new Treasury guidance that was just issued last week, permitting, redefining or revising how agencies can obligate their funds by 1231 2020 2021 Even if the service property or equipment that you're using the funds to purchase is not going to be provided until 2022. I'm going to hopefully have a decent amount of time at the end for a q&a because I really think that this would be you know, we're kind of getting up to the deadline here for sure. And if there are people are having specific questions or have ideas or suggestions or kind of brainstorms about ways in which to obligate or incur these funds by the end of the year, I'd really would like to get that information out across the entire community so that everybody could take advantage of that. So originally, there was no Cares Act. There was a deadline to spend all the phones by December 31 2021, or you had to return the Cares Act funds to Treasury Given the timing of when Alaska Native corporations received the their portion of the Cares Act funds, and given the continued prevalence of COVID, including adult variant and now the Omniconvert variant I think there was widespread political support to extend that deadline for another year till December 31 2022. And in fact, in October of 2021, Senate passed Senate Bill 3011, which would have extended the deadline for tribes and agencies to use their funds until December 31 2022 and also made other amendments to to eligible uses of ARPA funds back tries. That said it that bill was passed. Senate Bill 3011 is passed by the Senate unanimously, which to my view gave us a good indication that there was probably broad political bipartisan support for the extension and that there was a good chance that it would pass the House. Unfortunately, it seems that politics has gotten involved. The House of Representatives passed hr 5119 On December 8 2021, which would have extended the deadline for tribes and agencies to use Cares Act funds also to December 31 2022. But it did not make the changes. Any changes ARPA or the specifically the changes to ARPA that were included in Senate Bill 3011. Quarterly because both the House and Senate bills were different even though they both provided a Cares Act extension. The extension was not enacted did not become law and Senate in the house are in the process of leaving Congress leaving wash DC for the Christmas holiday quarterly and unfortunately, it certainly appears that at this time then extension of the deadline to use the Cares Act funds appears to be dead at this time. However, there is some light at the end of the tunnel. end of the tunnel on December 14 2021 Treasury issued new guidance on when Cares Act funds have to be spent and this guide is was specifically in response to the lack of a congressional action on giving an extension to use the Cares Act funds and in recognition that Alaska Native corporations had only recently received their Cares Act funds. So the Cares Act statutorily in the statute itself states of Cares Act funds have to be used can only be used to cover costs that are incurred during the period that begins on March 1 2020 and ends on December 31 2022. Previously, Treasury had interpreted this interpreted the statutory language to mean that performance of delivery of services or goods paid for using care funds had to occur by December 31 2021. That is you needed to actually receive the proper receive the good receive the service, buy the property and have it be in use by the end of this year. Now Treasury could not change that statute that December 31 deadline because it is a statutory requirement of the Cares Act. However, Treasury could provide flexibility to Alaska Native corporations and tribes and really all Cares Act recipients including state and local governments by revising its prior interpretation as to what it means to incur an expense by December 31 2021. So what is the new Treasury guidance? This is so I've got the link here at the bottom of the page. If you need would like a copy of it. I could certainly provide it to you via email, but essentially what what Treasury states is that well, the new Treasury guidance now defines incurred at
excuse me, as follows. Quote, a cost associated with the necessary expenditure incurred due to the public health emergency shall be considered to have been incurred by December 31 2021. If the recipient has incurred an obligation with respect to such cost by December 31 2021. The Treasury guidance then goes on to say that, that it requires that recipient will incur an obligation if they if there is quote an order placed for property and services and entry into contracts and subawards and similar transactions that require payments. Treasury did also include a note that all payments using CRF funds, I checks that are set checks need to be sent out by September 30 2021. Oh, sorry, I had a little mistake here my right so So essentially, under the new Treasury guidance, you will have incurred an expense by December 31 2021. If you sign a contract award or other agreement requiring payment by December 31 2021, even if the service or property is not provided or received until after 2022 and as a read that out. I realized that's kind of poorly phrased in the way I've summarized that. You need to sign the contract requiring payment by December 31 2020 2020 21. You can make the payment you and receive the service or property or equipment in 2022. So you just need to have the contractual obligation to make a payment entered into by December 31 2021. Even if that payment is not actually made and the service property or equipment not received until sometime in 2020 2020 22. Now you do need to have all your checks sent out like your checks actually spending the Cares Act funds by September 30 2022. So there is still a little bit of a deadline and that you could sign a contract by the end of the this year for a service equipment or property that you're going to get next year and make that payment next year so long as that payment is actually made by September 30 2022. If you have obligations under contracts you sign now that extend beyond September 30 2022 payment obligations and you have to make a payment on those obligations after September 30 2022. You will need to use non Cares Act funds to do so because you're gonna have to return any unused Cares Act funds, any Cares Act funds that are unused as of September 30 2022. Now I would like to note that necessity and COVID-19 connections are still required for these contracts that you're going to sign by the end of the year. You will still need to show that you are incurring an expense in response to or due to COVID-19 and at the expense is quote unquote necessary. As a reminder necessary is very broadly defined, it is essentially in your reasonable judgment that it is reasonably necessary for the intended use and includes actions taken to respond to the public health emergency, including addressing the medical or public health needs of COVID-19 and providing economic support to those suffering from employment or business interruptions do to cover it, but really the main point is that this is not this new Treasury guidance does not change the essential requirement that you find that you have some that you make some finding that your expenditure is necessary because of COVID-19 because it is either responding to COVID-19 providing for COVID-19 mitigation measures or addressing the negative economic impacts of COVID-19.
Now I think what what this new guidance provides for agencies and tribes is certainly a longer runway to use your funds provided that you can get those contracts in place now, specifically, a lot several agencies and some tribes were considering real property acquisitions, real property improvements or building improvements etc. Or but you may be in purchase of equipment that could not be obtained until 2022. So before this new Treasury guidance, those those projects were kind of off the table. But under this new Treasury guidance, again, provided that you can get the contract for the work or for the equipment in place by the end of the year. I think they're more feasible. So the old guidance was that if you were going to buy a piece of equipment or if you're going to buy a piece of property, that property that improved that improved property or that acquisition of equipment had to be put into use in service of the COVID-19 related use for which it was acquired or approved by December 30 2020 to 2021. That guidance that that guidance in the Treasury's frequently asked questions is no longer applicable. Treasury has revised it. Instead, the new guidance provides that pay were that you only need to incur the cost for that new that real property for that equipment for that improvement. By December 31 2020 21. i You need to send a contract to for the work and that the ultimately even even though you're not going to receive an AKA be able to use the property use the improvement use the equipment until December until 2020 20 Sorry until 2022 It eliminates the requirement that the property equipment or service be put into service by December 31 2021. Accordingly, for real property acquisitions, real property improvements or building acquisitions, building improvements, or for the purchase of equipment, the requirements now under the new guidance are one the acquisition or improvement must be necessary due to the COVID-19 public health emergency. The need arising from the public health emergency cannot be met in a cost effective manner by leasing property or equipment or by improving property already owned and a contract for the purchase of the real property or equipment must be entered or the improvements or the construction services must be entered into by December 31 2021. So essentially, it is eliminated. The new guidance eliminates only the requirement to have the work done by the end of this year. It permits you to complete the work next year but all the other requirements for purchasing property purchasing equipment or improving property remained. In protect specifically, I didn't want to call out that this includes the requirement that the that you you make a determination that you are not able to meet the need arising from the public health emergency in a cost effective manner. By leasing property or equipment or by improving property already out. That obligation as vague as it is, remains and you're going to if you're going to sign a contract for construction work, you're going to sign a contract to buy a piece of equipment, you're going to sign a contract to improve real property or to buy a piece of property as part of your documentation you're going to need to have want to have written justification or written explanation for why the purchase of that property the improvement of that property is more cost effective than leasing. And when you're doing that cost that justification you know consider one are there even lease options available in many circumstances, particularly in remote Alaska, there may be simply no ability to lease another building to provide the COVID-19 use that you want to purchase a building for or maybe there's no vehicles for lease. So the only option is to purchase or that the lease cost would be excessively high as compared to a purchase price. So those are some some kind of considerations you can incorporate into your justification. But again, when you're purchasing equipment when you're buying, particularly when you're buying real property, or building a new building, for example, you're going to want to have pretty robust explanation as to why it is more cost effective to build or to purchase than it would be to lease or improve something you were already out.
It's just really quickly do you want to wait for questions or as they come up? Do you want me to interrupt and there's a question in the chat just firming, the signing of a PSA must be done by 1231? Or do you want to wait till the end and ask questions What's no I'm
happy to get interrupted because it makes more sense as kind of things come up so people don't forget. So yes, I think that you have to have a contract or similar kind of transaction in place that requires payment. And so that would be required the signing of the purchase agreement, I think, by the end of by the end of 2021 obligating you to make the payment. Now, I would note that, you know, sometimes people get kind of hung up. It's like, well, it's Christmas time. People are not available. How are we going to get physical signatures on contracts? You know, under the law, a quote unquote, signature can be electronic. Right? It can be, you know, that you don't have to have a physical wet signature to have a binding contract. So, a lot of times logistically, you should there, there are definitely ways to work through in terms of availability of folks to actually do signings to signing contracts. But yes, you're gonna want to have an enforceable contract in place by the end of 2021, to be able to meet the new Treasury guidelines guidance. So kind of to that same issue, what kind of a type of agreement do you need to have in place by December 31 2021. So Treasury guidance requires quote and order place for property and services and entry into contracts, sub awards, and similar transactions that require payment. Essentially, I read this as requiring you to have some type of written agreement with a specific obligation to pay. Now does that is that is it an invoice enough? If you accept the invoice I would argue it would be is a purchase order enough if the purchase order has been accepted? I would argue it would be certainly a contract you know, a written contract or a you submit an order like you buy from Amazon. you've submitted your order and Amazon you get the confirmation to receive the order. That would be an L that would be you know, an order place for property before the end of the year. What I think where there's kind of more question marks is, you want to avoid contracts that permit either party to back out after December 31 2021. without paying anything. So for example, if you signed a contract to buy a property, but you didn't have closing until February of 2022, and there's kind of a due diligence period or a period in which either party could just say no, I'm just not going to I can just back out, I don't have to pay I'm not gonna have to pay anything back out of the deal. It's not specifically addressed by Treasury, but I'd be a little bit more on the kind of the risky area in terms of is that actually a contractual obligation to pay if somebody can just back out at any time? No, I think if you have a contract to provide for monthly price for payments monthly in like you said a contract for one year of service, for the next for 2022 and requires monthly payments. Even if there's a termination provision, I think that still would be sufficient, under the Treasury guidance, recognizing that let's say you signed a contract for a year that required monthly payments for the course of a year. Again, you're going to only be able to spend Cares Act funds through September 30 2022. And so once once you get past September 30 2022 For that October, November, December time period, you won't have cares at funds to be able to to be able to pay for those monthly fees or that monthly private monthly payment because you have already expended them or had to have returned them to Treasury by 930 2022. Chris,
this is January. Yes. I have a question. Oh, if you have until September 30, and you enter into a contract and you're making payments, So hypothetically, if we've engaged larger space and staff can spread out and we are now you know, doing all the protocol to stay COVID conscious, and we moved from the small space to a larger space. We've been charging the delta of this between the smaller space and the larger space of the carrier spins because we're under a lease agreement. Can we continue to do that through September 30 2022?
I would say yes, because you've signed that lease agreement before the end of the year.
Now one thing that that Okay, so let's get some examples of options available under the under the Treasury guidance. So placing a purchase for supplies or equipment by the end of this year with delivery occurring in 2020 2020 2022. Sorry. So if you wanted to stock up on PPE at home COVID-19 tests, you're doing some new infrastructure, IT infrastructure, you're going to buy a bunch of laptops for your employees, but you're not gonna have them delivered before the end of the year or can't have them delivered for the new year, you signed the contract for buying them even though they're gonna get delivered and, you know, first second, third quarter of next year, you're still you're still an eligible Cares Act expense, same thing with vehicles and equipment. Again, subject to that cost effective analysis and the necessity requirements. You know, one note is that you know, some of the are the agencies and tribes on the call, you know, you may be subject to this new OSHA ETs that is coming out and that the Sixth Circuit just actually dissolved the state of it. So OSHA is making taking steps to require employers who are going to be subject to it to comply with it. Including the testing requirements by February granted that that may date may be delayed due to further litigation or or actions by the state of Alaska, but it's a potential out there. If you're thinking that you're going to be subject to the OSHA ETS, you know, one thing to consider is, well, you can use at home COVID test to meet the testing requirements of OSHA ETs and so purchasing those at home COVID tests. We is an eligible expense using Cares Act funds. And so you could potentially if you're going to be certain ETS, you know, place an order for those at home COVID test now before the end of the year, even though they're not going to be delivered to next year. That'd be an eligible cares experts. Another example is signing a construction contract by December 31 2021. For work to be done in 2022. So this could be office upgrades to permit social distancing, you know before you wanted to make some ventilation improvements or you wanted to expand, you know, do some internal changes to your layout to have permit social distancing. But you're gonna have to be able to have the work done by the end of the year, so you put it off to the side. Well, now as long as you could sign that contract with the general contractor before the end of the year to do the work, I think then you're going to be that's an eligible expense. Now, a couple of notes about that. One, you're going to want to look at the project timeline, right. Is it going to be done by September 30 2022? If for whatever reason the construction deadline is going to timeline, it's going to extend beyond September 30 2022. You have to recognize that bills are cost that you have to pay beyond September 30 2022 will have to be paid for using non Cares Act funds. But all the rest of the cost could be incurred could be paid for user cares like before then another question that I received is well, if you have do you have to does the general contractor have to sign contracts with its subcontractors by the end of the year? I don't view that as a requirement because this is not You're not making a sub award to the general contractor in which they would still be subject to you would be required to making sure that they comply with cardiac requirements. Your mate you're complying with Cares Act by contracting with the general contractor to perform work. Eligible work covered by an elegant to perform work that can be paid for using my cares icons, you've met the Cares Act obligation by signing that contract by the end of the year, even if they don't actually end up signing the sub contracts or getting the bids for this. I've got tracks until sometime in 2022. So for the construction work, you know the key is finding your general contractor signing that contract by the end of this year.
Another example is signing a service contract for services to be provided in 2022. So long as you sign a contract by the end of this year. Let's say that you have you're implementing a new IT infrastructure and you want to have a new remote, a new server font no server system or computer it system to permit your employees to better operate remotely and that maybe it's a yearly cost or there's like a maintenance charge. Well, I think that there's a good argument that you could sign that contract by the end of this year even though it's not going to be deployed until next year, and to at least cover the cost of that IT service for part over all of 2022 Similarly if you want to like prepay COVID-19 testing services or sign signed somebody up to provide COVID-19 testing services I think that's an eligible expense if you could send that contract by the end of the year. If you have kind of deep cleaning needs for deep clean your facilities. Do you want to sign up those janitorial contracts to provide that deep cleaning services? Through 2022? You want to sign it up by the end of this year. You've obligated the funds even though you're not going to make payment of those for those services until next year.
Included within the types of kind of way you ways you want agencies and tribes can obligate their funds by the end of the year and still be in compliance with the Cares Act is including issuing sub awards to sub recipients. So that for example, let's say you have a nonprofit and you know that they want to do a program next year that's going to be kind of responding to care to COVID either by providing assistance to maybe for example elders or to the needy or assist homelessness. Well, if you can, you can make an award to that nonprofit by the end of this year. And then you're going to be deemed to have incurred those funds, even if that nonprofit is not going to be providing a certain those services for which you will services until 2022 And maybe you're not making payments to the nonprofit for those services until 2022 or making the actual grant the nonprofit until 2022. So for I know that there are several agencies we're trying to address some programs to address homelessness in Anchorage and elsewhere. There are other agencies are addressing the needs of their elders or the elderly in their communities, providing food services and other support. Those are the type of sub words that I think are eligible under this new guidance provided that you get them in place by the end of 2021. Now one note, if you're going to do a sub award to a nonprofit, that nonprofit is going to be treated as a sub recipient, which means they're going to have to the obligation to comply with the carrot comply with the Cares Act fund. You're going to be ultimately responsible for their compliance with the Cares Act, which in this case would be making sure that they continue they only spend the money you give them the Cares Act money you give them. One Cares Act eligible expenses. So if you're going to grant a sub award to a nonprofit, you're going to want to have a grant agreement in place, which includes an obligation but on behalf of the nonprofit to comply with the Cares Act fund limitations on use of the funds have record keeping and reporting obligations back to you and an indemnity an agreement to return or reimburse the Cares Act funds in the event of violation. And this is again because when you grant when you issue a civil war to a sub recipient, they're still subject to the Cares Act requirements, but Treasury will only look to you for reimbursement of the funds if they violate the Cares Act. So we got a question that cut the question from that we posted in the chat. The cost we can apply these Cares Act dollars to our ones all the way back to March of 2020. Yes, there's no change in that, to the extent you've had eligible COVID-19 related expenses that you've incurred since March since March of 2020. Through the end of this year, you can reimburse yourself for using Cares Act funds for all those expenses.
One issue too about you know, when you're making rather grants of subawards or entering into contracts, grants or contracts or expenditures of $50,000 or greater, must be separately reported to Treasury through the Grant Solutions portal. Whereas grants of less than $50,000 are only reported in the aggregate accordingly. If you are kind of if you're if you're if you're looking at an opportunity and you're trying to decide to fund it, or not, well, if it's less than $50,000, you're going to report it in the aggregate not separately. If it's more than $50,000, it's going to be reported separately. Sometimes it's more advisable to try to structure your grant agreements or your contracts so they fall under that $50,000 threshold to avoid having to do individual reports or individual reporting. On the expenditure in the Grant Solutions for
when you're structuring grants to your sub recipients, to the nonprofits, for example, there are two ways you can structure them that can be reimbursable which provides the most protection to you as the Cares Act recipient, because under a reimbursable approach, they can the nonprofit would incur the expense first and then submit an invoice reimbursement so you can make sure that you're only reimbursing them for eligible Cares Act expenses. Another alternative is the lump sum payment which is which you provide the nonprofit with the cost with the funds up front and then they go use them and you're kind of relying on them to make to expend the funds in an amount eligible on eligible expenses. The latter is a little more risky to you because there's the risk that they could either erroneously or intentionally spend the funds on a non Cares Act use and then not have any leftover money to repay you for the violation. But yet you still may be really have to reimburse the money to Treasury. However, on the flip side, a lot of nonprofits are not going to be able to front the cost to do the project that they want to do. They're going to need to have the money paid up front so that they can then pay their vendors so it's there's not there's no requirement to approach it one way or another. It just kind of depends on who you're the sub recipient is the nature of the program. And then whether or not they confront the cost or not.
If there's a couple of questions here.
Okay. So one question is if we have used all the funds, how does this impact in service if you're finishing our project with other funds? I don't think that this would if you've used up all your Cares Act funds, then the new Treasury guidance really is not going to impact you. And you're certainly able to wonder that the Treasury specifically noted that you can you can kind of mix funds, you can use non Cares Act funds and Cares Act funds to finish a project to fund a project. Another question is one of the ongoing issues some of the tribes maybe faces that they have no capacity of delivering their documentation to Treasury by email, as their access to broadband may be limited? How is this resolved? Well, so you do not need to ask Treasury for approval before you spend the money. And what you have to do is you have to go on to Grant Solutions and report but in terms of your backup documentation, your actual contracts, etc. You want to retain those in case you get audited or to submit to your auditor if you're subject to a single audit requirement. But again, you're not going to be having to submit that to Treasury in advance or prior to expend the funds. So so long as you can have the contract in place and you can have it availed that contract available if and when Treasury questions you and I think you're going to be you're going to be okay
so if funds are fully expensed by 1231 21 or sometime before 930 2022 Our grantees required to submit reports and Grant Solutions through 930 2022 or just a period in which funds are expense. Um, I'll be honest, I don't know the specific answer to this. I would bet that if you've already spent all your money, we reported it all through the Grant Solutions, that there would be an option for kind of a final report, but I don't know I apologize. I don't know the specific answer to that. And I don't want to guess.
I don't know. Niles, do you have any? Could you answer that? Yeah,
I think on the two reporting questions I think there's even if you've got zero expenditures, you should still file a report. According to the due dates that are assigned in their Cares Act and the CRS I think it's quarterly. So this mean you would have had this even without the extension, you would still be filing reports through 930. And part of that was because they also open it up for audit expenses to be allowed. Kind of post the covered period. So be thinking about audit expenses, too. But, I mean, if you're not spending anything, then it's just a zero report is fill it out and turn it in. I would say for the question about whether there's broadband or not. I think you can work there's there's probably different options for contract. I mean, I know AMLs offered to help with reporting and compliance and so Nelson, you could reach out to us and we could make sure that those reports get completed. If they haven't been submitted, then you're behind in complying. And I know that's one of our concerns as we move forward. So whatever we can do to help you get those reports submitted. There's no additional documentation that needs to be uploaded. So it's really once you've got grand solutions open, you're just putting in the numbers. And then if treasurer has questions, they come back to you later. But let us know if you if you aren't reporting or haven't been reporting or have questions about reporting, call AML or call one of your navigators and say listen, I'm behind. And let's get that fixed because that that does send red flags through Treasury and we want to get that taken care of. Thanks, Chris. Okay.
So, there are still some questions regarding the new Treasury guidance. So the new guidance states that Cares Act funds have to be spent ie the checks sent out by September 30 2022. But the new guidance does not include any type of explicit limitation on how long you can contract for services, for example, using Cares Act funds, provided that you sign that contract by the end of this year. Here's an example. Can you sign a contract by December 31 2021 for five years worth of IT services? Or can you only fund that portion of the contract that is through September 30 2022? Essentially, how much can you prepay now? How if you prepay now, how long can you extend those services? Is it just through the end of 2022 through September 30 2022 And you go into 23 and 24. I don't see an explicit answer in Treasury's guidance. I do think it would be a risky kind of gray area. To try to fund services significantly beyond September 30 2022. With a repayment, particularly if doing so is not consistent with your normal procurement policies and standard operating procedures. For example, in the treasury guidance, one of the kind of one of the Q and A's is Canada local government prepay something and Treasury came back and said, well, they don't want a typic they generally don't want people to prepay unless it's consistent with your kind of standard operating procedures is what you would normally do. So for if you're signing contracts that provide for kind of a period of service that's going to extend beyond 930 2022 or beyond 2022. I would just kind of flag that as that's a potential gray area. You may want to have more documentation or justification for why you're making that kind of clinical prepayment. Because to try to explain that this was the only it was necessary. It was consistent with your procurement policy was the only option. Like maybe you're buying again, like software that you need to prevail, permit your employees to remote work, but the software vendor will only sell you a one year subscription. You got to prepay the entire one year upfront. That's gonna extend beyond 930 2022 I think that's there's a really good argument in favor, that's still an eligible expense. But I did want to flag it. There's no definitive answer on that in the new Treasury guidance or the past Treasury guides. Initially, when you're looking at these kinds of 123 year or longer contracts, you have to remember you're still subject to that necessity requirement. So you're going to have to be able to say that hey, signing a three year contract prepaying a three year contract was necessary to respond to COVID-19. And while you're certainly afforded a lot of discretion in determining what is necessary, that may be pushing the outer boundaries, so I do again, it's a gray risky area that requires kind of very specific factual look at the very specific facts of the situation. Consideration of the potential risk and and how related to COVID is the expense. And here again, is the quote. Here's the link to that to the Treasury guidance. I'm sure that Sarah will have this I'll give this PowerPoint to Sarah and AFM will make it available to anybody who wants it. And you can download the guidance. You know, I really did want to try to reserve a decent amount of time for questions. So we'd have a discussion to try to kind of share ideas. I'm happy to get into some other Cares Act questions if anybody has it, but I did want to make sure that we give everybody who wants an opportunity to ask a question or raise an issue to do so. So I guess that that operates that time. At this time. I'd kind of open it up to the floor for questions, comments or ideas
and you can ask him in the chat or just unmute and speak up.
Just curiosity, have you heard anything with respect to you know, so the Treasury guidance has been great, but have you heard anything as far as a legislative fix or anything about the Cares Act extension from from a legislative perspective, as opposed to just the Treasury guidance perspective?
Um, I've heard from some folks that, you know, they view the House bill as being dead in the Senate. And so it have to be the house taking up the Senate bill. And I think people are pretty pessimistic. Given I think that I think that Congress might be going home shortly. And so unless you know, there's always a chance that they'll come back for something else and that will, and I'll take up the opportunity but we have not heard it. Nobody's very optimistic at this point. We were I was pretty optimistic in October, maybe unduly so. But certainly at this late stage unfortunately. know one other issue I did want to raise if we don't have any specific questions and I don't mean to like kind of alarm folks, but we did. I know that some this was circulating amongst the ANC community yesterday or last couple days. Was that trip that IRS was trying to consider was considering whether or not issued to issue guidance that the financial payments that should the agencies were making to their shareholders for financial assistance would be taxable to the shareholders. And that the actual agency's receipt of Cares Act funds may itself be a taxable income to the to the agencies. I know a lot of Alaska Native regional corporations and some of the other larger village corporations are pushing back strongly on that. And requesting immediate kind of treasury kind of consultation. Because they that was never kind of part of the deal, so to speak, right or part of anybody's understanding. And so we're hopeful that there will be some progress with that to prevent that from happening. I think there's a lot of good arguments for why that is a logical approach by IRS but we don't know that for sure.
Chris, I I guess I have a question on that. Um, so we received funding, it's grant funding, and so it would normally be income and then you expand it also have normally be an expense. So the net would be zero net income, taxable income, so I'm a little bit confused on kind of the, the guidance that's coming out there because I always thought it would be zero taxable income, you have revenue, you have expense, you either have to return it or expand it. So net is zero. And the guidance has been that we would reflect it in our financial statements net, zero, so I'm a little bit confused. Are we trying to get it so that it's not income? And so then we get a deduction without having the income so we're going to get a different a different result or what what is the
No I think, Well, I think that the largest concern was, hey, are these financial payments to the shareholders not going to be taxable to the shareholders, right? That's a big deal. Yeah. Because that's just not the deal. But there was just a reference to like, well, also taxable to the agencies. And I think that your point is exactly right. Is that even if it is taxable income, that really should not make any difference other than the numbers because you're gonna have you're gonna have a debit deduction, the other side? Is there a situation in which IRS kind of goes rogue and you have the worst case scenario of its income, but these aren't legitimate? These aren't viewed as business expenses for which you can claim a deduction? I think that's except I don't think that's a likely result. That's kind of worst case scenario result right? But unlikely but I think you're right. I, I think that even if they come out and say that it's income, the point is, make sure that there's no confusion that yes, it's income, but then all the expenses or deductions. Right, and then we're fine. The one point being is that if you reimburse yourself for an expense you took in the prior year in 2024, which you've already claimed a deduction, you're probably going to have income there, right? Because that would be double dipping there.
Yeah, and that's kind of what I figured it's income, but you have expenses offsetting every single dollar of it, whether it went in this year or last year. So it's a taxable income effect of zero. I didn't know if we were now trying to change that treatment, and make sure that it's not income, and it's only a deduction, which I agree, but that was a change. Yeah,
yeah. No, I think the bigger concern is the shareholder taxation to the shareholders. And it's frustrating because IRS has specific has, there's guidance out there on the IRS website saying payments to a tribe to a member of a tribe is not taxable to them under the general welfare exclusion. There's no reason why that should not also apply to ANC financial assistance to shareholders, or Yeah,
so I totally agree. Okay, thanks.
As I posted that IRS information in the chat bar, I think that's because that's how we'd been that's the assumption we've been operating as under that
same year, and there was just there was chat there was kind of a concern from one of the regional corporations had gotten word that IRS was considering, again, looking specific, particularly at that shareholder financial assistance, making that a taxable event to a shareholder. And so that was the kind of the genesis of the little bit of the kerfluffle over the last couple days,
right. I am sorry, I don't know that previous speakers name but she mentioned it being a grant. I haven't understood charismatic funds or CRF funds as grants or their financial assistance right under that. So different and I think they're different tax ability because of that. So that might be something to think about. Chris is with the extend extension? I guess that's what we're calling it to September, that you didn't mention the covered period is that basically though, what we're talking about is that from March 2020 through September 2022, that covered period has been extended, should we think or they haven't said that? It's just that,
you know, they're they're looking at you still have to incur the expense within the covered period, which is number 31st 2021. They just used to say that encouragement, you don't only spent the money, but you've gotten the kind of product or the good back. Now they're saying now it's just you just got to obligate the funds just have to obligate the funds by the end of the year. So that's why the there's a still I think this question of is September 30 2021 2022. Really a deadline? I mean, it's the deadline to spend the money the check has to be written, the money has to be out of your account by then. But I think depending again, factually specific and kind of what just because you come up, I think there's a path at least in some cases to say, Well, I'm gonna make a payment you know, I'm gonna incur the obligation now. Make the payment even make the payment now, I'll make the payment sometime in 2022. But the service that I'm going to get is going to extend beyond 930 2022. I think I do think you know, that starts getting into the gray area, and especially as the further you get beyond 2022. You get further and further, further kind of, on the risk spectrum. But I think that the cupboard period is still March to December 31. It's just that you can you can buy all the stuff now even though you're not going to you're not going to get into next year.
Yeah. The reason I asked about the covered period is because the I mean, what they had been saying is that the benefit from the gutter service needs to occur during the covered period.
They removed that language from the guide Third, the revised guidance. That was they took down language out thankfully
okay. Yeah, good. Okay.
Yeah, and I see in the chat, you know, I guess at least a solder who's the CEO of beans cafe, who's online with us. She put in a chat that they have projects that kind of fit their criteria we're talking about and if so, if anyone has unspent funds, please feel free to reach out. Again. This is a situation in which, you know, I mean, I think that as agencies have funds, they're trying to expand for the benefit of their community and better for the shoulders, recognizing that, you know, it always needs to be necessary because it COVID-19 is responding to COVID-19. But I think you know, to the extent you can share information about either projects that may be one ANC has that it can't fund because it didn't receive as many cares, much cares, fund cares, Act funds as others, maybe you can get a grant from a larger agency that didn't receive more funds. You know, there there's, there's certainly opportunities here to provide a really tangible benefit to the communities using these funds before they have to be returned to the federal government.
And in terms of compliance, you know, the key is one thing too is and, you know, it's always risky to say this. There's nothing magic in your contracts or in your met. There's no magic language you need to use in your contracts. So if you're going to sign a contract for like for goods or services, you're going to hire a contractor to do certain work, you know, just use your normal contracts that will be enough, provided that you get that contractual obligation in by the end of this year. The only area where you need to be kind of have the appropriate grant agreement that really incorporates the Cares Act requirements is if you're giving funds to a third to a third party, who are then going to be running their own programs, either by writing assistance to other folks providing utility assistance, rental assistance, etc. Or you know, providing it where they're an actual sub recipient, as opposed to you're buying a service or a product from them. So I don't want to get people hung up on the contractual side of like, oh, do I need to have this specific language? I think you'd want to focus on making sure you you get the obligation to pay you know what you're buying and you have that kind of signed document or agreed upon document in place by the end of the year.
Do we have any other questions or does it I mean, also, I mean, if anybody has like kind of examples of how you're using Cares Act funds that you think would be helpful for other people to know, because maybe they can they can look at it, that'd be that'd be great. I mean, you know, there's there's a wide variety of ways. You know, it's grants to nonprofits to provide food delivery to your elders. Like I said, ventilation improvements to your local facility. Even just simple as you know, better furniture or larger desks, so that you are larger, you know, conference tables, so that people can be socially distance distant when they have at when they have in person meetings. If you want to try to plan for a virtual annual meeting for next year, or if you want to plan for an in person meeting next year, but with with that has appropriate COVID-19 mitigation measures, that may also be an appropriate expense. We had a question about to get a copy of the PowerPoint. Yes, we're gonna provide that to Sarah right after our, our meeting and she'll distribute that I'm assuming everybody that she can, including apparently there's about 20 clones of myself on here. I apologize for that. I circulated a link to a variety of clients and didn't thought they would show up as themselves opposed to me many, many times.
So Grace again. It's Chris. No, it's Angie, but um, I had another question. So a lot of the funding activity that's going on right now. We're getting a funding request, and then maybe other agencies are getting the same funding request. And so how do you recommend that we kind of coordinate because we might be giving approval? We might be getting approval based on the fact that it's not 100% COVID related and then we find out that there are the all the funding came from COVID monies it just came from different pockets. Is that a responsibility of us or how do you how do you recommend that we move forward in the next week in the scramble to get things accomplished?
So in general, it is the obligation of us the Cares Act recipient to take kind of what is the administratively feasible steps to ensure that you're not providing a duplication of benefits that you're not giving individuals money for cost are a project that they've already been funded using other Cares Act programs. So I think the first line is, hey, give me a representation that you're not funding this, that the portion that we're funding is not being also funded by other Cares Act funds, or hey, this we you told us we're only funding this portion of the project. Where are the sources of the other funds? I mean, I think you just have to be at make those direct questions because ultimately, it's you are going to be on the hook. If there's a problem, Treasury's not going to look at whoever got the money. They're gonna look at you first and then you're gonna have to turn around and try to go after them to get reimbursement if you want to, which is you know, going to be fraught with different variety of different issues. So I think it's the first asking that and just, you know, being upfront, like, hey, please tell us where all the funding sources are. We want to make sure that we're not double dipping here inadvertently. And I think if you're doing in your grant agreement, or in your in your kind of in your application, most applications that I've seen have language that, you know, they the applicant is certifying that they're not seeking funds, cardiac funds from you, that are duplicative of Cares Act funds received from somebody else. So you can make to the point to them as like, hey, we don't want you to be we don't want you to be violating your agreement to us, and therefore having to reimburse us for these funds because you made a mistake and got to two buckets, a buckets of cares icons for the same expense. So please just be upfront and on it, you know, clear as to all the sources of funding.
Okay, thanks. Chris. I saw there was an article that had the double dipping mentioned as well. And I I want to make sure that I think the way you just described it is important for the same expense, right? I mean, multiple layers of Cares Act funds can go to the same recipient, as long as the expense or the need that they're certifying, adds up to the total right and that is as long I think that the language whatever is admitted administratively feasible is in the guidance or in the and the final language. So you know, that's going to vary depending on which is the granting organization or which is the funding organization and how much they can actually oversee compliance from that recipient. But it feels like it's not administratively feasible for all the different grants, all the different carriers, ACH recipients, you know, agencies to talk to each other and coordinate a group approach like That sounds terrible. But yeah, I think that's that's kind of an important way to maybe think about some of those things. I
guess what I was thinking about is some of the building activity might be Cares Act related and some of it might not be. And so when I'm looking at funding a program, I'm comforted that I'm only funding like 120 5% of it, but it was be really justifiable, that 25% of that program would be cares or, you know, Cares Act COVID related, but if they're getting funding from other people, they're not getting oversubscribed. I wouldn't say that they're not double dipping. But my assertion that was only 20% may not be true. My assertion might be that they got money from other organizations, so maybe it's more like 95%. And then what does that when I underwrote the program, so I gotta just figure out how to how that works.
Yeah, those those kind of programs where you can say, well, this is clearly not COVID related, but a portion of it is trying to allocate that cost. It's not an easy question. And there's, you know, Treasury's provided no real guidance as to it either. I think it gets down to that reasonableness approach. And also recognizing that you know, to the extent that it is clearly, you know, you're not going out and buying someone a, you know, a jet to go fly around, right. I mean, it's clearly like a public need or a public health need. It gives you some kind of benefit your argument. But again, it's not an easy question. We didn't get one question, you know, for that his question is for tribal member assistance that was provided, or the receipts now extended until 930, as well for them. So, I think this is an open question, but I because the guy that says you have to obligate you have a contract for payment by the end of this year. So I think that if you receive an application and you approve the application, so therefore you could obligate the funds for that specific applications by the end of the year, you're fine, even if your check doesn't come out till the end of the 2022. If it's a situation where it's an incomplete application, or you don't receive the application until the after this year, until after 1231 2020 2021 I think that's I don't think that's probably that's probably not an eligible expense, because you will not have obligated those funds by the end of this year. Again, I don't think there's a lot of huge guidance out there about well, can you just say, hey, we have this shareholder Assistance Program. We're going to obligate it by this year. We're going to deem this pot of money obligated by the end of this year, and call that and say that and therefore fun shareholder assistance in the future. I think that's questionable. I think that if you have a nonprofit, and you give them a subaward by the end of this year, and they're going to take that money, and they're going to provide assistance to shareholders, I think that's our more arguably ERP justifiable, still live in the gray area, because, again, the guidance is not quite clear if this kind of obligation to incur funds expenses by the end of this year also applies to sub recipients or if it only applies to the kind of subtle you know, the initial initial sub award. But my big, my, my ultimate answer to that question, I think it's if you're going to try to provide shareholder financial assistance after the end of the year, you should only do so for applications that have been accepted that received and accepted and kind of approved by 1231 2021 Otherwise, you're taking a risk that Treasury would do that as an ineligible expense.
So Chris, this is Jana trivia, again, if we've already made grants or given grants, I should say to nonprofit organizations do we need to go back with some sort of letter to them or something to verify that they're compliant? I mean, we went through an application process, we had them fill out an application. I think you actually reviewed it. I don't, I'm almost certain but I'm just thinking through all of the stuff that you're now educating us on today is there any follow up that we need to do with those organizations in there? They are nonprofits. No, I
mean, so for nonprofits, if it's a if you're reimbursing them for past expenses, you know, your reimbursement you're fine because they've already incurred the COVID-19 or the expense you've reimbursed them that money once they receive the reimbursement it's good to go, you know, nothing else. If it was a we're gonna give you money to do a project going forward. You know, you may want to go revisit them and say, Hey, maybe you should amend your grant agreement with them or your award to them to permit them to now provide that project into 2022. Since you will have obligated the funds by the end of this year. So there may be an opportunity to kind of give them the opportunity to to, to spend some of them to provide the services of 2022 based on this new guidance. So any that'd be their theory, you'd want to kind of revisit it.
Okay, any other questions? or ideas or suggestions? You know, again, hopefully try to have people provide examples of maybe how they're using their Cares Act funds so that might you know, trigger some ideas on behalf of anybody else.
And I know that this is you know, this is a short we got a you know, we have what 910 days to get everything done that you need to get done and we got a holiday Christmas holiday in between, you know, I'm certainly try to help out as many people as I can. If things come up and you have questions, please don't hesitate to reach out to our best to try to get prompt answers to you so that we can kind of make sure that most of this money is deployed as beneficially as possible for the ANC community, tribes and their their shareholders and members.
Well, thank you, Chris. Thank you for your time. Today. This was very helpful. Niels Niels is the executive director with Alaska Municipal League. So Neil, thank you for your time as well today. And as I mentioned in the chat, if you want to this PowerPoint crystal, send it to me, we'll get it uploaded as soon as possible. It may take a little bit to get the recording of today's session online, but we'll at least get his PowerPoint up and going by clicking on the navigator link and with that Happy Holidays to everyone and let us know if there's any way we can help.