Can HEERF I, HEERF II, and HEERF III Funds For Institutions Be Used To Pay Staff Salaries and Benefits?

KA-34805 Helpfulness Rating 1,339 page views

This AskRegs Knowledgebase Q&A was updated on March 22, 2021 to include guidance in the revised Higher Education Emergency Relief Fund (HEERF) II Frequently Asked Questions and guidance NASFAA has received from the U.S. Department of Education (ED) about awarding leftover HEERF I student grants under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), HEERF II funds under the 2021 Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA, Section 314 of the Consolidated Appropriations Act, 2021), and HEERF III funds under the American Rescue Plan Act of 2021 (ARP). It represents a change in ED's previous position.

HEERF I Funds Spent Prior to Passage of CRRSAA on December 27, 2020
Yes. Whether you could pay staff salaries and benefits with HEERF I institutional funds under Section 18008(a)(1) of the CARES Act depended on whether it was a cost related to significant changes in the delivery of instruction due to COVID-19 and the timing of those expenditures.

According to the Recipient’s Funding Certification and Agreement for the Institutional Portion, HEERF I grants to institutions are intended "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, including marketing and advertising; endowments; or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship (collectively referred to as “Recipient’s Institutional Costs”)." The certification goes on to state that the, "Recipient retains discretion in determining how to allocate and use the funds provided hereunder, 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." Typically, this will not include paying regularly employed staff whose standard salaries cannot be tied to the disruption in the delivery of instruction.

Some examples of when HEERF I institutional grants might have been used prior to December 27, 2020 to pay staff include but are not limited to the following:

The HEERF Supplemental Frequently Asked Questions provides additional examples in Q&A #8:

"Can schools use CARES Act funds under Section 18004(a)(1) to pay salaries and benefits for employees that work in the dining halls and dorms and who would have otherwise been paid through student housing fees had COVID-19 not disrupted campus operations?

Yes. Institutions may use Institutional Relief funds under Section 18004(a)(1) of the CARES Act for “costs associated with the significant delivery of instruction due to the coronavirus.” The Certification and Agreement for the Institutional Portion of the HEERF states: “Recipient retains discretion in determining how to allocate and use the funds provided hereunder, 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.” The Department considers institutions to have such a reasoned basis with respect to the salaries and benefits for employees that work in dining halls and dorms and who would have otherwise been paid through student housing fees, had COVID-19 not disrupted campus operations."

Institutions must take care when using an online program management (OPM) service that bundles learning platform offerings with other services like recruiting, marketing, and advertising, since those activities are prohibited from being funded with HEERF dollars. In such instances, institutions would only be able to use HEERF dollars for the portion of expenses paid to the OPM that did not pay for such ineligible expenses.

Also, as a condition of receiving HEERF I funds (student or institutional share), the institution agreed that it would pay all of its employees and contractors to the greatest extent practicable during the period of any disruptions or closures related to COVID-19. See AskRegs Q&A, What Does "To the Greatest Extent Possible" Mean Under the CARES Act?

HEERF I Funds Remaining Unspent as of December 27, 2020, HEERF II Funds, and HEERF III Funds
Yes. The same general HEERF I rules outlined above apply to leftover HEERF I funds, to HEERF II funds, and to HEERF III funds. However, effective with the enactment of the CRRSAA on December 27, 2020, HEERF I expenditures and HEERF II expenditures do not have to be directly related to changes in the delivery of instruction due to COVID-19. HEERF funds may be used more broadly to defray payroll and benefit costs associated with the Coronavirus. The Supplemental Grant Funds for Institutions Agreement states:

“Under section 314(c) of the CRRSAA, Recipient, an institution of higher education as defined in section 101 or 102(c) of the Higher Education Act of 1965, as amended (HEA), 20 USC § 1001 or 1002(c), may use these supplemental grant funds for Recipient’s Institutional Costs to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll); carry out student support activities authorized by the Higher Education Act of 1965, as amended (HEA) that address needs related to coronavirus; and make additional financial grants to students, which may be used for any component of the student’s cost of attendance or for emergency costs that arise due to coronavirus, such as tuition, food, housing, health care (including mental health care), or child care.”

According to the revised HEERF II Frequently Asked Questions, "Institutions may use CRRSAA funds and unspent CARES funds to pay for employee benefits costs as payroll costs if (1) such costs are newly associated with coronavirus, and (2) the costs were incurred on or after March 13, 2020, the date of the declaration of the national emergency due to the COVID-19 pandemic." It is NASFAA's understanding based on verbal conversations with ED that the same applies to HEERF III funds.

For more on the expanded flexibility  for use of  the institutional share, see the Higher Education Emergency Relief Fund (HEERF) II Public and Private Nonprofit Institution (a)(1) Programs (CFDAs 84.425E and 84.425F) Frequently Asked Questions (revised March 19, 2021). Any additional questions go to your school's legal counsel. NASFAA cannot make determinations related to paying staff with HEERF grants to institutions.

Remember, prior to the CRRSAA, as a condition of receiving HEERF I funds (student or institutional share), the institution agreed that it would pay all of its employees and contractors to the greatest extent practicable during the period of any disruptions or closures related to COVID-19. This is still a condition for spending HEERF II student and institutional funds. See AskRegs Q&A, What Does "To the Greatest Extent Possible" Mean Under the CARES Act?

Change In Guidance Related to the December 27, 2020 Date: According to previous guidance NASFAA had received from ED, schools could only use leftover HEERF I funds and HEERF II funds to pay for employee salary and benefit costs incurred on or after December 27, 2020. That guidance changed with publication of the revised HEERF II Frequently Asked Questions note above.

Update Notes:

AskRegs Q&As represent NASFAA's understanding of regulatory and compliance issues. They are FOR INTERNAL USE ONLY. While NASFAA believes AskRegs Q&As are accurate and factual, they have not been reviewed or approved by the U.S. Department of Education (ED). If you should need written confirmation of AskRegs information for audit or program review purposes, please contact your ED School Participation Division. NASFAA shall not be liable for technical or editorial errors or omissions contained herein; nor for incidental or consequential damages resulting from the furnishing, performance, or use of this material.