The first reports accounting for Minnesota cities’ use of federal coronavirus relief money were due Aug. 10 and Sept. 10, but some municipalities are still marking down a zero expenditure as they grapple with how, exactly, the funds can be used.
Even as cities report their interim outlay of CARES money, they can choose to delay any decision—and expenditure—until submission of a final report, due Nov. 15.
The federal Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law March 27 and with local government aid made available to Minnesota cities and counties at the end of June, has generated a trove of literature around what are and are not eligible uses for the $841 million that Minnesota state officials set aside for local governments.
As federal expenditures, use of CARES money in large distributions is subject to audit, either through the Office of the State Auditor or through a private CPA firm.
The threshold for audit is $750,000—more than any west lakes area city received—but the state is still requiring that all cities receiving CARES money submit initial, interim and final reports to the ad hoc COVID-19 Response Accountability Office, a temporary arm of Minnesota Management and Budget (MMB).
Three main principles define eligible use for these funds: the cost must be pandemic-related; was incurred or will be incurred between March 1 and Dec. 30, 2020; and it was not previously accounted for in the most recently approved budget.
But many area cities are looking at large sums of money and have no clear place to go with it. During an initial accounting early in July, staff with Minnetonka Beach had toted up just $3,500 in clear pandemic-related costs to the city, leaving its coffers with more than $38,000 in leftover CARES money.
Catherine Pausche, finance director for Mound, noted that a recent MMB webinar scrapped some initial plans the city had for the surplus of its $704,000 allocation.
The rules may be straightforward at first glance, but officials during this process have been asking—beyond plexiglass, PPE and IT, what’s in, what’s out and what’s still up in the air?
No go on this—staff with Minnetrista inquired about this for the city’s residents, but because usage is needs-based such rebates were not eligible.
“You can’t just do a per capita redistribution of the money,” said city administrator Michael Barone. “You have to basically prove that there’s some sort of hardship and just giving the same amount to everybody doesn’t really go after that hardship angle on that.”
Also out are enterprise funds, like those for muni golf courses and liquor stores. By contrast, grants for rent, mortgage and food assistance would be considered eligible costs, according to U.S. Treasury guidance.
The Treasury, in a FAQ updated Sept. 2, specifically allowed for cities to use their CARES money toward expanding broadband Internet access, provided the city doing so would be able to “increase capacity to a significant extent” prior to the end of the current public health emergency.
Officials with Minnetrista, a still largely rural but fast-developing city that has had trouble in attracting Internet service providers, have been mulling the possibility of using the city’s CARES money for just such an expansion in broadband.
“Expansion of broadband to better allow telework and distance learning could be considered an eligible expense by allowing individuals to better adhere to public health guidance,” noted Ron Beatty, Minnetrista city attorney, in a Sept. 3 analysis of relevant literature from the both the Treasury and the League of Minnesota Cities.
But doing so could prove a challenge. In addition to getting broadband up and running before the public health crisis fades, Beatty also determined that the costs in doing so would have to be accounted for by mid-November when the city submits its final report to MMB.
Minnetrista is expected to look at options for expanding broadband access this month, regardless of whether its CARES dollars would be used to do so.
Mound Mayor Ray Salazar had invited Kevin Borg, superintendent for Westonka Schools, to the city’s initial council discussion July 14 around how Mound would spend its surplus CARES money. Likewise, officials with Minnetrista have weighed as an option some disbursement to the public school district.
Beatty, the Minnetrista city attorney, determined in his analysis for Minnetrista city council members that the Treasury, in its Sept. 2 update, “established a presumption that up to $500 per elementary and secondary school student to be eligible expenditures” for CARES dollars. Beatty further noted that schools would not need to document specific uses up to that amount but should still document expenses prior to receiving the money as well as give assurance that they have not received equal funds “from other CARES Act sources.”
Much of the discussion aired publicly around CARES Act money has concerned public safety costs, for which the guidance has been murky in determining what can and cannot be covered and with questions lingering around payroll expenses in particular (see related article, “Public safety payroll is gray area for federal funds.”)
The clock is ticking on making a decision on the money as both the fall budgeting season and the final Nov. 15 deadline for reporting CARES fund usage draw nearer.
“We’re all in budget mode right now and this plays a part in some of that,” said Pam Mortenson, Minnetrista city council member, Aug. 17. “We need some answers and some clarity quickly so we aren’t down to the final hour to make the decision on whether we keep the money.”
Minnetrista has aired much of the discussion around CARES Act money during the city’s regular council sessions and was scheduled to further parse the details—and talk preliminary 2021 budget—at the Sept. 8 meeting. That meeting occurred after Laker Pioneer went to press.