Tax Tips Logo ImageISSUE:

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARP) (Pub. L. 117-2). The ARP appropriated approximately $39.6 billion for the Higher Education Emergency Relief Fund (HEERF) and represents the third stream of funding appropriated for HEERF to prevent, prepare for, and respond to coronavirus. Taken together, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 116–136), the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA) (Pub. L. 116-260), and the ARP represent HEERF I, HEERF II, and HEERF III, respectively.

HEERF III is structured like the HEERF II programs under the CRRSAA, with certain important differences.

SITUATION:

Idaho Theological Seminary (ITS) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are not required to file Form 990 annually.

The Comptroller at ITS called us with questions regarding HEERF III (Higher Education Emergency Relief Funds from the American Rescue Plan Act of 2021.

HEERF III allocations are basically divided 50% for student grants and 50% for institutional uses.  If  Institutional Portion is not used entirely for emergency financial grants to students, a portion of funds must be used to:

(1) implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines; and

(2) 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 term “portion” is not defined in the ARP other than stating, “some of their ARP (a)(1) Institutional Portion funds.”  FAQ #34 states that institutions are required to, “spend a reasonable and necessary portion of its HEERF grant funds in order to successfully implement these two required grant activities.”  In addition, institutions should document how they implemented these two required uses of funds as follows:

(1) the strategies used to monitor and suppress COVID-19,

(2) the evidence to support those strategies,

(3) how those strategies were in accordance with public health guidelines,

(4) the manner and extent of the direct outreach the institution conducted to financial aid applicants, and

(5) how the amount of the HEERF grant spent on these two required activities was reasonable and necessary given the unique needs and circumstances of the institution

For #1 above, the FAQs direct that some funds are required to be spent “to help fight the spread and transmission of COVID-19 on their campuses and among their student, faculty, and staff community members.”   The HEERF III FAQs give examples of “Testing, Prevention, Reducing Barriers to Vaccination, and Supporting Students.”

For #2 above, “Direct Outreach to Financial Aid Applicants,” FAQ #30 answers as follows:  “This requires institutions to provide notice to financial aid applicants and current financial aid recipients that they may be able to receive a financial aid adjustment due to the recent unemployment of a family member or independent student, or other circumstances.”

Further, the rules consider that “Direct outreach” requires an institution to actively engage financial aid applicants and recipients regarding the opportunity to receive a financial aid adjustment. Such outreach should be more than a passive notification of the opportunity to receive a financial aid adjustment, such as posting this opportunity on the institution’s website.

Take a look at the HEERF III FAQs (see link below) – especially FAQs #28-35 for more on these two new required uses of funds and how to document your institution’s compliance with them.

 

RULES:                                                                        .

From U.S. Department of Education: “Higher Education Emergency Relief Fund III Frequently Asked Questions” – published May 11, 2021:

New required uses of grant funds: The ARP has two new required uses of HEERF III Institutional Portion grant funds for public and private nonprofit institutions in which, if the Institutional Portion is not used entirely for emergency financial grants to students, a portion of funds must be used to: (a) implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines; and (b) 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, described in section 479A of the HEA.

More information on these new required uses is in Section D, Questions 28-35 of this FAQ document.

The HEERF III FAQ document may be found at:

arpfaq.pdf (ed.gov)

 

BOTTOM LINE:

  • Many provisions of “HEERF III” are similar to HEERF I and HEERF II “Institutional funds.”
  • A great source of data for HEERF III expenditures, reimbursements, and reporting is the ED document released on May 11, 2021, Higher Education Emergency Relief Fund III Frequently Asked Questions.
  • If your institution has been allocated HEERF III funds, carefully navigate the two new required uses of funds.
  • Be diligent about documenting your school’s uses of funds to implement evidence-based practices and conduct direct outreach – as prescribed.

Moja & Company QR CodeSpecific questions? Email Dave Moja – dave@mojacpa.com

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

© 2021 Moja & Company, LLC