Covid-19 and the Stimulus package in America
Updated: May 11, 2020
America, just like almost the entire world, is living a surreal experience not ever seen before. We are struggling against a public health situation that has changed the way we live, the way we communicate, and even the way we survive. COVID-19 is the name given by the World Health Organization (WHO) for the disease caused by the coronavirus SARS-CoV-2, a highly infectious disease which targets the respiratory system. Since there is no “cure” yet for the disease, treatments consist of managing underlying symptoms as the ones from influenza and other respiratory illnesses.
The virus is mainly transmitted from person to person through small droplets generated when an infected person coughs, sneezes, or exhales. People can be infected by the virus just by breathing when they are within close proximity of someone with the disease, or when touching a contaminated surface and then proceeding to touch their eyes, nose or mouth. That effect can also cause the droplets to fall on the floor or other surfaces which leads to the virus staying there since studies have shown it can survive for some time.
The most successful course of action to avoid the spread of the virus has been social distancing, a measure that has been prioritized by the World Health Organization since the moment they established the disease as a pandemic. With this initiative, it was to be expected that many companies would close their doors, which would undoubtedly cause a dramatic impact across all sectors on the economy. (Food and hospitality, retail, wholesale, and manufacturing, among the most affected). Full and partial lockdowns have affected four in five workers, for a total of almost 2.7 billion workers, according to the latest assessment of the International Labor Organization (ILO).
One thing that must be understood is that the economy is facing a temporary halt of activity due to health restrictions, which inevitably leads to a solvency problem for many companies, firms, and individuals. In the US the scale and speed of job losses are similar to a natural disaster: more than 30 million Americans have filed for unemployment benefits, affected by the lockdown of many businesses.
As a response to this situation the US government has passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law by President Trump on March 27th, 2020. This is an over $ 2 trillion economic relief package to protect the American people from the public health and economic impacts of COVID-19. It is additionally the largest rescue package in U.S. history (the 2009 Recovery Act was $831 billion), and is expected to provide fast and direct economic assistance for American workers, families, small businesses and organizations, along with that it also preserves jobs for the American industries.
This federal financial assistance, while urgently needed, must be carefully and appropriately managed. As is the case after every previous crisis, when the dust settles, federal auditors will follow and review these awards, including eligibility, and recordkeeping of such funds by the recipients.
What will happen when non-compliance with these criteria is discovered once these federal funds have been awarded? People and businesses will face disclosure obligations, and it will be critical to handle those disclosures and agency interaction effectively. It helps if people and companies can point to a strong compliance program that shows their commitment to assemble their obligations under the uniform guidance.
Preparing now can make all the difference in avoiding severe enforcement, including staggering penalties under the False Claim Act. It is going to be necessary to establish mechanisms to track the use of federal dollars, with a compliance infrastructure to operate as a constant control and balance for funding oversight. This means making sure that there’s a procedure in place that addresses key audit issues, preserving and protecting relevant records, materials and documents involved in the use of the funds.
Having the advice of a specialist can help people and organizations to better prepare and be ready to respond any audit requests and mitigate the risk of costly investigations down the road. Also, there’s a lot of additional information about the management of the CARES financial assistance that must be understood to be sure how to proceed with it, so it turns more relevant the guidance of specialist in the matter.
Finanzeal Solutions is ready with a team of experts available with the most up to date information including tax credits for you and your business, conversion of SBA loans to grants, etc. Our services include bookkeeping, payroll and payroll taxes, tax returns, internal controls, audit support and preparation, cash flow and forecasting, tax and financial planning, and all other aspects of your accounting and financial processes, vital to your operations in this moment of crisis.
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