A Recap of the Department of Education’s Guidance on the HEERF III Programs for Higher Education Institutions
In March 2021, the American Rescue Plan (ARP) was enacted, creating the Higher Education Emergency Relief Fund III (HEERF III). The Department of Education (DOE) made $396 million available to proprietary colleges under this program.
Similar to the previous round of HEERF II under the Coronavirus Response and Relief Supplemental Appropriates Act (CRSAA), HEERF III allows for only a single program under “Proprietary Institutions Grant Funds for Students” (314(a)(4)) for proprietary institutions. There is no comparable institutional portion of aid for proprietary institutions under the legislation.
Proprietary Institution Grant Funds for Students
The financial aid grants under HEERF III follow the same scope as HEERF II as it applies to coverage of student programs. Grants can go to any student enrolled at the institution after the date of the declaration of the national emergency (March 13, 2020).
Grants should be prioritized for students with “exceptional need,” such as Pell eligible students. Prioritizing students based on attendance or GPA is an example of what not to do when distributing the grant.
Students can use the emergency grants for any portion of their cost of attendance, in addition to emergency costs that arise due to COVID-19. It is the students’ discretion to determine how to spend it.
While an institution cannot compel students to apply the emergency grants towards institutional charges, they may provide the option to apply the grants directly to a student’s account. In order to do this, the institution needs to receive affirmative written consent from the student.
The DOE strongly encourages institutions to communicate that students can determine how these emergency grants are spent. The emergency grants are not taxable to students; however, institutions still need to report qualified tuition and related expenses on Form 1098-T paid with emergency financial aid grants funds. According to the IRS’s FAQ on Higher Education Emergency Relief Grants, “Institutions do not need to separately identify the portion of QTRE paid with the emergency financial aid grants anywhere on Form 1098-T, and they do not need to report the grants themselves in Box 5 of Form 1098-T.”
Reporting and Audit Requirements
When reporting the HEERF III grant, follow the same requirements from previous rounds of HEERF. For student grants, institutions must continued to follow the Quarterly Student Public Reporting Requirement, which includes a deadline of 10 days after the end of each quarter. Keep in mind that all HEERF funding streams are combined into the quarterly reporting.
Annual reporting for a year-end of December 31, 2021 must be submitted to the DOE in early 2022 with an anticipated due date of May 6, 2022. During the submission period for this the report, the expectation is that the portal will be open to allow for corrections of prior HEERF reports.
In addition to the HEERF reporting requirements, HEERF III monies are subject to the same auditing requirements for proprietary institutions as the first two rounds of HEERF. A proprietary institution must have a separate compliance examination for any fiscal year during which more than $500,000 of HEERF grant monies are expended. This includes HEERF grants under the CARES Act, CRSAA and ARP (all three rounds of HEERF). A separate HEERF examination is also required for institutions that expended HEERF grants during any fiscal year while on Heightened Cash Monitoring (HCM) 1 or 2 – regardless of the amount of HEERF expended. The fiscal year for this HEERF specific examination is the same as the institution’s fiscal year for its annual financial and compliance audits.
Closing Out the HEERF Grants
With many institutions reaching the end of their participation in the HEERF programs, it’s important to understand the required steps associated with closing out the grants. Specifically, the DOE provides the following requirements in a recent FAQ, as described in 2 CFR § 200.344:
- Contact the ED Program Contact listed in Box 3 of your GAN.
- Ensure the institution has liquidated remaining funds for expenditures incurred during the grant period of performance. Per recent changes to the Uniform Guidance, institutions now have 120 calendar days to liquidate all financial obligations incurred under the award after the period of performance.
- Ensure that all quarterly reporting is properly and publicly posted online and submitted to the DOE, as required by the HEERF Quarterly Reporting requirements. Additionally, public quarterly reports should remain online for a period of at least three years after the submission of the last quarterly or annual performance report.
- Submit the annual performance report covering the last period of grant performance when the DOE opens the system for annual performance reporting.
- Maintain all grant financial records, supporting documents, statistical records and all other entity records pertinent to the HEERF grant award for a period of three years from the date of submission of the last quarterly or annual performance report, per 2 CFR § 200.334.
- Submit all required audits.
The third round of HEERF grants will have a direct impact on your institution and how you serve your students. Depending on the amount of funding you receive, there may be additional audit requirements as a result of the funds. Make sure your institution is aware of the requirements of the grant and talk through your unique situation with one of Sikich’s Title IV audit experts.