The U.S. Treasury Department seems to be nearing the end of the CERTS grant application approval process. Most of the recipients have received their initial payment, estimated to be 80% of the full award. Below is a summary of how CERTS funds are to be spent, including information from the newly issued FAQs earlier this month.
Recipients are required to spend at least 60% on payroll costs. The remainder can be spent on operations costs. There is also a requirement to rehire or recall employees furloughed after March 27, 2020, within 30 days of funds receipt UNLESS operations do not warrant the same staffing due to demand for services.
Remember to document the reduced levels of service as well as any previous employees’ refusal to return to work. There is more guidance available regarding required payroll certifications. But that is an entirely different article.
Payroll costs include salaries, wages, commissions, tips, paid time off, health insurance, retirement benefits, state or local taxes on payroll, compensation to a sole proprietor, and compensation to an independent contractor. Compensation paid to an employee is limited to an annualized $100,000 maximum.
Non-payroll costs include Paycheck Protection Program (PPE) costs and operations costs. Operations costs initially included interest on regularly scheduled debt, insurance, leases, rents and restored compensation. Newly defined and clarified costs that can be included in operations costs are facility operating costs, which include utilities, and equipment operating costs.
The Treasury gave the following examples for equipment operating costs: fuel, tolls, access fees, licenses, tour expenses, payments to vendors and subcontractors for equipment maintenance.
Create a budget
Once your final award amount is known, calculate the 60% payroll requirement and determine if you can expect to meet that amount, given your current level of demand for services. Subtract that calculated amount from the total and plan how to spend the rest, given your unique situation and the next year’s expected costs. If you can’t meet the 40% with non-payroll costs, see if you make up the difference with payroll.
Track spending
Track your spending with a spreadsheet, your accounting software or whatever methods work for you. Remember, there will be quarterly reporting, and be prepared to upload any documents requested. We do expect IRS Form 941 — which reports income tax, and Social Security and Medicare taxes withheld from employees’ paychecks, as well as the employer’s portion of Social Security or Medicare taxes — to be one of the documents requested.
Old bills
You may not use funds to reimburse the company for expenses already paid, but the guidance does not say you cannot pay past-due bills.
I will be keeping my eyes open for anything else new coming from the Treasury Department.
UMA Member Tracy Fickett, CPA, operates BUSBooks, a specialty accounting firm dedicated to the motorcoach industry. If you have a question, you can reach her at tracy@busbooks.co.
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