Report: Department of Education’s management of adequacy funds are inadequate
A state report released yesterday found the state Department of Education lacks internal controls over the management of $940 million in adequacy aid each year.
Every year, the state is required to provide districts with about $3,450 in funding per pupil. Each district’s annual aid package is based on average enrollment numbers from the previous year. The purpose of the report, performed by the Office of Legislative Budget Assistant, was to evaluate whether the Department of Education has appropriate procedures in place to monitor and manage this money, which eats up a large portion of the state budget.
The report found that the Department of Education doesn’t have clearly documented policies regarding aid calculation and distribution, doesn’t adequately verify school-provided data, doesn’t collect enough information on specific types of aid, has not established appropriate controls over its IT systems, lacks internal checks to make sure data is accurate and relies too much on consultants.
“The Department has not fully developed, formalized, and documented its control processes to reasonably ensure the aid program is operated efficiently and effectively, its financial operations are reliably reported, and that it is in compliance with applicable state law,” the report says.
Despite these critical findings, the report said none of these observations led to incorrect funding in fiscal year 2013. The Department of Education agreed with each of the findings and listed specific actions it is taking to fix some of them, including hiring an internal auditor.
School districts report enrollment data to the Department of Education that include average daily membership and other student information. The state then uses those averages to calculate aid, which it dispenses in four intervals throughout the school year.
In the audit, the Office of Legislative Budget Assistant said that the Department of Education relies too heavily on the assumption that districts are providing accurate data. In 2013, officials did no on-site audits or reviews of data, and there aren’t any procedures to verify data that’s submitted, the audit found. In response, Department of Education officials said they would need to hire more staff to complete more thorough reviews.
This year, a change in state law requires districts to use enrollment numbers from the previous year, rather than three years before. The audit noted this could lead to more mistakes and lessens the window of time to make corrections, which could lead to more adjustments later on.
The department’s IT system has its own data-collection issues. In fiscal years 2012 and 2013, it left out high school students when calculating the number of English language learners in a district, which understated necessary aid by $519,000. Each district ultimately received the right amount of money through other mechanisms in the adequacy aid formula.
The audit also found that the department isn’t requiring districts to report on the use of extra aid that schools get based on the number of students on free and reduced lunch, in special education programs and other factors. The audit says state law requires districts to report on the use of those funds. The department said it had not been receiving those reports because portions of the state law no longer existed, and said it would work with the Legislature to revise or repeal the specific law.
A lack of documentation of policies was noted multiple times throughout the audit. The auditors were also concerned by the department’s heavy reliance on consultants. Coupled with the lack of formal policies, this could cause a problem if the department had to rely on new personnel to carry out adequacy aid calculations, they said.
“Placing so much responsibility with a contractor increased the department’s risk that it will not have the necessary in-house expertise to properly manage and operate the program should that ever become necessary,” the audit says.
In response, the department again stated that it lacked state funding to hire people for this job.
“Although the department has paid out the appropriate adequacy funding, the department recognizes the need for additional staff to improve the rigor of controls, policies and procedures,” officials wrote in response.
Aside from problems with internal controls, the department hit a snag with adequacy funding earlier this year that was not referenced specifically in the audit. A misinterpretation of the funding formula led to more than 70 cities and towns receiving less money than they were owed. In response, the Legislature had to quickly pass a bill this spring to restore aid.
After this misunderstanding, Department of Education officials met with the Office of Legislative Budget Assistant, the Department of Revenue Administration, the governor’s office and the attorney general’s office to discuss the proper policies. These meetings will likely continue in future years to ensure schools get accurate information, Deputy Education Commissioner Paul Leather said.
“Now we are meeting face to face with various groups prior to putting out information about projections,” he said.
(Kathleen Ronayne can be reached at 369-3390 or firstname.lastname@example.org or on Twitter @kronayne.)