Whitepaper on Accounting for Coronavirus State and Local Fiscal Recovery Funds
Posted May 6, 2022 in TARC updates
This whitepaper was written to provide guidance on GAAP reporting for annual financial statements. It is not intended to provide guidance on the ARPA federal reporting requirements or the Schedule of Expenditures of Federal Awards reporting requirements.
The Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) were granted under the American Rescue Plan Act (ARPA). Illinois municipalities received an allocation of funding under CSLFRF. The CSLFRF funds include eligibility requirements established by the Treasury and require reporting of how municipalities spend the funds to verify that it is spent on allowable activities. Therefore, the eligibility requirement is met when the money is spent on allowable activities. ARPA stipulates certain conditions that are required to be met, such as the incurrence of eligible expenditures. Those conditions are identified, for accounting and financial reporting purposes, per paragraph 20 of GASBS No. 33, as eligibility requirements. In addition, the recipient government has the ability not to accept the resources. Therefore, the CSLFRF funds are identified as voluntary nonexchange transactions, subject to eligibility requirements rather than purpose restrictions.
Recommendation of reporting CSLFRF funding prior to meeting eligibility requirements
CSLFRF funding should be reported as unearned revenue until eligible costs have been incurred. Expenditures for, or incurred obligations of, eligible costs trigger revenue recognition.