Accounting for Emergency Relief Funds Under the American Rescue Plan Act

Revenue and Expenditure Recognition Considerations

Elementary and Secondary School Emergency Relief (ESSER III) Formula Funds received under the American Rescue Plan (ARP) Act through MDE should be recorded as federal revenue under Major Class 414, Suffix 0250 (new). Expenditures of these funds should be recorded with Grant Code 435 (new).

As districts begin FY22, special attention should be given to the timing of revenues and expenditures of COVID-related grant programs outlined throughout this document. As a reminder, revenues must be “measurable and available” to be recognized (including having a “grant agreement” in place – often in the form of an award letter and/or Grant Award Notification) in a given fiscal year, even if the expenditure period is retroactive to a prior fiscal year.

Many districts will not have grant agreements in place for ESSER and other programs until one or two fiscal years after the beginning of the allowable expenditure period. Until revenue of a given funding source can be recognized, the Grant Code of that program should not be used when reporting incurred or anticipated expenditures. Districts may choose to create and use a 9xx Grant Code to track expenditures incurred before revenue is recognized for a funding source if those funds are eventually intended to cover those expenditures. Then, in the fiscal year when revenue can be recognized, “net-zero reclassifying entries” similar to those examples provided for Coronavirus Relief Fund accounting may be used to tie those expenditures to the appropriate grant funds:

Using $10,000 of teacher salaries as an example below, a net-zero expenditure should be added to FYxx reporting to ensure “___ grant” expenditures across all fiscal years of the expenditure period match revenues reported across FID, audited financial statements, and other documentation:

Debit      11-113-1240-xxx0       $ 10,000
Credit     11-113-1240-0000     $ 10,000

Resource: Michigan Department of Education, Office of Financial Management, Financial Accounting Guidance During the COVIC-19 Pandemic, Last Updated January 21, 2022