Generally, independent schools intentionally refrain from participating in the majority of federal funding programs, preserving their ability to ensure the educational program is provided in a manner that is reflective of their unique mission and culture. However, as different programs and funding sources present themselves, the question independent schools would be wise to consider is whether and the extent to which receipt or participation would render the school a recipient of federal financial assistance. It is important to understand this, as the obligation to comply with certain federal laws and regulations is triggered by a school's receipt of federal financial assistance, and, as discussed here, so is the requirement to comply with certain executive orders.
Below we review common sources of federal funding and whether receipt or participation may result in an independent school's obligation to comply with certain federal nondiscrimination laws. Participation in a federally funded program does not automatically make a school a direct recipient of federal financial assistance. While federal laws do not generally define what makes an entity a "recipient" of federal financial assistance, courts have identified several factors to help make this determination. These factors include whether an entity is a direct, rather than indirect, recipient of federal financial assistance; whether the entity receives a monetary benefit or merely services, goods, or other non-monetary benefits paid for by federal financial assistance; and/or whether a federal program conditions receipt of funding on specific federal compliance obligations.
Titles I, II, and IV of the Elementary and Secondary Education Act
Under Title I, Title II, and Title IV of the Elementary and Secondary Education Act (ESEA), the federal government provides funding to local education agencies (usually school districts), which are responsible for planning, designing, and implementing the educational programs. Independent schools, or their teachers and/or students, may receive materials or services from local education agencies because such agencies are required by law to provide "equitable services" to children attending local private schools. Because the ESEA funds are controlled by the local education agencies and not the independent schools themselves, independent schools are not considered recipients of federal financial assistance.
National School Lunch Program
Independent schools may participate in the National School Lunch Program, which helps states deliver lunches to school children through grants and food donations. Independent schools that participate in the National School Lunch Program are considered recipients of federal financial assistance if they enter into an agreement with their state education agency as a school food authority.
Individuals with Disabilities Education Act
The Individuals with Disabilities Act provides grants to states to be used to provide special education and related services, including for children with disabilities enrolled in independent schools. Whether an independent school that participates in IDEA is considered a recipient of federal financial assistance tends to depend on two factors: (1) whether the child was enrolled in the independent school by their parent or the local education agency; and (2) whether the funding received derives from federal or state sources. As a general rule, if the program benefits students who are placed at an independent school by their parents, the independent school is not considered a recipient of federal financial assistance. However, if the program benefits students who are placed at the independent school by a public agency, such as a school district or state government, then the independent school is considered a recipient of federal financial assistance. Nonetheless, schools should review any documentation associated with such funding and consult with their legal counsel to confirm whether receipt of special education funding makes them a recipient of federal financial assistance.
E-Rate Program
The federal E-Rate program helps schools and libraries obtain affordable access to telecommunications services, Internet access, and internal connections. There is still some ambiguity involving E-Rate and whether schools participating in the E-Rate program are considered recipients of federal financial assistance.
While the program was specifically designed not to trigger obligations under Title IX and other federal statutes, it did in one case. Specifically, in 2010, a Pennsylvania federal district court held that an E-Rate grant rendered a school in receipt of federal financial aid; therefore, the school could be sued for violations of Section 504 of the Rehabilitation Act (requiring accommodation for students with disabilities) or Title IX. In reaching this decision, the court relied on the U.S. Supreme Court's characterization of the E-Rate program as a form of "federal assistance" intended to help the public gain access to the Internet.
Conversely, in 2014, the Fifth Circuit Court of Appeals in a False Claims Act claim found that E-Rate funds were not considered federal funds. In order to trigger a claim under the False Claims Act, some portion of the money being requested must be provided by the federal government. In a review of the case law, the court found that the money in the E-Rate program is "untraceable to the United States Treasury." The court then looked at whether the Act should still be applied because of the federal government's control over the program through the FCC, ultimately finding that because there are no federal funds involved in the program, the federal government does not "provide any portion of" the requested money.
Independent schools should consult their legal counsel before choosing to participate in the E-Rate program.
Emergency Assistance to Non-Public Schools (EANS)
During the COVID-19 pandemic, Congress set aside funds allotted to the Education Stabilization Fund through the CARES Act. The Department awarded these grants to state educational agencies (SEAs) for the purpose of providing local educational agencies (LEAs), including charter schools that are LEAs, with emergency relief funds to address the impact that COVID-19 has had on elementary and secondary schools across the country.
Notably, independent schools whose students and teachers receive equitable services under the CARES Act programs are not considered "recipients of federal financial assistance." Since, pursuant to the CARES Act, a public agency must control the CARES Act funds and disperse them to students and teachers of independent schools, no funds are going directly to an independent school. Thus, an independent school is not a recipient of federal financial assistance by virtue of its students and teachers receiving equitable services from their local public school district under a CARES Act program. As a result, certain federal requirements that apply to a recipient of federal financial assistance are not directly applicable to an independent school whose students or teachers receive equitable services under the CARES Act programs.
Nonprofit Security Grant Program
The Nonprofit Security Grant Program (NSGP) provides funding to nonprofit organizations at high risk of a terrorist or other extremist attack, for facility hardening and other physical security enhancements and activities. NSGP funding recipients are considered recipients of federal financial assistance. Pursuant to the Department of Homeland Security Standard Terms and Conditions for the NSGP program, NSGP funding recipients and subrecipients are contractually required to comply with the federal nondiscrimination obligations set forth in the terms and conditions document.
Veterans Education Program
The Survivors' and Dependents' Educational Assistance Program offers education and training opportunities to the children and spouses of certain veterans or military service members and may be used to pay for children's independent school tuition obligations. Independent schools that accept funding from this program are recipients of federal financial assistance and are required to sign a statement of assurance that they will comply with equal opportunity laws.
Going forward, independent schools should consult with their legal counsel to determine whether they participate in any federally funded programs and evaluate any potential compliance obligations.
Independent schools should stay tuned to this rapidly changing area. Venable is closely monitoring developments and will keep its clients informed.
