District of Columbia Public Education: Agencies Have Enhanced Internal Controls Over Federal Payments for School Improvement, But More Consistent Monitoring Needed
Published: 2010-11-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Between fiscal years 2004 and 2009, Congress appropriated nearly $190 million in federal payments for school improvement to the District of Columbia (D.C.). This includes $85 million to the state education office--currently the Office of the State Superintendent of Education (OSSE)--to expand public charter schools and $105 million to D.C. Public Schools (DCPS) to improve education in public schools. Over the years, GAO and others have identified challenges that DCPS and OSSE face in managing federal monies. This report identifies, on the basis of available information, activities for which OSSE and DCPS used federal payments between 2004 and 2009 and describes how OSSE and DCPS monitored grant and contract recipients, respectively. GAO reviewed expenditure data and interviewed and collected documentation from OSSE and DCPS, among others. GAO reviewed all available grants awarded by OSSE in 2008 and 2009 and 14 of the largest contracts awarded by DCPS during that time.
section_title: What GAO Found
paragraphs: Approximately 77 percent of federal payments for public charter school improvement in D.C. have been awarded for facility costs, including acquiring, renovating, constructing, or leasing facilities. The funding for facilities has mainly been disbursed through direct loans to schools and grants to expand schools in certain neighborhoods as part of a city improvement initiative. OSSE used the remaining funds for initiatives intended to improve the quality of education through efforts such as academic enrichment and supplemental education activities (provided beyond the normal school day), as well as a variety of other charter school expenditures. OSSE officials reported having established some policies and procedures for monitoring its grant recipients, but, with one exception, these were not documented. Furthermore, the procedures as explained to us by OSSE were not consistently followed. OSSE did create a list of information that program staff are to acquire from grantees. However, the grant files we reviewed often lacked evidence that staff collected this information or performed other monitoring activities. Specifically, most of the files did not include all the narrative and financial reports as required by OSSE in many of their grant agreements. Also, few included any record indicating that staff had followed-up to obtain such documents. According to the expenditure data D.C. provided, DCPS has used federal payments for a variety of purposes--ranging from summer school programs to teacher incentive pay--but available information prior to 2009 does not provide enough details for GAO to fully identify specific activities funded with federal payments. In 2009, DCPS used $40 million primarily for teacher incentive pay, salaries for staff such as physical education and art teachers at underserved schools, and supplemental education activities such as summer school. Expenditure data show that between 2004 and 2008, DCPS funded a variety of programs such as supplemental education and professional development; however, DCPS could not locate information that may have been created on specific activities funded with federal payments during this time. For example, about half of these expenditures were for a "literacy improvement program," but DCPS was unable to provide information to describe the program's goals, objectives, activities, or outcomes. DCPS has policies on responsibilities for monitoring contractor performance; however, these policies do not cover how to do the monitoring and they were not consistently followed. According to program office staff, they have some flexibility in how they implement their monitoring responsibilities and have employed a variety of methods to monitor contractor performance. Of the contract files we reviewed, we found that several lacked any evidence of a performance evaluation by a program officer, or any subsequent review. Notes added to several of the files indicated a program officer had left before the end of the contract term; however, we found no indication that these contracts had been reassigned. Furthermore, the contracting office could not locate 3 of the 17 files we requested for our review.
section_title: What GAO Recommends
paragraphs: To improve internal controls, GAO recommends that the Mayor direct OSSE and DCPS to establish and implement written policies and procedures for monitoring use of federal payments for school improvement, and DCPS to maintain contract files and other expenditure documentation. The District agreed with GAO's recommendations and provided additional information on steps taken to improve internal controls.

section_title: Letter
paragraphs: The District of Columbia’s (D.C. or the District) public school system has  had long-standing problems related to overall management, student  academic performance, and the condition of school facilities. Between  fiscal years 2004 and 2009, Congress appropriated approximately $190  million in federal payments directly to the D.C. public school system to  improve education. In those years, $85 million in federal payments went  to the state education office—currently the Office of the State  Superintendent of Education (OSSE)—to expand quality public charter  schools under its jurisdiction. Another $105 million was provided to D.C.  Public Schools (DCPS) to improve education in the traditional public  schools under its jurisdiction. Congress provides D.C. with direct financial  assistance in the form of “federal payments” for a number of programs and  initiatives. Federal payments for school improvement are different from  most federal education funds in that they are appropriated directly to  OSSE and DCPS and do not go through the U.S. Department of Education.  While an examination of how these particular federal payments are  managed has not been conducted, over the years GAO and others have  identified deficiencies in both OSSE and DCPS management of federal  monies. OSSE continues to be designated as a “high-risk” grantee by the  U.S. Department of Education for its poor grant management, and audits  of DCPS continue to identify systemic problems in its internal controls.
To learn how the state education office and DCPS have used these federal  payments for school improvement, Congress asked GAO to: (1) identify  the activities for which OSSE has spent federal payments since 2004, (2)  determine how OSSE currently monitors grant recipients, (3) identify the  activities for which DCPS has spent federal payments since 2004, and (4)  determine how DCPS currently monitors contract recipients.
To perform this work, we gathered and analyzed expenditure data,  financial reports, and other documentation provided by DCPS and OSSE  to identify the activities these agencies funded with federal payments  between 2004 and 2009. We analyzed existing information to describe the  activities on which federal payments were used, but did not evaluate the  impact or outcomes of the projects that OSSE and DCPS funded. We  analyzed expenditure data from D.C.’s financial management system— System of Accounting and Reporting (SOAR)—and D.C.’s procurement  data system—Procurement Automated Support System (PASS). We  reviewed the data reliability processes D.C. has in place for these systems  and interviewed staff at OSSE, DCPS, and the Office of the Chief Financial  Officer—which maintains these systems—to understand them, as well as  reviewed existing information about the data and the respective systems  that produced them. We found the data to be sufficiently reliable for our  purposes. We evaluated OSSE and DCPS monitoring of federal payment  recipients according to established federal practices and D.C.’s own  policies. Because OSSE distributed the majority of federal payments  through grants to public charter schools or other entities, we assessed  OSSE’s monitoring through file reviews. Specifically, we examined 30  grant files for recipients of federal payments for 2008 and 2009 as  identified by OSSE. DCPS has distributed the majority of its federal  payment funds through contracts; therefore, we also conducted a review  of DCPS’ contract files. However, because DCPS indicated that it would  have difficulty compiling all contract files for 2008 and 2009, we selected a  nongeneralizable sample of 17 files, of which we reviewed 14 because  DCPS could not locate 3 files. The 17 files were the largest of the contracts  awarded during this time, accounting for more than one-half of the  contracts funded with federal payments for these years. We selected these  two years to understand how DCPS and OSSE currently function with  regard to federal payments given the new administration of DCPS and  OSSE since 2007.
We conducted this performance audit from October 2009 through  November 2010 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives. For more  information on our scope and methodology, see appendix I.
subsections: section_title: Background
paragraphs: In school year 2009-2010, the District’s school system enrolled more than  72,300 students and was comprised of 58 local educational agencies  (LEA). These included DCPS, the largest LEA with 129 schools, and 57  public charter schools. D.C.’s public charter schools act in most respects  as independent and autonomous LEAs, some of which consist of more  than one school location. The number of children attending public charter  schools in the District has increased in recent years, with about 38 percent  of the District’s children attending these schools in the 2009-2010 school  year. D.C. charter schools are independent of traditional public schools  and are authorized by the Public Charter School Board (PCSB), whose  members are appointed by the District Mayor. The PCSB evaluates the  schools’ academic performance and fiscal management, as well as their  adherence to local and federal education laws, and has the authority to  grant and revoke a school’s charter. D.C. public charter schools must  independently lease or purchase school buildings for their use and, as  previously reported by GAO, have consistently encountered problems  obtaining cost effective and appropriate facilities.
The D.C. Council passed the Public Education Reform Amendment Act of  2007 (Reform Act) in response to persistent challenges facing the school  system. This act significantly altered the governance of the D.C. public  schools by transferring the day-to-day management of the public schools  from the Board of Education to the Mayor. It also created OSSE to serve in  the same capacity as a state education agency (SEA). Effective October 1,  2007, DCPS transitioned its responsibilities for all SEA functions to OSSE.  OSSE now fulfills the functions of an SEA under federal law, including  grant-making, oversight, and maintaining standards, assessments, and  federal accountability requirements for elementary and secondary  education. OSSE performs these functions for both traditional public and  public charter schools throughout D.C. (see figure 1).
subsections: section_title: Federal Payments
paragraphs: Both the President and Congress may propose financial assistance to the  District in the form of special federal payments in support of specific  activities or priorities. Upon being appropriated by Congress, federal  payments are provided directly to D.C. agencies from the federal  government and are subject to the requirements of the statutory  appropriations language. Congress appropriated federal payments for  school improvement in the District every fiscal year from 2004 to 2009 to  the state education office (now OSSE) to expand D.C. public charter  schools and to DCPS to improve public education in the District. During  these years, about $190 million in federal payments were provided for  these purposes (see table 1).
With the exception of 2005, Congress has generally not included statutory  language that offers additional specificity on the use of funds.  Occasionally, committee reports accompanying the D.C. appropriations  acts have stated the committee’s instructions as to the purpose and  manner in which the funds should be used. These reports generally list  projects and designate amounts for the expansion and improvement of  public charter schools; committee reports have not consistently done this  for payments to DCPS. The statutory language generally has not  specified how or whether these offices should report on the use of the  funds.
subsections: section_title: OSSE and DCPS Federa Payment Management
paragraphs: The District’s Office of the Chief Financial Officer (OCFO) uses SOAR t budget and disburse federal payment funds in accordance with annual  spending plans created by OSSE and DCPS. These spending plans outline  how the agencies will use the funds, including the amounts to be available for specific initiatives or program offices. The agencies’ financial officers  report to the District’s OCFO and monitor the financial activities of thei respective agencies. Within OSSE, the Office of Public Charter Schoo Financing and Support (OPCSFS), created in 2003, manages several  federally funded programs that provide funding to charter schools for  facility financing and grant programs to improve public charter school quality, including federal payments for these purposes. It also provides est  technical assistance for grants and supports the dissemination of b practices and innovation at D.C. public charter schools. At DCPS,  priorities regarding the use of federal payments are established and managed through the Chancellor’s office, which allocates funds to  applicable program offices that implement various academic initiativ For those payments that fund contracts, program offices coordinate  procurement activities with the contracting office which has the authori to enter into, administer, and terminate contracts. The program office monitor an awarded.  es. d document contractor performance once the contract is  According to annual independent audits, OSSE and DCPS have  consistently had problems managing grants and contracts. These audits  have identified, among other things, internal control deficiencies related to federal grants management at OSSE and procurement practices at DCPS.  For example, the District’s fiscal year 2008 Single Audit found that OS SE  had a total of 24 material weaknesses regarding internal control over  compliance with federal grant program requirements and cash  management. Also, an independent review by BDO Seidman, LLP, of  DCPS’s internal controls during that time reported weaknesses related to  insufficient procurement documentation and grants management.  According to D.C.’s independent auditor, because its reviews likely  included federal payment expenditures, their findings could also be  relevant to these payments. Because of these and other findings, the U.S.  Department of Education designated OSSE as a “high risk” grantee in  2007, when OSSE took over responsibility for the District’s education  programs. While OSSE reports having taken corrective actions to address  many of the longstanding financial, grants management, and program  compliance issues that have plagued the D.C. public school system, the  U.S. Department of Education has maintained a high risk designation for  OSSE.
section_title: OSSE Used Federal Payments Primarily to Finance Charter School Facilities
paragraphs: Of the nearly $85 million in federal payment funds designated by Congress  for the District’s public charter schools, OSSE has used approximately 77  percent—about $65 million—of these payments to help finance charter  school facilities (see figure 2). OSSE has allocated approximately $17  million for other initiatives to improve the quality of public charter school  education, such as supplemental education (e.g. a college preparatory  program that included summer enrichment programs and standardized  test preparation), and for other activities to address public charter school  needs. OSSE also used nearly $1.5 million for administrative purposes and  the remaining funds on other activities that included a truancy center and  data collection efforts.
subsections: section_title: Facilities Financing
paragraphs: OSSE has used roughly $65 million of federal payments to award more  than 80 grants and loans to help public charter schools build, improve,  lease, or purchase facilities (see table 2). According to OSSE, public  charter schools often face challenges in funding facilities-related projects.  Despite receiving an annual per pupil facility allowance to help pay for  rent or mortgage and other facilities’ costs, public charter schools often  need to supplement this with other sources of funding. Schools frequently  need additional financing to purchase, renovate, or build facilities; to  explore facility and financing options; and to make facility improvements.
OSSE has funded various grants to not only improve school facilities but  to also simultaneously meet other District needs such as creating  community partnerships, revitalizing neighborhoods, and promoting the  use of public facilities. The facilities projects that grantees, such as charter  schools and nonprofit organizations, undertook range from building new  campuses to conducting overdue maintenance on heating and cooling  systems to updating security equipment and technology systems. For  example, a public charter school that is a public facilities grantee used  funds to help finance renovations and upgrades of a former D.C. public  school to expand the number of students the school could serve. Among  other things, the grantee updated mechanical, electrical, and plumbing  systems; repaired roofing; replaced windows; and constructed a new  gymnasium. Another public charter school that is a City Build grantee,  received funds from OSSE to help build new classrooms so that it could  expand the grade-levels that it serves, build vocational classrooms such as  a barber shop, and create staff offices.
section_title: Quality School Initiatives and Unmet Needs
paragraphs: OSSE allocated almost $17 million to award a range of grants on quality  school initiatives or unmet needs (see table 3). These projects cut across  several areas focused on supplemental education activities—which are  activities that are provided in addition to those that occur during the  course of the typical school day—and activities conducted during the  school day to enrich students’ instruction. For example, between 2005 and  2008, OSSE awarded 41 incentive award grants to help schools enhance,  improve, or implement an innovative program that would improve student  learning and achievement or to start or expand their physical education  programs. Some of the projects that schools undertook with this grant  included the expansion of a reading buddies literacy volunteer program, a  string instrument music program, and several physical education  initiatives to address obesity. OSSE has also funded grants to help  students prepare for and improve their access to college. For example, as  directed in the conference report accompanying the District’s 2005  appropriations act, OSSE provided funding to the Educational  Advancement Alliance to implement a college preparatory program. This  program aimed to assist 9th through 12th graders with course enrollment,  precollege advising, financial aid counseling, test preparation, college  application completion, and career exploration and leadership  development.
section_title: Administrative and Other Areas
paragraphs: Between 2004 and 2009, OSSE spent about $2.5 million to administer  federal payment programs and undertake other projects. Specifically,  OSSE allocated about $1.5 million for administration of federal payment  programs, according to data provided by OSSE. OSSE funded several  other projects such as a review of Medicaid billing policies and potential  practices to help ensure that public charter schools received appropriate  Medicaid reimbursement. OSSE also funded a data collection and analysis  project to review public charter school data collection systems, coordinate  data collection to ensure the systems are compatible with the entities that  need to use them (e.g., the LEA, SEA, and charter school authorizers), and  develop assessments to track student performance.
section_title: OSSE Conducts Monitoring But Policies and Procedures Not Fully Documented
paragraphs: According to OSSE officials, OSSE employs a range of activities to  monitor public charter schools and other entities that receive grants  funded by federal payments (federal payment grantees), but has limited  written policies and procedures for conducting monitoring activities.  OSSE typically outlines the monitoring activities it will employ in the  request for grant applications and includes specific time frames for these  activities and deliverables in grant agreements. In establishing their  approach, OSSE officials stated that they try to balance OSSE’s monitoring  functions with those of other organizations, such as PCSB, so they do not  overburden schools with reporting requirements. Most often, these  activities include reviewing financial and narrative performance reports  that grantees must submit, reviewing 100 percent of all expenditures prior  to providing money to grantees, conducting site visits, and in some  instances auditing the grantee’s financial statements. To inform its  monitoring process, OSSE officials told us that it also conducts a risk  analysis based on the award amount and other information that the office  reviews, such as a grantee’s independent audit results, PCSB reviews, and  lender information. OSSE indicated that since 2007, it has implemented  several operational improvements to monitor the use of federal payment  funds. For example, OSSE also developed a document that outlines  questions that staff should ask grantees and acceptable evidence the staff  should review as part of their monitoring. However, we found OSSE lacks  documented procedures on how staff should carry out and maintain  records of these activities, including how to determine the level of risk  based on the information from others’ reviews, and relies on more  experienced staff to provide guidance and training. According to the  Director of OPCSFS, staff generally should maintain documentation of  their monitoring activities, such as grantee reports, in a grantee’s file.  However, OPCSFS does not have written procedures or guidance on what  should be maintained in the grantee files. The Director also stated that he  would like to create a standardized file management process.
According to the Director of OPCSFS, one of the main components of  OSSE’s monitoring process is the review of invoices prior to reimbursing  grantees for expenditures. OSSE developed a standardized form that  grantees are to submit with invoices for staff to review prior to  reimbursement. The files we reviewed included evidence that grantees  submitted and staff reviewed the required reimbursement forms and  invoices. According to the Director, the reimbursement process provides  the opportunity for an extra level of monitoring in that OSSE compares  expenditures with the intended purpose of the grant and approves or  denies reimbursement based on this assessment.
OSSE staff did not consistently document their collection and review of  grantee narrative and financial reports. According to an OSSE official,  these reports are used to help OSSE monitor grantees’ use of funds and  their impact. Less than one-third of the files we reviewed contained all of  the reports that were required during the grant award period, and one- third of the files had no reports (see figure 3). In instances in which files  did not include all of the reports, the Director indicated that this may be  because the grantee did not submit the reports or the staff responsible for  monitoring the grantee did not put the report in the file.
Of the files that did contain reports, several were submitted late—ranging  from a couple of days to more than 3 months. Further, the files did not  consistently have evidence that staff followed-up to obtain the reports.  When there was evidence of staff follow-up, it was sometimes not until  months after a report was due. For example, two files that had no reports  included notices to grant recipients requesting that they submit final  performance reports since they had been reimbursed for the amount of the  grant award. An OSSE official stated that OSSE may withhold further  payments on grants when grantees have failed to provide regular reports  or other required documentation, but we saw no indication in the files that  this happened.
The files we reviewed also rarely had evidence that staff conducted site  visits. An OPCSFS official told us that while the office conducts site visits  “as necessary,” staff generally try to visit a school at least once during the  grant award period. During these site visits, OSSE staff may interview  school officials, review the school’s accounting practices, and request  documentation on a program’s performance, among other things. We only  found evidence of four site visits for the 30 files we reviewed. OSSE found  that two of the schools visited needed to take corrective actions.  Specifically, one school did not have adequate tools to measure the impact  of the program as outlined in its grant agreement and the other did not  maintain proper contractor records. According to the files, OSSE followed  up with both schools to ensure that they were addressing the issues  identified during the site visits.
section_title: DCPS Used Federal Payments for a Range of Purposes, But Some Information Was Not Available Before 2009
paragraphs: According to the expenditure data D.C. provided, DCPS has used its $105  million in federal payments for school improvement since 2004 for a  variety of purposes—ranging from summer school programs to staff  incentive pay. However, a lack of available information describing  programs or initiatives funded with federal payments prior to 2009  precludes a full identification of the use of these funds. DCPS officials  provided spending plans and other programmatic information that  described program goals, objectives, activities, and outcomes related to  DCPS’s use of federal payments since 2009; however, they could not  provide similar information for prior years. DCPS officials stated that they  searched for documentation that may have been created by the prior  administration, including spending plans and guidance for 2007 and 2008,  but were unable to recover any documentation that prior administrations  may have developed or used.
In 2009, under the current administration, DCPS used $40 million in  federal payments primarily for supplemental education programs, staff  incentive pay, and staff salaries, based on expenditure data (see figure 4).  According to DCPS officials, it currently funds activities aligned with  DCPS’s 5-year strategic plan and district-wide priorities designed to  increase student achievement. Some of these funds were provided directly  to schools, while others supported school administration functions within  DCPS. These funding priorities are outlined in spending plans that guide  the budgeting process and are submitted to Congress.
Staff incentive pay. DCPS set aside almost $10 million of federal  payments in 2009 to provide merit-based awards to eligible teachers and  staff through a new assessment system called “IMPACT” when a contract  agreement was reached with the Washington Teachers’ Union.  Implemented in the 2009-2010 school year, the IMPACT system rates  teachers and noninstructional staff, such as guidance counselors and  custodians, on a combination of factors to assess and provide feedback on  performance. For example, teachers are assessed on, among other things,  the impact they and the school have on students’ learning over the course  of the year, classroom observations, and commitment to the school   community. Counselors, meanwhile, are assessed on DCPS counseling  standards and commitment to the school community.
Staff salaries. About $5.9 million was used to pay staff salaries and  benefits distributed to schools through DCPS’s Comprehensive Staffing  Model. According to DCPS, this model was first instituted in the 2008-2009  school year and is designed to ensure that all schools, regardless of size or  location, offer a full complement of programs, including art, music, and  physical education classes. It also helps schools provide services, such as  social workers and psychologists, to support students’ nonacademic  needs. The model distributes resources on a formula basis across the  school district, and in 2009, according to DCPS, federal payment funds  helped to hire and retain staff at 89 schools.
Professional development. DCPS spent $5.7 million on teacher and  principal development activities. Funds supported the Master Educator  Program, whereby experienced educators traveled from school to school  evaluating teachers and providing support as part of the IMPACT  performance system. According to DCPS, educators provided targeted  professional development to help teachers improve their instruction.  Funds were also used for a “Principals’ Academy”—a monthly professional  development session. According to DCPS, these meetings were used to  train principals on effective parent and community engagement and share  best practices on leadership. Finally, funds supported Partnership Schools  where staff in low-performing schools received additional resources,  expertise, and professional development opportunities from organizations  hired to manage the schools.
Supplemental education. DCPS used about $5.7 million for summer  school activities and $2 million for the Saturday Scholars program.  Saturday Scholars is a 12-week program that provides additional help in  math and reading to students in grades 3-12.
Data reporting. DCPS used about $6 million to fund data reporting  activities that could provide parents with information on the performance  of their children, classrooms, and schools. These initiatives included the  DCPS School Scorecard, an annually released report on each school  detailing school safety, culture, student growth, and family involvement in  the school; stakeholder surveys; and a student information system to keep  parents informed.
Supplies. In 2009, DCPS used $3 million of the federal payments to  purchase textbooks.
Other activities. DCPS spent the remaining payments on other activities  in 2009. For example, it provided $1.5 million to the Capital Gains  Program, which, in partnership with Harvard University, provided  financial literacy education and incentive payments for academic  performance, behavior, and attendance to more than 3,000 students in  grades six to eight.
For the period between 2004 and 2008, D.C. provided expenditure data  showing that DCPS used federal payments to fund a variety of programs  for early childhood education, supplemental education, professional  development activities, and supply purchases. While DCPS worked to  provide information on programs funded prior to 2009, it could not locate  detailed programmatic information on most expenditures to explain the  goals, objectives, activities, and outcomes of these programs and we  cannot, therefore, fully describe the use of federal payments for these  years (see figure 5). According to DCPS, prior administrations may not  have consistently created or maintained documentation on some of the  programs they implemented. For example, expenditure data indicate that  between 2004 and 2007, DCPS used $37.4 million to fund a literacy  improvement program; however, DCPS was unable to provide information  to describe the program’s goals, objectives, or outcomes. Additionally, we  were unable to characterize approximately 36 percent of the other  activities because DCPS could not provide information describing the  expenditures beyond what was maintained for accounting purposes. In  2007, for example, 27 schools received “high performance awards.”  Current DCPS officials were not able to ascertain why those schools  received the funds.
The lack of detailed information to fully describe the programs for which  funds were expended also precludes us from assessing whether DCPS  used funds as directed to do so by appropriations legislation. The 2005  District appropriation act states that DCPS shall use not less than $2  million of that year’s payments on a new incentive fund to reward  improved schools and not less than $2 million on a transformation  initiative directed to schools in need of improvement. While 20 expenditure data shows DCPS spent $9.8 million on a literacy  improvement program, we cannot determine whether these or the  remaining funds appropriated in that year were used for the two initia outlined in legislation. Expenditure data did not capture information  linked to specific legislated initiatives, and according to agency officials,  DCPS does not have records of the plans that would describe the incentive  fund or the transformation initiative.
section_title: DCPS Monitoring Policies Existed But Were Not Con Followed In Monitoring Contracts
paragraphs: DCPS program offices have employed a variety of methods to monitor  contractor performance; however, in practice we found evidence of  weaknesses in carrying out some monitoring responsibilities possibly  attributable to staff turnover and a lack of a formal process to reassign  responsibilities when turnover occurs. Specifically, in our revie and 2009 contract files, we found 7 of 14 files with incomplete  documentation and evidence of review as well as missing files (see  appendix II).
DCPS’s Office of Contracts and Acquisitions has policies that specify a  program officer’s responsibilities to monitor contractor pe program offices have flexibility on how to carry out these  responsibilities. Pursuant to their monitoring responsibilities, program  officers are to ensure that technical work is performed in accordance with the terms and conditions of the contract, maintain a contract file, review  invoices, perform periodic site visits, and provide periodic written report and a final performance evaluation. Additionally, files maintained at the  contracting office should consistently contain the name of the ass igned  program officer who is responsible for contract oversight. In our  discussions with a number of program offices, we were shown differen strategies they employ to fulfill their monitoring responsibilities. One  program officer, who oversees a contract that provides an after school  program, showed us a tool designed to track site visits. The document  records observations of tutoring sessions to assess the tutor’s subje ct- matter knowledge, presentation style, and classroom management  abilities. Another program officer did not conduct site visits because the  contractors were often located at the program office and could be  t  observed on a more regular basis. That office independently a program to track deliverables across contracts it managed.
In our review of contracting office files, we saw inconsistent  documentation of monitoring activities related to the assignment of  program officers and the lack of required evaluations on contractors’  performance. In our review of 14 contract files, we found that som contained notes from the contracting staff that the program officer left  before the end of the contract term, and the file had no evidence that anew program officer was assigned. DCPS officials stated that the  monitoring function has been impacted by staff turnover, and one offici said it is not uncommon for a contract to be overseen by two or three  different program officers over the life of the contract. However, staff  turnover alone does explain the lack of adequate monitoring. Program  officials we spoke with stated that their respective offices did not have  written protocols and procedures for transitioning responsibilities when a  program officer leaves, nor did they have written processes for how to  notify the contracting office. According to officials, staff generally  the contracting office via e-mail when a program officer left, however, we  did not see evidence of correspondence in those files. Recognizing that the  specific nature and extent of contract administration may  contract, one program official told us that it would be helpful for DCPS to  develop a list of basic information that should be collected across program  offices to ensure continuity in the event of staff turnover.
Moreover, 4 of the 14 contract files we reviewed—totaling $2.7 million— were missing performance evaluations, and evaluations of 3 additional  contractors were not completed within the required time frames.  Performance evaluations are an important tool to help the contracting and program offices determine whether to extend a contract, and these  evaluations must be submitted before a contract extension can be  awarded. The evaluations are required to be submitted within 30 days of  the end of the contract; however, one of the evaluations was submitted  more than 1.5 years late. Further, one contract file that lacked a  performance evaluation and two files that were submitted late were  awarded contract extensions. According to a contracting official, staff  from his office should take steps to gather this information from program  staff, but we did not find evidence in the files that officials followed up to  obtain these documents, or that many of the files had supervisory review.  An official with the contracting office stated that it might also be helpful to  have more regular formal assessments of contractor performance, and the  on a  office recently asked program officers to begin evaluating contractors  monthly basis.
The DCPS contracting office, which is responsible for maintaining all  contract documentation, could not locate 3 of the 17 contract files we  requested. According to a contracting official, DCPS recently moved and  sent its contracts to storage and was having problems locating the files  during the period of our review. DCPS could not locate the original file for  one of the contracts, was unsure whether one contract was in fact  awarded, and told us the other file could not be located because the name  of the company had changed. According to D.C. Municipal Regulations,  each D.C. office performing contracting functions is responsible for  maintaining files containing records of all contractual actions pertinent to  that office’s responsibilities, including documents sufficient to constitute a  complete history of the transactions. These files are essential in  providing a complete background as a basis for informed decisions at each  step of the procurement process as well as providing information for  reviews and investigations.
section_title: Conclusions
paragraphs: Over the years, D.C. public schools have wrestled with numerous  challenges: deteriorating facilities, low student performance, and lax  administrative and management oversight. D.C. has recently taken steps address the long-standing problems with its public school system, and  federal payments have contributed to some of these efforts. The statu language appropriating these funds does not generally direct OSSE and  DCPS on how to use these monies for school improvements. It appears  that OSSE and DCPS have expended federal payments on a range of  activities related to “school improvement”—from facility renovation to  summer school programs; however, the lack of detailed information on  tory  some of these payments dating back to 2004 precludes a complete  understanding of their use. A lack of information describing how these  funds were used highlights the need for stronger internal controls related  to information management across administrations.
Moreover, the financial management challenges that others, such as the  U.S. Department of Education and D.C. Inspector General, have previous identified also persist with OSSE’s and DCPS’s monitoring of grants made  with federal payment funds and contracts, respectively. Specifically, the  policies OSSE and DCPS have are not consistently followed and  sometimes fall short of commonly accepted standards. Because OSSE and DCPS distribute a large portion of federal payment for school  improvement funds through grants and contracts, respectively, effective  internal controls over grants and contracts are critical to their missions.  Without proper documentation on the use of funds and the applicati strong monitoring framework, these funds may more easily be misused.  Further, grantees and contractors may not be held accountable for  meeting the agreed upon performance outcomes. In addition, OSSE and  DCPS may risk implementing initiatives that fall short of reaching the potential to improve the District’s schools. Documenting required and  actual monitoring processes may not completely eliminate potential  m isuse of funds, but it could help to mitigate this risk.
section_title: Recommendations Executive Action
paragraphs: To improve internal controls for managing the use of federal payments and  to provide continuity of information across administrations, we  recommend that the Mayor of the District of Columbia take the following  two actions:  1.  Direct the State Superintendent of Education to establish and  implement written policies and procedures for monitoring federal  payment grantees. These policies and procedures, which can draw from OSSE’s general monitoring practices, should outline OSSE’s  ds of  practices for how staff should document and maintain recor m monitoring is appropriately and consistently implemented. onitoring activities and identify other measures to ensure that grant  2.  Direct the DCPS Chancellor to establish and implement p contract monitoring to ensure that contract monitoring is  appropriately and consistently done. Implementing this  recommendation would include documenting monitoring activities  ce  throughout the term of the contract, directing DCPS to better enfor existing policies to ensure performance evaluations are complete, and rocedures for  developing protocols and procedures for transitioning contracting  officer responsibilities and for notifying the contracting office. Wh implementing this recommendation, DCPS should develop specific  guidance on maintaining contract files and other documentation  relevant to the use of these funds to ensure that contract records are  available for inspection and as a means of retaining institutional  knowledge of contracts.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the D.C. Mayor’s Office, OSSE, and  DCPS for review and comment. These entities provided written comme on a draft of this report, which are reproduced in appendix III. DCPS and  OSSE generally concurred with our recommendations; however, they  expressed concern with the way in which we evaluated their use of fed payments for school improvement and the tone of the draft report. Both  OSSE and DCPS indicated that federal payment funds are unique and  different from other federal funds and do not require the same reporting and monitoring. While these payments are different than funds provided ucation, a fact we state in the report,  through the U.S. Department of Ed we maintain that both OSSE and DCPS should have better practices in  place to monitor the use of them.
OSSE stated that our recommendation is in line with its continued  improvement and oversight of recipients of federal grant funded program and highlighted several of the steps it has taken since 2007 to improve its  overall operations as well as the management of federal payment funds.  OSSE also indicated that it will borrow from existing District and agency - wide protocols for monitoring federal payment funds, when appropriate.  In our report, we recognize the processes OSSE has in place to monitor  grantees; however, we continue to believe that these processes should b better documented. As indicated in our recommendation, we agree thatdrawing from  existing practices that are documented is a good step for  OSSE to take in ensuring that federal payment funds are appropriately  monitored.
OSSE also stated that our on-site review only included hard copy f During the course of our review, OSSE did indicate that it maintains some information electronically. We subsequently requested additional  information that OSSE maintains on federal payment grantees, including  electronic information that tracks the receipt of grantee reports. As of the  time we drafted our report, OSSE had not responded to our repeated  requests for this information. Regardless of whether information is  maintained in hard copy or electronic form, we continue to believe that  iles.
OSSE should have in writing its procedures for documenting and  monitoring grantees. OSSE agrees that is necessary and indicated that it  would take steps to address our recommendation by June 2011.
DCPS agreed with our recommendation to improve monitoring acti and maintain contract files and other applicable documents. In its  response, DCPS provided information on several procedures it has  recently put in place to implement more effective monitoring. These  include, among other things, instituting and maintaining documentation on monthly performance evaluations and requiring contracting an officers to sign documentation acknowledging their roles and  responsibilities at the beginning of the contract term. DCPS stated that  these steps will mitigate the risk of not retaining an appropriate program  officer for the duration of the contract. As indicated in our draft repo the time of our review, DCPS did have policies in place that clearly outlined the roles and responsibilities of the program staff. While  establishing monthly performance evaluations and reinforcing staffs’ roles  and responsibilities are important steps towards more effective monitoring  sting  practices, we maintain that DCPS needs to better enforce new and exi practices throughout the continuous monitoring.   life of the contract to ensure consistent and  DCPS’s response also identified areas of the report that they found to be  d  misleading or incomplete. Specifically, DCPS was concerned that we di not provide a sufficient explanation of the historical context of federal  payments, including the use of the term “school improvement payments, which might be confused with other federal school improvement funds  provided by the U.S. Department of Education. In our opening paragraph  and the report background we state that federal payments are unique and  separate from other federal funding, and that our use of the term “federal  payments” throughout the report refers to these differentiated fund , we have subsequently  not monies from federal agencies; however changed our title to help clarify this point.  ”
In addition, DCPS was concerned that the report does not adequately  address the fact that during the current administration, programmatic  initiatives and expenditures against those initiatives were clearly and w s  documented. We disagree. On page 15 and again on pages 18-19 of thi report, we state that D.C. provided expenditure data for all years we  requested and that the current administration has created spending plan and other programmatic information describing the planned and actual  use of funds since 2009. DCPS also commented that we did not adequ explain the steps DCPS took to locate documentation from the prior  ately  administration that we requested. In response to this, we have provided  additional clarification in the report, where appropriate, to explain that  current DCPS officials took steps to locate information we requested on federal payment use prior to 2009, but spending plans or programmatic  information that they could not locate may not have been created by prior  administrations.
DCPS also stated that it could have been more responsive in providin missing information for applicable contract files and documents for  inspection if it were advised of the specific documentation deficiency  referenced in the report. At the time of our file review, we worked with contracting office officials, and did, on several occasions, identify and  request from them missing contract files and information. These officials   or  indicated that the documentation should have been in the contract file that they could not locate the information. Given our findings and the  challenges DCPS had in locating information for our report, we continu ld  to believe that DCPS can improve its monitoring processes and shou have practices in place to ensure these processes are implemented.
We also provided a copy of the draft report to the independent D.C. Office ed technical comments on the  of the Chief Financial Officer which provid draft that we incorporated as appropriate.
We are sending copies of this report to the D.C. Mayor’s Office, the Office of the State Superintendent of Education, the DCPS Chancellor’s Office,  al  the D.C. Office of the Chief Financial Officer, appropriate congression committees, and others who are interested. We will also make copies  available to others on request. In addition, the report  no charge on GAO’s Web site at http://www.gao.gov.  will be available at  If you or your staff have any questions about this report, please contact me  at (202) 512-7215 or ashbyc@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs can be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix IV.
section_title: Appendix I: Scope and Methodology
paragraphs: To identify the activities that both the Office of the State Superintendent of  Education (OSSE) and the District of Columbia Public Schools (DCPS)  funded with federal payments, we analyzed allocation and spending data,  reviewed documentation provided by the offices, and conducted  interviews with officials in these and other knowledgeable offices. We  then categorized this information into activities that we identified based  on previous GAO work, U.S. Department of Education program  descriptions, and categorizations used by DCPS and OSSE when tracking  their use of federal payments.
Primarily, we analyzed data from the District of Columbia’s (D.C. or the  District) financial management system—the System of Accounting and  Reporting (SOAR)—and its procurement tracking system—Procurement  Automated Support System (PASS). SOAR isolates federal payments from  other revenue streams and provides OSSE, DCPS, and the D.C Office of  the Chief Financial Officer (OCFO) with real-time information related to  revenue and expenditures, among other things. SOAR is interfaced with  PASS. We supplemented these data with interviews, spending plans that  identify how the offices allocated federal payments, and other documents  provided by OSSE and DCPS to describe the purpose and more specific  use of funds as well as how they prioritized the use of funds. For example,  we used SOAR and PASS data to understand the amount of funds DCPS  used for a specific contract or program, but used additional information  from DCPS to understand the purpose. For public charter schools, we  supplemented the SOAR data with other information received from OSSE,  including grant descriptions in the request for applications and summary  data on allocations of federal payments. We also reviewed documentation  provided by the D.C. Public Charter School Board.
Using SOAR data, we identified fields that provided descriptive  information on the program or general purpose of funds and the  appropriated and expended amount for a given year’s appropriation. These  funds were often used across several fiscal years. For example, we used  these data to identify public charter schools that received grants and the  amount of these grants. We used additional information provided by OSSE  to determine the amount of funding in a given appropriation year that was  used. We were unable to obtain transaction level data for appropriation  year 2004 because, according to an OCFO official, federal payments for  charter schools were managed by the Department of Insurance, Securities,  and Banking. The department did not respond to our request for this  information.
We took several steps to assess the reliability of the data provided. We  reviewed existing documentation about SOAR and PASS and prior GAO,  D.C. Office of the Inspector General (OIG), and Independent Auditor  reports that discussed these systems. We also interviewed knowledgeable  staff in OCFO, OSSE, and DCPS about how these data were collected,  stored, used, and the access controls in place. We interviewed officials  within the D.C. OIG and Independent Auditor’s office. We conducted  electronic testing on transaction-level data, including checks for missing  data elements or out-of-range variables. Given the objectives and scope of  our review, we did not conduct transaction testing (e.g., compare data  input into the SOAR or PASS systems to invoices or other expenditure  documents) to verify the accuracy and classification of data in the SOAR  system, nor did we test specific transactions for noncompliance with  Antideficiency Act requirements. We did, however, review previous  assessments conducted by D.C.’s Independent Auditor that, among other  things, included transaction testing. Overall, we found the data to be  sufficiently reliable for the purposes of providing an understanding of how  federal payments were allocated and expended.
subsections: section_title: OSSE’s Grantee Monitoring
paragraphs: To assess OSSE’s monitoring of grantees that received federal payments,  we reviewed available information on OSSE’s monitoring practices for  federal payment grantees. We also reviewed information on OSSE’s  general monitoring practices and reports from the D.C. OIG, U.S.  Department of Education, and GAO to understand previously identified  weaknesses with grantee monitoring. We also interviewed OSSE officials  on their practices.
We reviewed 30 of the 34 grantee files for grants that were awarded with  fiscal year 2008 and 2009 federal payments to assess OSSE’s monitoring of  federal payment grantees that we identified as within our scope. OSSE  identified 42 grants that were awarded during this time. However, we  eliminated eight from our scope, and OSSE did not respond to our request  for four additional files, although OSSE indicated that these files were  maintained. Specifically, we eliminated seven grants that, according to  data provided by OSSE, were awarded as a “reimbursement” for costs that  a school already incurred in developing an application for the use of  surplus DCPS facilities. We eliminated these grants because they would  not necessitate on-going monitoring given that the deliverable was already  completed as a part of the application process. We also eliminated a  special education grant, which was for Medicaid Billing and Technical  Assistance, because it was an amendment to a November 2007 grant  between OSSE and the D.C. Public Charter School Cooperative. We  selected 2008 and 2009 grantees because these were the first years that  OSSE was responsible for federal payment use and we could capture the  most currently available monitoring information.
We developed a data collection instrument to record information from the  grantee files. We reviewed files for evidence of grantee monitoring,  timeliness of grantee reporting, follow-up actions by OSSE staff,  submission of required documents by grantees, and other documented  actions by OSSE. To ensure that our data collection efforts conformed to  GAO’s data quality standards, all files were independently reviewed by two  GAO analysts. When the analysts’ views on how the data were recorded  differed, they met to reconcile any differences.
section_title: DCPS’s Contractor Monitoring
paragraphs: To assess DCPS’s monitoring of contractors that received federal  payments, we reviewed available information on DCPS’s monitoring  practices. We obtained this information from the Office of Contracts and  Acquisitions, which is responsible for contracts management and oversees  purchasing goods and services for DCPS, as well as additional information  from four program offices that were responsible for monitoring  performance of those contracts funded through federal payments we  selected. We also reviewed information on DCPS’s general monitoring  practices and reports from the D.C. OIG, BDO Seidman LLP, and GAO to  understand previously identified weaknesses with procurement practices  and contract monitoring.
We originally planned to review all 42 contracts awarded by DCPS for 2008  and 2009; however, based on discussions with DCPS on the challenges of  compiling the requested files, we limited our selection to 17 contracts. We  were only able to review 14 files because DCPS was unable to provide files  for 3 contracts for our review. The 17 contracts we selected represented  just under $9.5 million, or 61 percent, of federal payment funds that were  distributed through contracts of more than $100,000 in 2008 and 2009. We  selected those years to be consistent with our review of grant files from  OSSE. We selected our contracts based on the type and size of contracts.  Specifically, we selected the highest dollar amount in service contracts  that would allow us to assess the monitoring processes throughout the  term of the contract as well as the highest dollar amount contracts for  goods such as textbooks. Results from this nongeneralizable sample  cannot be used to make inferences about all contracts awarded for this  time period. To ensure that our data collection efforts conformed to GAO’s  data quality standards, all files were independently reviewed by two GAO  analysts. When the analysts’ views on how the data were recorded  differed, they met and reconciled any differences.
While the sample allowed us to learn about many important aspects of  DCPS’s monitoring, it was designed to provide an overview of DCPS’s  monitoring functions, not findings that would be representative of  practices at all program offices within DCPS. We reviewed the purpose of  the contract and DCPS offices’ policies and practices for monitoring these  contracts. We reviewed files maintained at the Office of Contracts and  Acquisitions that included documentation on contractor performance  submitted by the program offices, as well as obtained additional  information from these program offices. Because none of the DCPS  program offices that managed contracts we reviewed maintained contract  files, we were unable to fully assess the steps these offices took to monitor  the contracts. We did, however, review some of the monitoring tools that  individual staff and offices created to track their monitoring. For example,  we reviewed project plans, samples of invoices, and other types of  information staff maintained to document performance.
We did not hold an exit conference with the relevant D.C. agencies  because the designated point of contact for the District was unresponsive  to our repeated requests to schedule an exit conference. However, at the  request of the Mayor’s Office, we met with representatives of the Mayor,  OSSE, and DCPS, prior to receiving official comments on the draft report.
We conducted this performance audit from October 2009 to November  2010 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Information on DCPS File Review of Selected Contracts from 2008-2009
subsections: section_title: School supplies for after school and summer school programs
section_title: Appendix III: Comments from the D.C. Mayor’s Office and District Education Offices
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: Janet Mascia (Assistant Director), Rachel Beers, Sue Bernstein, Scott  McNulty, Jean McSween, James Rebbe, and Nyree M. Ryder Tee all made  key contributions to this report.