Issues found with West Virginia public school COVID fund spending

Members of the Joint Standing Committee on Government Organization heard a report Monday from the Legislature’s Performance Evaluation and Research Division (PERD) regarding the spending of federal dollars made available between 2020 and 2021 during the COVID-19 pandemic.

Legislative auditors found numerous issues with how school systems spent millions in available COVID-19 dollars, including allegedly misusing funds and doing business with vendors not registered in West Virginia. Auditors also found that the state Department of Education was unable to adequately monitor misuse of COVID dollars.

West Virginia received more than $1.2 billion between three phases of Elementary and Secondary School Emergency Relief (ESSER) funds between 2020 and 2021 through the Coronavirus Aid Relief, and Economic Security (CARES) Act, the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act and the American Rescue Plan Act (ARPA).

For all of those dollars, the state Department of Education’s Office of Federal Programs (OFP) had a total of three employees to do cyclic monitoring of ESSER expenditures by school systems once their fiscal year spending was completed.

While county school systems turn in full reports on spending, OFP staff review only a sample of transactions.

“The fiscal monitoring system lacks appropriate risk assessment,” said Brandon Burton, a research manager with the Legislative Auditor’s Office. “The frequency of improper purchasing procedures and other ESSER grant violations warranted a reassessment of risk and adjustment to the system’s capacity and structure. The current monitoring process lacks appropriate structure due to a lack of written policies and procedures for the cyclical monitoring process.”

According to a review of OFP’s monitoring, 37 county school systems out of 54 monitored were found to be non-compliant for not following proper purchasing procedures, spending money on unallowable expenses, or exceeding indirect cost rates. As a result, more than $457,000 has been recovered from counties from the Department of Education.

According to PERD’s review, of the 29 counties that OFP deemed were compliant, legislative auditors found seven transactions — or $285,000 in spending — was non-compliant. More than $2.1 million of COVID funds were spent with vendors not registered with the West Virginia Secretary of State’s Office.

OFP has completed its cyclical monitoring of county ESSER I funds and has nearly completed its review of ESSER II funds. ESSER III funds from the American Rescue Plan are now being reviewed. According to legislative auditors, preliminary findings are turning up similar issues found with earlier COVID funding phases.

The Department of Education and county school systems have until September 2024 to spend their remaining COVID funds. The most recent phase — ESSER III — comes from the $1.9 trillion American Rescue Plan Act, which included $81 billion in ESSER Funds

West Virginia was awarded $762 million in ESSER III funds in March 2021. The U.S. Department of Education approved the remainder of West Virginia’s ESSER III plan on July 15, 2021, awarding the state the remaining $252.3 million. The first tranche of $597.6 million was awarded on March 24, 2021.

PERD staff recommended that the Department of Education increase its monitoring and internal control capacity in OFP, including using available ARPA dollars to hire temporary staff to assist in monitoring. In a written response to the report, the department said it was not feasible to either transfer additional staff to OFP or use COVID dollars to hire temporary staff, with “just ten months” remaining of ARPA spending authority.

Two county school systems have already been taken control of by the Department of Education due in part to improper use of COVID dollars, including in Upshur County. Burton said further reviews could result in additional county takeovers.

“The examples of Upshur County is indicative that other special circumstance reviews could potentially occur going forward as the OFP continues to monitor the final rounds of federal COVID grant purchases over the next several months,” Burton said.

The Board of Education voted earlier this year to place Upshur County Schools under department authority after declaring a state of emergency. A department review team found hundreds of thousands of dollars of misused federal funds, including purchases of passes to the State Wildlife Center and family pool passes.

The state board voted in 2022 to intervene in Logan County Schools due to multiple issues, including spending $19,500 as part of a larger $500,000 contract with Heritage Educational Services for virtual learning services. The Logan County Board of Education entered into a no-bid contract with Heritage Educational that included no written contract. Heritage Educational provides programs for Christian school and home school families.

Melanie Purkey, the federal programs officers for the Department of Education, explained that her office monitors the federal grant spending by counties once a fiscal year closes and after the money has already been spent. She blamed the chaos in the early days of the COVID-19 pandemic for driving bad spending decisions, coupled with receiving more funds later on than the schools were used to receiving.

“I think school systems were in a panic.” Purkey said. “If we found a vendor who can supply this, we’re going to buy it because people all over the country were having trouble buying masks, hand sanitizers, even computers.

“Then the second round came in the spring of ‘21 … we’re talking about three times, a little more than four times what the original was,” Purkey continued. “That’s when we realized that now we’ve purchased the computers and we’re moving out of needing masks and so forth. So now we have some more substantial money and we increased the monitoring.”

As the monitoring entity on behalf of the federal government, the state Department of Education can recoup the ESSER funds from counties if unallowable expenditures are found. Those funds can be given back to a county once they make allowable purchases.

“We basically recoup the funds because they spend it on something that was not allowable, but it goes back into their account so they can get access to use it again on something that is allowable,” Purkey said. “So from the federal standpoint, their issue is if it’s not allowable, you can’t spend the money. We’re going to get it back. If you didn’t follow procurement, then we’re going to do some corrective action and work with you to fix your procurement problems.”

Read the full report here.