Can a School Transfer 100 Percent Of Its Unspent FWS Funds Into FSEOG Due To COVID-19?

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This AskRegs Knowledgebase Q&A was updated on July 1, 2021 to remind schools that they may continue to transfer unspent Federal Work-Study (FWS) funds into Federal Supplemental Educational Opportunity Grant (FSEOG) at any time through the end of the payment period that includes the end date for the federally declared emergency related to COVID-19.

Yes. Section 3503 of the CARES Act allows an institution to transfer up to 100 percent of its unexpended FWS allocation into its FSEOG funds (but not from FSEOG to FWS) during the period of the COVID-19 qualifying emergency. This includes unexpended initial and supplemental FWS fund allocations for the 2019-20, 2020-21, and 2021-22 award years.

Per the January 15, 2021 Electronic Announcement, schools may continue to transfer FWS into FSEOG through the end of the payment period that includes the end date for the federally declared emergency related to COVID-19. At this time, the national emergency has been extended through March 1, 2022, unless the President ends it earlier or extends it further. If and when there is a change, we will post an announcement in NASFAA's Today's News.

Institutions are then allowed to use any portion of their FSEOG allocation, including any funds transferred from FWS as noted above, to award regular FSEOG, Emergency FSEOG, or both. If the school awards the funds as regular FSEOG awards, regular FSEOG awarding rules in 34 CFR Part 676 and Volume 6 of the FSA Handbook continue to apply. If the school uses these funds to award Emergency FSEOG to students, special relaxed rules apply. See AskRegs Knowledgebase Q&A, How Can Schools Use Campus-Based Funds As Emergency Aid?

Unfortunately, according to guidance NASFAA has received from ED, schools that are graduate or professional schools with no undergraduate programs (graduate-only schools), and that have an FWS allocation but no FSEOG allocation, cannot transfer unused FWS funds into FSEOG.

What does this mean, for example? If the qualifying emergency ends during the fall 2021 term/payment period, the school can continue to transfer FWS funds into FSEOG through the end of the fall 2021 term/payment period even after the qualifying emergency ends. In this example, this means the school can still make regular FSEOG or Emergency FSEOG awards for the entire fall 2021 term/payment period from those transferred funds.

According to ED, the FWS "transfer" occurs when the debit of funds occurs from G5 into the school's institutional FSEOG account, not when the school makes the policy decision that it is going to transfer up to 100 percent of the unspent FWS funds. In other words, if the school draws down its unspent FWS funds from G5 directly into its FSEOG institutional account, then that is when ED considers those funds to be "transferred" into FSEOG for CARES Act purposes.

Per ED, the correct transfer process is to draw down the funds from the FWS allocation in G5 and deposit them in the school's institutional FSEOG account for use in making either regular FSEOG or Emergency FSEOG awards within excess cash timeframes. If the school accidentally draws down unspent FWS funds from G5 directly into its institutional FWS account, and then moves those unspent FWS funds out of its FWS account into its institutional FSEOG account, then the transfer of unspent FWS occurs at the point when the school moves the funds from its institutional FWS account into its institutional FSEOG account.

The key is the date when you transfer the FWS funds into FSEOG funds, not the date you decide to implement the CARES Act flexibilities and not the date you complete the FISAP.

Because of excess cash rules in 34 CFR 668.166, the school cannot simply draw down the entire FWS allocation from G5 and deposit it into the school's FSEOG account unless those funds will be disbursed to students as regular FSEOG or Emergency FSEOG within three business days. Another cash management tolerance also applies, the school may maintain for up to seven days an amount of excess cash that does not exceed one percent of the total amount of funds the institution drew down in the prior award year. The school must return immediately to ED any amount of excess cash over the one-percent tolerance and any amount of excess cash remaining in its account after the seven-day tolerance period.

Another Example: If the qualifying emergency ends during the spring 2022 term/payment period, the school can still transfer FWS into FSEOG through the end of the spring 2022 term/payment period and still make regular FSEOG or Emergency FSEOG awards with those transferred funds through the end of spring 2022. Etc. Remember however, it is premature to make Emergency FSEOG awards prior to the start of spring 2022 (or fall 2021) given the cash management timeframe restrictions and the uncertainty as to when the qualifying emergency will end. 

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.