July 8, 2020
The Coronavirus Relief Fund for Tribes: July 8 Update
This article discusses the Treasury Department's latest
Guidance and explores in greater depth the assistance to Tribal businesses and
The Coronavirus Relief Fund for Tribes
The Coronavirus Relief Fund
for Tribes - Administrative Leave
The Department of the Treasury issued
updated Guidance on June 24, 2020
(updated again on July 8, 2020, as discussed below)
regarding the ways that Tribes can use the Coronavirus Relief Fund (“Fund”) for
the betterment of their members’ lives. In that update, Treasury added six
questions and answers (on pages 8 and 9) that provide some important
clarifications but left certain items of prior guidance open to interpretation.
Treasury followed up with an
update on June 30, 2020, to the Coronavirus Relief
Fund Guidance for State, Territorial, Local, and Tribal Governments that was
originally issued on April 22, 2020. They are now providing clarification of
when costs are considered to have been incurred.
This article will discuss the new Guidance and explore in greater depth the
assistance to Tribal businesses and related parties. We will continue with a
discussion of procurement and cost principles. We will close by exploring how
Treasury is applying the requirement that costs must be incurred by December 30,
(The link in the first paragraph originally pointed the reader to Guidance that
was issued on June 24, 2020. Now it takes you to brand-new guidance that was
issued today. There is an important update regarding administrative leave for
governmental employees, which we will cover in our next article.)
Page 8 of the
FAQ states that payments from the Fund may be used to meet
non-federal matching requirements for Stafford Act assistance. Tribes that had
been deterred from applying for Federal Emergency Management Agency (FEMA)
funding due to matching requirements may want to reconsider their decision.
Page 8 now makes explicit that per capita payments are not eligible for
reimbursement from the Fund. Tribes that have previously made per capita
distributions now appear to be faced with two unappealing options.
Option 1: Try to recharacterize the distribution as emergency assistance after
the fact. That would require the legal structure and administrative aspects
discussed in our last article to be put in place. It would also require the
Tribe’s auditors to get comfortable that the program was successfully brought
into compliance with the General Welfare Exclusion Act and CARES Act
requirements. We recommend that any Tribes considering this option consult with
their outside accountants or auditors as the first step in a process that is
bound to be burdensome.
Option 2: Charge per capita distributions to the fund normally used – most
likely the general fund or a per capita major fund. This will mitigate against
questioned costs arising during the Tribe’s Single Audit. Again, we recommend
that Tribes consult with their accountants or auditors.
Page 8 also states that Fund payments may be provided to non-profits for
distribution to individuals in need of financial assistance related to COVID-19.
Tribes already had discretion to provide assistance to political subdivisions,
businesses or individuals. We will explore this topic in the second section of
Tribes may use the Fund to remarket their convention facilities and tourism
industry. By extension, this includes their gaming properties. The FAQ states
that the costs of such remarketing must satisfy the requirements of the CARES
Act and has exclusionary language regarding a long-term plan to reposition the
Tribe’s properties in the marketplace.
The FAQ provides a very helpful clarification regarding payroll expenses.
Treasury is allowing the entire payroll cost of an employee whose time is
substantially dedicated to mitigating or responding to the COVID-19 public
health emergency. We renew our previous advice to maintain thorough
documentation of employee time and effort to support charges to the Fund.
Assistance to Tribal Businesses and Related Parties
Tribes may have complex legal structures that include enterprises or other
related parties that are defined as component units for financial statement
reporting as well as entities that are not component units but are still part of
the Tribe. The latter category may include schools, traditional Villages, or
enterprises with a governance structure that excludes them from treatment as
component units. Tribes may consider passing portions of the Fund to these
entities to administer on behalf of their stakeholders.
We hear that some Tribes are asking, “Can we transfer funds to our casinos to
cover their lost revenue?” and “What should we consider in making that
The FAQ has language that may shed some light concerning a variety of fund
transfers scattered throughout the document, so let’s start by gathering it in
May a State receiving a payment transfer funds to a local government? Yes,
provided that the transfer qualifies as a necessary expenditure incurred due to
the public health emergency and meets the other criteria of section 601(d) of
the Social Security Act. Such funds would be subject to recoupment by the
Treasury Department if they have not been used in a manner consistent with
section 601(d) of the Social Security Act.
May a unit of local government receiving a Fund payment transfer funds to
another unit of government? Yes. For example, a county may transfer funds to a
city, town, or school district within the county, and a county or city may
transfer funds to its State, provided that the transfer qualifies as a necessary
expenditure incurred due to the public health emergency and meets the other
criteria of section 601(d) of the Social Security Act outlined in the Guidance.
For example, a transfer from a county to a constituent city would not be
permissible if the funds were intended to be used simply to fill shortfalls in
government revenue to cover expenditures that would not otherwise qualify as an
The Guidance provides that eligible expenditures may include expenditures
related to the provision of grants to small businesses to reimburse the costs of
business interruption caused by required closures. What is meant by a “small
business,” and is the Guidance intended to refer only to expenditures to cover
administrative expenses of such a grant program? Governments have discretion to
determine what payments are necessary. A program that is aimed at assisting
small businesses with the costs of business interruption caused by required
closures should be tailored to assist those businesses in need of such
assistance. The amount of a grant to a small business to reimburse the costs of
business interruption caused by required closures would also be an eligible
expenditure under section 601(d) of the Social Security Act, as outlined in the
The Guidance provides that expenses associated with the provision of economic
support in connection with the public health emergency, such as expenditures
related to the provision of grants to small businesses to reimburse the costs of
business interruption caused by required closures, would constitute eligible
expenditures of Fund payments. Would such expenditures be eligible in the
absence of a stay-at-home order? Fund payments may be used for economic support
in the absence of a stay-at-home order if such expenditures are determined by
the government to be necessary. This may include, for example, a grant program
to benefit small businesses that close voluntarily to promote social distancing
measures or that are affected by decreased customer demand as a result of the
COVID-19 public health emergency.
May Fund payments be used to assist impacted property owners with the payment of
their property taxes? Fund payments may not be used for government revenue
replacement, including the provision of assistance to meet tax obligations.
The Guidance provides that ineligible expenditures include “[p]ayroll or
benefits expenses for employees whose work duties are not substantially
dedicated to mitigating or responding to the COVID-19 public health emergency.”
Is this intended to relate only to public employees? Yes. This particular
nonexclusive example of an ineligible expenditure relates to public employees. A
recipient would not be permitted to pay for payroll or benefit expenses of
private employees and any financial assistance (such as grants or short-term
loans) to private employers are not subject to the restriction that the private
employers’ employees must be substantially dedicated to mitigating or responding
to the COVID-19 public health emergency.
Must a State, local, or tribal government require applications to be submitted
by businesses or individuals before providing assistance using payments from the
Fund? Governments have discretion to determine how to tailor assistance programs
they establish in response to the COVID-19 public health emergency. However,
such a program should be structured in such a manner as will ensure that such
assistance is determined to be necessary in response to the COVID-19 public
health emergency and otherwise satisfies the requirements of the CARES Act and
other applicable law. For example, a per capita payment to residents of a
particular jurisdiction without an assessment of individual need would not be an
appropriate use of payments from the Fund.
May Fund payments be provided to non-profits for distribution to individuals in
need of financial assistance, such as rent relief? Yes, non-profits may be used
to distribute assistance. Regardless of how the assistance is structured, the
financial assistance provided would have to be related to COVID-19.
Are Fund payments considered federal financial assistance for purposes of the
Single Audit Act? Yes, Fund payments are considered to be federal financial
assistance subject to the Single Audit Act (31 U.S.C. §§ 7501-7507) and the
related provisions of the Uniform Guidance, 2 C.F.R. § 200.303 regarding
internal controls, §§ 200.330 through 200.332 regarding subrecipient monitoring
and management, and subpart F regarding audit requirements.
If a State transfers Fund payments to its political subdivisions, would the
transferred funds count toward the subrecipients’ total funding received from
the federal government for purposes of the Single Audit Act? Yes. The Fund
payments to subrecipients would count toward the threshold of the Single Audit
Act and 2 C.F.R. part 200, subpart F re: audit requirements. Subrecipients are
subject to a single audit or program-specific audit pursuant to 2 C.F.R. §
200.501(a) when the subrecipients spend $750,000 or more in federal awards
during their fiscal year.
Does any of the above seem confusing or contradictory? In a word, yes. Does it
seem to open a door to Tribes providing funds to casinos so the casinos can make
distributions back to the Tribes? We hear that some Tribes may want to interpret
the Guidance in support of that position. We have drilled into this topic to
emphasize first principles and try to bring perspective that helps Tribes weigh
factors effectively in their decision-making process.
Here are four key points that we believe Tribes should consider:
Fund payments retain their character as federal financial assistance, whether
made directly by Tribes or passed through to subrecipients.
Fund payments made to or on behalf of Tribal entities count toward the
$750,000 threshold for the entity to be subject to Single Audit.
Tribes must be prepared to perform subrecipient monitoring.
Expenditures from the Fund, regardless of which entity spends them, are
subject to the eligibility restrictions in the CARES Act.
We previously recommended that, when Tribes consider how to provide assistance
to businesses, they do so in a manner that does not risk the business becoming a
subrecipient of the award. We have engaged in subsequent consultations that lead
us to believe that is not possible. However, Tribes can get a leg up on
subrecipient monitoring by providing the assistance on a cost-reimbursement
basis ― i.e., reimburse costs that are substantiated by receipts and additional
supporting documents in the case of significant purchases.
We noted that the above Guidance referred to certain requirements of the Uniform
Guidance but not others. We checked out the
CFDA listing and found this nugget:
The following 2CFR policy requirements are excluded from coverage under this
Subpart B, General provisions
Subpart C, Pre-Federal Award Requirements and Contents of Federal Awards
Subpart D, Post Federal; Award Requirements
Subpart E, Cost Principles
Subpart D is the section that includes Procurement Standards (§§ 200.317 -
Does this mean that Tribes have liberty to waive procurement standards when
using the Fund? Yes, if they go about it correctly. Remember that the Tribe is
bound by the stricter of the federal standard or the Tribe’s standards as set
forth in its procurement code, ordinance, policies and procedures. The Tribal
Council may pass a resolution that waives its procurement standards when using
the Fund, either on a case-by-case basis or for the life of the Fund.
Subpart E, Cost Principles is also excluded from coverage.
Does this mean that Tribes have liberty to spend the Fund in a lavish or
extravagant manner? A prudent Tribe will not test that question for two
The Fund guidance states, “The statute also specifies that expenditures using
Fund payments must be 'necessary.' The Department of the Treasury understands
this term broadly to mean that the expenditure is reasonably necessary for its
intended use in the reasonable judgment of the government officials responsible
for spending Fund payments.”
Subpart F, Audit Requirements does apply to the Fund. § 200.514(c) Scope of
audit - Internal control makes reference to the compliance supplement that
auditors will follow when testing expenditures.
The compliance supplement is projected to be issued in September 2020 and may
provide definitive guidance regarding allowable costs. Until such time, the
prudent course of action is to rely on the Fund guidance that, to be allowable,
costs must be reasonably necessary.
Aside from the above technical considerations, we always urge Tribes to be good
stewards of the resources that are available to them.
The June 30 update provides important clarifications regarding costs that were
incurred between March 1, 2020, and December 30, 2020 (the “covered period”).
Here are the highlights:
Goods or services must be received during the covered period, but payment can
occur later (generally within 90 days). There must be a COVID-19-related
necessity for the goods or services to be received in that time frame.
Leases of equipment and other property are eligible expenditures only for the
covered period, regardless of when they are paid. For example, let’s say you
enter into a one-year lease for $10,000 for the period July 1, 2020, through
June 30, 2021. The Fund will cover only the first six months, or $5,000 of the
Goods delivered in the covered period need not be used during the covered
period in all cases. Treasury is allowing bulk purchases to the extent that
there is consistency with the Tribe’s procurement policies and practices and the
goods will begin to be used in the covered period.
The guidance states, “… the touchstone in assessing the determination of need
for a good or service during the covered period will be reasonableness at the
time delivery or performance was sought[.]” Tribes that are considering
stockpiling goods are advised to be mindful of the principle that, to be
allowable, costs must be reasonably necessary.
Treasury recognizes the likelihood of supply chain disruptions that may delay
delivery until after the covered period ends. They will allow the Fund
expenditure if the Tribe obtained a contractual commitment from the vendor to
deliver the goods by December 30, 2020, and delivery was delayed due to
circumstances beyond the Tribe’s control.
This guidance applies in a like manner to costs of subrecipients. The Tribe
will need to monitor its subrecipients’ activities to ensure that they adhere to
the same principles and practices.
Tribes have now received their shares of both the first 60% distribution from
the Fund and the final 40% distribution. They continue to operate in an
environment that is replete with unknowns, although updates to the Guidance are
helping to a degree. Tribes are relying on trusted advisors to help them
navigate uncharted waters.
The pandemic continues to cause hardships and uncertainty in people’s lives.
Tribes are continuing their efforts to “flatten the curve” and protect the
health and well-being of their people. Despite their best efforts, I know
personally one Tribal employee who caught the virus and another whose father
lost his life to the virus. I am sadly sure that many of my readers can share
such stories. We continue to pray for you and your loved ones.