Academic medical centers and other health care entities operating within institutes of higher education need to be aware of the compliance risks surrounding the recent release of higher education grants under the CARES Act. On April 21, 2020, the U.S. Department of Education (Department of Education) announced the release of $6.2 billion in connection with the Higher Education Emergency Relief Fund, part of nearly $31 billion in grant funding to the education sector appropriated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The newly released funds will go to institutions of higher education to cover so-called “recipient institutional costs” associated with the significant changes to the delivery of instruction due to the COVID-19 outbreak. In an April 21 press release, Education Secretary Betsy DeVos commented that “the additional funds made available today can be used to expand remote learning programs, build IT capacity, and train faculty and staff to operate in a remote learning environment so that at any moment institutions can pivot quickly.” This release of funds comes just weeks after the Department of Education’s April 9 announcement releasing over $6 billion in funds to colleges and universities to provide direct emergency cash grants to college students whose lives and educations have been disrupted by the coronavirus outbreak.

Similar to how health-care providers must agree to the Terms and Conditions provided by the U.S. Department of Health and Human Services as a condition of receiving CARES Act funds (covered in our prior Client Alert) institutions of higher education are required to sign a Certification and Agreement from the Department of Education to gain access to CARES Act funds. Among other things, the Certification and Agreement includes mandatory reporting requirements, stipulates that the costs to which the funds are directed must have been first incurred on or after March 13, 2020 (the date President Trump declared a national emergency), and contains an acknowledgment that a recipient’s “failure to comply with this Certification and Agreement, its terms and conditions, and/or all relevant provisions and requirements of the CARES Act or any other applicable law may result in Recipient’s liability under the False Claims Act, 31 U.S.C. § 3729” (FCA), among other laws and regulations.

While the CARES Act provides vital funding for institutions of higher education and their students who are forced to manage disruptions caused by the COVID-19 pandemic, it is crucial that these institutions fully understand and are prepared to meet the various conditions and requirements associated with receiving those funds. Access to CARES Act funds comes with significant compliance and reporting obligations and institutions will be expected to demonstrate that funds were used only for the intended purposes, and the failure to comply with these requirements may result in significant liability under the FCA as well as under other statutes and regulations. In fact, given the Department of Education’s deliberate reference to FCA liability in the Certification and Agreement, it is highly likely that federal enforcement agencies will be devoting substantial resources to auditing and monitoring when it comes to the disbursement and expenditure of CARES Act funds, and institutions of higher education should assume that their handling of these funds will receive ongoing scrutiny.

We have prepared a general overview of the CARES Act provisions, including the education provisions, in a prior Client Alert and we have specifically covered the fraud and abuse implications associated with the receipt and expenditure of CARES Act funds in prior Client Alerts located here and here. The Department of Education has also released a detailed set of FAQs to assist institutions of higher education in applying for and using these funds.

Please contact us, or the Reed Smith lawyer with whom you frequently work, to ensure compliance with applicable laws in applying for and utilizing funds under federal programs to avoid enforcement in the future.