Mismanagement and Misspending: CA Schools Risk Losing $160 Million in COVID-19 Stimulus

California school districts may have to return as much as $160 million in federal COVID-19 stimulus funds due to the slow rate of spending, a state audit found. The report released Tuesday morning, confirms an NBC Bay Area investigation earlier this month that found the majority of school COVID-19 money is still unspent.

• CA Schools Got $26 Billion for COVID-19, How Did Your District Spend It?

California schools received more than $20 billion to help educate students during the pandemic. However, if that money isn’t all used by 2025, education agencies will have to forfeit the remaining amount. Investigators with the state auditor want the California Department of Education to keep a closer eye on school spending and are concerned districts may not be able to ramp up due to supply chain shortages.  

“We put the statewide management of federal funds that were coming into our state (on the) high risk list because of the speed of how quickly these funds have to be spent,” state auditor chief of public affairs and quality assurance Margarita Fernandez told NBC Bay Area. “One of the big issues here is that the Department of Education is not providing enough oversight.”

The 65 page audit examined the California Department of Education’s management of those stimulus funds and issued two main criticisms: a lack of reporting by school districts and a lack of oversight by the California Department of Education.

An example in the report cited Hayward Unified School District’s use of $4 million in stimulus money that did not have any supporting documents to verify the money went toward COVID-19 related expenses.

“The federal government requires you to be able to support those funds and if you can't support them, then you have to return the funds,” Fernandez said.

A spokesperson for the district told NBC Bay Area in a statement that 65% of the money went to technology, hot spots, and software licenses. The remaining 35% went to fund staffing and professional development efforts for the transition between in-person/remote learning.

"We are continuing to work with the state on the audit. Some of the outstanding items had to do with expenditure reports that needed to wait until the closing of the financials last month.

"We are in communication with the state on the requests and there is mutual agreement to resolve these items by the end of the month," the district told NBC Bay Area.

The report also questioned $360,000 spent by Oakland Unified School District to purchase three commercial trucks and communication software calling the expenses “not reasonable or necessary to respond to the pandemic.”

A spokesperson for OUSD disagreed with the audit report’s characterization and told NBC Bay Area all OUSD COVID-19 dollars have been spent in compliance with guidance from the state. The district provided the following explanation for the purchase in an email to the Investigative Unit:

• The commercial vehicles we purchased were, and continue to be, used in response to the pandemic to transport food, PPE, and technology to schools for students and families in need because of the pandemic. In fact, prior to the trucks’ purchase, CDE staff provided the District with initial guidance that these truck purchases were an allowable use of the Coronavirus Relief Fund, but CDE later determined that the trucks needed to be funded with alternate COVID relief resources.
• The communications software program is what is called ParentSquare, which we adopted in OUSD starting last summer. This was to give the District a more robust ability to communicate important information - much of it COVID related - to our students, families, and staff. It also gave us the ability to do instantaneous Health Screenings at schools, for staff and students to use to verify that they don’t have COVID or COVID symptoms, and that they have not been exposed to someone with COVID.
• Based on CDE’s perspective, each of these expenditures would be allowed under different COVID resources, just not the Coronavirus Relief Fund which was the largest source of funding at the time.
• After working with CDE on the issue, OUSD replaced the $360,000 with money from another source of one-time COVID response funding. There is no need to repay any funds to the state, as in the end, that money was used to pay for items that qualify for the stated use.

Limited Resources for Oversight

At the time of the report, CDE only had two employees to keep an eye on spending by more than 1,500 school districts. State investigators say this contributed to the oversight concerns.

In a statement to the NBC Bay Area Investigative Unit, CDE said it agreed with some of the audit findings but disagreed about the monitoring. While CDE only reviewed funding for 1% of school districts, the agency contends those districts represent over 25% of the funds allocated to California schools.

This article has been updated to include responses from Hayward Unified School district and Oakland Unified School District.

If you have a tip for the Investigative Unit, email theunit@nbcbayarea.com or call 888-996-TIPS. Follow Candice on Facebook and Twitter at @CandiceNguyenTV, or send her an email at Candice.Nguyen@nbcuni.com