The Office of Management and Budget (OMB) published an addendum to the 2021 Compliance Supplement last Friday that addresses audit requirements for education funds under the American Rescue Plan Act (ARP). The initial version of the supplement released earlier this year discussed requirements for stimulus funds provided under the first two rounds, but did not include directions related to ARP.
For all Education Stabilization Fund allocations, auditors are directed to focus on activities allowed or unallowed, allowable costs/cost principles, cash management, equipment/real property management, reporting, subrecipient monitoring, and special tests and provisions.
Regarding use of Elementary and Secondary School Emergency Relief funds (ESSER) under all three stimulus bills, the addendum clarifies that grantees can use ESSER funds “to support a very wide range of activities, including activities indirectly linked to the impact of COVID-19, as outlined in the ED Volume 2 COVID Handbook… provided such uses are consistent with statutory requirements and the Uniform Guidance in 2 CFR Part 200.” While activities paid for with ESSER funds do not have to be directly linked to the pandemic, such as COVID-19 tests or personal protective equipment, indirectly-linked costs must still be tied to the pandemic in some way. Examples of indirectly-linked costs include reengagement of students with chronic absenteeism, intensive student tutoring, and mental health services for students and staff.
The addendum also addresses the question of maintaining time and effort for employees working on stimulus-funded programs. The addendum states that employees that are splitting time between activities that are allowable under ESSER and the Governor’s Emergency Education Relief Fund (GEER) and activities that are not allowable under those programs are required to maintain time and effort. However, the addendum suggests that there would be limited circumstances in which an employee would be working on activities that are unallowable under ESSER or GEER since grantees can use ESSER and GEER funds for “activities that are necessary to maintain the operation of and continuity of services in [an LEA] and continuing to employ existing staff of the [LEA].” This language continues to muddy the water on maintaining time and effort for employees working on stimulus-funded programs, failing to resolve conflicting statements in the 2020 and 2021 Compliance supplements on the necessity of time and effort records when using ESSER funds.
In addition, the addendum outlines reporting requirements and requirements for purchasing equipment or real property. The supplement addendum also includes several special tests of compliance for auditors to perform including the wage rate requirements for construction, participation of private school students under ESSER I and GEER I, and prioritizing services or assistance to non-public schools under the Coronavirus Response and Relief Supplemental Appropriations Act, Emergency Assistance for Non-Public Schools Program.
The full compliance supplement addendum for education stimulus funds is available here.
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