Project Advisory 83, June 2023

Update to the MSBA’s Third-Party Funding Policy

The following information replaces Project Advisory 54 from April 2018.

The purpose of this Advisory is to summarize changes to the MSBA’s Third-Party Funding Policy (“Policy”). When the MSBA first implemented its Policy in 2011, a broad approach was applied, and all forms of third-party funding resulted in a decrease to the project cost basis and a concomitantly lower MSBA grant. As the MSBA’s program has evolved over time, it has updated the Policy in 2018 and 2022 to exclude certain types of grants and rebates.

In light of the preponderance of federal and state grants, rebates, and other sources of funding that districts could use to assist with funding their school projects, and the current market conditions, the MSBA has further reviewed its Policy to facilitate the use of these monies by districts for their school projects. In accordance with the June 21, 2023 MSBA Board vote, rebates, grants, state or federal funding, donations, or other sources of project income that MSBA program participants may receive will not lower the project cost basis or reduce the amount of grant funding for Districts; provided that a district is not receiving more than its share of project costs from a third party source or the district is not being reimbursed or paid more than once through an MSBA grant for any cost incurred in connection with the school project for which a participant has received funding from a third-party. These changes will allow districts to use and fully benefit from many available third-party funding sources.

The MSBA’s Third-Party Funding Policy continues to apply to insurance settlements and may apply to other forms of financial compensation a program participant may receive from a third-party, in the sole discretion of the MSBA. For third-party funding that is subject to the MSBA’s Policy, such as insurance proceeds, both the MSBA and the District will share in the savings that may result from third-party funding. The third-party funding reduces the MSBA’s and District's share of the Project proportionally.

Third-Party Funding Example - Insurance

² There are no scope exclusions or other ineligible costs in this example.
³ Note that the third-party funding reduces both the MSBA's and District's share of the Project proportionally.

Pursuant to the current MSBA’s program requirements, program participants are required to disclose all sources of funding, including rebates, grants, state or federal funding, donations, or other sources of project income from a third-party funding source, in the MSBA Sources and Uses Form, which is required as part of the close-out audit. Based on this revised policy, in addition to submitting as part of the close-out audit, program participants are required to disclose sources of funding from any third-party funding source at the time they are eligible for a funding agreement with the MSBA. If such third-party funding becomes available after the execution of the funding agreement, the District will be required to promptly notify the MSBA. Timely notification to the MSBA by Districts using a third-party funding source will be critical but particularly important for those participating in the Accelerated Repair Program. If any type of third-party funding, such as a utility rebate, exceeds the amount of the District's share of the Project, the incremental portion would be considered third-party funding, and therefore, the relevant costs would be deemed ineligible.

The MSBA requires program participants to provide specific documentation in connection with third-party funding that is being used to pay for project costs. The MSBA may require additional information related to third-party funding at any time. Further, program participants must execute a third-party funding certification that requires disclosure of all third-party funding and an agreement that, should the participant be paid in excess of any actual project cost between the receipt of MSBA grant funds and any source of third-party funding, the participant will notify the MSBA and work with the MSBA to repay any excess grant amounts that have been provided by the MSBA. As set forth in M.G.L. 70B § 3E, should a municipality remain indebted to the MSBA, this amount may be offset by the Commonwealth’s disbursement of funds payable to the indebted municipality.