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CARES Act in higher education: where institutions stand today with distributing, managing and overseeing funds

This marks approximately 12 weeks since the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted, providing $14 billion in relief funding for higher education students and institutions to offset the impacts of the coronavirus on campus, through the Higher Education Emergency Relief Fund (HEERF). The higher education community has quickly mobilized to understand, manage, disburse and oversee these funds, but questions and challenges remain.

In our conversations across the higher education industry, certain patterns have arisen with regards to approaches and obstacles for administering these funds, which we highlight below:

Allocation and spending of HEERF student funds

At this point, most institutions have decided upon and documented a plan for allocation and communicated expectations (and applications, if relevant) to their student communities. Many institutions are deep in the decision-making process to award funds, and some have begun disbursing funds to students. A number of institutions have opted not to take the HEERF funding at all, instead relying on institutional funding to meet their coronavirus-related fiscal needs.

Institutions have developed a wide variety of allocation plans to meet the unique needs of students and institutions, while also meeting the Department of Education’s (ED) compliance expectations. For example, among the more than 100 institutions we have connected with:

  • More than half are using an application-based process to award grants; others are allocating costs based on internal estimates of financial impact/needs
  • The large majority are requiring the confirmation of student eligibility via a Free Application for Federal Student Aid (FAFSA), either previously on file or newly submitted
  • Most are providing funding to students via a student account to allow for easier tracking and distribution
  • Depending on the nature of the student body, institutions may be emphasizing or deemphasizing certain costs, such as travel costs for those with significant numbers of out-of-state students, or childcare for those with larger nontraditional populations

Some institutions have received applications or requests far in excess of available funding. In these cases, institutions have explored options such as:

  • Considering multiple factors when prioritizing awards (e.g., demonstrated financial need per FAFSA alongside requested award amount)
  • Using a first-come, first-served basis to award funds
  • Establishing an average award amount and limiting grants to a set percentage (e.g., 150%) of that average until all applications are processed
  • Setting aside a portion of HEERF funds (typically 10-20%) for a second round of applications/appeals in the fall

On the flip side, some institutions have thus far received an inconsistent or insufficient response from the student body. In these cases, institutions have explored alternatives including:

  • Providing multiple rounds or multiple channels of communication to publicize available funding and encourage applications via email, text and social media
  • Having advisors personally reach out to students with demonstrated financial need to share funding information during conversations on other topics
  • Sharing examples and additional details on eligible expenses to better illustrate what costs might be eligible
  • Allowing for rolling applications over a longer period of time than initially anticipated
  • Setting aside a portion of HEERF funds (typically 10-20%) for a second round of applications/appeals in the fall when students might be back on campus and more readily able to apply

Reporting of HEERF student funds

ED issued its reporting expectations for the student funds on May 6, 2020 (Higher Education Emergency Relief Fund Reporting- Emergency Financial Aid Grants to Students).

Thus far, reporting has consisted of posting responses to a series of questions on the institution’s website. The current requirements are fairly straightforward. One thing we have learned through this reporting is that while most institutions have posted their initial reports, few have actually disbursed significant amounts of funding yet as they work through logistical and compliance considerations.

With regards to reporting, we would recommend:

  • Keep it as simple as possible – address ED’s questions and that’s it
  • Align your reporting and wording with ED’s specific requirements
  • Assign a single point of contact to handle reporting and coordinate across data owners
  • Perform validation procedures on data to ensure accuracy

Allocation and spending of HEERF institutional funds

In our conversations, the overarching theme is that the institutional funds provided by HEERF are insufficient to cover the financial impact that the pandemic has had on schools. In fact, some institutions have estimated that these funds have covered less than 25% of their losses and additional costs.

For the majority of schools, the simplest approach has been to use the institutional funds to offset refunds made for room and board.

For compliance and audit purposes, it is important to document the institutional costs and their relationship to changes on campus operations due to coronavirus, and to maintain basic support such as invoices and approvals. For most institutions, given the usage to offset refunds, the good news is that this should be a simple process.

Meanwhile, some institutions have opted to use some or all of the institutional funds to pay for additional student emergency funding to better support their student bodies. In this case, it is critical to follow the same compliance requirements established by ED for the HEERF student funds.

Oversight and monitoring of HEERF funds

Given the somewhat complex and changing compliance requirements combined with the significant funding volume, institutions are relying on internal audit functions and external objective monitors to provide oversight of funding allocation, spending and reporting. Specific support activities could include:

  • Auditing disbursements for compliance with ED requirements and adherence to the institution’s allocation plan through a mix of data analytics and sample-based testing
  • Assessing web-based applications and automated databases used to allocate awards for validity of data, accuracy of calculations and security considerations
  • Examining changes in processes and internal controls that were made to the financial aid system to allow for disbursements of emergency student aid
  • Reviewing student or external communications prior to posting for compliance with ED requirements and reputational impacts
  • Reviewing required reporting to ensure accuracy and completeness of data prior to posting

As your institution continues to manage and oversee its HEERF funds, it may be helpful to reference the FAQs developed by Baker Tilly to help make sense of the guidance.

Our team is available to discuss your questions and concerns, and provide solutions for oversight and monitoring for HEERF compliance.

For more information on this topic, or to connect with a higher education specialist, contact our team.

Ashley Deihr
Partner, CPA, CIA, CFE
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