State Auditor Issues High-Risk Reports on Federal COVID-19 Funding to CDE, BSCC

This week, California State Auditor Elaine Howle issued two reports relative to state agency and departmental oversight of federal COVID-19 funds awarded to the California Department of Education (CDE) and the Board of State and Community Corrections (BSCC). The reports are part of the state’s high-risk audit program, as determined by Howle. These reports are detailed below:

CDE Oversight of Federal COVID-19 Funds

The State Auditor reviewed CDE’s oversight of the Elementary and Secondary School Emergency Relief Fund (ESSER) and the Governor’s Emergency Education Relief Fund (GEER), which provided more than $24 billion to help mitigate the effects of the pandemic and enable the safe reopening of schools statewide. Local educational agencies (LEAs) must spend their first allocations of ESSER and GEER funds by January 2023 and subsequent allocations by January 2024 and January 2025. Any unspent funds after these deadlines will revert to the federal government.

According to Auditor Howle, CDE does not have the information necessary to oversee LEAs’ use of funds to meet educational and safety needs of students because LEAs are not consistently reporting spending data to the state. Further, Howle determined CDE has not taken a “strong leadership role” in ensuring that LEAs are effectively and promptly using ESSER and GEER funds. As of June 30, 2021, nearly 90 LEAs had spent less than 20 percent of their initial ESSER allocations and more than 140 had spent less than 20 percent of their initial GEER allocations.

The Auditor’s Office projects that LEAs will collectively have nearly $160 million in unspent initial ESSER and GEER allocations, which would be reverted to the federal government. Howle additionally notes that CDE has monitored less than one percent of the LEAs that received additional funds during FY 2020-21.

The Auditor sets forth a series of recommendations for CDE and LEAs to ensure the full utilization of federal funds. CDE is recommended to continue tracking the number of LEAs that fail to submit quarterly spending reports and to seek additional resources and staffing to ensure all LEAs submit required reports. CDE is also recommended to regularly assess LEAs’ spending data to identify LEAs in jeopardy of losing funding and strengthen its oversight activities of LEAs that have received ESSER and GEER funds.

CDE agreed with some of Auditor Howle’s recommendations, though it disagreed with recommendations aimed at strengthening monitoring efforts.

The full report on federal funding received by CDE is available here.

BSCC Emergency Supplemental Funds

Auditor Howle additionally conducted a review of the BSCC’s management of the federal Coronavirus Emergency Supplemental Funding (CESF) intended to prevent, prepare for, and respond to the pandemic in correctional settings. BSCC received $59 million in federal funding to be allocated to state, county, city, and tribal agencies.

According to Auditor Howle, BSCC significantly reduced the amount of CESF funds that were available to assist local governments, specifically counties, impacted by the pandemic. BSCC did not use a formula, as promised to the U.S. Department of Justice, to allocate $22 million of the $59 million received to the California Department of Corrections and Rehabilitation (CDCR). BSCC did not require CDCR to justify its specific needs or associated costs in responding to COVID-19. BSCC used a population-based formula for allocating remaining CESF funds instead of identifying jurisdictions most impacted by COVID-19, and “it unnecessarily delayed providing CESF funds to counties and deprived them of these funds during the height of the pandemic.” Howle additionally determined BSCC’s grant requirements were overly burdensome and more stringent than federal requirements, deterring some counties from applying for any of the funds.

Auditor Howle set forth a series of recommendations for BSCC to ensure that it efficiently and effectively administers state and federal grants, including any future emergency funds it might receive. BSCC is recommended to revise its grant policies and procedures by December 2021 and immediately develop and implement a plan to monitor the use of CESF funds.

BSCC acknowledged it takes “audit report findings and recommendations seriously,” but disagreed with the Auditor’s findings and criticized some of the Auditor’s methodologies. BSCC also generally disagreed with the recommendation to revise its grant policies and procedures and did not address other recommendations provided by the Auditor’s Office.

The full report on federal funding received by BSCC is available here.