New Federal Revenue – Coronavirus Relief Funds and ESSER Funds Guidance and Q&A

New Federal Revenue – Coronavirus Relief Funds and ESSER Funds Guidance and Q&A

CPAs & Advisors

Jennifer Watkins
Jennifer Watkins CPA Principal CPAs & Advisors

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The Revenue from ESSER fund cannot be recognized in fiscal year 2020 if a school did not receive its award letter/Grant Award Notification (GAN) by June 30, 2020.  Prior guidance allowed for schools until August 31 to receive its GAN.

ORIGINAL POST 7/27/2020:

The following information about Coronavirus Relief Funds and Elementary and Secondary School Emergency Relief Funds is what we understand as of July 27, 2020, and is subject to change. The 2020 Compliance Supplement related to these funds has not been released from the U.S. Office of Management and Budget (OMB). 

Coronavirus Relief Funds (CRF)

In July, within state School Aid payments, Local Education Agencies (LEAs) received a funding line item called “District COVID Costs,” equating to approximately $12 per pupil. Although these funds are coming through State Aid, they are restricted federal funds, Federal Coronavirus Relief Fund (CFDA 21.019), authorized by SB 690 and signed into law on July 1, 2020. Since SB 690 was not signed into law until after schools’ 2019-20 fiscal year ended, these revenues should not be recognized in 2019-20 financial reporting or audited financial statements.

Additionally, Senate Bill 373 has not been finalized and therefore, the timing and method of distribution of those funds are unknown. However, anticipate it will include an additional $350 per pupil in the August State Aid payment. These funds would follow the above concepts. They are also restricted federal dollars and are not to be recognized in the 2019-20 fiscal year. 

The main reason for not recognizing the above funds until the 2020-21 Fiscal Year is the date the bill was signed into law, which was after year-end. GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions, is very clear in the requirements of when the recipients (LEAs) have an asset (receivable) and it cannot be before the passing of the bill. Therefore, we recommend that as of June 30, 2020, no receivable, unearned, or earned revenue be reported. Amounts should be reported as Federal Expenditures and Revenue for fiscal year 2021.


The Elementary and Secondary School Emergency Relief (ESSER) Fund (84.425) is part of the United States Education Department’s (USED) Educational Stabilization Fund Program. It awards grants to state educational agencies (SEAs) to provide LEAs, including charter schools, with emergency relief funds to address the impact that COVID-19 has had on elementary and secondary schools across the nation. Eligible applicants are those LEAs that received a 2019-20 Title I, Part A allocation from MDE. The grant period is March 13, 2020 through September 30, 2021. Eligible LEAs were able to apply for these funds beginning May 8, 2020. The LEAs will initiate and apply in the Michigan Electronic Grants System Plus (MEGS+).

This grant has led to questions about how to account for these funds as well. MDE has noted that many applications/award letters are not yet complete, which leads to concerns on the availability of revenue and when to recognize that revenue. This award (or a portion of the award) is allowable to be spent in fiscal year 2020. However, to do so, three items must happen before August 31 (the period the LEA uses for availability, also known as the 60-day rule):

  1. The application must be submitted.
  2. The award must be approved.
  3. The funds must be requested and received by LEA.

Timing of recording the funds

The main concern with the CRF funds has been that they were intended by legislation to “backfill” the reduction in State Aid that is coming in August. The reduction will be approximately $175 per pupil, which will affect fiscal year 2020. The CRF funds, as noted above, will be approximately $362 per pupil, which is a net gain for cash flow purposes of $187 per pupil. However, due to the timing, the reduction and the CRF funding will be recorded at different times. Hence, fiscal year 2020 will show the entire per-pupil reduction and fiscal year 2021 will show the whole CRF amount.

The above items will affect your audit, single audit, major program testing, compliance testing, etc.  Therefore, it is vital to work with your Yeo & Yeo auditor closely. 

Michigan Department of Education (MDE) has provided guidance on some of these issues and will update it in the next few weeks. Initial guidance is available at MDE CARES Act Grant Information and MDE Financial Accounting Guidance During the COVID-19 Pandemic.


When should I record revenue for CRF funds?
FY 2021.

Are CRF funds federal or state dollars?

Can I have expenditures in FY 20 for CRF funds?
Technically, yes. However, the expenses cannot be recorded as such until fiscal year 2021, as the grant award did not exist as of 6/30/20. This will likely be handled through an adjustment to the SEFA in fiscal year 2021 and explained in the notes to the SEFA.

Are CRF funds subject to supplanting?

Can ESSER Funds be used and recorded in fiscal year 2020?
Yes, provided the application is completed, you accounted for the spending of the funds, and the reimbursement (cash) was received before August 31, 2020.

UPDATE as of 8/7/2020: ESSER fund cannot be recognized in fiscal year 2020 if a school did not receive its award letter/Grant Award Notification (GAN) by June 30, 2020, not August 31 as previous guidance stated.   If you have received the award letter/GAN as of June 30, 2020, it is allowable to have expenditures related to ESSER funds in fiscal year 2020, providing you have requested and received the funds within 60 days after year-end.   

Are ESSER Funds subject to supplanting?

What can the ESSER Funds be spent on?
The costs allowable for the ESSER funds are broad.  Refer to a memo from MDE on the usages of the funds at MDE ESSER Important Information.

Are ESSER Funds the same as Title I, Part A funds?
No, although the LEA receives ESSER formula funds via the Title I, Part A formula, ESSER funds are not Title I, Part A funds and are not subject to Title I, Part A requirements.

Contact your Yeo & Yeo professional if you need assistance.

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