Kelly Smith, Ed. D.,
Baker Tilly Municipal Advisors

On March 11, President Biden signed the $1.9 trillion American Rescue Plan Act of 2021 (ARP). The plan eclipses previous COVID-19 relief packages in terms of both funding dollars and reach for state and local governments, including school districts – with more than $350 billion in direct funding to put toward recovery. While the ARP brings new opportunities for recipients, it will also involve additional policy considerations and compliance requirements.

The ARP includes additional funding for Minnesota school districts through the Elementary and Secondary School Emergency Relief (ESSER) Fund, referred to as ESSER III. ESSER III comes on the heels of other recent federal funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act (ESSER I), which provided $140 million and the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA), which provided $54.3 billion for school districts as part of the ESSER II fund. The ESSER III funding estimate for Minnesota is currently $1.32 billion. Districts should prioritize and strategize spending for each of the funding sources based on the obligated spending deadline for each round of funding. The deadlines currently in place are:

  • 30, 2022 for ESSER I
  • 30, 2023 for ESSER II
  • 30, 2024 for ESSER III

An important factor to keep in mind when determining the district’s spending plan is that all relief funding from the federal government through ESSER I, II and III should be viewed as one-time distributions. Consider the timing requirements and eligible uses for each funding source as you plan expenditures:

  • ESSER I funding, with the shorter duration of when funds can be expended, may focus on the costs aligned with preparing for and preventing COVID-19
  • ESSER II funding, with expanded use and timing allowances, may have more of an academic and/or operational focus. For example, eligible uses for ESSER II include addressing learning loss, preparing schools for reopening and testing, and repairing or upgrading infrastructure

The more than three-year out ESSER III spending deadline allows districts to take a more strategic approach to leverage funding for student, faculty, staff and school needs. Districts have a significant amount of time to effectively plan and invest for expenditures that will benefit the most students while avoiding spending tails that would need to be addressed in the future.

The following is a helpful checklist to assist school districts in the strategic planning process as you prepare to receive ESSER III funding:

  • Understand your current accounting structure and internal controls to be ready to receive, segregate and track the funds
  • Review all of the eligible uses for your direct funding allocation before making any decisions
  • Investigate alternative funding provisions available from other federal agencies for specific needs and projects
  • Identify key district constituents who will/should benefit from the funds
  • Develop and communicate a plan for stakeholder involvement in the strategic funding deployment process, considering diversity and inclusion among participants
  • Formulate a strategic funding plan that establishes district priorities and aligns with eligible uses of both the direct allocations and potential additional funding from other federal agencies
  • Create an investment plan for the funding
  • Examine the funding compliance requirements, including potential single audit requirement that may affect your district due to the increased level of federal funding

School district leaders, teachers, students and parents have responded very positively to the circumstances determined by this pandemic and have worked tirelessly to provide strong educational programs in spite of the changing learning environments. While COVID-19 has put tremendous pressures on our education systems across the country, the federal dollars flowing into each school district offer an opportunity to provide strategic growth and deliver enhanced learning opportunities within every school district.

The mission of Baker Tilly’s public sector practice is to help build strong communities and school districts. We continue to monitor the latest ARP information to help organizations navigate through the complex compliance requirements and strategize how to maximize your funding sources. Please visit our Public Sector American Rescue Plan Resource Center for the latest information and guidance.

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