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Alert

Department of Education Makes Available Institutional Portion of Grants Awarded under CARES Act

Schools should carefully review the terms of the certification ED requires before accessing funds.

By Jeffrey P. Metzler, Roland C. Reimers

Alert

By Jeffrey P. Metzler, Roland C. Reimers

Takeaways

The U.S. Department of Education (ED) has made available funds for institutions of higher education (IHEs) to use for “costs associated with significant changes to the delivery of instruction due to the coronavirus.”
To access this institutional aid, IHEs must complete a certification for emergency financial aid grants to students, as well as a new certification for institutional aid.
Both certifications include provisions that IHEs should review carefully before signing.

04.22.20

As previously noted, the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, (CARES Act), which was signed into law on March 27, 2020, includes approximately $14 billion in stimulus funds for higher education. Approximately $12.6 billion are allocated to IHEs according to a formula based on student enrollment (Formula Grants). See CARES Act, § 18004(a)(1). On April 9, 2020, ED made available to IHEs half of the Formula Grants to be used for emergency financial aid to students (more information here).

On April 21, 2020, ED made available the remaining 50 percent of Formula Grants for institutional costs (Institutional Funds) and issued additional guidance, including detailed information on how to access funds. IHEs may use Institutional Funds “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus, so long as such costs do not include payment to contractors for the provision of pre-enrollment recruitment activities; endowments; or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship.” CARES Act § 18004(c).

The Funding Certification and Agreement for Institutional Funds expands on this statutory language and includes several requirements that IHEs should review carefully before signing:

  • As a condition for receiving Institutional Funds, the recipient must have entered into the Funding Certification and Agreement for Emergency Financial Aid Grants to Students under the CARES Act.
  • An IHE “retains discretion in determining how to allocate and use [Institutional Funds], provided that funds will be spent only on those costs for which Recipient has a reasoned basis for concluding such costs have a clear nexus to significant changes to the delivery of instruction due to the coronavirus.”

-  Institutional Funds may be used by an IHE “to reimburse itself for costs related to refunds made to students for housing, food, or other services that Recipient could no longer provide, or for hardware, software, or internet connectivity that Recipient may have purchased on behalf of students or provided to students.”

-  ED “would not consider the following … Institutional Costs to be related to significant changes to the delivery of instruction due to the coronavirus, and therefore would not view them as allowable expenditures: senior administrator and/or executive salaries, benefits, bonuses, contracts, incentives; stock buybacks, shareholder dividends, capital distributions, and stock options; and any other cash or other benefit for a senior administrator or executive.”

  • Costs that may be covered by Institutional Funds must have been first incurred on or after March 13, 2020, the date of the Proclamation of National Emergency.
  • A recipient must “to the greatest extent practicable, continue to pay its employees and contractors during the period of any disruptions or closures related to coronavirus.” CARES Act § 18006.
  • Recipients must comply with reporting requirements, including additional reporting that the Secretary of Education may require in the future, “including but not limited to reporting on the use of the funds for Recipient’s Institutional Costs, demonstrating such use was in accordance with Section 18004(c), accounting for the amount of reimbursements to the Recipient for costs related to refunds made to students for housing, food, or other services that Recipient could no longer provide, and describing any internal controls Recipient has in place to ensure that funds were used for allowable purposes and in accordance with cash management principles.”
  • Funds must be used within one year “to the greatest extent practicable.”
  • Failure to comply with the Certification and Agreement, including the reporting requirements described above, may result in liability under the False Claims Act, 31 U.S.C. § 3729, et seq., OMB Guidelines to Agencies on Governmentwide Debarment and Suspension, and other provisions of applicable acts and regulations.

A letter from Education Secretary Betsy DeVos announcing the availability of Institutional Funds includes language that should cause IHEs to reflect on how ED may interpret provisions of the CARES Act and Certifications when it reviews how Formula Grants were used. Specifically, the Secretary continues to emphasize her prioritization of aid to students, noting pointedly, “It’s been two weeks now since the Department made $6.3 billion in initial formula grants available to institutions to provide emergency financial aid grants to college students,” but only “about half of institutions have completed the simple applications required to access these funds, which means many students are still waiting for emergency financial relief. I hope those that haven’t will act quickly to help their students.”

This priority on student aid is also reflected in the Secretary’s statement, “Because helping students remains our number one priority, please note that your institution must have entered into the Funding Certification and Agreement for Emergency Financial Aid Grants to Students before submitting the second Certification and Agreement for Recipient’s Institutional Costs.” The Secretary also encouraged institutions to consider using Institutional Funds to assist students, as the CARES Act provides that schools must spend “at least” 50 percent of the Formula Grant on students, but allows for a greater allocation.

Schools should be cognizant of President Trump’s recent statement that Harvard must pay back its Formula Grant due to the size of its endowment, and ED’s concurrence in the New York Times that “Sending millions to schools with significant endowments is a poor use of taxpayer money.” As ED noted to the Times, Secretary DeVos’s April 9, 2020 letter, announcing the availability of emergency relief aid to students, asked that, if an IHE determined that its students did not have significant financial need, it “consider giving your allocation to those institutions within your state or region that might have significant need.”

Finally, ED released FAQs on both the institutional portion of funding under the CARES Act, as well as for the emergency financial aid grant portion. The FAQs provide guidance on a wide range of issues, including:

  • An IHE may not reimburse itself from student emergency relief funds for:

-  refunds that the IHE issued to students for room and board, tuition, and other fees,

-  laptops or other technology provided to students for distance learning, or

-  continued payments from institutional funds made to student workers for campus jobs.

  • An IHE may reimburse itself for institutionally-funded emergency grants to students made as a result of COVID-19 provided the grant was “1) for authorized expenses related to the disruption of campus operations due to coronavirus as set forth in Section 18004(c) of the CARES Act; 2) made to students eligible to receive emergency financial aid grants under the CARES Act; and 3) made on or after March 27, 2020, the date the CARES Act was enacted.”
  • Only students who are or could be eligible for financial aid under section 484 of Title IV are eligible to receive emergency financial aid grants—i.e., students must be U.S. citizens or eligible noncitizens; have a valid Social Security number; be registered with Selective Service (if the student is male); and have a a high school diploma, GED, or completion of high school in an approved homeschool setting.

For more information, please contact Jeffrey P. Metzler, Craig J. Saperstein, Barry D. Burgdorf, Roland C. Reimers, Sarah G. Flanagan or Jacob R. Sorensen.

Pillsbury’s experienced, multidisciplinary COVID-19 Task Force is closely monitoring the global threat of COVID-19 and providing real-time advice across industry sectors, drawing on the firm’s capabilities in crisis management, employment law, insurance recovery, real estate, supply chain management, cybersecurity, corporate and contracts law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. For more thought leadership on this rapidly developing topic, please visit our COVID-19 (Coronavirus) Resource Center.

Tags
COVID-19 and Economic Impact Resource Center, COVID-19: Government Stimulus Guidance, Government Law & Strategies, Education, COVID-19: Industry Transformation, COVID-19: Financial Strategies, Crisis Management
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