Misspending or Misunderstanding?

Gulf Coast State College received $2.6 million in emergency assistance funds in 2019 after Hurricane Michael severely damaged its Florida campus the year before. The college used about three-quarters of that funding for inappropriate purposes, according to an audit report issued Thursday by the U.S. Department of Education’s Office of the Inspector General.

College officials argue that, while responding to the crisis, they sought advice from department officials, who approved spending choices that are now being deemed problematic. The report concludes that Gulf Coast is nonetheless responsible for spending $1.8 million of its emergency assistance funds on expenses that fell outside federal requirements.

After Hurricane Michael hit Panama City, where the college’s main campus is located, the number of unhoused students in the county increased from 738 students to more than 4,800. Enrollment at Gulf Coast fell from 5,933 students in fall 2018 to 4,813 in spring 2019, a loss of 1,120 students at the time.

“Many of our students, faculty, staff lost some or all of their possessions, including their homes,” John D. Mercer, vice president of administration and finance at Gulf Coast, wrote in a letter to auditors. “The College had serious damage to most buildings on its Panama City Campus with every building receiving some damage. Appropriately, the College was understandably excited and appreciative when approached about submitting a disaster relief application, although the guidance at the time was somewhat general and the College was still under reconstruction and otherwise preoccupied.”

Gulf Coast spent about $1.7 million to compensate for lost tuition revenue, according to the report. Auditors determined this an unallowed expense under the Additional Supplemental Appropriations for Disaster Relief Act, signed into law in 2019, the same year the college received the funds. The law provided funding for the Emergency Assistance program, a grant program administered by the department’s Office of Postsecondary Education to help educational institutions recover from natural disasters.

The college also put $96,365 toward buying and maintaining equipment not directly connected to hurricane recovery, according to the report. A total of $79,565 was spent on a generator, and $16,800 on engineering costs related to the generator, to prepare for future disasters. The report says the funds were only intended to respond to needs caused by Hurricane Michael.

Gulf Coast administrators argue that the Office of Postsecondary Education approved a revised budget they submitted, which detailed their plans to use funds to cover lost tuition dollars and the generator, among other needs. Auditors acknowledge in the report that the college received this approval but say the report’s findings are “factually correct” regardless. They also note that because the two offices are “operationally independent,” the two entities can disagree with each other.

The report recommends that the assistant secretary for postsecondary education require Gulf Coast to reallocate the almost $1.8 million in questionable expenses to an allowable use or return that amount to the department.

Mercer agreed to follow the recommendations and reallocate the funds to faculty and staff member salaries paid after the hurricane but objected to the report’s findings. He called on the department to “resolve its internal inconsistencies in interpreting guidance to prevent similar failures that result in frustration among those who rely on it.”

“As a recipient of other Federal funds, this inconsistency causes us great concern,” he said in his letter. “We may no longer be able to trust guidance from any programs within the DOE.”

An ‘Evergreen Concern’

Jon Fansmith, assistant vice president for government relations at the American Council on Education, said the audit of Gulf Coast reflects an “evergreen concern” among college and university administrators working to comply with complicated requirements or unclear guidance regarding how to use federal funding. The more than $76 billion in federal COVID-19 relief funds that flowed to colleges and universities during the pandemic brought some of these fears to the fore.

Fansmith said he’s fielded a barrage of calls over the last two years from campus leaders trying to parse out what kinds of spending are allowed under the Higher Education Emergency Relief Fund. Some leaders put off using the money earlier in the pandemic out of “an abundance of caution” as they waited for clearer guidance.

“Each subsequent round of relief funding, there was new guidance, some of which contradicted the earlier guidance in terms of what students might be eligible, in terms of how you use that to replace lost revenue,” he said. “Schools were working really, really hard to understand what was allowable, and that’s a difficult process, because over about a year and a half, what was allowable changed substantially.”

For example, he pointed out that recipients of the Deferred Action for Childhood Arrivals program, or DACA, appeared to be eligible to receive COVID-19 relief funds during the first round of funding, but later guidance from the department disallowed it.

“Given the uncertainty in the landscape as well as the amounts of funds, the huge number of institutions receiving them, the change in guidance, if the [Office of the Inspector General] were to look very, very closely at a number of schools, they would probably find things where, acting in the best faith, an institution may have been technically out of compliance to a certain degree,” he said.

Catherine Grant, public affairs liaison for the Office of the Inspector General, said in an email that the office has done audits of some higher ed institutions to determine whether they used their COVID-19 relief funds—the portions allotted for student aid and for institutional needs—“for allowable and intended purposes.” The office also has a pandemic relief oversight plan intended for this purpose.

Fansmith said he has not encountered college and university leaders who discovered their institutions misspent COVID-19 relief funds. He believes that the Biden administration has demonstrated “a much greater willingness to understand the constraints schools were working with and clarify that to try to work past problems that really frankly the statutes and the guidance initially created for schools.”

Even if the Gulf Coast audit might not reflect the administration’s approach to COVID-19 relief funds, campus leaders and government officials are collaborating in order “to avoid exactly the kinds of issues this OIG report raises,” he said.