At the time of the COVID-19 emergency, the Division of Local Services (DLS) issued Bulletins 2020-07 and 2021-6, which allowed municipalities in the Commonwealth to segregate spending for the emergency into a special revenue fund and apply Federal reimbursements to cover the cost of that spending. Additional Federal monies were granted to municipalities to mitigate the effects of the emergency.
DLS has noted that many municipalities have outstanding COVID-19 deficits in their special revenue funds. Such deficits are in funds where CARES, FEMA, ARPA, and ESSER monies were accounted for. Additionally, we have noted accounts titled “Other Covid-19” also with deficits. As the time for spending and receiving reimbursements from these programs have concluded, these deficits must now be provided for.
The Director of Accounts issued guidance in the FY2024 and FY2025 “Year End Letter to Accountants and Auditors” as well as in the FY2025 and FY2026 “Budget Issues and Other Related Procedures” Bulletins regarding the need to provide for any remaining COVID-19 deficits on the FY2026 balance sheet during the FY2027 budget and tax rate setting process. See below:
- Bulletin 2024-2 – FY2025 Budget Issues and Other Related Procedures
- Bulletin 2025-2 – FY2026 Budget Issues and Other Related Procedures
- FY2025 Year End Letter to Accountants and Auditors
Cities and towns in the Commonwealth must provide for these COVID-19 deficits on the FY2027 tax rate recap, Page 2, Part II, Line IIb. 10 or from any available fund prior to setting the FY2027 tax rate.
We are aware that there may be a handful of communities with a pending FEMA reimbursement appeal or other delay in payment that may extend beyond FY2026. If you believe you have a pending reimbursement that will cover a portion or the entire deficit in a FEMA COVID-19 special revenue fund, please provide documentation of that to the Director of Accounts, Deborah Wagner at wagnerd@dor.state.ma.us.
If you have any questions, please contact your Bureau of Accounts Field Advisor.
| Date published: | October 22, 2025 |
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| Last updated: | October 24, 2025 |