Federal CARES Act
California Community Colleges FAQ
1. Who is eligible for the CARES/Higher Education Emergency Relief Funds?
Guidance released by the U.S. Department of Education indicated that only students who are or could be eligible for Title IV or FAFSA may receive emergency grants. This definition includes:
- U.S. citizens or eligible noncitizens
- Students with valid SSN
- Students registered with the selective service
- Students with a high school diploma or GED
- Programs leading to a degree or certificate
Full-time and part-time students are eligible for emergency grants. Students who meet basic eligibility criteria for federal financial aid can be considered for these funds. If a student is eligible to file a FAFSA but has not yet filed for 2019-20 and need assistance, they may file a FAFSA at studentaid.gov.
Unfortunately, the U.S. Department of Education does not allow these funds to be used for international students, undocumented students, non-matriculated students or students enrolled in distance-only degree programs. Student from one of these groups may be eligible for campus-based emergency funds, other types of emergency aid through the Student Equity and Achievement categorical, depending on availability of local funds, or private grants.
2. How did the Federal Government determine the total amount of CARES Act funding each college would receive?
The CARES Act stipulates a funding formula to divide these funds among institutions. The formula has two distinct parts:
- 75% of the funds will be awarded based on the institution’s fulltime in-person Pell grant recipients as a share of the national total.
- 25% of the funds will be awarded based on the institution’s fulltime in-person enrollment who are not Pell Grant recipients as a share of the national total.
The CARES Act then divides the Formula Funds into two categories based on conditions for their use:
Emergency Student Financial Aid
At least 50% of funds must go to emergency financial aid for students. Also referred to as the Advanced Funds, Emergency Financial Aid Grants to Students, Section 18004 Student Funds, or CARES Act Student Aid Funds)
The remaining balance can be used at the institution’s discretion to cover costs associated with the interruption of instruction and significant changes to the delivery of instruction due to the coronavirus. Institutions may also use the funds to make additional emergency financial aid grants to students, provided that such emergency financial aid grants are for expenses related to the disruption of campus operations due to coronavirus. (Also referred to as Recipient’s Institutional Costs Funds, Institutional Portion of the Higher Education Emergency Relief Fund, and Section 18004 Institutional Funds)
3. How can Emergency Student Financial Aid funds be used?
On April 21st, the U.S. Department of Education (USDE ) issued a technical FAQ, providing further guidance and clarification on the emergency student aid funds.
At least 50% of the funds each institution receives must go towards emergency student financial aid for expenses related to the disruption of campus operations due to coronavirus, including eligible expenses under a student’s cost of attendance (e.g., food, housing, course materials, technology, healthcare, and child care).
The U.S. Department of Education guidelines for emergency CARES Act grants stipulates that:
- The funds can only be used to provide direct grant assistance to students
- Colleges must make these funds available to students as soon as possible
- Institutions cannot use these funds to reimburse themselves on any incurred costs or expense, including refunds or aid previously issued to students
- Institutions cannot use these funds to pay outstanding or overdue student bills to institutions
- Institutions have discretion over how to award aid with a few provided guidelines instead of mandates
- Institutions should prioritize students with the greatest need and factor in student socioeconomic status
- Institutions can elect to award aid to all their students aid or award aid only to those who have demonstrated need
- USDE recommends, but does not require, using the maximum Federal Pell grant (for the 2019-2020 academic year, $6,195) as the maximum amount of aid awarded to each student
- Financial aid administrators should exercise “professional judgement” on a case-by-case basis to exclude this emergency aid from a student’s cost of attendance
- Emergency aid will not be counted as Title IV financial aid
- Funds can only be awarded to students who are eligible for Title IV funding, thereby prohibiting aid from going to most non-US citizens
- Students exclusively enrolled in online programs before March 13th are not eligible
- Institutions will need to report to USDE within 30 days on how they intend to award the funds including how grants were distributed to students, how the amount of each grant was calculated and any instructions that the institution gave to students about the grants.
4. How can Institutional Funding be used?
On April 21st, the U.S. Department of Education (USDE) provided a technical FAQ on Institutional Fund uses.
Based on the USDE April 21st Letter from Secretary DeVos, Funding Certification and Agreement, and FAQ, the following guidelines and conditions apply to the institutional use allocation:
- Institutions need to have first signed the student aid funding certificate to access these funds
- Should institutions choose, they can convert their institutional use funds to provide additional emergency financial aid to students under the same rules as the already issued agreement
- USDE urges institutions, especially well-resourced schools and universities with substantial endowments, to “devote the maximum amount of funds possible to emergency financial aid grants to students, including some or all of the funds earmarked for Recipient’s Institutional Costs” (Section 3 of the Funding Agreement)
- Institutions may not use these funds to provide emergency grants to students who were enrolled exclusively in online or distance education programs prior to March 13th
- Institutions have reasonable discretion on how they use the money as long as they can demonstrate a valid connection between the eligible expense and “significant changes to the delivery of instruction due to the coronavirus” (Section 4 (b) of the Funding Agreement)
- Institutions can use the funds to reimburse themselves for student refunds (e.g., room and board, tuition, and other fees) or technology (e.g., laptops, hotspots) they purchased for students, if done so on or after March 13th
- Institutions cannot use the funds for executive salaries or benefits or for the provision of pre-enrollment recruitment activities such as marketing and advertising
- Institutions that accept funds are required to continue to pay employees and contractors to the greatest extent practicable based on the unique financial circumstances at each institution
- Institutions will need to submit quarterly reports to USDE to demonstrate that they used the funds for qualified purposes and to account for how much of the funds were used to reimburse refunds
- Institutions should spend the funds within one year
5. Are CARES Act emergency financial aid grants (under section 3504, 18004, or 18008) to Students required to be included as gross income and taxable?
No. Emergency financial aid grants under the CARES Act for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on account of the COVID-19 pandemic, such as unexpected expenses for food, housing, course materials, technology, health care, or childcare, are qualified disaster relief payments under section 139 of the Internal Revenue Code. This grant is not includible in your gross income.
See the IRS FAQs page for more details https://www.irs.gov/newsroom/faqs-higher-education-emergency-relief-fund-and-emergency-financial-aid-grants-under-the-cares-act
CARES Act Sec 18004(a)(1) Funds Accounting Guidance
Audit Requirements and Allowable Uses
CARES Act funds are subject to audit. Districts must be able to provide reports to demonstrate that funds were used for allowable purposes. Expenditures of CARES Act funds will be included in the districts’ audit reports on the Schedule of Expenditures of Federal Awards (SEFA) using CFDA number 84:425E.
The disbursement provided for by Sec. 18004(a)(1) of the CARES Act requires that, of the amount allocated to each institution, no less than 50 percent must be used to provide students with emergency financial aid grants to help cover expenses related to the disruption of campus operations due to coronavirus. The remaining 50 percent of funds may be used to cover any costs associated with converting courses to distance education.
Institutions may use the funds to provide student refunds and reimburse themselves for costs, on or after March 13, 2020, the date of the President’s Proclamation, resulting from significant changes to the delivery of instruction, including interruption in instruction, due to the coronavirus, including:
- Recipient’s institutional costs to provide refunds for room and board, tuition, other fees
- To make additional emergency financial aid grants to students for food, housing, course materials, technology, health care, and child care
- To award scholarships to provide payment for future academic terms
- Purchase equipment or software, pay for online licensing fees, or pay for internet service to enable students to transition to distance learning
- Purchase computers or other equipment to donate or provide to students
Some expenditures of CARES Act funds are strictly disallowed, including payment to contractors for pre-enrollment recruitment activities; endowments; or capital outlay for athletic facilities, sectarian instruction, or religious worship.
The CARES Act also provides for the Secretary of Education to allocate an additional award or grant under Sec. 18004(a)(2) for minority serving institutions or Sec. 18004(a)(3) for smaller institutions particularly impacted by coronavirus, as determined by the Secretary. If your college receives these funds, those additional funds may be used to defray expenses (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll).
Additional federal guidance, including the Recipient’s Funding Certification and Agreement and a CARES Act Frequently Asked Questions about the Emergency Financial Aid Grants to Students, is available on the U.S. Department of Education’s CARES Act webpage.
Accounting Requirements for CARES Act Funds
CARES Act Revenue:
- Funding is restricted and must be accounted for as Federal Revenue following guidance in the California Community Colleges Budget and Accounting Manual (81xx).
CARES Act Expenditures:
- Each institution may develop its own system and process for how to allocate CARES Act funds to students.
- Funds are restricted in nature and should be accounted for separately using a unique COVID19 program code/identifier to easily pull COVID19 cost reports.
- All expenditures should follow the existing BAM classifications. Expenditure classification is dependent on the nature of the expenditure.
- Direct aid to students should be accounted for in other outgo (7xxx) object code.
Example Journal Entry - Student Aid Portion
Each institution may determine how to account for and distribute the CARES Act funds, as long as the requirements noted above are met. As an example, the first disbursement for direct aid to students could be recorded as follows:
- Fund Code – 74 Student Financial Aid
- Object (Account) Code – Distinct 81xx for CARES Act funds
- Object (Account) Code – 75xx for cash grants/aid
- Activity (Program) Code – 7320xx Student Aid
Example Journal Entry - institutional Portion
Each institution may determine how to account for and distribute the CARES Act funds, as long as the requirements noted above are met. As an example, COVID19 related expenditures could be recorded as follows:
- Fund Code – 12 General Fund – Restricted
- Object (Account) Code – Distinct 81xx for CARES Act Funds
- Object (Account) Code – 4000 Supplies and Materials
- Activity (Program) Code – 65xx COVID19-Facilties Disinfecting