In June 2020, GASB issued Technical Bulletin No. 2020-1 (TB 2020-1). TB 2020-1 addressed six frequently asked questions that GASB staff were seeing around the CARES Act and the CRF funds included with the Act. This blog is intended to make North Carolina local governments aware of TB 2020-1 and the related implications for year-end reporting. Several of the questions included in TB 2020-1 have direct impact on how COVID-19 funds should be reported in governmental financial statements for the year ended June 30, 2020.
Question 1 in TB 2020-1 clarifies that the CRF funds are subject to eligibility restrictions, not purpose restrictions. Since the federal government allocated CRF funds to state and local governments based on population allocations, they are subject to eligibility restrictions which have revenue recognitions implications for local governments. Under GASB 33 revenue recognition guidance, the unspent funds on hand at June 30 do not meet the definition of a revenue and should be reported as a liability in the financial statements. Unspent funds at June 30 should NOT be reported as deferred inflows.
Also, Question 5 addresses the reporting of CARES Act resources within enterprise funds and business-type activities in the government-wide statements. The question response is that, except for resources provided for uninsured individuals’ treatment for COVID-19 care, CARES Act resources are subsidies that will be reported as non-operating revenues.
Finally, Question 6 considers whether the COVID-19 expenditures/expenses (outflows) should be presented as extraordinary or special items in the Statement of Changes in Net Position. In the response, GASB clarifies that these outflows do not meet the definition of either an extraordinary or a special item; therefore, COVID-19 related outflows should NOT be reported as either of these but as part of functional outflows.
We urge local governments and their auditors to review the entire Technical Bulletin issued by the GASB at Technical Bulletin 2020-1.
Please let us know if you have any additional questions. We can be reached at SLGFD@nctreasurer.com.