On March 19, 2021, the U.S. Department of Education (ED) released long awaited guidance on the uses of the Higher Education Emergency Relief Funding (HEERF) grants included in the various coronavirus relief legislation passed over the previous year: the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which created the first round of the grants, or HEERF I; the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) (HEERF II); and the American Rescue Plan (ARP) Act (HEERF III).
We were pleased to see this guidance from ED, as this is an area in which we fielded many questions over the last year, and the guidance is more expansive and lenient than we had anticipated. We applaud and thank ED for this new guidance.
As a reminder, for institutions that are proprietary, this guidance only applies to HEERF I grants, as HEERF II and HEERF III did not award them new institutional grants. Institutions should act quickly if they want to utilize lost revenue to claim any remaining institutional HEERF I grant as the one-year anniversary of this grant will occur in April, in many cases.
The guidance issued mainly addresses two items:
- Lost revenue (https://www2.ed.gov/about/offices/list/ope/heerflostrevenuefaqs.pdf)
- Timeframe for the expanded guidance related to institutional grants, which was included in CRRSAA (https://www2.ed.gov/about/offices/list/ope/heerfinterpretationnotice.pdf)
The lost revenue portion of the guidance, which is presented as an FAQ document, lists a number of potential sources of lost revenue in Question 3 and provides an example of how to compute and claim the lost revenue. After a review of the document, here are our first thoughts:
- We would continue to encourage institutions to not claim lost revenue merely because tuition has decreased. Institutions need to support that the lost revenue was the result of the COVID-19 pandemic. See Question 5 in the guidance.
- Clinic revenue would be very similar to the auxiliary services sources provided in the pandemic. A decrease in clinic revenue could be claimed using the prior year month as the baseline or an average of the two previous years. Institutions should maintain the state and local stay-at-home orders and restrictions related to the reopening procedures. This information will support why the clinics were closed or were operating at a significant reduction from prior years.
- For a new program not starting on time due to delays in accreditation visits, an institution could compute lost revenue using the expected starts and, to be conservative, the number could be discounted for potential non-starts.
- For decreased enrollments due to social distancing requirements, similar to the lost revenue for clinic services, if an institution can show that on-ground enrollments were lower due to social distancing requirements, this lost revenue could be claimed. An institution should ensure that the loss of on-ground students wasn’t replaced with online enrollments and, thus, the institution didn’t experience any lost revenue.
- Concerning increased student withdrawal rates — especially if they are tied to specific programs (e.g., cosmetology, trades) — lost revenue could potentially be claimed due to increased withdrawals, provided the institution tracked that the student’s drop was due to COVID-19 and the withdrawal rate for a given program is higher than past years. The institution would need to remove any Title IV refund not returned as a result of ED’s regulatory relief and the lost revenue would only be the amount above the normal/historical withdrawal rate. This calculation would need to identify specific students/cohorts and tuition amounts as part of the institution’s calculation and support.
- The guidance specifically indicates to not “double-dip” and claim the lost revenue in more than one federal grant and to remove students who received a tuition refund from any lost revenue calculations (Question 9).
In regard to the timeframe related to the expanded uses of the institution HEERF grant per CRRSAA, ED clarified two points:
- ED is allowing institutions to charge pre-award costs for unspent HEERF I and HEERF II back to March 13, 2020, for expenses associated with COVID-19. Thus, the concern that the costs had to have occurred on or after Dec. 27, 2020 (date CRRSAA became law), is no longer an issue. This applies to lost revenue and reimbursement for expenses already incurred.
- ED also waived the requirement for prior written approval of pre-award costs, in accordance with 2 CFR 200.407. Thus, institutions won’t need to document why prior written approval wasn’t received in expending unused HEERF grants for periods prior to December 27, 2020.
Although this guidance provided more clarity regarding these topics, you may still have questions regarding the use of HEERF funds. In that event, we’re here for you. Feel free to schedule a chat with one of our experts or check out our McClintock Minute blog for more analysis and news.