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A look back on the CARES Act and what Indian Country can expect from the American Rescue Plan

At Baker Tilly, our specialists understand this is a trying time as we continue to navigate the COVID-19 landscape and look forward to resuming a new normal. There are many challenges, priorities and opportunities as we look towards the future, both in combating the pandemic and executing a plan for short and long-term recovery. The American Rescue Plan (ARP) has been signed into law to help support these efforts in a substantial way, providing tribal governments with direct relief payments of a magnitude never seen in the past. The ARP includes $31.2 billion in tribal government and native community set-asides as part of the overall $1.9 trillion package – the second largest stimulus package in U.S. history. Understanding the challenges from the CARES Act can help your tribe proactively plan now to get the most out of the ARP funding.

A look back at the last 12 months managing CARES Act funding:

Many tribal governments are just coming off managing their distribution of the $8 billion Coronavirus Relief Funding (CRF) that was appropriated through the CARES Act in March 2020. In many cases, this funding was 1.5 to 3 times the amount of federal funding managed by the tribe in a 12-month period. When passed, the CRF funds contained minimal guidance and a spending deadline of Dec. 30, 2020; only eight months from the receipt of the first distribution that, for many, occurred in May of 2020. This extremely condensed expenditure period, coupled with the ever-changing regulatory guidance and frequently asked questions, provided tribes with a significant challenge in planning and executing many of their expenditure plan strategies. Through our work in aiding tribes and governmental entities with managing and executing their expenditure plans with their CRF funding, we uncovered the following common challenges and themes, which should be considered when looking forward to the receipt of the ARP funding

Overall inability to adequately prepare due to time constraints and spending deadlines was a major challenge. The lack of a process for submitting expenditure plan requests, maintaining a comprehensive expenditure plan and budget, and maximizing the effectiveness of expenditures in alignment with the short-term and long-term needs of the tribe are all examples of observed preparation constraints.

The CRF funding was meant for immediate and direct relief to combat the direct impacts of the COVID-19 pandemic. It became very clear to the previous administration what tribes had been voicing all along: they have different needs and priorities than state and local governments. Infrastructure projects take a great deal of planning and project management to be successful. A stressed supply chain coupled with a labor shortage drove up the cost of these projects. In addition, tribes did not have a comprehensive “wish list” of executable projects in place to be able to quickly deploy these resources to execute. Projects that were embarked upon were often done in haste to ensure the project was completed before the end of the covered period. Overall, infrastructure enhancements were extremely difficult given a variety of factors, principally the condensed timeframe and spending restrictions. Looking forward to the ARP, such factors will be of a lesser concern given the greater duration of time to expend and specific reference to infrastructure allowability within the legislation.

Many tribes lacked the necessary capacity or expertise to oversee these federal funds on top of their existing federal funds and other tribal programs. This not only put a strain on the divisions responsible for overseeing federal programs, but also on other accounting functions such as purchasing, accounts payable and payroll. Additionally, many divisions or departments were now tasked with managing budgets that included federal funds, sometimes for the first time.

As noted, this funding was of great significance to nearly every tribal beneficiary, and inappropriate or unallowable expenditures that would require recapture or repayment back to the U.S. Treasury was of paramount concern. The risk of recapture is increased by the fact that the guidance for this funding was rather high level and was updated frequently by Treasury. It was crucial for tribes to obtain expertise in managing a large volume of federal monies while maintaining compliance with federal laws, regulations and compliance requirements. This remains an even greater concern as we look forward to the distribution of the ARP, which is expected to be much larger.

The most significant need for many tribes was providing direct relief payments to individuals and small businesses in a compliant manner. Treasury has specifically disallowed a direct, per capita payment. Creating, managing and executing a compliant program takes a significant amount of effort. Using customized technology solutions helped many tribes get money to their members while maintaining compliance.

Tribes struggled to interpret and execute agreements with other component units, including the gaming enterprise, tribal housing or utility authorities and other related enterprises. The structure of these agreements can have a significant impact on the required compliance with laws and regulations by the tribe or the recipient.

What does the future hold? Questions you may have:

  • What programs are available to tribes?
  • How do I leverage the money I will be receiving with other public and private funding?
  • What do we qualify for and how do we apply?
  • What are the deadlines?
  • Are there other traditional and non-traditional funding sources that can be coupled with ARP funds to expand our spend plan?
  • How do we best position our tribe for success?
  • Each funding program has different rules. How do we maintain compliance without the risk of government funding recapture or delays in my annual financial audit?
  • When will we receive the money and what is the appropriate timeframe for which we can expend the funds?

The answer to several of these questions will be specific to your individual tribe and your needs, capacity and priorities.

The ARP contained over $31.2 billion in federal funding available to federally recognized tribal governments. A significant portion of that funding will be through the Fiscal Recovery Fund (FRF), distributed to all tribes in a manner determined by the Treasury Secretary. The remainder will be a mix of competitive funding and formula driven distributions to enhance existing programs.

Federal funding, particularly federal grants, carry restrictions on the use of such funding, including supplementing or supplanting other available funding sources. Work with your grants and contracts specialist to determine if the funding source allows for such treatment. In many cases, federal funding may require a matching component, which cannot be matched by other federal funding sources.

Success in managing a significant influx of funding, whether that be in the form of federal relief or other funds, requires a significant amount of planning and development of a spending strategy. The more time put forth in planning expenditure plans, the more successful the execution of the related projects or initiatives. With the longer duration of many of the available funding sources under ARP, tribes will be in a much better position to perform advanced planning.

For more information, visit our article “Preparing your tribe for the American Rescue Plan: A breakdown of the nearly $31.2 billion set-aside for Indian Country”.

Joel M. Laubenstein
Principal
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