Sneak Preview: ED Re-enables SEAs To Liquidate ESF Dollars
(The following was excerpted from a recent Thompson Grants Compliance Expert article). The Department of Education (ED) is again enabling all states with approved obligation extensions to liquidate funds awarded under the Education Stabilization Fund (ESF) programs and submit reimbursement requests for agency review and evaluation, after preliminary injunctions in recent months prevented the agency from enforcing a strident policy issued in March related to these funds.
ED on March 28 issued a letter to state education heads calling for an immediate halt to extensions of the ESF obligation liquidation period (see “ED Halts ESF Obligation Liquidation Extensions,” May 2025). The ED letter to states cited the uniform guidance provision at §200.344(c), which requires a federal award recipient to liquidate all obligations no later than 120 calendar days after the conclusion of the award. It added that a federal agency may approve extensions if the agency, in its discretion, finds that such an extension is justified. ED’s March letter stressed that the period to liquidate obligations for extensions had expired, and that the department would no longer grant liquidation period extensions. “Extending deadlines for COVID-related grants, which are in fact taxpayer funds, years after the COVID pandemic ended is not consistent with the department’s priorities and thus not a worthwhile exercise of its discretion,” ED wrote in the March letter.
On May 6, the U.S. District Court for the Southern District of New York issued a preliminary injunction in New York, et al. v. Department of Education et al. (1:25-cv-02990-ER), enjoining ED from enforcing the letter against 16 plaintiff states and the District of Columbia. On May 11, ED issued a letter notifying these plaintiffs that as of May 25, the period to liquidate obligations under the ESF program would end. On June 3, the same court entered another preliminary injunction in the case that enjoined ED from enforcing the May 25 termination date. On June 20, the U.S. Court of Appeals for the Second Circuit denied ED’s motion to stay the district court’s injunction.
In response, ED Secretary Linda McMahon on June 26 issued a follow-up letter to its stakeholders that essentially allows nonplaintiff states the same flexibility as plaintiff states — to avoid “fairness and inconsistency problems” — to draw down reimbursements for projects previously approved — the process that was in place prior to the March 28 letter. The recent letter emphasizes that ED “will carefully review [reimbursement or route pay] requests in order to ensure they continue to adhere to governmentwide grant cost principles and that, broadly, expenditures are intended to prepare, prevent and respond to coronavirus.”
(The full version of this story has now been made available to all for a limited time here.)
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