Accounting for COVID-19 Relief Grants

In response to the COVID-19 pandemic, governments have implemented a number of relief programs to help businesses and nonprofit organizations. In this article, we discuss key considerations when accounting for COVID-19 Relief Grants.

Accounting for Shuttered Venue Operators Grant (SVOG) by Nonprofit Organizations

The Shuttered Venue Operators Grant (SVOG) provides relief to entities that suffered revenue losses because of closures due to restrictions on public gatherings resulting from COVID-19. Nonprofits eligible for this grant includes operators of live performing arts organizations, museums, zoos, aquariums, movie theaters, live venues, and more.

Eligible uses for SVOG money include payroll costs, rent, utilities, scheduled mortgage and certain debt payments, state and local taxes and fees, insurance, maintenance, payments to independent contractors, and other ordinary and necessary business expenses.

Under the terms of SVOG, recipients are not required to repay the funding if funds are used for eligible uses by the dates specified by each respective program.

The American Institute of CPAs (AICPA) has issued non-authoritative guidance in the form of a Technical Question and Answer (TQA) about how a recipient should account for a Shuttered Venue Operators Grant (SVOG) issued under the Small Business Administration COVID-19 Relief Programs.

Not-for-profit entities should account for government grants in accordance with the “contributions received” subsections of FASB ASC 958-605. That model requires entities to first determine if a contribution is conditional or unconditional.

According to this TQA, the payments received under these grants would be considered conditional contributions and, thus, contribution revenue would be recognized only to the extent that eligible expenses have been incurred at that date. Not-for-profit entities will need to evaluate their individual facts and circumstances in determining the extent to which conditions have been substantially met at a given reporting date.

To the extent that conditions have been met (and, thus, contribution revenue is recognizable), FASB ASC 958-605 also requires a recipient to consider whether the government has imposed restrictions on the use of the funds. Because the payments can only be used for eligible expenses, they would be considered to be donor-restricted. Due to the linkage of the conditions with the restrictions, restrictions will likely be satisfied simultaneously with meeting the conditions (but each entity’s specific facts and circumstances would need to be considered). Thus, in an NFP entity’s statement of operations and statement of changes in net assets, any contribution revenue recognized would be reported as an increase in donor-restricted net assets, along with a reclassification to net assets without donor restrictions to reflect the satisfaction of the restriction. However, an NFP entity that has elected one of the “simultaneous release” accounting policy options described in paragraph 4A–B of FASB ASC 958-605-45 (for donor-restricted contributions whose restrictions are met within the same reporting period) would be permitted to report the contribution revenue directly in net assets without donor restrictions.

Audit & Compliance Requirements for Provider Relief Fund (PRF) Recipients

The Provider Relief Fund (PRF) was established to support American families, workers, and healthcare providers in the battle against COVID-19. Grants are distributed through the U.S. Department of Health and Human Services (HHS) to hospitals and healthcare providers on the front lines of coronavirus response and relief efforts.

Qualified providers of healthcare, services and support may receive PRF payments for healthcare-related expenses or lost revenue due to COVID-19. The funds do not need to be repaid if providers comply with the terms and conditions established by HHS. They do, however, come with unique compliance, reporting and audit requirements.

Any entity expending more than $750,000 or more in federal grant funds (including PRF) payments is subject to a single audit or program-specific audit performed under the requirements of Uniform Guidance and conducted in accordance with Government Auditing Standards.

Additionally, providers who received one or more PRF payments exceeding $10,000 during the second payment period (July 1, 2020 – December 31, 2020) must report on how these funds were used by March 31, 2022 in the PRF Reporting Portal. Payments received during this period must have been expended by December 31, 2021.

For more information about single audits and how you can prepare, read our post “For Nonprofits, It’s the Year of the Single Audit. Here’s What You Need to Know.”

Since 1974, our trusted advisors have partnered with nonprofit organizations to navigate every step of the financial journey. At Dugan & Lopatka, our CPAs and consultants are always on the cutting edge of changes in the nonprofit sector. We understand the challenges you face—the special accounting, auditing and reporting requirements of your organization—and we use our deep expertise to deliver exceptional service tailored to your needs.  

Contact us today.


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