As Districts Spend Grant Funds, Auditors Say ‘Business Is Booming’ – The 74

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The U.S. Department of Education’s Office of Inspector General currently employs more than 30 auditors, including a criminal division, to investigate how all single-purpose schools spend billions of dollars in K-12 grant funds.

They are busy.

“Business is booming,” Assistant Special Agent in Charge Corey Smith told district officials at a conference to oversee federal programs.

He offered hypothetical examples of fraud and misuse of aid funds meant to recover from the pandemic — such as buying 700 Chromebooks when a district only needed 500, or stockpiling masks and other protective equipment at staff members’ homes.

An investigation turned over to the Department of Justice found that two Louisiana Christian University students stole the identities of nine students and used their names to receive $5,600 in emergency aid intended for housing, education and food. On a non-educational note, a Texas man duplicated a program that helped employees pay $25 million in severance payments during business shutdowns and used them to buy a limited edition Bentley convertible.

“We think it’s going to get worse,” Smith said. The unexpected is a lot of money.

Allegations of defrauding the government made the news. But they are only one lever in the complex regulatory landscape of an unprecedented $122 billion bailout plan. Districts face intense scrutiny from federal and state officials as they move from planning how to use the grant money to signing contracts. But the fear of the audit has had an unintended consequence, some experts say: Districts are treading carefully to spend money meant to solve pressing problems.

‘Is this good for our children?’ It’s almost forced to ask. The next question is, ‘What do the auditors say about this?’ “said Shira Kravarik, co-founder of the Federal Education Group, a law firm specializing in federal K-12 programs.

That means districts will use the money as quickly as possible to cover student tuition losses and other needs, sometimes falling on deaf ears, Education Secretary Miguel Cardona said.

For example, some districts are reluctant to spend grant money on non-academic programs like sports and physical education “despite good compelling evidence it helps with learning loss,” Krvaric said.

And despite severe staffing shortages and financial turnover, some districts are using grant funds in the form of retention bonuses or other incentives to retain teachers “because their states have indicated that it’s not permissible,” she said. “This is a clear directive though [the Education Department] that it is permissible”

Those contradictions give district and state officials more reason to be on guard. “There’s still a lot of confusion about what you can spend the money on,” she said.

Meanwhile, auditors with an independent inspector general’s office aren’t necessarily digging for secrets. Just last week, Oklahoma Governor Kevin Stitt’s office cited that more than $650,000 in grant funds were not used for playground equipment, Christmas trees and 131 cookware. The state has set up an $8 million grant program to provide $1,500 grants. for low-income families and has contracted with ClassWallet, an online payment platform for teachers, to run the program.

Auditors said the purchases did not meet the criteria for “emergency educational services” and called for the state to return money spent on “impermissible” items. In its response, the state held ClassWallet accountable for “shortcomings” and said it had improved controls.

‘moving target’

A year ago, parents, teachers and community members were invited to advise districts on how to spend the maximum federal windfall. But as auditors sifted through the details, many parents accused districts of embezzling the money and continued to clamor for more tutoring and other opportunities to keep their children engaged.

Kerry Rodrigues, president of the National Parents Association, argues that many parents don’t see these funds benefiting their children. Every two weeks she meets with Cardona or his staff, the use of grant funds comes up frequently.

“He wants counties to take immediate action, but they’re saying, ‘We don’t know what to do.’ “

By law, districts can’t just keep the money. In the year They must oblige by the end of September 2024. While the department says it will consider some extensions, there is no guarantee they will be approved.

At the same time, laws requiring counties to audit at least $750,000 in federal funds are changing rapidly.

“I’m talking about a complete reversal. It’s literally a moving target, says Bonnie Graham, a partner with Brustein & Manasevit, a law firm specializing in federal education policy. “School districts are in a tough spot. I can’t afford to make a mistake.”

In the year In 2020, the Biden administration’s Office of Management and Budget announced that districts will no longer be required to track staff hours they pay for elementary and high school emergency assistance — known as ESSER. The 2021 and 2022 versions of the document are the complete opposite, he said.

Kathy Harlow, manager of an accounting firm in Pennsylvania that conducts district audits, said districts were allowed to use grant funds to reimburse themselves for spending during the outbreak, but their records often don’t go back.

A former superintendent of the Tyrone Area School District — located midway between Pittsburgh and Philadelphia — she sympathizes with the districts.

“Our firm is on the soft side,” she said. “We’re holding counties accountable, but we’re also understanding that the landscape is changing rapidly as they go through.”

‘New State’

Sometimes audits don’t tell the whole story.

The Office of Inspector General also reviewed how Missouri’s elementary and secondary education departments used grant money to connect more students to the Internet.

Due to clerical error, the district did not reach all eligible districts, the audit showed. What he didn’t show was that the authorities used ESSER funds to cover the rest.

“We had to make peace with it,” said Chris Neale, the department’s assistant commissioner. “We know there will be an unprecedented amount of audit scrutiny. It’s new territory for everyone.

That’s especially true for smaller districts and charter networks, which don’t typically spend enough federal money to trigger an audit. The Colorado Charter School Institute is the first time some charter management organizations face the process.

“The question I get from CMOs is, ‘Should we really do this?'” says Andy Denton, director of finance and operations. Most, she adds, don’t want to pay an accounting firm $10,000 or more to complete. She reminded them that they made “a lot of money.”

As districts and charters apply for grant funding, some state officials are pushing the requests for more information before approving them.

In Georgia, for example, the state auditor’s department rejected districts’ requests to use grant money to cover salaries. Matt Cardoza, a spokesman for the Georgia Department of Education, said the law was interpreted to mean those funds could only be used to offset a reduction in state revenue.

To clear up the confusion, federal officials sent a letter stating that the use of grant funds to pay workers “is not dependent on state and local funding shortages.”

Marguerite Rosa, director of the Edunomics Lab at Georgetown University, said some officials may not follow the “twists and turns” sent from the education department about “authorized” spending.

The law says that the aid money for education is for “prevention, preparation and response” to Covid. The department’s most recent definition says districts should use the money to “build post-pandemic resilience” and address needs exacerbated by Covid.

Districts are now submitting refund requests to their state departments of education, which typically turn around approvals quickly — with a few questionable exceptions.

“A couple of counties asked for pressure washers to clean sidewalks. It’s hard to link that to Covid,” Cardoza said. “We’re not trying to be over the top. [that] They can’t withdraw their money, but we’re trying to keep them from being audited.