MSDE presents federal grant spending, local reserve picture and timeline for school-level financial reporting

Donna Gunning of the Maryland Department of Education told the state board that the department is providing a more detailed briefing than in prior years on federal grant programs, local fund balances and a new financial reporting system intended to show school-level spending.

“This level of financial data is the first time that we've been able to get briefed on this level of financial data,” Donna Gunning said, introducing the presentations. She reported, “To date, 75% of the ARP ESSER 3 funds have been spent of the $441,000,000 balance,” and added that 47% of that total is already included in late-liquidation requests while the remaining amounts must be liquidated by December 2024.

Why it matters: board members pressed for clarity because the state is approaching the end of several federal spending windows and local budgets are tightening. The briefing covered ESSER and ARP ESSER funds, Title I and other Title programs, IDEA special-education funding, Perkins career-and-technical education funds, and local education agency (LEA) fund balances.

Allocation error corrected: MSDE told the board a U.S. Department of Education (USED) monitoring visit discovered an error in MSDE’s Title I allocation calculation. MSDE said it had used an incorrect order of operations and that the largest effect was an inflated allocation to a so-called “seed school.” According to MSDE, staff worked with USED in June and July to recalculate and the current process is approved by USED. “The amount of funds that were being allocated to the seed school was too high,” Gunning said, describing the methodological change.

Monitoring, late liquidations and follow-ups: board members asked whether MSDE expects challenges meeting liquidation deadlines and whether MSDE could provide more granular reporting on what LEAs purchased. MSDE said it does not anticipate widespread difficulty but identified one LEA as having an especially large late-liquidation request and said it is working closely with that district. MSDE plans an October outreach to LEAs to confirm they will have invoices and materials in time, a January/February update after additional liquidations, and a February memo tied to the governor’s allowance that will include further spending status.

Local fund balances and authority limits: MSDE clarified assigned (restricted) versus unassigned fund balances and said local boards and county governments primarily control local reserves. Board members asked what options the state has if an LEA appears to be hoarding unassigned reserves; MSDE staff said oversight is limited, though the state and department can review reports and, in some circumstances, withhold funds or pursue statutory remedies, and MSDE counsel will provide a written summary of those legal authorities.

Financial reporting system and public access: MSDE described a financial reporting system procured in 2023 (a PowerSchool implementation) designed to align LEA charts of accounts to the state’s chart and report school-level spending by program. MSDE said 17 of 24 LEAs have fully reported FY24 data and are reporting FY25 monthly; remaining LEAs face coding and data-quality issues that MSDE is helping to resolve. “The intent is for the public to have access to the data in this system,” Gunning said, adding that FY25 will serve as a baseline year and MSDE plans to delay full public access until FY26 so it can fix issues and prepare communications and multilingual guidance.

Board requests and next steps: board members asked for more visible expenditure detail (actual dollar amounts by category) in future memos and for additional information about Title III program outcomes and uses. MSDE described ongoing technical assistance (weekly CFO calls and program-level support), the plan to check late-liquidation requests in October, and an aim to resolve negative-balance cleanup by December though staff turnover could extend that timeline. The board asked MSDE to provide a legal memo on the board’s authorities over local LEA fund balances; MSDE agreed.

Procedural close: the committee approved a motion to adjourn (moved by Mr. Greer; seconded by Ms. Chang) and the chair closed the meeting after members voiced approval.

What remains uncertain: MSDE said it will provide more detailed expenditure reporting in January/February and counsel will clarify oversight authorities; the public timing for full school-level disclosure remains FY26 contingent on data fixes and communications preparation.