MEMORANDUM TO State and Community College Presidents FROM Richard M Freeland Commissioner DATE June 25 2009 SUBJECT by sge21080


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TO:            State and Community College Presidents

FROM:          Richard M. Freeland, Commissioner

DATE:          June 25, 2009

SUBJECT:       Final Guidance on ARRA State Fiscal Stabilization Fund Spending

The Department of Higher Education (DHE) has been charged to distribute and oversee
funds coming to the state and community colleges through the State Fiscal Stabilization
Fund (SFSF) of the American Recovery and Reinvestment Act (ARRA) of 2009. This
memorandum provides revised guidance to colleges on the receipt and use of these
dollars. This guidance supersedes all previous guidance regarding ARRA SFSF issued
by the DHE.

The intent of this memo is to provide specific guidance to colleges in several areas

       the use of ARRA State Fiscal Stabilization Funds;

       the requirements necessary to receive ARRA funds;

       the process, timing, and flow of the funds from the federal government to the
        state and to the colleges;

       spending parameters on the Massachusetts Management, Accounting, and
        Reporting System (MMARS); and

       the tracking and evaluating of college spending of ARRA funds.

As you know, the ARRA provides additional funding for a number of research-related
programs (National Science Foundation, National Institute of Health, Department of
Energy, Department of Agriculture). In addition to our responsibilities with respect to
SFSF funds, the DHE has also been charged, in conjunction with the Office of the
Comptroller, to track separately any other ARRA funds campuses receive directly from
the federal government. To this end my office will be working with your staff to collect
data on college receipt of additional ARRA grants in the interest of aggregating and
reporting these data to the Executive Office of Education (EOE) and to the Governor.

Section I: Guidance on the Use of ARRA State Fiscal Stabilization Funds

The overall goals of the American Recovery and Reinvestment Act are to stimulate the
economy in the short term and to invest in education and other essential public services
to ensure the long-term economic health of the nation. The language contained in the
ARRA federal guidance for SFSF
( dictates three major
principles to guide public higher education in the expenditure of ARRA State Fiscal
Stabilization Funds, and colleges must find an appropriate balance among these
competing needs:

    1. Spending funds quickly to save and create jobs.
    2. Ensuring transparency and accountability and reporting publicly on the use of
    3. Investing one-time ARRA funds thoughtfully to minimize the "funding cliff" when
       the funding ceases.

I understand that adhering to the above-mentioned federal guiding principles present a
challenge in light of our state’s fiscal situation. I recognize that colleges are under great
pressure to spend ARRA funds to close budget gaps, thereby creating funding
dependencies that cannot be sustained and missing the opportunity to invest in
improvements that yield long-term benefits. Therefore, in planning for the use of State
Fiscal Stabilization Funds, I expect college leadership to engage in a thoughtful process
that goes beyond simply closing or minimizing gaps in the college's operating budget. I
am confident that colleges will utilize great care in prudently managing federal, state,
and campus resources to avoid the potential impact of a structural deficit in FY11 and
beyond. Since it is extremely unlikely that public higher education institutions will receive
SFSF funds in FY11, I strongly urge colleges to use ARRA funding as a bridge to a long-
term fiscal plan that positions the college to maintain financial sustainability in the face of
an uncertain future as the result of the state’s and the nation’s current economic

In General: According to the American Recovery and Reinvestment Act of 2009, Public
Law 111-5, the college that receives funds under this title must use the funds for
education and general expenditures, and in such a way as to mitigate the need to raise
tuition and fees for in-state students, or for modernization, renovation, or repair of
institution of higher education facilities that are primarily used for instruction, research, or
student housing, including modernization, renovation, and repairs that are consistent
with a recognized green building rating system.
111publ5/content-detail.html Public Law 111-5 (H.R. 1) Section 14004(a).

In General: According to U.S. Department of Education guidance released April 2009 in
conjunction with Public Law 111-5, a college may use the funds to support a broad array
of activities. For example, a college might use State Fiscal Stabilization Funds to

      Support for salaries related to classroom and laboratory instruction and
       instructional technology;
      Academic support for libraries, laboratories, and other academic facilities;
      Institutional support for activities related to personnel, payroll, security,
       environmental health and safety, and administrative offices;
      Student services that promote a student’s emotional and physical well-being
       outside the context of the formal instructional program; and
      Student financial aid, such as IHE-sponsored grants and scholarships.

The DHE is currently seeking clarification from the U.S. Department of Education as to
whether ARRA funds can be used to pay down Tax Exempt Lease program (TELP)

Guidance on the SFSF Program, pgs 26-30, U.S. Department of Education, April 2009

In General: The college that receives funds under this title should consider using the
funds in such a way that avoids creating unsustainable funding dependencies. A
principle that could be applied is the notion that one-time revenues should be generally
used on one-time expenses. For example, colleges might consider using the ARRA
funds for capital investments to increase physical plant efficiency. This could include
retrofitting buildings for energy efficiency, reducing the backlog of deferred maintenance,
and extending the life and utility of existing buildings. The same notion would pertain to
one-time IT expenses and could be applied to a broad array of strategic, one-time


   1. The college must not use funds received under this title to increase its
      endowment. Public Law 111-5 (H.R. 1) Section 14004 (b).

   2. No funds awarded under this title may be used for:

              The maintenance of systems, equipment, or facilities;
              Modernization, renovation, or repair of stadiums or other facilities
               primarily used for athletic contests or exhibitions or other events for which
               admission is charged to the general public; or
              Modernization, renovation, or repair of facilities used for sectarian
               instruction or religious worship; or in which a substantial portion of the
               functions of the facilities are subsumed in a religious mission. Public Law
               111-5 (H.R. 1) Section 14004 (b,c).

Maximizing Flexibility: Public higher education institutions have flexibility both in the
expenditure of these funds and in determining when to use these funds, as long as the
ARRA funds are spent by September 30, 2011. For additional information on allowable

uses for SFSF, refer to pages 26 to 30 in the federal Guidance on the State Fiscal
Stabilization Fund Program at

Section II: Administration of ARRA State Fiscal Stabilization Funds

Specific College Requirements Necessary to Initiate an ISA Between the DHE and
the College

State Fiscal Stabilization Funds will come to the colleges through the vehicle of an
Interdepartmental Service Agreement (ISA) between DHE and the colleges. Based on
discussions with EOE, A&F, and the Comptroller’s Office, the following components
have been identified as necessary to initiate the required ISA:

       1. Submission to the DHE of an ARRA SFSF budget including detailed planned
          spending according to MMARS subsidiary categories. The Spending Plan
          template, in the form of an Excel spreadsheet, will be available on the DHE’s
          website on June 30, 2009, at

       2. Certification of a set of assurances the college must submit in order to
          receive ARRA funds. The Statement of Assurances, in the form of a Word
          document, will be available to download on the DHE’s website on June 30,
          2009, at and must be signed by the college
          president and submitted to the DHE with the ARRA SFSF spending plan.

       3. Colleges must immediately review their internal control plans and make any
           updates to ensure that all of the ARRA guidance issued by the DHE are
           included and distributed to all program, fiscal, human resource, payroll and
           executive staff. See Comptroller’s website for details on this Comptroller’s Office

Timing of the ARRA SFSF College Request Process and Flow of Funds

Following consultation with CFOs of the state and community colleges, we are
establishing the following timeline for submission of Spending Plans and Statements of
Assurances for ARRA SFSF funds.

   1. As referenced above, the ARRA SFSF Spending Plan template and the
      Statement of Assurances will be available on the DHE’s website on June 30,
      2009, at Forms will also be emailed to the college
      presidents on June 30, 2009.

   2. As soon as the Fiscal Year 2010 General Appropriations Act is signed into law,
      the EOE will determine the amount of State Fiscal Stabilization Funds to be
      awarded to each public higher education institution based on achieving a level of
      funding from both the GAA and SFSF in FY10 that is equal to what each college

      received in the FY09 GAA. I will send the presidents these final figures via email
      as soon as I have them.

   3. DHE staff will participate in a conference call with both the state college and
      community college chief fiscal officers to answer any remaining questions related
      to ARRA SFSF. This conference call will occur during the two-week period after
      the FY10 GAA is signed and before the ARRA spending plans and signed
      assurances are due to the DHE.

   4. Completed ARRA Spending Plans and signed Statements of Assurances are
      due 14 calendar days after GAA is signed.

   5. The DHE will sign off and submit all completed college ARRA spending plans
      and certification of ARRA spending assurances to the EOE within 10 calendar
      days of receipt of the submission from the college.

   6. Upon EOE approval of each college’s ARRA Spending Plans and signed
      Statement of Assurances, the Department of Higher Education will initiate an
      individual ISA with each college. The ISA will contain detailed SFSF spending
      plans and will be reflective of both of the Terms and Conditions of the Grant
      Anticipation Notice (GAN) as well as the specific ARRA-related accountability
      and monitoring requirements required in federal statute, by the Governor, by
      Administration and Finance, and by the Office of the State Comptroller. The DHE
      must receive the original ISA signed by the president to initiate the transfer of

   7. Once the ISA has been signed by the college president the DHE will submit the
      ISA to the Comptroller, and the funds will be released to the campuses through
      the Massachusetts Management, Accounting, and Reporting System (MMARS).

   8. The DHE is currently seeking assurances from the EOE, Administration and
      Finance, and the Comptroller regarding the timing of the distribution of ARRA
      State Fiscal Stabilization Funds. The disbursement schedule has not yet been
      confirmed. College cash flow considerations are in the forefront of this

Spending ARRA State Fiscal Stabilization Funds on MMARS:

   1. The Cash Management Improvement Act (CMIA) provides the general rules and
      procedures for the efficient transfer of federal funds between the federal
      government and the states. The Cash Management Improvement Act Agreement
      between the Commonwealth of Massachusetts and the Secretary of the Treasury
      is known as the Treasury-State Agreement (TSA). A copy of the CMIA guidance
      is available on the Comptroller’s website at

2. In order to assure compliance with federal CMIA requirements, all draws of
   federal funds must be processed through the Commonwealth’s Automated
   Central Draw process, under the supervision of the Comptroller.

3. All ARRA State Fiscal Stabilization Funds will be loaded in 00 accounts and not
   by subsidiary. However, the DHE and the Comptroller will be tracking ARRA
   spending by subsidiary, and such spending must be in accordance with the
   college’s approved spending plan and consistent with outlined spending in the

4. Colleges will not be allowed to use ARRA State Fiscal Stabilization Funds to
   reimburse previous expenditures that were made from campus or GAA funds. No
   EXs will be allowed for any prior payments.

5. New Hires: Full-time equivalents hired as part of ARRA SFSF will not be covered
   on the SFSF MMARS payroll until such funds have been received by the college
   on MMARS. All new hires must be specifically coded as such in HR/CMS.
   Please review the Human Resources Division (HRD) memo outlining
   the HR/CMS Hiring Process for Federal Stimulus Positions on HRD's intranet

6. Public higher education institutions have received exemption status from the
   Executive Office of Administration and Finance from its general requirement that
   all state agencies must submit ARRA hiring plans for approval prior to using
   ARRA funds to pay employees.

7. Maintaining Current Full-time Equivalents: The DHE is still in negotiation with
   A&F and the Comptroller’s Office to determine if colleges interested in
   transferring current employees from local campus trust funds and from the
   college GAA funds to their ARRA SFSF account in MMARS will be allowed to
   shift these employees through Labor Cost Management (LCM) or need to assign
   these position through HR/CMS.

8. The Comptroller will be monitoring college ARRA SFSF spending on a daily and
   weekly basis and will contact the DHE and college directly with any concerns.

9. Public higher education institutions are exempt from the Comptroller’s
   assessment of indirect costs for ARRA funds, as is highlighted in Massachusetts
   General Laws, Chapter 29, Section 6B:
   6b.htm and Administration and Finance Bulletin Number 5 pertaining to Fringe
   Benefits, Payroll Taxes and Indirect Costs:

10. There have been very recent discussions between the Executive Office of
    Administration and Finance and the Comptroller’s Office about instituting a 0.5%

       chargeback on State Fiscal Stabilization Funds to cover the Commonwealth’s
       reporting requirement obligations. We have received mixed signals as to how this
       0.5% will be applied. Our position is that the chargeback should occur across the
       top and must not reduce allocations to the colleges. We are currently working to
       resolve this issue.

   11. Colleges should refer directly to the Comptroller’s website for detailed information
       on auditing and reporting, accounts management, contracts and procurement
       and MMARS coding.

Section III: Tracking and Evaluating College Spending of ARRA State Fiscal
Stabilization Funds

Every college official can count on tremendous scrutiny of the use of ARRA funds with
unprecedented levels of reporting requirements. The U.S. Education Department
(USED) intends to collect and publish on a quarterly basis and on an annual basis data
on the use and impact of SFSF funds. Further, the USED will require states to
document, as part of the process for applying for the second installment of SFSF funds,
the progress they are making toward promoting the overall goals of the American
Recovery and Reinvestment Act.

Annual Reporting Requirements for College Receiving ARRA State Fiscal
Stabilization Funds

As part of the requirement for receiving ARRA funds under Public Law 111-5 (H.R. 1)
Section 14004(a), each college must assist the Executive Office of Education, the
Department of Higher Education and the Office of the State Comptroller in collecting the
following information:

          The uses of funds within the college;
          How the college distributed the funds it received;
          The number of jobs that were saved or created with the funds;
          The tuition and fee increases for in-state students charged by the college;
          The extent to which the college maintained, increased, or decreased
           enrollment of in-state students, including those students eligible for Pell
           Grants or other need-based financial aid; and
          A description of each modernization, renovation or repair project funded,
           including the amounts awarded and project costs.

Quarterly Reporting Requirements for College Receiving ARRA State Fiscal
Stabilization Funds

As part of the requirement for receiving ARRA funds under Public Law 111-5 Section
1512 (c), each college shall provide the assistance necessary for the state to submit
reports within 10 days after the end of each calendar quarter containing the information
required under said section of the ARRA in accordance with future guidance expected to
be issue by Office of Management and Budget during the week of July 7. The following
initial reporting requirements been identified as part of Sec 1512:

          The total amount of ARRA funds received at the college.

          The amount that was expended or obligated on projects/activities. (February
           18, 2009 guidance also included a requirement to report on unobligated
           allotment balances in order to facilitate reconciliations.)

          A detailed list of all expended or obligated projects/activities, including:

           a. Name of the project/activity;
           b. Description of the project/activity;
           c. Evaluation of the completion status of the project/activity;
           d. Estimate of jobs created and jobs retained by project/activity; and
           e. Detailed information on subcontracts or sub-recipients awarded by the

For additional information on quarterly and annual reporting requirements refer to and

C:     State and Community College Chief Fiscal Officers
       Paul Reville, Secretary of Education
       David Bunker, Chief Fiscal Officer, Executive Office of Education
       Martin Benison, Comptroller, Office of the State Comptroller
       Leann Pasquini, Assistant Budget Director, Executive Office of Administration
       and Finance
       Brian Gosselin, Fiscal Policy Analyst, Executive Office of Administration and


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