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Third COVID-19 relief funding package – American Rescue Plan Act provides $40 billion for colleges and universities

Authored by Amanda Shanaberger, CPA and Mike Wascura, CPA

Higher education institutions are set to collectively receive nearly $40 billion in a new round of funding after the House passed the $1.9 trillion COVID-19 relief plan, signed into law on March 11, 2021. Officially titled the American Rescue Plan Act of 2021, the bill provides the largest funding boost to colleges and universities since the start of the pandemic to date.

  • Coronavirus Aid, Relief, and Economic Security (CARES) Act provided $14 billion in funding
  • Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) provided $22.7 billion in funding
  • American Rescue Plan Act (ARPA) provides $40 billion in funding

The allocation formula is similar to previous allocation formulas, except that there will be a reduced allocation for colleges with endowments over $1 million and an increased allocation for institutions with endowments under $1 million, including institutions that do not have endowments. The allocation formula to determine each institution’s award amount for these funds will be similar to the one used to determine CRRSAA allocations.

Whereas the CRRSAA only required the same dollar amount spent on students as under the CARES Act, the ARPA requires at least 50% of the support be used for emergency financial aid grants to students, prioritizing students with exceptional financial need.

The ARPA follows the terms set in the CRSSAA that higher education institutions may use the funding to:
  • defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with transition to distance education, faculty and staff trainings and payroll)
  • provide financial aid grants to students (including students exclusively enrolled in distance education), which may be used for any component of the student’s cost of attendance or for emergency costs that arise due to coronavirus, such as tuition, food, housing, healthcare (including mental health) or child care
ARPA adds that institutions must use a portion of funds 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 (often called “professional judgment” or “PJ”) due to the recent unemployment of a family member or independent student, or other circumstances described in section 479A of the Higher Education Act of 1965 (20 U.S. Code 1087tt)

While we expect there will be reporting requirements related to this funding, none have been released for CRRSAA or ARPA at this time. Additional clarification from the Department of Education is also expected to answer questions such as whether DACA students are considered eligible, the time period expenses can be applied to and further guidance for determining revenue losses. Stay tuned for additional updates as more information becomes available.

Baker Tilly can help

Our specialized higher education team can help institutions approach ARPA and the CRRSAA Higher Education Emergency Relief Fund (HEERF II), review allocation plans, discuss accounting treatment and navigate the complexities and opportunities under ARPA and CRRSAA.

We can also help guide institutions through the Paycheck Protection Program (PPP) and Employer Retention Credit (ERC). In association with the American Institute of Certified Public Accountants (AICPA), CPA.com and Biz2Credit, Baker Tilly launched a new tool to help institutions through the next round of the PPP.

There have been notable changes to the now extended ERC, creating an entirely new credit for 2021 that is separate and distinct from the ERC available for 2020, and appears to offer a significant opportunity for institutions, even those that received funding through the PPP or PPP2.

For more information, or to learn how we can help, contact our team.

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