students on lawn wearing masks

On March 18, Baker Tilly hosted a webinar for higher education institutions on the second Higher Education Emergency Relief Fund (HEERF II). This FAQ was developed in response to the questions we received, and will continue to be updated with new information and guidance for colleges and universities as available.

On May 26, this FAQ was updated to reflect HEERF III information. Learn more about HEERF III guidance.

Q: How do we account for HEERF funds in our financial statements?

A: (FASB) Per ASU 2018-08, grants are conditional when both a “right of return” (or right of release) and a “barrier to entitlement” exist. All HEERF program grants have minimum spending requirements on emergency aid to students. The HEERF II absolute dollar spending minimum results in less aid allocated to students and more aid to institutions when compared to the no less than 50% student spending rules under HEERF I and HEERF III.

Under HEERF I and HEERF III the 50% minimum spending requirement on emergency aid to students requires institutions to recognize the institutional portion proportionately to the student portion. For example, if an institution has a total allocation of $1 million and draws down and expends $400,000 to students as aid, the institution may recognize as revenue $400,000 of the student portion and $400,000 of the institutional portion. If the institution has drawn down the entire institutional share of $500,000 and applied against eligible expenses, $100,000 is to be recorded as unearned revenue.

Under HEERF II, the minimum spending requirement on emergency aid to students must be equal to that spent under HEERF I. Recognition is proportionate to the allocation split. For example, if an institution has a total allocation of $1.5 million and must spend $500,000 on emergency aid to students, but only drew down and spent $250,000 (50%) on student aid, the institution the institution may recognize as revenue $250,000 of the student portion and 50% or $500,000 of the institutional share. If the institution has drawn down the entire institutional share of $1 million and applied against eligible expenses, $500,000 is to be recorded as unearned revenue.

Q: For the HEERF II funds, is there a requirement for the match between institutional portion and emergency student aid portion? Our institutional portion was significantly higher than the emergency student aid portion.

A: The timing of the use of the funds during the period of performance (one year from the GAN date) does not have to be on a pro-rata basis, but rather the split between the two must align with the allocation at the end of that one-year period. For accounting and financial reporting purposes, there are limitations, however, on the extent of revenue that can be recognized in the financials in line with the conditional contribution guidance.

Q: Is there a list of allowable expense that can be covered by HEERF?

A: No. There is not a list, but the Department of Education’s (ED) HEERF II FAQ document states: defray expenses associated with coronavirus, including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, payroll, carry out student support activities authorized by the HEA that address needs related to coronavirus, make additional financial aid grants to students.

The most recent HEERF III FAQs issued May 11, 2021 provides some additional examples of allowable expenses.

Q: What are some prohibited expenses?

A: Payments for recruitment contractors, marketing, recruiting, endowment expenses, capital outlays associated with athletics-related facilities, secretarial instruction or religious workshop, senior administrator or executive salaries, benefits, bonuses, contracts, incentives or any other cash or benefit for a senior administrator or executive.HEERF III FAQs #22 and 23 expanded on the prohibited list to include unallowable costs include religious worship, instruction, or proselytization or equipment or supplies to be used for religious worship, instruction, or proselytization, and construction or purchase of real property, capital projects, including deferred maintenance and capital improvement.

Q: Where can a copy of the compliance supplement be obtained for HEERF II?

A: There is no compliance supplement for HEERF II at this time. HEERF I requirements can be found at https://www.whitehouse.gov/wp-content/uploads/2020/12/2020-Compliance-Supplement-Addendum_Final.pdf

Q: Institutions are required to complete the first drawdown by April 15, 2021. We still have an unspent HEERF I. Are we required to spend HEERF I before drawing down HEERF II?

A: No. There is no requirement to spend HEERF I before drawing HEERF II.

Q: We are hearing that institutions plan to draw down $1 by April 15 to be in compliance. Is this true?

A: Institutions have 90 days to draw down "some" of the allocation for both the student and institutional portion, but have one year to use the full amount. HEERF III also contains a 90-day period to draw down “some” of the allocations.

Q: We are getting close to the 90 days. Is there an estimate of when guidance will be finalized as to whether the timing of the draw must be within the 90 days or if institutions have up to a year, especially considering there is currently no clear guidance on the lost revenue calculation?

A: Institutions have 90 days to draw down "some" of the allocation for both the student and institutional portion, but have one year to use the full amount.

Institutions that receive an ARP (a)(1) or (a)(4) supplemental award(s) must draw down any amount of its grant funds within 90 days of the date of each supplemental award. Failure to draw down any amount of the institution’s award(s) may constitute nonacceptance of the terms, conditions, and requirements of the Supplemental Agreement and the Department may choose to deobligate and redistribute the ARP supplemental grant funds.

Q: Must an institution draw down student emergency grant funds before or at the same time as the institutional funds, or can an institution draw down the institutional funds first? 

A: The order of the drawdown does not matter. Institutions have 90 days to draw down "some" of the allocation for both student and institutional portions but have one year to use the full amount. Accounting treatment for revenue recognition may be affected by the timing/order of drawdowns, but if the expenses have been incurred in either category, the funds can be drawn down. HEERF III also contains a 90 day period to draw down “some” of the allocations.

Q: If we draw down institutional funds due to loss of revenue, can these funds trigger a profit?

A: The expectation is that the funding would not result in a profit; however, it would be important to articulate the various factors that would be contributing to that result (perhaps a large non-recurring gift that was received but not anticipated).

Q: What is the guidance about setting up a fund with institutional portion funds to use specifically to clear up student account balances?

A: Institutional funds can be used to provide additional emergency grants to students. The HEERF III FAQ #26 addresses using ARP or other HEERF institutional grant funds to discharge student debt or unpaid balances to the institution.

Q: For the institutional portion, can institutions cover expenses directly related to COVID-19 that were incurred between August and Dec. 27, 2020? That would be a timeframe that the HEERF I left off for institutions, and there would be no double-dipping in this timeframe.

A: This was clarified by ED on March 19, 2021. Institutions can apply HEERF II funds back to lost revenue beginning in March 2020. For example, this could relate to room and board refunds that were not already covered with HEERF I funds.

Q: Can an institution use their portion to cover the cost of COVID-19 testing for students in the spring semester?

A: Yes, as long as no other public funds were already used to cover these costs. HEERF III requires institutions to allocate HEERF grant funds to “implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines.” The HEERF III FAQ #28 addresses this requirement and provides examples of allowable expenditures and activities which includes student testing.

Q: Will we be required to report the HEERF funds on the 1098-T? If so, will it be just Box 5 (Scholarships & Grants) or both Box 1 (Payments Received) & Box 5?

A: The Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) includes an expansion of the grant provision permitting institutions to apply the emergency grants to a student’s account, only after receiving written (or electronic) affirmative consent from the student that grants could potentially be payments for qualified tuition and related expenses (QTRE). Student grants made from the second round of federal aid contained in the CRRSAA may need to be reported on the Form 1098-T, according to a notice published by the IRS on Jan. 19, 2021. The notice states that there is no requirement to report those amounts on the Form 1099-MISC; however, it states that “the waiver does not apply to the requirement to file and furnish Form 1098-T, Tuition Statement, with respect to any payments received for qualified tuition and related expenses, including qualified tuition and related expenses paid with grants described in this notice.” Until further guidance is received, campus administrators should track amounts of student emergency grants applied to student account balances.

The IRS released an FAQ in April 2021 which indicated that higher education institutions have information reporting requirements for payments made with emergency financial aid grants known as qualified tuition and related expenses (QTRE). Institutions must report total QTRE including QTRE paid with emergency financial grant funds, in Box 1 of Form 1098-T, Tuition Statement.

Q: What are the tax implications for funds given to students?

A: We are awaiting final guidance, but there is a possibility that funds applied directly to a student's account will be reported on Form 1098-T, so institutions should track these types of funds used for qualifying tuition and related expenses (QTRE).

See IRS FAQ referenced above.

Q: If we treat HEERF II like HEERF I and just send it to the student, will it NOT be on a Form 1098-T?

A: Correct, if you are not applying to account balances, our understanding is the grants to students will not be included on Form 1098-T. The current guidance indicates 1098-T reporting may only be applicable if a student opts to apply against an account balance.

Q: If we have awarded funds for tuition and it is coded to apply to Form 1098-T, and the policy changes, how do we address that change after awarding funds?

A: Until the IRS publishes clearer guidance, campus administrators should track amounts of student emergency grants distributed this year. You may have to work with your software to determine how to reverse any coding as needed.

Q: Would all payments under HEERF II be reportable on the Form 1098-T or just payment students give permission to be allocated to prior balances?

A: Payments to students who opted to apply funds to their student account balance should be tracked for potential 1098-T reporting. 1098-T reporting would be applicable for students who give permission to apply funds to an outstanding account balance.

Q: Do student emergency funds awarded to students and applied to their tuition need to be reported on the Form 1098-T?

A: It is possible that funds applied directly to a student's account will be reported on Form 1098-T. Institutions should track these types of funds used for QTRE.

See IRS FAQ referenced above.

Q: What are the differences between HEERF I, HEERF II and HEERF III?

A: The National Association of Student Financial Aid Admissions (NASFAA) developed a helpful comparison chart. Some differences include: allocations; expanded allocation formula; HEERF II and HEERF III requirements to prioritize students with greatest need; institutional portion under HEERF I required a clear nexus to significant change in the delivery of instruction due to coronavirus while HEERF II provides additional allowances; no student eligibility requirements in HEERF II; and HEERF II allows distance students. HEERF III also includes some additional institutional requirements to spend a portion of the institutional share funds on. Additionally, the HEERF III guidance released on May 11 by the Department of Education noted expanded eligibility to students including DACA students and this applies to any remaining HEERF I and II funds as well.

Q: What is the application of indirect cost rate?

A: Indirect costs may be charged only to institutional portion awards, both new and supplemental, and may not be charged to any student portion grant awards because the student allocation represents an amount of funds that must be distributed to students. Generally, this indirect cost rate will be the on-campus rate specified in an institution’s negotiated indirect cost rate agreement. If an institution does not have a current negotiated indirect cost rate with its cognizant agency for indirect costs, it may appropriately charge the de minimis rate of ten percent (10%).

Q: What is the process for applying an indirect cost rate multiplier to reimbursements?

A: Indirect cost rates (or the 10% de minimis rate) can be applied to the institutional portion, but not the student portion. It is important to consider which indirect costs may have already been applied to other grants in order to avoid potential double-dipping.

Q: For the institutional portion, can an institution charge its negotiated indirect cost rate to charges it deems eligible?

A: Yes. The FAQs indicate that the existing negotiated rate may be used for the institutional share. If an institution does not have a current negotiated indirect cost rate it may appropriately charge the 10% de minims rate.

Q: What are qualified expenses for the institutional portion of HEERF II and III?

A: Lost revenue, reimbursement for expenses already incurred, technology costs associated with transition to distance education, faculty and staff trainings, payroll, carry out of student support activities authorized by HEA (but note that this has been removed under ARPA) and to make additional financial aid grants to students. NASFAA provided guidance received from the ED that payroll includes employee salaries and benefits. With regards to payroll, the costs are to be associated with the impact of the pandemic. An example of that may be the hiring of additional information technology support to facilitate the transition to distance learning.

HEERF III qualified expenses align with those under HEERF II however requires an allocation of the institutional portion be used to “implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines” and “conduct direct outreach to financial aid applicants about the opportunity to receive a financial aid adjustment due to the recent unemployment of a family member or independent student, or other circumstances.”

Q: What is the appropriate internal control documentation related to lost revenue calculations for the institutional portion as well as the student allocation methodology?

A: An institution should have a designated person(s) to be familiar with the various requirements and allowed uses for each type of the HEERF funds, and to keep up-to-date on new guidance when published. For lost revenue calculations, the institution should review the lost revenue guidance published by ED on March 19, 2021 (of which much is captured in the following questions in this section), and document the methodology, calculations etc. All relevant documentation to support the institution’s uses of the funds should be saved. 

Additionally, institutions should have a documented methodology for using the student and institutional portions of the funds, follow that methodology and include some documented controls around review and approval, which could be at the individual student grant, refund or expense level, or could be done in aggregate.

Q: What is the definition of lost revenue?

A: ED provided the following definition in the lost revenue FAQs issued March 19, 2021:  “Lost revenue refers to those revenues an institution of higher education (institution) otherwise expected but were reduced or eliminated as a result of the novel coronavirus 2019 (COVID-19) pandemic. As such, lost revenues can only be estimated.

Q: What is time frame for eligible lost revenue and expenditures?

A: ED clarified on March 19, 2021 that institutions can apply HEERF II and HEERF III funds back to lost revenue beginning March 13, 2020.

Q: What are some recommended methods for calculating loss of revenue?

A: ED provided several examples for calculating lost revenue in the lost revenue FAQs issued March 19, 2021: These include:

  • A year-over-year comparison using the prior year
  • A semester-over-semester comparison using the prior year semester (i.e., fall 2019 compared to fall 2020 or summer term 2019 compared to summer term 2020)
  • A comparison using a three- or five-year combined average revenue as baseline revenue
  • A comparison to previously budgeted revenue or projected revenue for the period
  • A comparison with a baseline year of a fiscal year prior to the March 13, 2020 national emergency declaration, such as the fiscal year from July 1, 2018 – June 30, 2019

Q: How does an institution translate lost revenue to identified expenses that can be charged to the funds?

A: The lost revenue is considered to be the "expense" and therefore it would not be necessary to attach particular expenses paid to those amounts being claimed for lost revenue.

Q: Would a reduction in available housing due to physical distancing measures be an eligible source of lost revenue?

A: Yes, room and board reductions associated with COVID-19, such as for reduced capacity on campus for physical distancing is an allowable source of lost revenue for HEERF grants. Institutions should be aware that ED specified that lost housing revenue due to previously planned remodeling, would not be directly attributable to COVID-19. 

Q: Will revenue be looked at on an accrual basis? We bill spring tuition in December, but it technically applies to January - May.

A: This was clarified by ED on March 19, 2021 indicating that there would not be such a timing issue.

Q: What documentation is required for the institutional portion of HEERF II and III in order to document lost revenues such as room and board?

A: This was clarified by ED on March 19, 2021. The focus is on support for the rationale, methodology, underlying data for calculations, etc. Institutions are required to maintain this documentation for three years from the date their final report was submitted.

Q: Can institutions use the institutional funds as lost revenue if we typically receive funding that is expected but not guaranteed each year for scheduled maintenance?

A: This likely would depend on the source and nature of the funding. FAQ #4 in ED’s March 19, 2021 communication calls out those that are explicitly prohibited. For example, those fees related specifically to athletic facilities are to be excluded.

Q: What is the guidance on institutions using HEERF II and III funds toward lost revenues experienced by its hotels, athletic facilities, etc. due to the coronavirus?

A: ED provided guidance on March 19, 2021 on auxiliary service sources of revenues that are allowable including for cancelled ancillary events, use of facilities or venues, including external events such as weddings, receptions, or conferences (other than facilities associated with sectarian instruction or religious worship), parking revenue, etc. ED also included some specifics on non-reimbursable expenses that institutions should also be aware of.

Q: Is loss of contributed revenue something that might qualify as lost revenue? Individual donations?

A: No. This was clarified by ED on March 19, 2021.

Q: Can institutions use the HEERF II and III institutional funds to reimburse the institution for the student use fees (e.g., student center) we refunded after Dec. 27, 2020?

A: Yes, if the refunds were related to disruption of campus activities due to COVID-19.

Q: Can institutions compare pre-COVID-19 revenue to post-COVID-19 revenue when determining lost revenue considering ED urged institutions to maintain 100% employment for as long as practicable?

A: Yes. See clarified guidance from ED issued March 19, 2021.

Q: Is the calculation of lost revenue only based on revenue or should it be net revenue based too?

A: The lost revenue would be expected to reflect the amount that would actually have been received by the institution. For instance, tuition and fees reduced by institutional aid would be necessary. With regards to other sources of revenue for conferences and the like, the guidance does not indicate that reductions in related expenses would need to be factored in. Appropriate judgment should be exercised in such cases and it is advised that consultation with your program contact occurs if there is uncertainty.

Q: Can the lost revenue be for FY21 only or can it be used in FY22?

A: ED clarified on March 19, 2021 that institutions can apply HEERF II funds back to lost revenue beginning March 13, 2020 (previously the date was Dec. 27, 2020), and this applies to both the student and institutional portions. For the HEERF II funds, institutions have one calendar year from the date of their award to expend funds unless they receive an extension. ED noted that institutions charge the lost revenue to the grant at the end of the period used to estimate the lost revenue and the example provided was “if an institution calculated lost revenue on the basis of its institutional fiscal year (FY) and used FY July 1, 2020 – June 30, 2021, it would charge the HEERF grant award for the lost revenue on or after the last day of the estimation period, June 30, 2021.

Q: What impact do reductions in state funding have on the determination of lost revenue? In regards to loss revenue, can State funding be considered "revenue" for this purpose?

A: FAQ #4 in ED’s March 19, 2021 communication describes various revenue sources that are to not be included for which there is not anything specific to state funding, other than a reference to any revenue used for certain capital outlays. If a position can be taken and appropriately supported that there was a direct reduction in state funding tied to the pandemic impact, then it is possible that ED would consider that to be an appropriate use of the funds.

Q: Do institutions have a CARES Act/HEERF committee to adjudicate distribution of the funds?

A: Many institutions have developed their allocation plans through a committee structure, or by otherwise bringing together viewpoints across campus, including finance, financial aid, academics and student success representatives.

Q: Do auditors look at disclosures on institutions’ CARES Act/HEERF websites?

A: Yes. When auditing the HEERF funds, we as auditors do review the institution's website for the required reporting for HEERF I, II, and III.

Q: Can institutions use funds for expenses incurred in summer and/or fall 2020?  Will international students be eligible for student portion?

A: This was clarified by ED on March 19, 2021. You can apply HEERF II funds back to lost revenue beginning in March 2020. Further clarification in the HEERF III FAQ released on May 11, 2021 included a final rule on student eligibility which stated that all students who are or were enrolled at an institution of higher education during the COVID-19 national emergency are eligible for emergency financial aid grants from the HEERF, regardless of whether they completed a FAFSA or are eligible for Title IV. That includes citizens, permanent residents, refugees, asylum seekers, Deferred Action for Childhood Arrive (DACA) recipients, other DREAMers and similar undocumented students.

Q: Are the "procurement" standards applicable to possible use of the institutional portion internal standards of the institution or federal procurement standards?  How likely is it that institutions can consider the expenses as emergency?

A: Institutional standards should align with procurement standards under Uniform Guidance (including checking vendors for disbarment/suspension, bids, etc.). If considered an emergency, then documentation should be maintained to support emergency situation and bypassing of procurement requirements. The HEERF compliance supplement addendum (page HEERF-8) provided more clarification about what might be considered an emergency: “A circumstance that may influence this determination is the length of time between the procurements and the emergency at issue. Specifically, exceptions are more likely to be acceptable the closer the procurement occurred to the March 13, 2020 declaration of the national emergency.”

Q: What are the tips for adding value by looking at specific risks encountered?

A: Documentation is key. Maintain documentation of any processes/approvals, keep meeting minutes and engage your board. A best practice is working with your external auditor to review plans and/or provide outside commentary or suggestions. Make sure copies of any required reporting is maintained, including documentation for date posted.

Q: Have institutions found that the initial student response was lighter than expected?

A: Some institutions found that student response (e.g., requests or applications) to HEERF I funding was lower than anticipated, resulting in less than the total amount of funds being distributed. These institutions often went through a second round of requesting applications, or in some cases provided funds to certain subsets of students in order to maximize use of the student share funds per ED guidance.

Q: What exactly is allowable under payroll expenses?

A: Need to make a reasonable connection to COVID. For example, salaries/benefits were paid due to COVID (i.e. testing, nursing, cleaning, virtual adjuncts) they are allowable. FAQ #10 from the Department of Ed also indicates which are NOT allowable.

HEERF III FAQ #25 notes that institutions may use ARP, CRRSAA funds and unspent CARES Act funds to pay for certain payroll costs including benefits if (1) such costs are newly associated with coronavirus and (2) the costs were incurred on or after March 13, 2020, Examples of uses include new staff or repurposed staff if the work is associated with coronavirus, IT staff, additional medical personnel, teach assistants, etc. HEERF funds can also be used to pay salaries from March 13, 2020, onward of staff who were unable to work during a period or periods of any full or partial campus closures due to the pandemic. Additionally, any overtime work any staff incurred from March 13, 2020, onward associated with coronavirus, additional training to assist with online learning transition can also be paid for with HEERF grant funds.

Q: What exactly does payroll include, payroll for anyone?

A: Under HEERF I, the use of funds for payroll had to be more clearly aligned with significant change to the delivery of instruction due to coronavirus, therefore excluding employees that worked in dining halls, dorms, etc. Effective with the enactment of CRRSAA, HEERF II funds may be more broadly used to defray payroll and benefit costs associate with the coronavirus. Prior to the CRRSAA, as a condition of receiving HEERF I funds (student or institutional share), the institution agreed that it would pay all of its employees and contractors to the greatest extent practicable during the period of any disruptions or closures related to COVID-19. This is still a condition for spending HEERF II student and institutional funds.

FAQ #10 indicates that no supplemental institutional portion awards or new institutional portion awards may be used to fund contractors for the provision of pre-enrollment recruitment activities; marketing or recruitment; endowments; capital outlays associated with facilities related to athletics, sectarian instruction or religious worship; senior administrator or executive salaries, benefits, bonuses, contracts, incentives; stock buybacks, shareholder dividends, capital distributions, and stock options; or any other cash or other benefit for a senior administrator or executive.

See clarification above.

Q: Can we use the institutional portion to cover faculty and staff payroll that doesn't fit into the bucket noted above, even if we were not closed?

A: An institution will need to make a reasonable connection to COVID-19 for payroll expenses. For example, salaries/benefits that were paid due to COVID-19 (i.e. testing, nursing, cleaning, virtual adjuncts), they are allowable. FAQ #10 from ED also indicates which payroll expenses are not allowable.

See clarification above.

Q: Is there clarification on what payroll/benefits qualify? Is it only those that provide services related to online learning?

A: For payroll and benefit costs, until further clarification is received from ED, our understanding is that the costs should be able to be tied to COVID-19 somehow, using a reasonable basis. For example: testing, nurses, cleaning, virtual adjuncts or, if the associated revenue stream(s) that would have covered the salary and benefit costs has been significant affected such as dining hall or housekeeping.

See clarification above.

Q: What constitutes "employee benefit costs" for which recipients of HEERF I and II funds can be reimbursed?

A: If an institution can make the connection that those salaries/benefits were paid due to COVID-19 (i.e. testing, nursing, cleaning and virtual adjuncts) or if the revenue stream that would have covered the salaries (i.e. dining hall or housekeeping) went away due to COVID-19, they are allowable. The institution should be able to tie the reimbursement back to COVID-19 using a "reasonable basis."

See clarification above.

Q: If an institution’s budget for next fiscal year includes costs related to specific equipment and/or personnel cost attributable to the pandemic (e.g., counseling services), can the institution apply the CRRSAA funding (if any remains) to next fiscal year (after June 2021)?

A: The HEERF II funds under the CRRSAA are to be used within one year of the supplemental grant award agreement. HEERF III funds under the ARPA are to be used within one year from the date when the Department processed the most recent obligation of funds for each specific grant. The specific period of performance will be indicated in Box 6 of your institution’s grant award notification.

Q: For HEERF I, is there a deadline for when items purchased can be used? For example, an institution is currently purchasing software needed for distance learning that will be used this summer. Would that be an allowable expense?

A: Yes, but the costs need to be incurred within the institution’s grant award period.

Q: Has ED clarified the allowance for HEERF II funding for student need for expenses incurred prior to Dec. 27, 2020?

A: This was clarified by ED on March 19, 2021. Institutions can apply HEERF II and HEERF III funds back to eligible expenses beginning in March 2020.

Q: Should institutions report on the HEERF II funds on a quarterly basis, even though there is no clear guidance?

A: Over-reporting is generally not a bad idea, but until more guidance is released on reporting, institutions are not out of compliance if they choose not to report.

Clarified on May 11, 2021, HEERF grantees receiving ARP funds must continue to adhere to the two quarterly reporting requirements originally implemented through the CARES Act for HEERF I funding. Those reporting requirements include quarterly institutional public reporting which must be posted on the institutions’ website no later than 10 days after the calendar quarter (July 10, October 10, January 10, April 10) and quarterly student public reporting which must be posted on the institutions’ website no later than 10 days after the calendar quarter (July 10, October 10, January 10, April 10).

Institutions that expended HEERF grant funds during the calendar quarter from January 1 – March 30 are required to post the two quarterly reports that involved the expenditure of HEERF II CRRSAA and HEERF I CARES Act funds. As the Department did not previously indicate this reporting requirement was in place for HEERF II CRRSAA funds, institutions may have until the end of the second calendar quarter June 30, 2021 to post those retroactive reports if they have not already done so.

Q: What reporting obligations will institutions have to satisfy as a result of HEERF II?

A: Specific requirements have not been released. It’s likely safe to assume similar reporting requirements to HEERF I will be required for HEERF II, including separate reporting for student and institutional portions. CRRSAA language reads that "recipients must promptly and timely report to the Department on the use of funds no later than six (6) months after the date of this award in a manner to be specified."

This was clarified in the HEERF III FAQ released on May 11, 2021. See above.

Q: The Quarterly Budget and Expenditure Reporting document was developed under the CARES Act. Is any form available for HEERF II under CRRSAA? What are the reporting requirements for HEERF II?

A: The reporting requirements have not been explicitly determined yet, however the expectation is that they will be similar to HEERF I.

The ED released requirements and the related forms can be found here.

Q: Is it correct for an institution to over-write the required disclosures of the student portion of HEERF I each quarter? Should institutions just be adding new sections each quarter when we are updating them?

A: Institutions should maintain evidence or documentation that the prior quarters were posted on a timely basis, but don't necessarily need to keep all information "live" on the website.

Q: When should an institution recognize institutional revenue (i.e., when drawing funds down form G-5)?

A: Under FASB, an institution should recognize revenue under the contribution standard similar to HEERF I, once barriers have been met (i.e., costs incurred, student portion paid). HEERF III requirements are similar to HEERF I however HEERF II funds will have to be recognized in line with student funds paid as a percentage of the allocation.

Q: Can an institution provide student funds to those who left the institution with pending balances because they could not pay and continue at school?"

A: Yes. Institutions may choose to make financial aid grants to students who have left school for any reason during the period of the national emergency, beginning on March 13, 2020, the date of the declaration of the national emergency. Affirmative consent is needed to apply to account balances. See the ED’s FAQ #26 for more information.

The HEERF III FAQs also provided more clarity on applying student portion funds or institutional portion funds to student account balances, including when student consent is required, and for the student portion grants, that the institution not condition the awards for applying to the account balances, continued enrollment, etc.

Q: In regards to getting permission to have funds applied to a student account, do institutions need specific permission or would an overall permission be acceptable? For example, if a university has a permission that allows them to use Title IV aid to pay charges on an account

A: Given ED’s clear guidance that students must have the ability to determine how the student share funds are spent, it is recommended that institutions receive explicit approval from students in order to apply funds to the student account. It is not recommended to automatically apply student share funds to the student account.

The HEERF III FAQs also provided more clarity on applying student portion funds or institutional portion funds to student account balances, including when student consent is required, and for the student portion grants, that the institution not condition the awards for applying to the account balances, continued enrollment, etc.

Q: Student awards can be applied to charges posted prior to Dec. 27, 2020. Does that extend to paying balances from prior terms (e.g., summer or fall 2020)?

A: Yes, charges associated on or after March 13, 2020, the day the national emergency was declared, are considered allowable.

Q: Are bursars normally directing the distribution?

A: We have seen distribution handled through both the bursar and/or financial aid.

Q: Are the majority of funds being distributed via ACH?

A: We have seen physical checks, ACH and application to student accounts (with permission).

Q: Are there any limitations if a student opts to allow the institution to use their HEERF II grant to pay an outstanding balance? If so, what types of charges can these grants be used to pay off?

A: Student grants can be used for any component of the student's cost of attendance (COA) or for emergency costs that arise due to the coronavirus, such as tuition, food, housing, healthcare (including mental healthcare) or child care.

Q: How should exceptional need be defined?

A: ED gives the example of Pell-eligible, but leaves it up to each individual institution to define and document. As long as the institution’s approach is reasonable and documented, they should be safe.

The HEERF III FAQ #11 and #12 provide additional information related to the requirements for making emergency financial aid grants to students and additional examples of exceptional need.

Q: Do you have to allow students to use to satisfy outstanding balance?

A: No.

Q: Are DACA students eligible?

A: There is still no guidance from ED to clarify whether or not undocumented, DACA or international students may receive funds.

Further clarification in the HEERF III FAQ released on May 11, 2021 included a final rule on student eligibility which stated that all students who are or were enrolled at an institution of higher education during the COVID-19 national emergency are eligible for emergency financial aid grants from the HEERF, regardless of whether they completed a FAFSA or are eligible for Title IV. That includes citizens, permanent residents, refugees, asylum seekers, Deferred Action for Childhood Arrive (DACA) recipients, other DREAMers and similar undocumented students.

Q: Is there guidance on student eligibility, citizenship and/or how to verify eligibility without a FAFSA on file?

A: Under CRRSAA, no student eligibility requirements are identified. Further, there is currently no guidance from ED to clarify whether or not undocumented, DACA or international students may receive funds.

Further clarification in the HEERF III FAQ released on May 11, 2021 included a final rule on student eligibility which stated that all students who are or were enrolled at an institution of higher education during the COVID-19 national emergency are eligible for emergency financial aid grants from the HEERF, regardless of whether they completed a FAFSA or are eligible for Title IV. That includes citizens, permanent residents, refugees, asylum seekers, Deferred Action for Childhood Arrive (DACA) recipients, other DREAMers and similar undocumented students.

Q: What is the timeframe for eligible lost revenue and expenditures? Can CRRSAA funds be spent during the entire project period or must they be used on expenses incurred after Dec. 27, 2020?

A: This was clarified by ED March 19, 2021. Institutions can apply HEERF II and HEERF III funds back to lost revenue and eligible expenditures beginning in March 2020.

Ryan Engelstad
Partner, CPA
Ashley Deihr
Partner, CPA, CIA, CFE
Amateur student athlete with NIL rights
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