Higher Education Update: COVID-Related Funding and Other Financial Reporting Considerations

by Stacie Kowalczyk
September 25, 2020

On April 10, 2020, we brought you information on the CARES Act Higher Education Emergency Relief Fund. On April 22, 2020, we published more news regarding additional funding available through the Department of Education to support continued education at colleges and universities.

As a reminder, there were two ways in which this COVID-related funding could be used by institutions:

  1. Student Aid – Institutions must spend 50% of funds for emergency financial aid grants to students.
  2. Institutional Aid – Up to 50% of the funds can be used to replace lost revenue due to campus disruption/closure due to COVID-19. This portion of the funding can also cover technology costs required to change the method of delivery of instruction to students due to the current environment.

Many institutions have had questions around the accounting for this funding. An AICPA report released on July 22, 2020, from the Center for Plain English Accounting (CPEA) indicates that institutions will need to follow Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958-605 to account for these funds because of the limited discretion indicator.

Under ASC 958-605, a grant would be considered conditional if it contained both a right of return or right of release and the existence of a barrier. The limitations described above on the use of the funding indicate that a barrier exists because there is limited discretion by the institutional recipients of this funding on its use.

The FASB issued a Staff Q&A bulletin in 2019 to provide additional guidance useful in helping reporting entities apply the limited discretion indicator, particularly with respect to the meaning of limited discretion on the conduct of an activity by the recipient that may be helpful to private institutions of higher education.

Have questions or want to learn more? Reach out to our Higher Education team.

September 25, 2020

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