NASFAA AskRegs: Should HEERF I, HEERF II, and HEERF III Funds Be Drawn Down From G5 As They Are Awarded Or In a Lump Sum?

This AskRegs Knowledgebase Q&A was updated on May 14, 2021 to include guidance in the May 11, 2021 Higher Education Emergency Relief Fund (HEERF) III Frequently Asked Questions, as it relates to HEERF I grants under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), HEERF II grants under the 2021 Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA, Section 314 of the Consolidated Appropriations Act, 2021), and HEERF III grants under the American Rescue Plan Act of 2021 (ARP).

Schools are prohibited from drawing down all of their HEERF dollars all at once, unless they are spending those dollars all at once.

For the HEERF I funds, the Grant Award Notification (GAN) that schools receive from Grants.gov contains details about managing these funds. Among other things, the GAN states that, “Funds must be drawn only to meet a grantee’s immediate cash needs for each individual grant.” Similar language is in the GAN for HEERF II funds as well as the HEERF III funds. Therefore, it would not be appropriate to draw down HEERF I, HEERF II, or HEERF III grant funds in a lump sum before there is an immediate cash need for that entire lump sum.

Immediate cash need is defined in 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 (updated March 19, 2021), the Higher Education Emergency Relief Fund (HEERF) II Proprietary Institution Grant Funds for Students (CFDA 84.425Q) ((a)(4) Program) Frequently Asked Questions, and Higher Education Emergency Relief Fund (HEERF) III Frequently Asked Questions. Institutions must pay obligations (disburse) for student grants within 15 calendar days of drawing down those funds from G5, whereas funds used for purposes other than the awarding of student grants must be spent within three calendar days of drawdown. In other words, 2 CFR 200.305(b) applies to HEERF funds and requires grantees to minimize the time between drawing down funds from G5 and applying those funds to support the award’s activities within these timeframes.

Additionally, institutions must maintain grant funds in interest-bearing accounts, and any interest earned on grant funds above $500 must be returned to the federal government. With all of this in mind, the school must establish a distribution plan prior to drawing down HEERF grant funds (student and institutional shares).

While schools receiving both student and institutional HEERF grant funds are required to submit the Recipient's Funding Certification and Agreement for the student portion to Grants.gov before the Certification and Agreement for the institutional portion, there is no requirement to draw down or spend the student grant funds before drawing down or spending the institutional funds. This is true for HEERF I, HEERF II, and HEERF III funds. Schools that previously received HEERF I funds do not need to reapply for HEERF II or HEERF III funds.

Refer to Q&As #3, #5, and #40 in the above-referenced HEERF III FAQ, as well as Q&A #17 of the HEERF II Frequently Asked Questions, first published on January 14, 2021.

NASFAA has confirmed with the U.S. Department of Education (ED) that there is no requirement to draw down the student and institutional shares on a dollar-for-dollar basis. The draw downs for the two funds (student and institutional) do not need to be in tandem with each other, but instead should be on an as-expended basis for each separate fund. For example, you are not limited to spending $300,000 in institutional funds just because you only spent $300,000 in student funds, or vice versa.

Note: NASFAA is aware that schools are receiving “Dear Project/State Director” email notices reminding them that they should not draw down all of their HEERF II dollars at one time unless they are also paying obligations with (liquidating) those funds 15 calendar days (for grants to students) and within 3 calendar days (for all other uses). The email informs the school that, “This activity is considered an Excessive Draw of Funds and will flag the institution as ‘high-risk.’ Moreover, the high-risk flag could impact future funding opportunities.” NASFAA has reached out to ED asking what schools should do if they receive an automatic email alert about excessive cash drawdowns because they drew down all their HEERF grant funds at one time. We understand that ED will be issuing guidance in the future, so stay tuned to Today’s News.

Update Note: This Q&A was updated on January 20, 2021 to reflect requirements under the CRRSAA. The same rules apply to both HEERF I and HEERF II funds.