American Recovery & Reinvestment Act: Opportunities and Impact

The American Recovery & Reinvestment Act of 2009 was signed into law Feb. 17, 2009, by President Barack Obama. The Recovery Act is intended to provide a stimulus to the U.S. economy in the wake of the economic downturn. Approximately $787 billion in funding is available for federal tax relief, expansion of unemployment benefits and other social welfare provisions, and increased spending in education, healthcare, infrastructure and energy. The government has established a public Web site (www.recovery.gov) to provide guidance to properly manage activities under the Recovery Act. The site also includes a list of the recipients of these funds and guidance on how to track how these funds are spent. There is an unprecedented level of transparency and accountability associated with these funds which will necessitate additional reporting by fund recipients.

Impact on your business or organization

The Recovery Act was enacted to create and save jobs through projects funded at the state and local level. It will have a significant impact on small businesses and on the credit crunch, providing tax incentives and financing opportunities that will help small businesses create jobs. The Recovery Act makes the Small Business Association part of the solution, providing it with specific tools to make it easier and less expensive for small businesses to get loans, give lenders new incentives to make more small business loans, and help unfreeze the secondary markets to boost liquidity in the credit markets (see www.sba.gov).

A key feature of the Recovery Act includes:  $375 million for temporarily eliminating fees on SBA-backed loans and raising SBA’s guarantee percentage on some loans to 90 percent. The 90-percent guarantee is for loans up to $1.6 million. The elimination of fees will remain in effect until the end of the calendar year or until the funding is exhausted and is retroactive to the day the Recovery Act was signed into law. In addition, the funding includes $255 million for a new loan program to help small businesses meet existing debt payments.

In addition to actions taken by the SBA and Treasury Department to expand access to capital, the Recovery Act provides tax breaks and incentives for small businesses and is aimed at increasing spending and employment. Some of the features of these tax incentives found at www.irs.gov include:

  • longer net operating loss carrybacks;
  • extension of 50 percent bonus depreciation;
  • extension of higher Section 179 limits; and
  • small business estimated tax relief

How Recovery Act funds are identified

Management must determine whether their company or organization is eligible for Recovery Act funding. The site www.FedBizOpps.gov lists all federal government contracting opportunities that exceed $25,000 and provides information on all major contract awards, subcontracting opportunities, surplus property sales and foreign business opportunities. For related grant opportunities, a listing of participating federal grantor agencies is available at www.grants.gov. Federal agencies receiving Recovery Act funds are required to create a separate Recovery Act Web page to provide guidance on the planned use of the funds.

Reporting requirements

Those receiving Recovery Act funds must clearly distinguish these funds from non-Recovery Act funds. Recipients are required to separately track apportionments, allotments, and obligations and report them in accordance with Section 1512 of the Recovery Act. Quarterly reporting on the use of funds is required; an entity that receives assistance funding under the Recovery Act must report information including, but not limited to:

  • the total amount of Recovery Act funds received;
  • the amount of funds expended or obligated to projects or activities;
  • a detailed list of all projects or activities including the name and description of the project, evaluation of the completion status, and an estimate of the number of jobs created and number of jobs retained by the project; and
  • detailed information on any subcontracts or sub-grants awarded by the recipient.

The reporting deadline for recipients of Recovery Act funding is Oct. 10, 2009, with quarterly reports due 10 days after the end of each calendar quarter thereafter. Recipients should submit reports that cover cumulative activity since the passage of the Recovery Act. Detailed reporting instructions will be made available at www.FederalReporting.gov.

A proactive approach

It is clear that if you receive Recovery Act funds there will be increased management responsibilities. There is an abundance of Recovery Act information and guidance available on the Internet. To comply with the transparency and accountability standards established by the current administration and the Recovery Act, management must take a proactive approach; we encourage all entities that receive federal funding to implement internal controls to ensure proper use and to carefully review any correspondence received from your funding agencies. Management should inform its auditors if Recovery Act funds are identified. In addition, it is our understanding that changes and updates to the requirements at www.recovery.gov will be ongoing. We recommend that you periodically return to these sites to ensure that your business or organization is meeting its obligations.

Maxine G. Romano can be reached at Email or 215.441.4600.

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