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Numbered Letter 2021-03

Numbered Letter 2021-03

Effective Date: July 1, 2021

Summary

To assist local units with receipting revenues related to ARPA, Treasury is providing the following guidance on how to record and accrue these funds.

Federal and State Reimbursements for the American Rescue Plan Act (ARPA)

In accordance with the ARPA, there will be direct federal payments to metropolitan cities and counties. Other units of government will receive grants passed through the state of Michigan although this will still be considered federal funding.

Revenue Account

Local units should use account 528-Other Federal Grants for recording the revenues associated with these grants. It is acceptable to point off this account if desired.

Accrual

When this revenue would be recorded is dependent on several items pertaining to each local unit including fiscal year end and when the grant has been officially executed.

No funds may be accrued back to a fiscal year that ended before March 11, 2021, the date the act became law.

No revenue may be recorded until both of the following occur:

  1. an award has been executed, and
  2. eligible expenditures are incurred.

Each local unit should record these transactions (both revenues and expenditures) within the funds that applicable expenditures were incurred. ARPA funds are restricted based on the nature of the applicable fund.

Fund-Based Financial Statements Journal Entries

Funds Available, Funds Received, Expenditures Incurred

If eligible expenditures have been incurred and the funds have been received, the following entry should be recorded:

XXX-000-001 Cash                                                                            $XXX

XXX-000-528 Other Federal Grants                                                                          $XXX

Funds Available, Funds Not Received, Expenditures Incurred

If the award has been executed and eligible costs are incurred, but reimbursement is available and not yet received, the following should be recorded:

XXX-000-078 (079) Due from State (Federal Government)             $XXX

XXX-000-528 Other Federal Grants                                                                          $XXX

Funds Available, Funds Received, Expenditures Not Incurred

If funds are received in advance of incurring eligible expenditures, then record cash with an offset to Unearned Revenue.

XXX-000-001 Cash                                                                            $XXX

XXX-000-339 Unearned Revenue                                                                             $XXX

Qualifying criteria can be incurred through December 31, 2024, so one would want to keep the entry booked to the Unearned Revenue until such time as said criteria can be met.

Funds Not Available, Funds Not Received, Expenditures Incurred

If the award has been executed and eligible costs are incurred, but funds are not available, a receivable and deferral would be recorded.

XXX-000-078 (079) Due from State (Federal Government)             $XXX

XXX-000-360 Deferred Inflows – Unavailable Revenue                                          $XXX

One would credit 528 Other Federal Grants for Government-Wide Statements while booking the Due from Federal or State Government or Cash. If a separate fund is preferred, please use an open number between 285-287.

Documentation

All corresponding expenditures used for reimbursement purposes must be tracked with detailed supporting documentation.  This information must be maintained so if required it can be made available for review by the granting agencies, your audit firm, or other applicable entity.

Single Audit

A non-federal entity that expends $750,000 or more during the entity's fiscal year in federal awards must have a single or program-specific audit conducted for that year…”

Scope of Audit

  • The audit must be conducted in accordance with generally accepted government audit standards (GAGAS)
  • Financial statements must be presented fairly in all material respects in accordance with generally accepted accounting principles.
  • Auditor must determine whether the auditee has complied with federal statutes, regulations, and the terms and conditions of federal awards that may have a direct and material effect on each major program.
  • All those that receive federal funds must also comply with the following:
    • Make your records available for review or audit by appropriate officials including pass through entities.
    • Document qualifying expenditures or reductions in revenue that meet the requirements of ARPA.
    • Maintain internal controls over the expenditure of federal aid.
    • Prepare financial statements and a schedule of expenditures of federal awards.
    • Submit to a Single Audit, if required, at additional cost.
    • Ensure your audit firm has the requisite qualifications to complete a Single Audit.Prepare corrective action plan for findings if applicable.