Last week, the Department of Education issued guidance on the use of funds for Higher Education Emergency Relief Funds (HEERF II) from the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA), signed into law on December 27, 2020. This guidance updates and overrides the guidance from January 14, 2020.
 
Importantly for private, nonprofit colleges and universities, the guidance expanded flexibility related to lost revenue and expenses. The lost revenue guidance also applies to any unexpended CARES funds (HEERF I) and to HEERF III funds from the American Rescue Plan Act (ARP), expected to be released in early April.
 
With this guidance, institutions should be able to confidently draw down funds to spend on institutional and student needs as well as plan their institutional assignment of funds over the three fiscal years to which they may apply (2020, 2021, and 2022). Funding is available for use for one year from the date it was made available to the institution.
 
Key components of the guidance are summarized below.  Additionally, NAICU hosted a webinar yesterday with the National Association of College and University Business Officers to provide additional details and insight on the Department’s guidance (webinar recording and presentation).
 
Guidance on Lost Revenue
 
The Department has taken a generous approach to the use of funds for lost revenue under the institutional portion of HEERF by:

• Defining lost revenue and expenses related to coronavirus.
• Allowing a broad array of categories to be covered.
• Applying the declaration of the national emergency, March 13, 2020, as the point in time for which both expenses and lost revenue can be backdated for all funds.
• Waiving federal requirements for approval for pre-award costs.

This guidance overrides the most restrictive part of the previous guidance from the Trump Administration citing December 27, 2020, as the date from which all expenses and lost revenue must be applied. Institutions do not have to sign new agreements to utilize the new date or allowable uses.
 
Expenses and Revenue Covered
 
The guidance provides two illustrative lists of expenses and revenue losses that institutions can use the relief funds for; one for academic sources and one for auxiliary sources. These include, but are not limited to:
 
Academic Sources:

• Unpaid student accounts, such as tuition, fees and institutional charges
• Room and board
• Enrollment declines
• Supported research
• Cancelled events and summer camps

Auxiliary Sources:

• Cancelled ancillary events
• Disruptions to food service
• Dormitory services
• Childcare services
• Use of facilities or venues
• Bookstore revenue
• Parking revenue
• Lease revenue
• Royalties
• Other operating revenue

The Department worked with the American Institute of Certified Public Accountants to ensure that institutional choices on how to spend the funds are understood and accepted by accounting professionals.  The guidance includes specific details targeted to the accounting of funds, as well as a series of Frequently Asked Questions and examples for calculating lost revenue, which will allow institutions to make flexible decisions on the use of funds that best fit their circumstances.
 
Student Eligibility and Student Use of Funds
 
The new guidance also includes updates to the January 14 FAQ’s regarding student emergency grants. The Department makes clear that the CARES Act limitation to students eligible for Title IV federal student aid does not apply to CRRSAA student funds. Institutions are asked to prioritize students with “exceptional need,” but the guidance does not require that those students be Pell Grant eligible. Institutions are asked to develop a plan for distributing student grants, document that plan, and adhere to the plan as it provides grants.
 
Additionally, a broader group of students are eligible to receive grants, including students who:

• Have left school for any reason during the period of the national emergency, beginning on March 13, 2020.
• Are non-degree seeking, non-credit, dual enrollment, and continuing education.
• Are qualified aliens, (including refugees and persons granted asylum). The guidance does not provide for DACA or international students and it is unclear if that flexibility will be made possible in the future. 

With this guidance, students can give institutions permission to pay account balances prior to December 27, 2020, and institutions can use student accounts as a “pass through” to disburse emergency grants. Throughout the guidance, the Department reiterates that “students have discretion about how they receive their grants, and institutions must receive affirmative consent from students before using financial aid grants to satisfy a student’s outstanding account balance.”
 
While the Department has given institutions broad allowance on the use of institutional funds, it promotes that it “strongly recommends institutions devote the maximum amount of funds possible to financial aid grants to students and prioritize costs associated with student safety and support and testing services, including by using some or all of the funds allocated for an institution’s expense.”
 
Institutions are encouraged to use their HEERF funding to best meet the needs of faculty and staff and to focus on helping students to stay in, enter, or reenter college. This includes helping students pay off credit balances so they can reenroll in classes.  
 
Reporting
 
Institutions should document their decision-making and accounting procedures for the uses of institutional funds and the distribution of student emergency grants, and additional reporting is expected to be required on HEERF II and HEERF III funds. The Department recently took its first snapshot of the use of HEERF I funds, which resulted in a report recommending increased oversight of how institutions are using their funds.