Best Practices for Accounting and Disbursing Allocations from the Higher Education Emergency Relief Fund

By Michael T. Wherry, CPA | April 15, 2020

Co-authored by Audrey Kaplan.

Since the U.S. Department of Education’s April 9, 2020, announcement of the forthcoming release of the student emergency funds as noted in Section 18004(c) of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), we have had numerous discussions with clients in regard to the awarding, disbursing, accounting and reporting of these funds. As the Secretary noted in her cover letter, the “CARES Act provides institutions with significant discretion on how to award this emergency assistance to students. ….The only statutory requirement is that the funds be used to cover expenses related to the disruption of campus operations due to coronavirus (including eligible expenses under a student’s cost of attendance, such as food, housing, course materials, technology, health care, and child care).” Due to the generous discretion being provided by the Secretary, institutions have the ability to target the emergency relief as best suits its student base. However, with this generous discretion, the onus of documentation supporting these emergency grants lies with the institution.

From our understanding and review, these emergency grants do not represent Title IV aid and, as such, are not part of the current audit guide for proprietary schools. However, these funds do represent government grants and an institution’s financial statement audit is conducted under Generally Accepted Government Auditing Standards. Therefore, these grants may be subject to audit procedures in future audits. We believe institutions need to develop and implement thorough policies and procedures prior to receiving, awarding and disbursing of these emergency grants to students. Institutions should not be taking an approach in which they award/disburse the funds and worry about the documentation later.

As you develop your policies and procedures amidst the uncertainty and lack of sub-regulatory guidance, we encourage you to document how your decisions were, in your opinion, done in the best interest of your students, many of whom may be the most impacted by the current crises. To assist you in receiving, developing, and documenting how these emergency funds were disbursed, listed below are best practices which we recommend based upon our reading of the regulations, and discussions with various clients and regulatory attorneys.

NEW – The information provided below has been updated to reflect guidance issued by ED on April 21, 2020 which can be located here

NEW – Please note that Secretary DeVos encouraged institutions to submit their Funding Certification and Agreement form for emergency student aid quickly, as only 50% of institutions has done so at the time of the Higher Education Stakeholder call on April 21, 2020.  Institutions were also advised that they must submit their Certification Form for emergency student aid before they will be able to submit their Certification Form to access relief funding for institutional costs.

Receiving and Holding of the Funds

  • Open a new bank account to hold the funds. The Recipient’s Funding Certification and Agreement form (Certification Form) indicates in section 4(b) that the Recipient (i.e. institution) hold these funds in trust for students and acts in the nature of a fiduciary. We believe this supports the reason to establish a separate bank account.
  • The emergency grants are awarded specifically by main OPE ID number. Thus, we recommend setting up a new bank account (i.e. HE Relief Bank Account) for each main OPE ID number. These funds can be drawn down via G5 into the existing federal funds account and then transferred to the institution’s operating account. We then recommend transferring the funds from the operating account to the appropriate HE Relief Bank Account as soon as possible.
  • We recommend the HE Relief Bank Account(s) be labeled to indicate Federal Funds and be interest bearing when possible. Federal regulation 2 CFR section 200.305(b) indicates the information below. If an institution is unable to meet the requirements, in this situation, we don’t believe the institution is at risk of any violation (pending further guidance) and we recommend the institution document as to why the requirements could not be met.  In addition, the federal regulations indicate that a grantee is required to minimize the amount of time between the drawdown and the expenditure of funds from their bank accounts. Because we are recommending that the funds be drawn down from G5 only as they are expended it is unlikely an institution would earn more than $500 in interest income due to the limited time these funds are being maintained.
    • Recipients shall maintain advances of Federal funds in interest bearing accounts, unless the following exceptions are met: (1) The recipient receives less than $120,000 in Federal awards per year. (2) The best reasonably available interest-bearing account would not be expected to earn interest in excess of $500 per year on Federal cash balances. (3) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.
  • Disbursements can be made directly from the HE Relief Bank Account to students. This provides the institution a single location for all disbursements related to the emergency grants for each main OPE ID number, and the funds are not commingled with any other institutional cash accounts. If possible, instituting Positive Pay with your bank would prevent individuals external to your institution from creating fraudulent checks.
  • The Secretary’s cover letter indicated ED “is prioritizing this funding stream in order to get money in the hands of students in need as quickly as possible.” However, the Certification Form indicates in section 4(e) that the funds should be disbursed within one year to the greatest extent possible.
  • The cover letter from the Secretary mentions “…if you determine that your institution’s students do not have significant financial need at this time, I would ask that you consider giving your allocation to those institutions within your state or region that might have significant need.” For institutions which have multiple main OPE ID numbers under one corporate structure, we don’t believe the funds can be “shared” between the main OPE ID numbers. Similarly, we don’t believe an institution can share excess funds with other unaffiliated institutions in your state or region. ED awarded the funds specifically to each main OPE ID and is allowing an institution to return unused funds to ED to reallocate to other institutions in need. In our opinion, ED wants to control this process and not delegate this reallocation to the individual institutions.
  • If you have a newer main OPE ID number which received limited or no funding based upon the allocation methodology, this institution will be able to apply for a portion of the $50 million reserve funding which has been set aside by ED. The Secretary’s cover letter indicated that details are forthcoming as to how an institution may apply for this reserve funding.

Awarding and Disbursing of the Emergency Grants

  • While a significant amount of press coverage has occurred, an institution should not assume that all students are aware of this funding. We recommend that an institution notify all students (via email or text) of the emergency funding that is available and indicate the process to obtain the funds. An institution may also want to post this information directly on their website.
  • NEW – ED has indicated these funds are limited to students who are Title IV eligible or could be Title IV eligible. Per ED’s guidance “If a student has filed a Free Application for Federal Student Aid (FAFSA), then the student has demonstrated eligibility to participate in programs under Section 484 the HEA. Students who have not filed a FAFSA but who are eligible to file a FAFSA also may receive emergency financial aid grants.”
  • NEW – ED clarified that students enrolled exclusively in online education as of March 13, 2020 are not eligible for the emergency relief funding. The basis for this decision is that students enrolled exclusively in online education would not have expenses related to the disruption of campus operations as a result of the coronavirus.
  • NEW – As noted above by the Secretary and the CARES Act, these funds are for a student’s cost of attendance for items outside of institutional charges. Thus, funds can’t be used to pay down a student’s outstanding balance or an institutional loan. These funds need to be provided directly to students. An institution is not allowed to reimburse itself for costs incurred from the students’ 50% emergency grant funding, even for equipment provided to students. ED specifically indicated these funds are emergency grants for students and may not be applied to outstanding institutional charges or used to create or funds scholarships.
  • Since these emergency grants are a direct award to students and not for institutional charges, we don’t believe these funds need to be posted to the student’s ledger card. If these funds are posted to the student’s ledger card, an institution needs to be very careful these funds are not applied to a student’s outstanding balance. In addition, these funds need to be fully excluded from R2T4 calculations, 90/10 calculations, institutional refund policies, revenue, etc. Posting these funds to the student’s ledger card does provide a vehicle for printing reports for ease of reporting as long as an institution is absolutely certain the setup of these funds is coded correctly.
  • We believe these emergency grants can be awarded to students on a leave of absence (LOA), especially if the LOA is a result of a delay in an externship as a result of the Covid-19 crises. As an analogy, a school is permitted to disburse Title IV Pell/SEOG grants while a student is on a LOA and not just FDL funds. Thus, this provides even more support, in our opinion, that disbursing an emergency grant to a LOA student is allowed.
  • From our discussions with attorneys who focus on higher education, they recommended that institutions develop an application to help determine the allocation of the funds. Students would describe the reason for their need, the intended use of the funds and sign to attest to both. There has been some concern that students will not be able to print and return signed applications.  An institution may consider using electronic signatures for applications.  Alternatively, an institution may consider accepting an email received from a student’s email account on file as a verified application with certification language added regarding the identity of the applicant.   Regardless of the method used to accept a student’s application for funding, a certification statement outlining the aid source and how it may be used should be included.
  • Institutions must have clearly written policies and procedures for awarding these funds. This is where institutions have been granted flexibility in the structure of the grants. These policies and procedures should be available for students to review and an institution may want to consider posting the guidelines on their website. We envision policies being similar to an SEOG policy. Attributes an institution can consider are as follows:
    • Will all students receive a portion of the emergency funds, subject to the limitations noted above as to which students are eligible?
    • Will the funds be distributed immediately or held for future starts & payment periods?
    • EFC and Pell eligibility,
    • Size of household,
    • Programs with larger student noninstitutional charges,
    • Technology costs incurred by the student to transition to an online teaching modality,
    • On- or off-campus (students who have been displaced), or
    • Enrollment status (i.e. full time versus part time), or
    • Special student circumstances (i.e. laid off, Covid-19 medical issues, reduction in hours at work).
  • We recommend institutions limit the number of buckets or tranches that exist in awarding the funds. Keeping the award and allocation as simple as possible will eliminate questions and the potential of discriminatory accusations. An example, policy could be developed as follows:
    • Compute the maximum amount to be provided to each student if the funds are disbursed 100% immediately to all students.
    • This number could then be divided by the number of future terms for which funds want to be held. (This assumes that enrollment levels will stay constant as student enroll, graduate and withdraw).
    • This number can be decreased further to provide for additional funds for students with higher needs. The decrease can be a factor of the number of special attributes which exist and the estimate of the number of students with these attributes. This number would be the “base” funding for all students.
    • Students with certain attributes (see above) would receive additional funding. Each attribute would have a specific amount tied to it. Thus, a student would receive the base funds and an additional amount for each attribute, as applicable.
    • Career Education Colleges and Universities (CECU) also has a detailed example in the guidance which they released – click here to access.
  • A question was raised as to whether an institution can simply provide aid to all students equally (i.e. can the formula simply be total aid over total enrollment), especially for smaller schools who feel their students are similarly situated across the board. The cover letter from the Secretary states, “This means that each institution may develop its own system and process for determining how to allocate these funds, which may include distributing the funds to all students or only to students who demonstrate significant need.” Potentially, some risk exists in that an institution hasn’t evaluated each student’s emergency needs, but the information released also doesn’t require an institution to make the student complete an application. Thus, if an institution’s policy is to award a set amount of emergency grant to all students, we believe they are being compliant, and this could also potentially limit any claims of being discriminatory. M&A reminds institutions of the limitation noted above as to which students are eligible.
  • Institutions should provide instructions and directions to students on the use of the funds. This should be a standard write-up to be provided with every disbursement.
  • NEW – Institutions can utilize checks, prepaid debit cards, electronic transfer payments, and payment apps to provide the emergency funds to the students as long as these methods adhere to ED’s requirements for paying credit balances to students. The students must receive 100% of the emergency grant funding. In addition, any debit or credit cards provided to the students can’t be limited to use solely at the institution’s facilities or with an affiliated retail outlet.


  • Institutions must ensure the processes and responsibilities to award the funds, disburse the funds, reporting the disbursements to ED, and to maintain the required documentation are assigned to the applicable personnel.
  • Our recommendation is to maintain all information for three years, consistent to other federal awards.
  • When the funds are received, trial balance accounts would be setup for the new HE Relief Bank Account and we recommend setting up a new HE Relief current liability account. This current liability is only for these funds. These funds are not revenue as the funds are merely flowing through the institution.
  • The institution’s policies and procedures should document when the student applications can be submitted and how often the institution will disburse the funds to the students. Like any disbursement process, we don’t think institutions need to process an application every time one is received, but we think doing so weekly, at minimum, is prudent.
  • The institution should create a spreadsheet to track all disbursements by student as reporting to ED is required. Institutions are required to report within 30 days of signing the Certification Form and 45 days thereafter of how the emergency grants were used. ED has not provided a spreadsheet or a vehicle for reporting this information. However, the Certification Form indicates in section 4(c) to report the following information: how grants were distributed to students, the amount of each grant awarded to each student, how the amount of each grant was calculated, and any instructions or directions given to students about the grants. HMBR and M&A have jointly created a sample reporting form for institutions to use to submit reports to the Department in accordance with Section 10084 of the Cares Act. You can find the form Here.
  • NEW – Institutions don’t need to track and report how the students utilized the emergency funding. The Department will publish a notice in the Federal Register to provide instructions to institutions on these reporting requirements.
  • Each time emergency grant disbursements are processed the institution should update the reporting spreadsheet similar to how a Title IV disbursement roster supports a G5 draw down. This disbursement roster will then tie back to the checks or ACH generated, which then reconciles to the bank account. This should provide a clear trail for the ED reporting and audit needs, if required.
  • If checks have not cleared within 30 days, we recommend that the institution follow-up with the student to determine if a check needs to be voided and a new check generated. If a check isn’t cashed after multiple attempts to contact, then we recommend the voided check is left on the disbursement spreadsheet with an explanation.

90/10 Considerations

  • NEW – ED indicated that funds paid directly to institutions by the Department through the Higher Education Emergency Relief Funding will not be included as revenue for 90/10 purposes.
  • By statute, these funds are for direct disbursement to students and are not for institutional charges. The 90/10 calculation’s purpose is solely to compute the Title IV funds received as compared to total funds received which have been applied to institutional charges. Since these are a direct pass-through to the student and are not revenue to the institution, these funds should have no impact and should not be included in the 90/10 calculation.

For more information or assistance with matters related to COVID-19’s financial impact on institutions, feel free to reach out to us.

Audrey Kaplan is a partner at Hogan Marren Babbo & Rose, Ltd. Learn more about her background and credentials by visiting

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