Throughout the COVID-19 pandemic, Congress has provided relief to higher education institutions through the Higher Education Emergency Relief Fund (HEERF). The Coronavirus Aid, Relief, and Economic Security Act, Coronavirus Response and Relief Supplemental Appropriations Act, and American Rescue Plan Act of 2021 are the three aid packages containing this specific financial relief for higher education institutions, known as HEERF I, HEERF II, and HEERF III, respectively.
The accounting for HEERF is examined in the April 2021 and May 2020 BKD Thoughtware® articles.
Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), provides the basis for determining when federal awards are expended for the purpose of including those expenditures on the Schedule of Expenditures of Federal Awards (SEFA). The Uniform Guidance states, “The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards …” This generally is interpreted that expenditures and/or lost revenues would be included on the SEFA when there’s an award in place and eligible expenditures/lost revenues are incurred. The recognition on the SEFA may not always align with revenue recognition on the financial statements in accordance with U.S. generally accepted accounting principles.
The American Institute of CPAs Governmental Audit Quality Center has created a nonauthoritative tool for SEFA recognition. The U.S. Department of Education doesn’t require that the student portion be awarded before using the institutional portion. Therefore, the institutional portion should be included on the SEFA even if the student portion hasn’t been awarded if there’s an award in place and eligible expenditures/lost revenues have been incurred. This scenario will likely occur for HEERF III for June 30, 2021, year-end institutions, since the awards were made prior to June 30, 2021, but most schools didn’t get the student portion awarded prior to year-end. Institutions should determine if they’re going to use the funds for expenditures/lost revenues through June 30, 2021, before the preparation of the final SEFA and completion of the Single Audit. If an institution determines subsequent to the issuance of the June 30, 2021, Single Audit to use the funds for expenditures/lost revenues prior to June 30, 2021, that would be considered to be an error correction that will need to be evaluated as a restatement of the June 30, 2021, SEFA.
In addition, presentation on the SEFA needs to break out the student and institutional portions separately by their respective alpha associated with the 84.425 Assistance Listing number, and the title should include COVID-19 at the beginning. A total for the program should be shown as well.
To connect on this or other accounting matters affecting higher education institutions, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.