Budget & Finance

COVID Relief Funds Are on Their Way Out. Scrutiny Is Only Beginning

By Mark Lieberman — February 17, 2023 4 min read
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As districts barrel toward the finish line for spending federal COVID relief dollars, policymakers and auditors are ramping up scrutiny and calls for accountability.

The federal government dispensed three rounds of aid totaling more than $190 billion to school districts during the first year of the pandemic. Federal regulations say districts must commit funds from the second round to specific expenses by this September. They must do the same for the third round by September 2024. The deadline to spend the first round has already passed.

Ever since the ink dried on the checks, critics have argued that schools aren’t spending the money quickly enough, and questioned whether certain investments will produce long-lasting outcomes that help students.

As deadlines approach, district leaders are anxious about continuing to fund programs and personnel they hired with those one-time dollars. And many continue to push for more time to spend COVID relief money, but the U.S. Department of Education has so far only pledged to extend grace for spending on contracts that run out after the deadlines.

Now, some observers are getting impatient. They want districts to spend down the relief funds they’ve been allotted more quickly, and others want more scrutiny of the spending that’s already happened.

Virginia state lawmakers this month introduced a bill that would require schools to return any unspent ESSER funds this summer to the state education department—well ahead of the schedule laid out by the federal government. The state agency would then redistribute and spend the funds on students’ academic recovery.

Republican Gov. Glenn Youngkin has already backed the proposal. But it’s unclear whether this bill will end up passing the state’s divided legislature. Districts there are already dealing with widespread confusion after state agencies discovered they had sent inaccurate budget estimates to districts affecting the current school year and the upcoming one. And school finance experts agree that the bill as written likely wouldn’t pass legal muster, as it goes against federal guidance on the relief money.

Audits may prove a more legitimate mechanism for analyzing whether districts have spent funds appropriately and holding them accountable. Already, some audits of district spending are fueling calls for more accountability.

Newly elected Nevada Gov. Joe Lombardo earlier this month ordered districts to share recent third-party spending audits with state officials in the next month. Lawmakers are also considering a bill that would require state audits of districts’ overall spending every five years.

On the local level, a recent audit of the Lafayette Parish schools in Louisiana questioned the district’s decision to use ESSER funds to reimburse its insurance fund more than $750,000 to cover hospital bills for employees who contracted COVID. District officials are trying to get clarity from the state education department on whether that category of spending broke the rules.

And in Stockton, Calif., a state audit report has prompted a storm of controversy over the district’s handling of a $2.9 million contract with an indoor air quality company.

The contract has yielded fewer than half the air filters it promised and its proposal had scored the lowest among several firms evaluated, according to media reports. The audit alleges the district failed to follow proper procedures for awarding the contract, tracing the arrangement back to information that was allegedly shared with the district via connections in local government.

The district’s superintendent referred the findings to state officials, the Stockton Record reported.

Districts are on track to finish spending federal relief funds on time

Despite the calls for faster spending, districts are generally on track to spend their federal relief funds on time.

Districts were permitted wide discretion on spending federal relief funds. They were able to use the first round on anything that helped schools maintain instruction during the pandemic, from personal protective equipment to digital devices for remote learning. Later rounds of relief funds included a few more restrictions, like a requirement that at least 20 percent of the third and largest round of relief funds, known colloquially as ESSER III, go toward mitigating learning loss.

Technology tools, HVAC upgrades, curriculum materials, and academic enrichment programs have been among the most common investments the aid package has fueled.

Because of the formula Congress used to distribute the aid, some low-wealth districts received thousands of dollars per student, while others that receive scant amounts of federal Title I aid hardly saw a cent.

It’s no surprise, then, that districts’ spending pace has varied considerably. Last year, many education observers railed against schools for taking too long to invest, and lawmakers in several states moved to fiscally punish schools for the slow pace of spending. These criticisms came as districts faced pressure to spend wisely, plant seeds for long-term transformation, and avoid a fiscal cliff when the funds ran out.

More recent finding show that districts are well on their way to exhausting their federal relief allocations. Nationwide, districts are on track to spend all of their federal relief aid in time for deadlines, according to an analysis by Georgetown University’s Edunomics Lab.

But there are many reasons why some districts don’t appear to have spent much of their relief funding yet.

Data on federal relief spending tend to lag districts’ decisions. Some funds may be “obligated” for expenses like salaries, but the funds may not actually leave districts’ accounts until the end of the school year. And districts are reluctant to spend recklessly, for fear of arousing auditor suspicions and failing to meet students’ complex needs.

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