Higher Education Emergency Relief Funds: Best Practices to Prepare for Future Compliance Requirements
On April 9, 2020, the U.S. Department of Education (ED) issued guidance related to the Higher Education Emergency Relief Fund (HEERF), a provision of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This guidance addresses the CARES Funding Certification and Agreement, which must be completed by higher education institutions to receive their share of relief provided by the HEERF. The CARES Funding Certification and Agreement states that all recipients must comply with various acts and regulations, including the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards in 2 CFR part 200 (Uniform Guidance). So, what does this mean for your institution? While no formal guidance has been issued, the HEERF grants your institution receives may require a compliance audit under the Uniform Guidance down the road—think of the audit your student financial aid funds receive annually.
Subsequently, on April 21, 2020, the ED issued frequently asked questions (FAQ) related to the HEERF. The FAQ provides some much-needed answers but doesn’t address future compliance requirements. For this reason, it’s crucial to develop policies and procedures related to HEERF grants in anticipation of future compliance requirements. Listed below are recommendations and considerations for meeting potential compliance requirements related to these funds.
Policies & Procedures
Institutions can quickly create a concise and well-documented policies and procedures manual related to HEERF funds that helps eliminate questions and concerns from internal and external parties and assists with current and future compliance requirements. Some topics to consider in your policies and procedures manual are listed below and described in more detail in the following paragraphs:
- Responsible individuals and their roles in administering HEERF funds
- Drawdown procedures related to HEERF grants
- Need for a separate bank account (if state regulations allow it)
- Allocation methodology
- Disbursement procedures:
- Record-keeping – Posting to student’s account and then disbursing
- Method – Check, electronic transfer payment, debit cards, payment apps, etc.
- Accounting and financial record-keeping
- Financial aid record-keeping – Items to be included in student’s file
- Compiling with required reporting
- Reconciliations to be performed
Separate Bank Account
Consider creating a new interest-bearing bank account with your financial institution titled “HEERF Grants.” This may help your institution reconcile to disbursements made and help ensure the HEERF grants aren’t being used for anything except their intended purpose. Be sure to track interest earned and disbursed on this account. In the Uniform Guidance, it’s prohibited to earn more than $500 in interest on federal funds. However, there are discussions within the industry that there may be exceptions if the interest income is used as supplemental relief to affected students.
Allocation Methodology for Student Recipients
Within the CARES Funding Certification and Agreement, the institution acknowledges that it retains discretion to determine the amount of each individual emergency financial aid grant consistent with all applicable laws, including nondiscrimination laws. It’s imperative to formally document the methodology your institution decides to administer. The methodology should detail which students are receiving funds and the calculation used to determine the amount of funds the selected students receive. When creating this methodology, the institution also should consider when it will disburse the aid. Will it make an immediate disbursement of all funds, or will it disburse a significant portion now and hold back a portion for a future period? The ED hasn’t provided guidance related to this, but creating a well-documented procedure and sticking to it will help ease any concerns or suspicions at a later review date. This methodology will be the key to meeting reporting requirements and potentially future compliance requirements.
Student Financial Aid File Considerations
In anticipation of future compliance audits, consider including the following items in each student’s financial aid file after a HEERF grant disbursement has occurred:
- A request for emergency funds form completed by the student
- A disbursement form indicating how much is disbursed to the student and dictating that the student understands what the funds should be used for
- Documentation of when and how the student was disbursed money, e.g., via a check to the student, electronic transfer payments, debit cards, payments apps, etc.
- Depending on the sophistication of your allocation methodology, a detailed calculation of the student’s disbursement
The above items can help your institution create the disbursement spreadsheet needed to comply with the reporting requirements described below.
Disbursement of Funds & Reporting
The CARES Funding Certification and Agreement states that 30 days from the date of the Funding Certification and Agreement and every 45 days thereafter, institutions shall report to the Secretary of the ED:
- How grants were distributed to students
- The amount of each grant awarded to each student
- How the amount of each grant was calculated
- Any instructions or directions given to students about the grants
- Documentation that the institution has continued to pay all of its employees and contractors during the period of any disruptions or closures to the greatest extent practicable
In many cases, disbursement information, e.g., direct deposit, addresses, etc., is already included in your financial aid software. Instead of running these disbursements through your accounts payable system, consider running the disbursements through the student’s account. Be cognizant that these funds can’t be encumbered by past balances as addressed in the April 21, 2020, guidance. While you can use the student’s account as an invaluable tracking mechanism for the disbursement, don’t let it create a problem for disbursing 100 percent of the disbursement posted to the account.
In addition, consider creating a report within your system or a spreadsheet that includes inputs specific to your allocation methodology as well as disbursement information from the student account statements to help you comply with the reporting requirements above. The spreadsheet could then be used to reconcile disbursements to your institution’s HEERF grants bank account and general ledger. Also consider creating separate trial balance accounts for HEERF grants so reconciliation is easier to perform.
As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. For more information, contact your BKD Trusted Advisor™ or use the Contact Us form below.