Department of Education releases HEERF III guidance

Note: all grants now may include DACA, undocumented and international students.

The Higher Education Emergency Relief Fund III (HEERF III), authorized by the American Rescue Plan Act of 2021 (ARP), provides $39.6 billion in additional support for higher education institutions to serve students and ensure learning continues through the COVID-19 pandemic. The Department of Education (ED) recently released new  guidance on the third round of HEERF grants authorized by the ARP. ED also released institution-level allocations for HEERF III grants to  public and not-for-profit institutions, as well as  proprietary  institutions.  

The ARP’s HEERF III requires that a minimum of 50% of an institution’s allocation be spent on students. Based on the allocation methodology, the minimum amount may be slightly greater than 50%. Allocation tables are linked above, which provides specifics on the total award amount and minimum amounts of student aid for each institution. For-profit institutions are required to spend 100% on students. The allowable uses of HEERF III are mostly consistent with HEERF II under the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) and are as follows:

Student portion

• Any component of the student’s cost of attendance
• Emergency costs that arise due to COVID-19 such as tuition, food, housing, healthcare (including mental healthcare) and childcare

Institutional portion

• Defray expenses associated with COVID-19, including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, payroll and benefits, carry out student support activities authorized by the Higher Education Act (HEA) that address needs related to coronavirus
• Make additional financial aid grants to students

In addition to the allowable uses noted above, HEERF III included two new required uses for any institution that receives (a)(1) institutional portion, (a)(2) or (a)(3) awards; provided that the institution has not allocated its entire institutional portion to emergency financial aid grants to students. The institution must use a portion of funds on these two required activities:

• Implement evidence-based practices to monitor and suppress COVID-19 in accordance with public health guidelines
• Conduct direct outreach to financial aid applicants about the opportunity to receive a financial aid adjustment due to the recent unemployment of a family member or independent student, or other circumstances

The HEERF III FAQ provides examples to satisfy the additional HEERF III requirements and confirms that specific thresholds or amounts have not been prescribed, but should be considered to be reasonable.

The most recent FAQ provided guidance regarding the use of institutional grant funds to discharge student debt or unpaid balances. Institutions may discharge student debt or unpaid balances as lost revenue and reimburse themselves through their HEERF institutional funds or may accomplish this by providing additional emergency grants to students (with their permission).

HEERF I, II, and III funds may not be used for:

• Funding contractors for the provision of pre-enrollment recruitment activities
• Marketing or recruitment
• Endowments
• Capital outlays associated with facilities related to athletics, sectarian instruction or religious worship
• Cash or any other benefits for senior administrator or executive salaries
• Religious worship, instruction or proselytization of equipment or supplies to be used for religious worship, instruction or proselytization
• Construction or purchase of real property

The general prohibition on construction and acquisition of real property does not extend to activities that meet the definition of “minor remodeling” including, but not limited to, installation or renovation of HVAC systems to promote better air filtration, purchase or lease of temporary classroom units for social distancing and costs associated with installation of room dividers for social distancing.

The HEERF III FAQ clarified student eligibility for emergency financial grants and defined eligibility as all students who are or were enrolled in an institution of higher education during the COVID-19 national emergency (on or after March 13, 2020), regardless of whether they completed a Free Application for Federal Student Aid (FAFSA) or are eligible for Title IV. This federal ruling includes citizens, permanent residents, refugees, asylum seekers, Deferred Action for Childhood Arrival (DACA) recipients, other DREAMers and similar undocumented students. As under the CRRSAA, institutions are directed to prioritize students with exceptional need and should carefully document how they are determining exceptional need students. Indications are that reporting requirements will include providing information as to how the institution complied with this directive. ED also encourages institutions to prioritize domestic students, especially undergraduates. 

HEERF grantees receiving ARP funds must continue to report the institutional and student portion uses quarterly and post reports on institutions’ websites no later than 10 days after the calendar quarter (July 10, Oct. 10, Jan. 10 and April 10). Institutions that expended HEERF grant funds during the calendar quarter from Jan. 1 through March 31, 2021 are required to post the two quarterly reports that involved the expenditure of HEERF II CRRSAA and HEERF I CARES Act funds. ED acknowledged that they did not previously indicate this reporting requirement was in place for HEERF II CRRSAA funds, therefore, institutions have until the end of the second calendar quarter (June 30, 2021) to post the retroactive reports. 

Institutions that receive an ARP allocation must draw down any amount of its grant funds within 90 days of the date of each supplemental award in order to demonstrate acceptance of the award. Failure to draw down any amount of the award may indicate nonacceptance of the terms, conditions and requirements of the supplemental award, and ED may choose to de-obligate and redistribute the grant funds to other institutions. In addition, any institution that determines it does not need some or all of its HEERF grants may submit the Voluntary Decline of HEERF Grant Funds form, and ED will reallocate the award to institutions with greater need.

Baker Tilly can help

Our specialized higher education team can help institutions:

• Approach and navigate ARP and CRRSAA HEERF
• Review allocation plans
• Discuss accounting treatment

We can also help guide institutions through the Employer Retention Credit (ERC). 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 your institution, contact our team.