The below article is an edited version of the interview between Justin Marlowe, research professor at the University of Chicago’s Harris School of Public Policy and senior fellow for the Center for Digital Government, and Joe Morris, vice president of research for the Center for Digital Government.
State and local governments have until the end of 2020 to put CARES Act funds to work. In this Government Technology Q&A, we talk with Justin Marlowe, research professor at the University of Chicago’s Harris School of Public Policy and senior fellow for the Center for Digital Government, about how government finance professionals can find quick wins around these funds before time runs out.
Finance directors play a critical role in the administration, allocation and reporting related to CARES Act funding. How are they managing competing priorities as well as the approaching deadline?
We’re seeing an emphasis on technology solutions to increase visibility and transparency and support new requirements related to the CARES Act. Organizations are looking at ways to leverage or retrofit existing enterprise resource planning (ERP) or financial reporting systems. In some cases they’re investing in new systems. Finance professionals are driving a lot of that. With the arrival of CARES Act dollars, they are deeply involved in finding ways to creatively and compliantly repurpose local dollars for things like matching other federal dollars or backfilling dollars they would have otherwise lost. They’re also seeking ways to spend CARES Act dollars in areas where they would otherwise have general fund dollars.
Federal guidance has been somewhat of a moving target. Many jurisdictions have taken the approach of “asking for forgiveness, not permission.” They’ve decided to use these dollars in ways they interpret to be permitted by the CARES Act and in turn provide clear documentation on what their policies and procedures were and how they spent those dollars. Another approach is to engage with requirements as they unfold. In this case, finance directors are tasked with working through the technical, financial and legal challenges. That’s been a really important role and they are uniquely qualified to do it.
In accounting, we have “extraordinary items,” which are one-time expenditures or revenues. Of course, you could call all of COVID and the CARES Act extraordinary. Governmental Accounting Standards Board (GASB) guidance has been that some items are extraordinary, but that a lot of the CARES Act dollars actually fit within existing accounting and reporting principles. So a big win is to determine how you’ll do that reporting and then ensure your documentation and processes are consistent with that. Another relatively quick, high-impact win is around transparency. Many finance departments are presenting financial performance data alongside non-financial performance measures. That has been great for showing taxpayers, local businesses and others how the local response is making a difference in their communities.
The consensus among state and local government CFOs seems to be that the technology is not only an appropriate application of funds, but one that’s encouraged. From a public health and business continuity standpoint, having employees work remotely and continue to do their jobs is good for everyone. Local governments especially are deciding that now is the time to go forward with their long-planned systems updates that will enable telework. Another potential application is using technology to automate systems and processes so that staff members are free to do other things.
As mentioned before, the best advice is document what you’re doing and why, have clear policies and procedures, be able to explain why it’s either new spending or repurposed existing dollars, and be on top of all of the federal requirements — not just for the CARES Act dollars, but for the eventual audit to come. There’s a lot of latitude because it’s an incredibly complex set of challenges. The federal guidance seems to be to try to address those challenges within your community, and then make clear after the fact what you did and why you did it.
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