Washington Watch: New ED guidance on pandemic relief funds

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New guidance released Friday by the U.S. Education Department (ED) contains mostly good news on two key issues for community college leaders. It applies to funds colleges have received through the Coronavirus Aid, Relief and Economic Security Act (CARES), the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) and will receive via the American Rescue Plan Act (ARP). 

The guidance extends the applicable timeframe for incurred costs and provides additional clarification on the all-important issue of lost revenue. However, some important questions about the aid remain unanswered.

Initial guidance released alongside the CRRSAA funds indicated that colleges could only use their institutional funds (and remaining CARES funds spent according to the broader CRRSAA rules) to cover costs and lost revenue incurred after December 27, 2020, CRRSAA’s enactment date. Friday’s guidance indicates that institutions may charge those funds to costs and lost revenue incurred any time after the pandemic emergency was declared – March 13, 2020. Institutions have one year from when they receive funds to expend them, with the possibility of a no-cost extension beyond that timeframe.

ED reiterates that costs and lost revenue must be associated with the pandemic and cannot be in certain categories that are explicitly forbidden by the statute. Many community college leaders had expressed deep frustration with the limitation imposed upon them by the December 27 date, so Friday’s guidance is especially welcome news.

Examples of use of funds

In a separate FAQ dedicated to lost revenue, ED provides examples of lost revenue sources that may be covered by the pandemic relief funds and methods of determining lost revenue amounts, two important issues for community colleges. ED defines lost revenues as those that an institution otherwise expected but were “reduced or eliminated as a result of the … pandemic. As such, lost revenues can only be estimated.”

The FAQ contains a non-exhaustive list of the sources of lost revenue that may be reimbursable with Higher Education Emergency Relief (HEERF) funds. Of particular note for community colleges, which have suffered the largest enrollment decreases during the pandemic, “enrollment declines, including reduced tuition, fees, and institutional charges” is on that list. Colleges may also reimburse themselves for unpaid student accounts if the reason they are unpaid is associated with the pandemic. Auxiliary services, canceled events, room and board and other items on the list are relatively straightforward.

The FAQ also covers sources of lost revenue that are not reimbursable with HEERF funds, including capital outlays for athletic facilities, decreased contributions and investment income and revenue from alcohol sales.

The FAQ is silent on the issue of public funding cuts. This question will be answered by institutions as they develop strategies to maximize use of funds. The ED materials do not state that this is unallowable.

How to determine lost revenue

The guidance not only addresses which lost revenue may be counted, but how to count it and when to charge it. ED provides institutions with a great deal of flexibility on the “how” question and provides a non-exhaustive list of five ways an institution may establish a baseline to determine its lost revenue amounts. These include year-over-year or semester-over-semester comparisons, multiple-year average revenues, pre-pandemic revenue projection, and comparison to a pre-pandemic baseline year. Institutions must be consistent in how they determine their baseline and lost revenue amounts, and may not count the same lost revenue for multiple programs (no “double-dipping”).

Institutions may charge lost revenues to their HEERF funds once the time period in question has ended (such as fiscal year, quarter, semester, etc.). An institution must document its lost revenue, “including its rationale, calculations, methodology, underlying data, and budgets or projections used to determine” its amount. Colleges must retain that information for three years.

To help crystalize the many different issues it addresses in its guidance, the FAQ includes a helpful chart that details three different lost revenue scenarios.

ED also updated its previously-released general FAQ to include the questions and responses it made directly to AACC and other higher education organizations earlier this month, thereby formalizing that guidance. These FAQs include the clarification that emergency grants may go to students in non-degree programs, dual enrollment and adult education students, and others that had been shut out from CARES grants because they were not federal Title IV eligible. This should tremendously benefit community college students. ED is still working with the U.S. Justice Department to determine whether undocumented students are eligible for these grants.

Exceptional need question

One key question that was not elaborated upon is how institutions should determine and document exceptional student need. This particularly applies to students who have not applied for Title IV aid. CRRSAA (and ARP by extension) requires institutions to prioritize students with exceptional need when making grants.

The American Association of Community Colleges and the Association of Community College Trustees plan to hold a webinar on implementing these laws on April 6. More details to come soon.

About the Author

Jim Hermes
is associate vice president of government relations at the American Association of Community Colleges.