Budget & Finance

No, You Can’t Spend COVID Money on That: A Compliance Expert Explains the Rules

By Mark Lieberman — February 03, 2022 3 min read
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School districts have a lot of options for how to spend the emergency money they got from the federal government in 2020 and 2021. But there are limits to that flexibility, and some may have escaped district leaders’ attention.

The federal government dispensed $190 billion to schools in three rounds from March 2020 to March 2021. Districts with a high percentage of high-need students generally got more money per student than other districts. Schools must spend the first round by this September, but they have until 2024 to spend the most recent and largest set of funds.

These funds are falling on school budget officials during a time of abundant chaos, as schools try to mitigate the spread of COVID-19 and help students recover from the devastating effects of the pandemic on learning and mental health. (For more on the three sets of federal funds, check out this explainer I wrote with my colleague Andrew Ujifusa.)

Some observers of the funds argue that districts have too much leeway to spend the funds exactly how they want. But in fact, auditors will eventually examine districts’ spending, and they’ll be expecting districts to have carefully followed certain procedures.

Tiffany Kesslar, a federal grants compliance expert and a partner at the law firm Brustein & Manasevit, since 2006 has been helping schools navigate the complexities of federal funding laws, including the Every Student Succeeds Act and the Individuals with Disabilities Act. She and her colleague Madelaine Cleghorn, an associate at the firm, recently hosted a webinar walking districts through guidelines and procedures for spending federal relief funds.

Here are three things everyone in K-12 schools should know about how districts must deal with federal relief funds.

Everything needs a ‘tie to COVID’

Congress allocated these emergency funds as part of its response to the COVID-19 pandemic. Lawmakers expect districts to spend them on things that represent a response to the pandemic. That means district officials should be carefully documenting how each expenditure links to COVID-19—even if that link is tangential.

The federal government recently issued guidance to districts confirming that the funds can be spent on priorities that existed before the pandemic, as long as addressing those priorities also helps with recovery from the pandemic.

A few scattered examples of acceptable purchases, according to Kesslar and Cleghorn, include:

  • Touchless water fountains to prevent the spread of germs
  • Paying families to transport students to school
  • Offering incentives for staff and students to get vaccinated

And here are a few examples that probably wouldn’t pass muster with auditors because the “tie to COVID” isn’t clear:

  • Upgrading all of a school building’s lights to LED
  • Repaving school parking lots
  • Replacing a roof that will eventually need repair in five years

Contracts and construction projects are extra tricky

Many school districts are looking to use the funds to enter into contracts with providers of transportation, technology, construction, mental health and nursing staff, and even substitute teachers. But districts should be wary of contracts that expire after the deadline for spending the funds, Kesslar said.

In general, the funds are designed for purchases that bear fruit during the grant period. A contract that starts now but ends in December 2025 doesn’t fulfill that requirement. But, she said, districts likely have a few months of leeway—a contract that ends in October or November 2024, for instance, is safer than a contract that ends in early 2025.

Another note: Construction projects using COVID-19 relief funds require written approval from the state before they proceed.

Schools must actively try to find cheaper solutions to their problems.

Districts have wide latitude to spend the funds how they see fit. So far, the funds have gone to a wide range of priorities depending on a district’s current and future needs.

That said, auditors will expect districts to demonstrate due diligence on ensuring that they’re making prudent spending decisions. Administrators should ask questions like: Does it make more sense to purchase a fleet of school buses, lease them, or offer travel vouchers to families? Should a broken window be replaced or would repairing it be sufficient?

These questions have more than one right answer, as long as districts document that they’re asking the questions in the first place. With the broken window example, “you don’t have to go over the moon to repair an existing one if it’s super impracticable,” but you do have to show that you’ve thought about it, Kesslar said.

The below table shows how much emergency relief funding each school district got from the federal government.

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