On December 14, 2021, Treasury issued an important update to its guidance on use of CARES Act funds. Currently, there is a deadline of December 31, 2021 to spend CARES Act funds on eligible expenses. While Congress is considering legislation that would extend that deadline to December 31, 2022, there is no assurance that legislation will pass. The new Treasury guidance provides an opportunity for Alaska Native Corporations and Tribes to obligate funds in 2021 for services, goods, and property that will not be delivered until 2022.
The CARES Act provides that payments from CARES Act funds may only be used to cover costs that were incurred during the period that begins on March 1, 2020 and ends on December 31, 2021. Treasury previously interpreted this to mean performance or delivery of services or goods paid for using CARES Act funds had to occur by December 31, 2021.
Treasury has now adopted a new approach and interpretation of the CARES Act, in recognition of the delay in providing CARES Act funds to Alaska Native Corporations and supply-chain issues. The new Treasury guidance now defines “incurred” as follows:
a cost associated with a necessary expenditure incurred due to the public health emergency shall be considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. (Emphasis added)
Treasury’s new guidance also now defines “incurr[ing] an obligation” as “an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment.”
This is a significant change, and Treasury has also revised prior Treasury FAQs on the use of CARES Act funds to buy property and equipment. The prior FAQ on use of CARES Act funds on goods and services and leases of real property and equipment stated:
[A]cquisitions and improvements [of goods and services and leases of real property and equipment] must be completed and the acquired or improved property or acquisition of equipment be put to use in service of the COVID–19-related use for which it was acquired or improved by December 30.
Treasury has now revised this FAQ to state:
Payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021. Regarding this requirement, please see the discussion of the interpretation of “incurred” under the heading “Costs incurred during the period that begins on March 1, 2020, and ends on December 31, 2021.”
Accordingly, the new guidance and revised FAQs now provide that an Alaska Native Corporation and Tribe can use CARES Act funds for property and services that will not be delivered or performed until 2022, so long as the contract obligating the CARES Act funds is signed before December 31, 2021. The funds must ultimately be expended (i.e. paid out) no later than September 30, 2022 for obligations that were incurred prior to December 31, 2022.
This is an important update by Treasury and Alaska Native Corporations, and Tribes should carefully consider how they can use this new guidance in connection with their CARES Act funds. We will continue to monitor developments in this area.
