By Jeffrey A. Kowalczyk, CPA, CFE, CGAP

The COVID-19 pandemic resulted in significant challenges for schools throughout the country. While most of the news coverage focused on the effects on the education process, both the pandemic itself and the federal response had significant impacts on the financial operations of schools. Throughout this post I will use the term “school” generically to refer to public school districts, charter schools, and nonpublic schools.

Elementary and Secondary School Emergency Relief Fund

The primary, but not the only, source of additional funding for schools was the Elementary and Secondary School Emergency Relief Fund (ESSER), initially funded through the Coronavirus Aid, Relief, and Economic Security (CARES) Act and then was expanded through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act. Combined, they provide about $190 billion for elementary and secondary schools nationwide. While the three tranches of ESSER funding (generally called ESSER I, ESSER II, and ESSER III) all serve the general goals of helping schools manage the extra costs associated with navigating the COVID-19 pandemic – including support for recovering student learning loss – each tranche has its own set of rules. These may include differing minimum and maximum thresholds for certain types of spending. For example, ESSER III requires each school to reserve at least 20% of funds to address learning loss.

While designed to meet immediate needs, ESSER funding rules recognize that impacts from the COVID-19 pandemic will last for multiple years. Therefore, ESSER I funding is available for obligations through Sept. 30, 2022; ESSER II funding is available for obligations through Sept. 30, 2023; and ESSER III funding is available for obligations through Sept. 30, 2024.

Funding Flexibility and Waivers

New funding is not the only challenge for schools: a number of compliance rules have been amended to provide flexibility or to waive certain requirements. When schools closed in spring 2020, it was unclear whether employees could continue to be paid with federal funds while they were not providing the services under the grant programs. In June 2020, the federal Department of Education did provide clarification that Title III, IV, V, and VII grantees could continue to charge employees to these grants, even if they were unable to perform their duties as a result of the pandemic. Significant flexibilities were provided in the national school lunch program, waiving mandated mealtimes, allowing meals to be picked up and brought to homes, and allowing meals to be served in nongroup settings. All these moves had the objective of ensuring students’ nutritional needs were met while limiting the risk of spread of COVID-19.

In addition to the flexibility and waivers provided at the federal level, the Commonwealth of Pennsylvania requested and received a waiver of accountability and school identification requirements detailed in the Elementary and Secondary Education Act of 1965. This allows schools to continue to use data from prior years rather than remeasure data in the current year, which would have been significantly influenced by the pandemic.

Other Funding Sources

In addition to funds passed through the Pennsylvania Department of Education, schools may have received funds from other state agencies or local charities to support operations and students through the pandemic. The Single Audit Act requires schools that expend $750,000 or more in federal-originated funds in a fiscal year to prepare a schedule of expenditures of federal awards (SEFA) which reflects all federal-originated funds. Schools must be aware that any new funding source is potentially federal-originated and should develop processes to affirm from potential grantors whether any funding is partially or fully federally funded.

If you would like to hear more from Jeffrey Kowalczyk, join us at PICPA's School District Conference on June 3, 2021, where Jeffrey will be discussing COVID-19’s Impact on Grant Compliance and the Single Audit.

Jeffrey A. Kowalczyk is a partner at Barbacane, Thornton & Company LLP, specializing in audits of governmental and nonprofit organizations. In addition to his CPA licensure, he is a certified fraud examiner and certified government accounting professional. Kowalczyk is a member of the AICPA and PICPA, and a frequent speaker for various state and local conferences in Pennsylvania and Delaware.

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