District of Columbia Opportunity Scholarship Program: Actions Needed to Address Weaknesses in Administration and Oversight
Released: 2013-11-15T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: School vouchers, a school choice program designed to provide students with public funds to attend private schools, feature prominently in policy discussions about education reform. The OSP was reauthorized by Congress in 2011 by the Scholarships for Opportunity and Results Act, and has garnered national attention as the first federally-funded voucher program. Since the program's inception in 2004, Congress has provided almost $152 million for the program benefitting almost 5,000 students, currently providing scholarships of about $8,000 for grades K-8 and about $12,000 for grades 9-12. As requested, GAO examined (1) the extent to which the Trust provides information that enables families to make informed school choices, (2) whether the Trust's internal controls ensure accountability for OSP, and (3) how Education and District agencies responsible for overseeing OSP have performed their stated roles and responsibilities.

To conduct this work, GAO visited 10 participating schools; interviewed school officials; conducted discussion groups with 14 parents of scholarship students; analyzed key program documents; reviewed generally accepted guiding documents for internal controls; and interviewed officials at Education, relevant District agencies, and the Trust.

section_title: What GAO Found
paragraphs: The DC Children and Youth Investment Trust Corporation (the Trust) provides information to prospective and current families of children participating in the District of Columbia (the District) Opportunity Scholarship Program (OSP) through a variety of outreach activities. To reach prospective OSP families, the Trust advertises through print, radio, and bus ads, as well as in newspapers and flyers posted in neighborhood libraries, recreation centers, and local government service centers. However, the Trust provides incomplete and untimely information about participating schools to OSP families. The participating school directory, which is published by the Trust, lacks key information about tuition, fees, and accreditation. The Trust published the directory 9 months after the start of the 2012-13 school year, too late to assist families in selecting a school for that year. Without such information, parents cannot make fully informed school choices. Additionally, the Trust awarded scholarships to students several months after many schools completed their admissions and enrollment processes, limiting the amount of time and choice in selecting schools. Most families GAO spoke with were generally happy with OSP but some were concerned about the availability of program information.

The Trust's internal controls do not ensure effective implementation and oversight of OSP. Adequate policies and procedures can provide reasonable assurance of effective, efficient operations, reliable financial reporting, and compliance with applicable laws. However, the Trust's policies and procedures do not include a process for verifying eligibility information that schools selfreport. As a result, the Trust cannot ensure that schools are eligible to participate in the program and, therefore, risks providing federal dollars to students to attend schools that do not meet standards required by law. Furthermore, the Trust's database is not well structured and hampers the effectiveness of program implementation. For example, the Trust lacks written documentation for the database, and staff must rely on institutional memory to ensure processes such as data entry are conducted properly, which could contribute to errors in the database. As required by law, the Trust groups eligible applicants into three priority categories by which scholarships are then awarded by lottery; however, weaknesses in the database's structure puts into question the Trust's ability to provide accurate priority categories. Additionally, the Trust has not submitted its mandatory financial reports on time, despite a legal requirement that these reports be filed within 9 months of the end of the entity's fiscal year. The Trust's fiscal year 2010 financial report was almost 2 years late, and the Trust's fiscal year 2011 and 2012 reports had not yet been submitted as of August 2013. In August 2013, the Trust also made amendments to its policies and procedures in three areas GAO identified. However, these amendments do not address all weaknesses identified in this report, and have not yet been fully implemented.

The Department of Education (Education) has provided limited assistance to the Trust in certain areas outlined in the memorandum of understanding (MOU) with the District and in the cooperative agreement with the Trust. Specifically, Education is responsible for helping the Trust make improvements to its financial system, enhance its site visit policies and procedures, and improve the accuracy of information provided to parents. Trust officials acknowledged that Education has provided general assistance regarding administrative and operational functions, but it has not assisted with specific improvements in these areas. Although the MOU is a written agreement between Education and the District, it holds the Trust, as the grantee, responsible for notifying District agencies to conduct required building, zoning, health, and safety inspections of participating schools—a requirement that is not detailed in the cooperative agreement signed by Education and the Trust—but would assist the Trust in providing continued oversight of schools participating in OSP. As a result, Trust officials were not acutely aware of this responsibility, and required inspections were not being conducted in the manner described in the MOU between Education and the District.

section_title: What GAO Recommends
paragraphs: GAO is making 10 recommendations to Education to improve OSP, such as ensuring that the Trust publishes a more complete school directory and updates key aspects of its policies and procedures. Education did not indicate agreement or disagreement with our recommendations. The Trust disagreed with some findings and both provided additional information.

section_title: Letter
paragraphs: In 2004, Congress passed the D.C. School Choice Incentive Act of  2003—the first federally-funded private school voucher program in the  United States—in an effort to provide low-income parents residing in the  District of Columbia (the District) with “expanded opportunities for  enrolling their children in higher-performing schools.” Specifically, the Act  authorized the Secretary of Education to award grants to eligible entities  to provide eligible students with scholarships to attend private elementary  and secondary schools in the District. The District’s program is known as  the D.C. Opportunity Scholarship Program (OSP), and it was reauthorized  in 2011 for 5 years under new legislation, the Scholarships for  Opportunity and Results Act (SOAR Act).Congress has provided more than $152 million for OSP, which has, in  turn, provided expanded school choice to low-income students by  awarding almost 5,000 scholarships to students who would unlikely have  otherwise been able to attend private school. Questions have been  raised, however, about whether students have as broad a choice as  intended. In the 2011-2012 school year, for example, over half of OSP  students were enrolled in only 15 percent of private schools that have  agreed to accept students from this program (participating schools).

Since the program’s inception,  In 2007, we reviewed OSP and found a need for increased accountability  from the program administrator. Specifically, we found that the  administrator at the time of our review—the Washington Scholarship  Fund—did not have the capacity to oversee participating private schools  and administer a growing scholarship program funded with federal  dollars. We also found that because of inadequate accountability  mechanisms, the program administrator could not provide key information  to low-income families about school performance, quality indicators, or  conformance with local safety and health regulations.

In 2010, the Washington Scholarship Fund withdrew as the administrator  of OSP and the Department of Education (Education) transferred the  grant to run the program to the DC Children and Youth Investment Trust  Corporation (the Trust). The Trust was initially created to link public and  private resources to address the needs of children, youth, and families in  the District. Its activities are primarily funded by grants from the District  government.

At the request of the committee, we assessed the extent to which the  Trust is meeting its stated goals and properly managing federally  appropriated funds. More specifically, our objectives were to determine:  1.  the extent to which the Trust provides information that enables  families to make informed school choices;  2.  whether the Trust’s internal controls ensure accountability for OSP;  3.  how agencies responsible for implementing and overseeing OSP  have performed their stated roles and responsibilities.

To address these objectives we used multiple strategies. To assess the  extent to which scholarship recipients are able to make informed school  choices, we analyzed key documents regarding participating schools and  the OSP program that are available to parents. We also conducted site  visits to 10 participating schools and interviewed key school officials. In  selecting the schools we visited, we chose the 5 schools with the highest  absolute number of OSP students and the 5 schools with the highest  concentration of OSP students given the total enrollment at the school in  the 2011-2012 school year. In addition, we used information from the  2011-2012 OSP Participating School Directory (the Directory) as well as  OSP enrollment information for the 2011-2012 school year from the  Trust’s database to better understand the characteristics of participating  schools. We also interviewed officials at the Trust and Education. To  assess the reliability of the enrollment data from school year 2004-2005  to school year 2011- 2012 from the Trust’s database, we performed  electronic testing for obvious errors in accuracy and completeness and  interviewed agency officials knowledgeable about the data. We found  substantial problems with the data, including missing fields or partially  entered applications. However, we determined that the data were  sufficiently reliable for the purpose of determining characteristics of OSP  schools and students in school year 2011-2012. Lastly, to obtain  information about the experiences of families in the program, we  conducted two discussion groups—one in English and one in Spanish— with parents and guardians of students who received and used an OSP  scholarship in the 2012-2013 school year.

To assess the extent to which the Trust’s internal controls ensure  accountability for OSP, we reviewed relevant laws and regulations,  internal documents such as the Trust’s policies and procedures manual,  as well as generally accepted guiding documents for internal controls  including those published by GAO and the Committee of Sponsoring  Organizations of the Treadway Commission (COSO). We also analyzed  the Trust’s database for administering OSP. In addition, we interviewed  officials at the Trust and Education, and the Trust’s contractor in charge  of creating and maintaining the database.

To assess the extent to which agencies responsible for overseeing OSP  performed their stated roles and responsibilities, we reviewed relevant  federal laws and regulations, guiding documents such as the June 2012  memorandum of understanding (MOU) between Education and the  District of Columbia Government. We also interviewed key officials at the  Trust, Education, and select agencies in the District. A more detailed  discussion of our scope and methodology appears in appendix I.

We conducted this performance audit from May 2012 through September  2013 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.
subsections: section_title: Background
subsections: section_title: Laws Governing the Opportunity Scholarship Program
paragraphs: Congress passed the D.C. School Choice Incentive Act of 2003 in  January 2004, which directed the Secretary of Education to award a grant  on a competitive basis for up to 5 years to an entity or entities to use to  make scholarship payments to parents of eligible students to be used for   This Act  private school tuition, fees, and transportation expenses.created the program known as the District of Columbia Opportunity  Scholarship Program (OSP), the first private kindergarten-through-grade- 12 school choice program supported by federal funds. The purpose of the  Act was to provide low-income parents of students in the District,  particularly parents of students who attend public schools identified as in  need of improvement under the Elementary and Secondary Education Act  of 1965, as amended, “with expanded opportunities for enrolling their  children in higher performing schools in the District” by providing annual  scholarships to attend the private elementary or secondary schools of  their choice.

In April 2011, Congress reauthorized OSP for 5 years under the  Scholarships for Opportunity and Results Act (SOAR Act).

The Act sets  forth requirements for participating private schools.provides that none of the funds may be used by an eligible student to  enroll in a participating private school unless the participating school  1.  has and maintains a valid certificate of occupancy issued by the  2.  makes readily available to all prospective students information on its  3.  if operating for 5 years or less, submits to the eligible entity  administering the program proof of adequate financial resources and  the ability to maintain operations throughout the school year;  4.  agrees to submit to site visits as determined to be necessary;  5.  has financial systems, controls, policies, and procedures to ensure  that funds are used according to the statute; and  6.  ensures that each teacher of core subject matter in the school has a  baccalaureate degree or its equivalent, regardless of whether the  degree was awarded in or outside of the United States.

section_title: Administration and Oversight of OSP
paragraphs: Education’s Office of Innovation and Improvement, which is charged with  the management of the program and oversight of the program  administrator, awards scholarship funds to a grantee and provides  programmatic guidance and technical assistance. Soon after the D.C.  School Choice Incentive Act passed in 2004, Education awarded the  grant to operate the OSP to the Washington Scholarship Fund, a  nonprofit organization in the District of Columbia that had experience  providing privately funded scholarships to low-income students. In May  2010, Washington Scholarship Fund withdrew as the grantee and  Education transferred the grant for administration of OSP to the DC  Children and Youth Investment Trust Corporation (the Trust), a non-profit  organization. As the program administrator, the Trust recruits new  students and schools, receives and processes applications, and awards  scholarship funds to program participants. The Trust is also responsible  for providing oversight to participating private schools.

The SOAR Act, which was enacted about 11 months after the Trust  assumed responsibility for administering the OSP grant, states that the  grantee (the Trust) must ensure that scholarships be awarded through a  random selection process if more eligible applicants seek admission to  the program than the program can accommodate, or if more eligible  applicants seek admission to a participating school than the school can  accommodate, and the Trust has implemented this requirement through a  lottery process. The groups of applicants that have a priority status as  defined in the SOAR Act are (1) applicants who are currently attending a  school that has been identified for improvement, corrective action, or  restructuring under the Elementary and Secondary Education Act of  1965, as amended; (2) applicants who have a sibling currently  participating in OSP; and (3) applicants who received an OSP scholarship  award in a previous year but did not use it. At the time of our review, the  lottery process was carried out by Westat, a contractor.

In addition, the SOAR Act updates the responsibilities for implementing  OSP for the District and Education. It directs the Secretary of Education  and the Mayor of the District to revise the MOU regarding the  implementation of OSP that was required pursuant to the D.C. School  Choice Incentive Act. The MOU governs the program for fiscal year 2011  and all subsequent years. It is intended to help ensure the efficient and  effective continued implementation of the OSP in a manner that  incorporates and is consistent with the roles and responsibilities of both  Education and the District. According to the MOU, Education is  responsible for overseeing the Trust as a recipient of federal funds and  working with the Trust to ensure that it makes improvements to various  aspects of program administration. The District also has a role in the  administration of OSP. The MOU states that District agencies are directly  responsible for conducting required building, health, and safety  inspections of participating schools when notified by the Trust.

section_title: Federal Funding for OSP and Use of Funds
paragraphs: According to Education, from fiscal years 2004-2010, Congress  appropriated between $13.2 and $14.8 million per year for OSP, as  shown in figure 1. For fiscal year 2011, the appropriated amount  increased to about $15.5 million, and in fiscal year 2012, the appropriated  amount increased to $20 million. Most recently, Congress appropriated  about $19 million for the program for fiscal year 2013. Since OSP’s  creation, about $152 million has been appropriated in total.

The SOAR Act permits 11 percent of the grant funds each year to be  used for certain administrative and other purposes as follows—with the  remainder of the funds going towards student scholarships:

5 percent for the program’s evaluation,

The grantee (the Trust):

3 percent for administrative costs,

2 percent for parental assistance,

1 percent for student academic support services.

The law provides for an increase in the amount of the scholarship for  eligible students. Specifically, it provides up to $8,000 for grades K-8 and  $12,000 for grades 9-12 starting in school year 2011-2012.  While tuition  is paid first, any leftover scholarship funds can be used to pay for school  fees—including uniforms, field trips, before and after care—and  transportation expenses.

section_title: Student Eligibility and Enrollment in OSP
paragraphs: Id., § 3007(c).

Id., § 3007(d). thresholdbenefits (known as SNAP benefits) issued within the District. The student  must also be at least 5 years old by September 30th of the school year.   or that receive Supplemental Nutrition Assistance Program  In the 2011-2012 school year, there were 53 participating schools in OSP  (see fig. 2). These schools represent a wide range of grades, sizes,  sectors, and tuition levels.

These schools are located throughout all eight wards of the District, with  the greatest number of schools located in Ward 3. In accordance with  District regulations for all private schools operating in the District, these  schools must be accredited by, or be in the process of being accredited  by, at least one of seven recognized accrediting organizations or any  other approved accrediting body. Schools that are unaccredited must  submit documentation to demonstrate satisfactory evidence of instruction.

section_title: Internal Controls Relevant to Implementation and Oversight of OSP
paragraphs: Internal control is broadly defined as a process—affected by an entity’s  board of directors, management, and other personnel—designed to  provide reasonable assurance that the following objectives are being  achieved: (1) effectiveness and efficiency of operations, (2) reliability of  financial reporting, and (3) compliance with applicable laws and  regulations. Internal controls include management and program policies,  procedures, and guidance that help ensure effective and efficient use of  resources; compliance with laws and regulations; prevention and  detection of fraud, waste, and abuse; and the reliability of financial  reporting. Effective internal control is a major part of managing any  organization to achieve desired outcomes and manage risk.

Standards for Internal Control in the Federal Government presents five  standards that define the minimum level of quality acceptable for internal  control in government and provide the basis against which internal control  is to be evaluated. These standards—control environment, risk  assessment, control activities, information and communication, and  monitoring—apply to all aspects of an agency’s operations and should be  an integral part of a system that managers use to regulate and guide an  agency’s operations. The private sector also recognizes the importance of  internal controls for executives to better manage their business  enterprises. The Committee of Sponsoring Organizations of the Treadway  Commission’s (COSO)the same five key elements stated previously, which are intended to  promote efficiency, reduce risk of asset loss, and help ensure the  reliability of financial reports and compliance with laws and regulations.

section_title: The Trust Provides Untimely Information and Scholarship Awards
subsections: section_title: The Trust Provides Information to Families through Many Channels, but Its Participating School Directory Provides Incomplete and Untimely Information
paragraphs: The Trust provides program information to prospective and current OSP  families through a variety of outreach activities. To reach prospective  OSP families, the Trust advertises through print, radio, and bus ads, as  well as in newspapers and flyers posted in neighborhood libraries,  recreation centers, and local government service centers. For example,  one OSP parent told us she found out about OSP through a local  Spanish-language newspaper. The Trust conducts several application  events throughout the District where interested families can apply for the  program. The Trust also holds a participating school fair in which OSP  families can obtain additional information about participating schools. In  addition, the Trust works with families directly, offering frequent personal  contact to assist families through the scholarship application and renewal  processes, according to Trust officials. The Trust provides this assistance  via phone, e-mail, and through one-on-one interactions, and employs  Spanish and Amharic speakers to assist non-English speaking families.Lastly, the Trust holds events to assist current OSP families, such as a  workshop for students transitioning from 8th grade to high school. Most  families we spoke with were generally happy with their children’s  participation in the program, citing increased safety and security at their  children’s OSP schools and improved quality of education.

The SOAR Act requires all OSP grantee applicants to describe how  parents of eligible students will be notified of the expanded choice  opportunities each year, and the Directory is a key source of information  about schools in the program. The Trust publishes the Directory for each  school year in both English and Spanish, and it is designed to provide  families with basic information on each participating school. The Directory  also includes guidance on how to apply to private schools and  worksheets to help families in their school search. In addition, the  Directory provides information on tuition, accreditation, admissions, and  facilities for each school participating in OSP for a given school year.

The 2011-2012 Directory was used to assist families with selecting  schools for 2012-2013. We found that this Directory lacked key  information about schools’ tuition, fees, and accreditation that could help  families make more informed school choices:

Tuition: The 2011-2012 Directory listed one tuition amount for each  school. According to Trust officials, the published tuition amount is the  tuition applicable to each student unless the student is in a category to  receive a discount on tuition. Whether a school offered different tuition  levels, however, was not noted in the Directory. We found that many  schools have different tuition levels, varying by grade level and  religious affiliation.

Grade level: Nine of the 53 participating schools in school year  2011-2012 offered different tuition levels for students in grades K- 8 versus students in grades 9-12. In addition, 10 of the 53  participating schools had tuition levels that differed within grades  K-8.

Religious affiliation: Some religious schools also offered lowered  or discounted tuition rates for their members. For example, in  school year 2011-2012, 6 Catholic schools offered lowered tuition  rates for Catholic families, but the Directory only listed the higher,  non-Catholic tuition rate. In addition, a Seventh-day Adventist  school offered three different tuition levels, with the lowest rates  offered to families belonging to their church and the highest rate  offered to families who were not affiliated with this denomination.

Only the highest tuition rate, however, was published in the  Directory.

Fees: The Directory offers parents limited information about fees. For  example, the Directory excluded the cost of commonly required fees  at schools, such as registration and book fees. In addition, many OSP  families may need services such as before and after care, and hot  lunches. The Directory listed the availability of such services but did  not include their cost. The Directory also excluded information about  parental involvement or fundraising fees. Some schools can  reimburse at least part of these fees if parents volunteer a certain  number of hours, according to four school officials. If a family cannot  fulfill these volunteer hours, then it must pay these fees out of pocket  because these fees are not covered under the OSP scholarship. Most  OSP students attend schools where the maximum OSP scholarship  amount would cover the estimated total cost of attendance (see  sidebar). But without having this information, it is difficult for families to  know the full cost of attendance, and they may be responsible for  paying fees that they were unaware of. This may be difficult, given this  program’s target population.

Accreditation: The Directory also offers families incomplete  information about schools’ accreditation status. According to  representatives of accreditation organizations, school accreditation is  important because it serves as a means of accountability and  oversight. The Directory indicates which accrediting organizations are  recognized by the District. However, the Directory lists some schools’  affiliated memberships as an accreditation organization. For example,  one school was listed as having the National Association of Episcopal  Schools as an accrediting organization, but this organization does not  accredit schools. Three schools were listed as being accredited by  Nativity Miguel, which is a network of schools serving low-income  communities, not an accrediting organization.

Some families we spoke with told us that they did not receive the  Directory or tuition information, and therefore, they were not aware of  which costs would not be covered by OSP or which schools were  participating in the program. Instead, they communicated directly with  schools about whether they were participating in the program. Although  the Directory is publicly available on the Trust’s website, not all program  participants may have computer or Internet access. In addition, even if  families have Internet access through smart phones, this does not  necessarily mean that program participants can use them to access  everything they need, according to one school official. Trust officials told  us they provide direct assistance to families to help them select schools  and discern their total cost of attendance, but not all families may be  receiving this assistance.

In addition to having incomplete information, the Directory has also been  published too late to truly assist families in selecting a school. Families  need to select schools for their students before the school year starts in  August or September. However, the Trust published the Directory for the  2012-2013 school year in May 2013, about 9 months after the start of that  school year. According to Trust officials, the Directory was published late  because the school site visits—during which Trust officials confirm and  update key school data for the Directory—occurred later in the year than  in previous years due to substantial staff changes. Trust officials also told  us that these directories are primarily meant to inform families selecting  schools for the upcoming school year. While the 2012-2013 Directory was  issued too late to assist families for that same school year, it can assist  families for the upcoming 2013-2014 school year. Trust officials stated  that in the future they plan to publish the Directory by December of the  current school year. The Trust plans for future Directories to include more  accurate notation of the school accrediting bodies and a general notation  about applicable discounts and/or additional fees.

According to Trust officials, they issued a list of participating schools in  the fall for the 2012-2013 school year to assist families with school  selection. This list of participating schools was intended to be a  companion piece to the 2011-2012 Directory and included schools’  addresses and grades served, but it did not include key information such  as updated tuition information and admissions requirements. According to  Trust officials, the participating school list is updated as needed to reflect  any school changes that may have occurred between the publication of  the previous year’s Directory and the start of the school year. For  example, the 2012-2013 list of participating schools excluded a school  that had closed, even though this school was listed in the 2011-2012  Directory. While some families may have been able to fill any gaps  between these two sources of information through the guidance and  hands-on assistance provided by the Trust, the extent to which all families  had access to this direct assistance is unclear.

section_title: The Timeframes for Awarding Scholarships Do Not Align with Many Schools’ Admissions and Enrollment Schedules
paragraphs: For both the 2012-2013 and the 2013-2014 school years, the Trust  awarded scholarships several months after many schools’ application  deadlines had passed. For the 2012-2013 school year, the Trust  conducted its scholarship lottery in July 2012, about 1 month before  classes started for many schools. In addition, the Trust did not hold its  school placement and welcome fair, which it uses to assist families with  school selection, until August 2012, the same month that classes began  for 6 of the 10 schools we visited, as shown in figure 3. By that time,  many of the schools in OSP had already completed their admissions and  enrollment processes. We found that 9 of the 10 schools we visited did  not have an application deadline or were still accepting applications after  students had been notified that they had received a scholarship.

For the 2013-2014 school year, the Trust moved up its timeframes, giving  families more time to select schools than in the previous year. First, the  Trust awarded scholarships in late May 2013 and held its school  placement and welcome fair in early June rather than August, as was  done in 2012, according to Trust officials. Still, as in school year 2012- 2013, many schools had already completed their admissions and  enrollment processes by that time. In addition, according to some schools  we visited, awarding scholarships so close to the start of the school year  can affect their ability to adequately plan for the coming school year. For  example, officials at two schools we visited told us that as a result of the  scholarship lottery and school fair being held in July and August 2012,  respectively, they did not know how many students would be enrolled at  their schools until just a few weeks before the school year started in  August. This made it difficult to discern class sizes and plan for the  number of teachers needed.

Officials at schools we visited told us that they have found ways to work  around the scholarship time frame and accommodate OSP students. For  example, one school held an additional open house and another school  accepted applications as late as the first week of school, according to two  school officials. However, several parents we spoke with mentioned that  they only had about a month to find a school and enroll their students, at  which time many schools were no longer accepting students, and three  school officials told us that the scholarship timeframes do not give  families enough time to research school options. Since the application  and financial aid deadlines for some of the program’s most costly schools  occur much earlier than the OSP scholarship timeframes, by the time a  student is awarded a scholarship, there are neither financial aid dollars  from the school nor space available for that student.

According to Trust officials, Education’s requirement to verify family  income using the most recent complete year of income information delays  scholarship awards. To verify income information, the Trust also told us  they have to wait until after the April 15th tax filing deadline. Trust officials  noted that some schools use prior year income information to determine  provisional financial aid awards, reconcile these awards with the current  year’s tax information once that is available, and rescind financial aid  awards if the incomes exceed a certain level. Trust officials expressed  concerns about having to potentially rescind any scholarships, even  though the chance that incomes will change so substantially among  program participants is low. Trust officials are currently exploring ways to  use prior year income information to determine eligibility earlier in the  year and enable them to award scholarships earlier. Education officials  told us if the Trust wants to consider using a different year’s income for  the purpose of making preliminary determinations regarding students’  eligibility, it would have to submit its proposal to Education for evaluation.

section_title: The Trust Has Not Developed Effective Internal Controls to Safeguard Program Funds
subsections: section_title: The Trust Has Not Developed Effective Policies and Procedures for Implementing and Overseeing the Program
paragraphs: The Trust’s policies and procedures lack detail in several areas related to  school compliance and financial accounting, which may result in little  overall accountability for program funds. The absence of detailed policies  and procedures also reflect weak internal control in the areas of risk  assessment, control activities, information and communication, and  control environment. Internal control is broadly defined as a process  designed to provide reasonable assurance that an organization can  achieve its objectives with effective, efficient operations, reliable financial  reporting, and compliance with laws and regulations. The Committee of  Sponsoring Organizations of the Treadway Commission’s (COSO)  Internal Control—Integrated Framework, includes five key elements or  components, as shown in table 1. COSO is applicable to the Trust  because it is a non-governmental entity.

Policies and procedures are a central part of control activities and help  ensure necessary actions are taken to address risks to achievement of  the entity’s objectives. In August 2013, the Trust made amendments to its  policies and procedures to address the financial review performed on  schools, administrative expenses, and bank reconciliations. However,  these amendments do not address all weaknesses identified in this  report, and they have not yet been fully implemented.

The Trust, as administrator of OSP, is responsible for ensuring that  participating schools comply with the reporting and program requirements  that are outlined in the SOAR Act. The Trust, however, does not have a  process for independently verifying the information that schools submit as  evidence of compliance, reflecting weaknesses in the Trust’s risk  assessment process and internal control activities.

The SOAR Act requires a potential OSP grantee to demonstrate how it  will ensure that participating schools meet certain reporting and program  requirements specified in the Act. In addition, the SOAR Act requires the  grantee applicants to ensure that participating schools report to parents at  least once during the school year on students’ academic achievement, as  well as the safety and accreditation status of the school. The Act also  requires schools to meet certain standards, such as building occupancy  and teacher credentialing requirements. The Trust’s policies and  procedures state that participating schools must self-certify whether they  have met several of these requirements.

Participating schools complete a School Participation Verification Form  that is submitted to the Trust each year to attest to student academic  performance, school safety, and all of the applicable requirements in the  SOAR Act, including status of accreditation. According to District  regulation, if a private school in the District is not accredited, the school  can provide evidence of acceptable instruction to the District’s Office of  the State Superintendent for Education (OSSE) by submitting information  regarding teacher credentials and curriculum documentation. However,  during our interview, officials from OSSE stated that they do not regularly  ensure that schools have an acceptable curriculum. Officials we spoke  with said that they are revisiting this policy, but they did not provide a  timeline for whether and when any changes will occur. According to  OSSE officials, the last time the Trust requested an accreditation review  of participating OSP schools was before the start of the 2010-2011 school  year.

The SOAR Act states that participating schools must maintain a valid  certificate of occupancy. The Trust collects and reviews copies of the  certificates of occupancy. However, if the validity of the certificate of  occupancy changes, the Trust may not know of the change. We obtained  and reviewed the certificates of occupancy for the 10 schools we selected  for site visits. In 5 of the 10 schools, we could not discern the validity of  their certificates of occupancy. For example, one school’s certificate of  occupancy did not list “school” or “private school” for the use, but rather  “child development center and infant preschool.” Enrollment at three other  schools, as shown in the Directory, appeared to exceed the listed  capacity, and one additional school’s certificate did not list a capacity so it  is not known if the school has exceeded its current capacity. Additional  follow-up is needed to determine if these certificates of occupancy are, in  fact, valid, but the Trust does not make any inquiries with the District  agency responsible for issuing certificates of occupancy, nor does the  Trust follow up with the schools.

In addition, the Trust conducts site visits at participating schools but does  not verify the documents or activities to which the schools attest.  Participating schools complete a School Review Form to document each  site visit. This form is also used by schools to attest to meeting reporting  and program requirements and is not independently verified by the Trust.

As the program administrator, the Trust is responsible for mitigating  potential program risks. Verifying the information reported by participating  schools is important to ensuring that scholarships are awarded only to  students to attend participating schools that are in compliance with the  SOAR Act’s requirements and that the program is administered  effectively. Without a mechanism or procedures for verifying the accuracy  of the information provided by participating schools, the Trust cannot  ensure that schools are eligible to participate in OSP and, therefore, risks  providing federal dollars to students to attend schools that do not meet  the educational and health and safety standards required by the District.

The Trust’s policies and procedures lack sufficient detail to ensure each  participating school in OSP has the financial systems, controls, policies,  and procedures in place to ensure federal funds are used according to  the law, a requirement of the SOAR Act.

The Trust’s policies and procedures require the financial Controller of the  Trust to review documentation that demonstrates the adequacy of each  participating schools’ financial resources. Based on this financial review,  the Trust has identified two schools as “high risk,” one for issues that  occurred during the 2010-2011 school year, and the other for financial  struggles in 2011. However, the policies and procedures for this financial  stability review do not identify the specific risk factors that should be considered when assessing schools’ financial sustainability information.In addition, it is unclear what risk factors were considered during the prior  Controller’s review of the schools’ documentation demonstrating  adequate financial resources since the policies and procedures did not  specify factors to consider and, according to current Trust officials, there  was no documentation about the review.

According to the risk assessment and control activities components of  COSO’s internal control framework, it is important that management  carefully considers factors that contribute to or increase risk and that  management creates policies and procedures that help ensure that  necessary actions are taken to address these risks. For OSP, factors that  contribute to or increase risk include whether a school can continue to  reasonably meet its financial obligations as they become due, and how  dependent a school is on OSP funds. If a school cannot reasonably meet  its financial obligations, it could be monitored more closely before and  after being accepted into the program. If a school is overly reliant on OSP  funds, which would be determined by the Trust, further review or  increased monitoring could be warranted. As a result of certain risk  factors not being considered in assessing schools’ financial sustainability,  schools that are not financially sustainable may be participating in the  program.

Based on documents provided by the Trust, several schools we visited  that participated in OSP during the 2010-2011 and 2011-2012 school  years did not provide detailed financial statements necessary to assess  their financial stability, and during this time, the Trust did not have a   The financial  practice of documenting its financial review of schools.information submitted by 6 of the 10 schools we visited did not include  detailed financial information required by the Trust’s policies and  procedures. There was not any documentation or guidance completed by  the previous Controller on these financial reviews. Officials from  participating OSP schools we visited also confirmed that the Trust did not  ask for additional information or support for the financial condition of the  schools. Despite the policies and procedures that exist for OSP financial  review of schools, there is little documentation detailing the analyses  performed or the conclusions reached by the Trust. In addition,  exceptions to the policy, such as where schools submitted information  that did not adhere to the policies and procedures, was not documented.  As stated earlier, the Trust amended their policies and procedures in  August 2013 to include more detail regarding the financial review of  participating schools; however, these amendments have not yet been  fully implemented.

The Trust does not have detailed policies and procedures for dealing with  schools that are not in compliance with program rules. For example, if the  Trust discovers that a school no longer possesses a valid certificate of  occupancy or is not accredited and did not meet the District’s educational  standards, the Trust lacks policies and procedures dictating what is to be  done at what time in the school year to ensure all schools participating in  the program meet program rules and all students in OSP are attending  schools that comply with these standards of safety, educational quality,  and financial stability. The Trust’s policies and procedures provide only  one example of a policy directed at a school not meeting standards  required by the SOAR Act: if a school is unable to provide supporting  documentation for financial sustainability, the Trust’s policy is that  scholarship payments to the school will be distributed on a month-to- month basis, as opposed to three times per year. It is a weakness in the  Trust’s control activities that there is not a clearly defined, comprehensive  written policy addressing schools out of compliance with program rules.  Trust officials told us that they were not clear on what actions they could  take to address non-compliant schools. However, Education officials told  us that under certain circumstances the Trust can remove a school from  participating in OSP.

The Trust’s policies and procedures for fiscal years 2010, 2011, and 2012  did not specify how to track administrative expenses, including what  expenses should be included, and the Trust has little documentation to  support administrative expenses incurred during the fiscal years 2010,  2011, and 2012. In addition, the Trust does not have detailed policies and  procedures outlining the monthly bank reconciliation process, where staff  review accounting system records and compare them to bank records.  As stated earlier, it is important that an entity’s management have policies  and procedures in place that address risks to achieving an entity’s  objectives. Control activities include a range of activities such as  verifications, reconciliations, as well as reviews of operating performance  and security of assets.

The SOAR Act limits the Trust’s administrative expenses to 3 percent of  the annual grant amount. The Trust’s policies and procedures state that  they may only draw down federal funds from Education on a  reimbursement basis after such expenses have been incurred and paid.  While the Trust’s policy manual does provide guidance for tracking  employee time that should be billed to the program, it does not provide  guidance for other expenses such as rent, telephone, printing, or office  supplies, which could possibly be counted as administrative expenses for  purposes of seeking reimbursement. The cost of administering OSP could  be higher or lower than the 3 percent designated for administrative costs.  Because these expenses were not tracked prior to October 2012, the true  cost of administering the OSP program is unknown. In part due to the  outcome of their fiscal year 2010 financial audit, the Trust has begun to  track administrative expenses more closely.

The Trust did not draw down federal reimbursement from Education for  administrative expenses for fiscal years 2010, 2011, and 2012. In  addition, the Trust did not document the decision or approval as to why it  did not follow its policies and procedures or did not request  reimbursement from Education for its administrative expenses. According  to Education officials, grantees do not typically document why they have  not drawn down funds. In addition, they explained that Education’s grants  management system automatically flags funds that have not been drawn  down within a particular time frame and the system has not flagged the  Trust since funds had been drawn for the scholarships. Education officials  also stated that the Trust classifies its obligations and expenditures in  reports such as their monthly expense reports, which is sufficient for the  department’s purposes.

In addition, as part of the finance department’s monthly bank  reconciliation process, the Trust’s policies and procedures also refer to  scholarship payment reconciliation as well as administrative expense  drawdown reconciliation. However, the Trust’s policies and procedures do  not specify certain aspects of the reconciliation, such as when the  reconciliations should be completed, how exceptions should be identified  and dispossessed, how the process should be documented, and when  the reconciliation should be reviewed—and by whom.

Without the specific guidance in the policies and procedures, it will be  difficult for the Trust to ensure that items are being appropriately and  consistently tracked and recorded, as administrative expenses may be  included that should not be (or not included that should be). In addition,  without specificity in the policies and procedures regarding bank  reconciliations, these reconciliations may not be completed in a  consistent or timely manner and increases the potential for errors, and  likelihood that errors will not be identified and corrected in a timely  manner.

section_title: The Trust’s Database Is Not Efficiently Structured
paragraphs: The Online Reports and Invoicing System (the database), which is used  by the Trust to manage the OSP program, is not structured well enough  for effective program implementation and oversight. Information contained  in the database includes current and past application information for  students and guardians, school placement information for each student  who received a scholarship award, payment information, and information  on participating schools.

According to COSO’s Integrated Framework, information should be  communicated to management and within the entity in a form and time  frame that enables officials to carry out their responsibilities and  determine whether they are meeting their stated objectives. For example,  in OSP, it is important that Trust officials have access to accurate, up-to- date student application information in order to meet program objectives,  such as determining eligibility and awarding OSP scholarships in an  efficient and timely manner. Similarly, families of OSP scholarship award  recipients, as consumers, need complete and timely information about  participating schools to make informed decisions about what school is  best for the student. The Trust’s database has several deficiencies  including a lack of documentation and automated checks, and a deficient  structure, which leaves the database open to errors and slows the Trust’s  ability to manage the program on a day-to-day basis, and communicate  information about the program to families and Education.

The Trust (including the contractor that created and maintains the  database) does not have any documentation for this database. For  example, there is no user guide or data dictionary, and potential users of  the database must rely on the institutional memory of select users who  have had more experience with the database to understand how to  properly use the database or the definitions of key data fields. When we  attempted to follow various verbal or informal written instructions for using  the database, we found flaws in these instructions that necessitated  several rounds of follow-up to successfully perform key functions and  basic data manipulation. It is not known what specifically caused this  condition, but Trust officials have noted financial constraints in requesting  more support from the contractor.

In addition to lacking documentation, the database does not have key  automated checks built into the system to ensure accuracy and efficient  data entry. Automated checks help maintain integrity in a database  reducing the risk that a significant mistake could occur and remain  undetected and uncorrected. For example, the Trust’s database does not  have checks to determine if a student’s application information has  already been entered. When a student submits an application, before his  or her information is entered into the system, a Trust staff person must  run searches in the database for his or her name, the guardian’s name,  both persons’ Social Security numbers and address to ensure the  applicant is not already in the system. These checks are necessary  because the system allows duplicate entry of the same student  information, potentially rendering the data unreliable, even with the  searches described above. To ensure data are accurate given the lack of  automated checks, the Trust stated that one of their officials runs several  queries and creates tables in Microsoft Excel to check for errors by hand  on a weekly or more frequent basis during key periods for the program.

The database’s current structure hampers an administrator’s ability to  look at historical trends and use them as an effective management tool.  When the Trust inherited the database from the Washington Scholarship  Fund, the older data in the system were not cleaned, and thus there are  many records in the database with missing fields, or applications that are  only partially entered, suggesting they are not valid records. The Trust  has stated they cannot attest to the accuracy of these older data. Yet, the  Trust is using these older data in reports without an explanation of the  potential issues of inaccuracy.

The weaknesses in the database’s structure also affect key activities for  the Trust, such as determining the priority groups of applications for the  OSP lottery. As stated earlier in this report, the SOAR Act states that if  more students apply to OSP than the program can accommodate, the  grantee (the Trust) must ensure that applicants are selected for awards  through a random selection process that gives weight to three priority  groups (which the Trust has implemented through a lottery). The groups  of applicants that have a priority status as defined in the SOAR Act are:  (1) applicants who are currently attending a school that has been  identified for improvement, corrective action, or restructuring under the  Elementary and Secondary Act of 1965, as amended; (2) applicants who  have a sibling currently participating in OSP; and (3) applicants who  received an OSP scholarship award in a previous year but did not use it.  Using the Trust’s database, we employed our own methodology to  replicate the process to determine the number of students in each  applicant priority group for the 2011-2012 school year because no  documentation exists for these queries. However, we were unable to  determine which students belonged in the third priority category of  students for the 2011-2012 school year because a key variable necessary  for this calculation appears to be unreliably populated. In other words, it  does not appear possible to use the Trust’s database to derive this  priority category and puts in question the Trust’s ability to provide  accurate priority categories for the OSP lottery.

Lastly, data entry of application information is also problematic. In  addition to basic eligibility information, OSP applications also include  important information needed for the third-party evaluation of the OSP  program. According to Education officials, the evaluation timelines have  been negatively affected for the 2011-2012 and 2012-2013 school years  because data entry was not completed in a timely manner. In one  instance the Trust had to retrieve hard copies of the applications from  storage and send relevant application data to the officials involved in the  evaluation because they were so behind in data entry. Education officials  stated that there may have been a lack of clarity regarding the specific  information the Trust was supposed to enter into the database and that  delays resulting from untimely data entry should not be an issue going  forward.

section_title: The Trust Has Not Filed Its Mandatory Financial Reports on Time
paragraphs: The Single Audit Act requires that recipients submit their Single Audit  reports to the federal government no later than 9 months after the end of  the period being audited, which would be June 30th for an entity with a  September 30th fiscal year end, such as the Trust. The Trust’s Financial  Statements, Schedule of Expenditures of Federal Awards, and  Independent Auditors’ Reports Required by Government Auditing  Standards and OMB Circular A-133 for the Year Ended September 30,  2010, were issued on January 31, 2013—more than 2 years after the end  of its 2010 fiscal year. Until this report was issued, Education did not have  the financial reports required to properly account for the federal funds  expended for OSP under the Trust’s administration. According to Trust  officials, the 2010 audit was delayed because of a need to change audit  firms and ongoing investigations regarding its finances related to other  grants.

The issue of delayed reports has not been resolved. As of August 2013,  the Trust’s audited financial statements for fiscal year ending September  30, 2011, and 2012 have not been issued yet (see fig. 4). On August 9,  2013, Trust officials told us that the final fiscal year 2011 audit is expected  to be completed by the end of August 2013 and the fiscal year 2012 audit  will not be completed before September 2013.delay in submitting mandatory financial reports there was no opportunity  for formal oversight of federal dollars spent on OSP for almost 2 years  under the Trust’s administration. In addition, the continued delay in the  audit reports means the Trust has not taken actions on deficiencies found  in each audit in a timely manner to mitigate further issues.

section_title: Agencies Have Not Fully Executed Responsibilities Outlined in Governing Documents
paragraphs: The SOAR Act requires that the Secretary of Education and the Mayor of  the District of Columbia enter into a memorandum of understanding  (MOU) that addresses how OSP will be implemented. The MOU, which  was agreed upon by Education and the District in June 2012, is intended  to help ensure the efficient and effective implementation of OSP in a  manner that incorporates and is consistent with the roles and  responsibilities of Education and the District. It describes, for example,  offices and officials within Education and the District that have lead  responsibility for implementing OSP, issues and areas on which  Education and the District will collaborate, and specific activities that  Education and District agencies, such as the Department of Consumer  and Regulatory Affairs (DCRA), Fire and Emergency Medical Services  (EMS), and the Department of Health will carry out. According to the  MOU, Education is responsible for working with the Trust to improve  certain aspects of the administration of OSP. The District is responsible  for conducting regulatory inspections of participating schools—upon  notification by the Trust—and providing the Trust with the results of those  inspections (see fig. 5).

In addition, Education entered into a cooperative agreement with the  Trust to set forth the responsibilities of each entity for implementing OSP  as required by the SOAR Act and the Education Department General  Administrative Regulations. Education and Trust officials signed the  cooperative agreement in June 2013, 3 years after the grant for OSP had  been transferred to the Trust. Education officials stated that, among other  reasons, the cooperative agreement had not been developed any earlier  because of substantial turnover in staff at the Trust. Education officials  stated they wanted to wait to implement the agreement until the Trust’s  staff had stabilized. Trust officials stated that the cooperative agreement  was an opportunity to codify the various ways in which Education and the  Trust would assist each other in implementing the program. Through the  cooperative agreement, Education also agreed to assist the Trust in the  same four areas stated in the MOU.
subsections: section_title: Education Has Provided Limited Assistance to the Trust
paragraphs: Education has provided limited assistance to the Trust as agreed upon in  the MOU and cooperative agreement governing OSP. Trust officials  acknowledged that they have not proactively sought Education’s  assistance in these areas. They told us that although they have had  several discussions with Education regarding the general administration  of the program and operational issues, they have not had opportunities to  discuss lessons learned or making improvements in certain areas of  program administration.

Through the MOU and cooperative agreement, Education is responsible  for helping the Trust ensure that it implements appropriate improvements  to its financial system. However, according to Trust officials, Education  has not undertaken any activity to help improve its financial systems and  the Trust has not had any conversations with Education about doing so.  Education officials told us that the Trust’s financial systems were an  improvement over the previous administrator’s financial system and that  they have not had to closely manage the Trust in this area. However, as  previously discussed, the Trust’s policies and procedures do not provide  specific guidance on allocating certain administrative expenses and the  Trust does not have detailed policies and procedures outlining the bank  reconciliation process. Further, as a result of the Trust’s tardiness in  submitting mandatory financial reports, the Trust was unable to account  for federal dollars spent on OSP for about 2 years after the end of fiscal  year 2010.

Education has not assisted the Trust in developing, implementing, or  updating its policies and procedures for conducting site visits, as specified  in the MOU and cooperative agreement. According to Education officials,  as long as the Trust maintained the procedures used by the previous  administrator, there was no need to revise its site visit procedures. When  we spoke to Trust officials, however, we were told that although  Education has not assisted with its site visit policies and procedures, the  Trust updates its procedures every year and provides them to Education  for review. Additionally, Education told us that it did not have any  concerns with the timing of the Trust’s site visits, even though the Trust  did not conduct site visits for the 2012-2013 school year until February  2013—the second semester of the school year.

According to the MOU and cooperative agreement, Education agreed to  assist the Trust in developing procedures to improve the accuracy of  information provided to families before they choose a participating school  and encourage schools to make such information available on an annual  basis to families of enrolled students. Education officials stated that they  meet with the Trust at the start of each school year to discuss marketing  and recruitment, the participating school fair, and how to engage with  families, and to provide feedback on these aspects of OSP as needed.  For example, Education worked with the Trust to publish the school  Directory for the 2012-2013 school year. Education did not have any  concerns with the accuracy of the information provided to families for the  purpose of selecting a school to attend. According to the Trust, Education  relies on it to verify that schools are providing parents with such  information. However, as discussed earlier, the school Directory does not  include complete information about schools’ tuition, fees, and  accreditation that families need to make informed school choices.

In addition to the responsibilities described above, Education is also  responsible for providing oversight of the Trust as a recipient of federal  funds. According to Education officials, its role is to identify a grantee to  administer OSP and ensure that the grantee adheres to applicable federal  law and regulations. Education monitors the Trust with regard to (1)  progress in implementing OSP; (2) financial records; and (3) data  records, including records on student placements and numbers of  scholarship awards. The activities that Education conducts as part of its  oversight of the Trust are documented in the cooperative agreement  between Education and the Trust and it conducts ongoing reviews of the  Trust’s activities to ensure satisfactory performance under the  cooperative agreement. Education officials stated that the cooperative  agreement was developed, in part, to increase its oversight of the Trust.  For example, Education used the cooperative agreement to institute  reporting requirements and clarify program rules. Officials said they also  recognized the need for a closer partnership with the Trust and stated  that the cooperative agreement was an opportunity to clearly describe the  Trust’s expectations.

Education officials also told us that they provide guidance and technical  assistance to the Trust. For example, Education officials told us they  participate in conference calls with Trust officials, review the Trust’s  annual performance report and monitoring plans, and provide ongoing  technical assistance. Education officials also stated that they conduct  regular, ongoing desk monitoring of the Trust, and will also conduct  biannual site visits with the Trust beginning in the fall of 2013. If there  were any problems with safeguarding OSP funds, Education officials  stated they would work with the Trust to correct the problem or, if  necessary, they could penalize the Trust through actions such as freezing  and withholding funds, recovering funds, and ensuring that the grant  cannot be renewed.

section_title: Requirements Under the MOU Are Not Being Met
paragraphs: The MOU requires that the District conduct inspections necessary for  schools to participate in OSP “upon notification by the grantee (the  Trust),” but required inspections are often not being conducted. For  example, the MOU requires the District Government, upon notification by  the Trust, to conduct regulatory inspections of all program schools to  determine whether they have a current certificate of occupancy. The  District’s DCRA issues certificates of occupancy and conducts  inspections based on the types of building or trade permits that schools  have. A DCRA official, however, stated that it relies on the permit holder  to make requests for all required inspections. Also, the District’s Fire and  EMS Department is responsible for conducting biennial inspections or  otherwise determining whether participating schools comply with  applicable District health and safety requirements, as required by the  MOU. However, a Fire and EMS official stated that private schools are  not subject to regular inspections. Trust officials told us they did not know  whether participating schools had been inspected by the District  agencies. Lastly, officials at schools we visited told us that certain District  agencies had conducted some inspections but not specifically for OSP.  Rather, they occurred for other reasons, such as general inspections for  schools that offer special education or early childhood services.

The MOU also states that the District should provide information to the  Trust regarding whether participating schools are in conformance with  District requirements. The Trust’s understanding of this requirement is  that the District should be providing the inspection results on a regular  basis without being specifically asked by the Trust. However, Trust  officials told us they do not receive any information from the District as a  result of any inspections that may have been conducted at participating  schools. And according to the Trust, it does not follow up with District  agencies to inquire about the results of any of the inspections.

Although the MOU is a written agreement between Education and the  District, it includes a responsibility for the Trust. Specifically, the MOU  states that the Trust—as the grantee—is responsible for notifying District  agencies to conduct these required inspections of participating private  schools. Given that the Trust is responsible for ensuring that participating  schools continue to be eligible to receive federal dollars through OSP,  notifying the District agencies can be important in ensuring appropriate  oversight of participating schools. This activity can be especially important  for agencies like the District’s Fire and EMS department that do not  normally inspect private schools. However, because the Trust is not a  signatory to the MOU, Trust officials were not acutely aware that they  were responsible for notifying the District agencies. Furthermore, the  cooperative agreement between Education and the Trust does not  include this requirement for the Trust to notify District agencies. Officials  from the Trust stated that they assumed that District agencies conducted  inspections of private schools as a matter of process, without the Trust  prompting them to do so. As a result, activities that are crucial to the  successful implementation of the program—such as building, zoning,  health, and safety inspections—may not be occurring for all participating  schools.

section_title: Conclusions
paragraphs: The OSP is intended to afford District families the opportunity to attend  higher-performing schools of their choice and have all or part of the cost  of attendance paid. In order to make well-informed decisions, however,  families need complete and timely information on schools’ tuition, fees,  and accreditation, as well as timely scholarship awards. Since taking over  OSP, the Trust has not provided such information to families in a timely  manner, requiring families to make less-informed decisions near the  beginning of the school year, when many schools no longer have places  for admission.

The Trust needs to improve program management and operations to  assure efficiency and effectiveness. Currently, it does not effectively  oversee participating schools, has not implemented effective policies and  procedures, and is unable to efficiently manage day-to-day program  operations. As a result, families may believe that participating schools  fully meet program requirements, although the Trust cannot ensure that  these schools meet them. In August 2013, the Trust made amendments  to its policies and procedures manual regarding the financial review  performed on schools, administrative expenses, and bank reconciliations.  However, these amendments do not address all weaknesses identified in  this report, and they have not yet been fully implemented. Without  sufficiently detailed policies and procedures for all aspects of the Trust’s  operation, the Trust cannot sufficiently monitor its own operation of the  program and may not be able to account for all federal dollars spent on  OSP. Additionally, because of the weaknesses in its program database,  the Trust cannot efficiently manage day-to-day operations of the program.

The weaknesses that we have identified highlight the need for sustained  oversight and management attention to ensure efficient and effective  program implementation and accountability over federal funds. However,  Education has provided the Trust with limited assistance in specific areas  stated in the MOU and the cooperative agreement governing the  program. Furthermore, the Trust is unsure whether key activities crucial to  the successful implementation of the program—inspections for  compliance with the District’s building, zoning, health, and safety  requirements—are being conducted. Under the MOU, the inspections are  to be done upon the Trust’s notification to District agencies, but the Trust  is not a signatory to the MOU.  Moreover, the cooperative agreement  between Education and the Trust is silent regarding the responsibilities of  the Trust on this issue. The Trust’s limited ability to effectively oversee  participating schools coupled with the weaknesses in the Trust’s internal  control environment underscore the need for Education to conduct more  rigorous oversight and monitoring of the Trust. Not only would increased  oversight help ensure that the Trust is administering the program  effectively, but it would also help ensure that OSP achieves its intended  purpose as outlined in the SOAR Act.

section_title: Recommendations for Executive Action
paragraphs: To ensure families receive expanded opportunities for school choice and  OSP is implemented and overseen effectively, we recommend that the  Secretary of Education take the following actions:

Revise the June 2013 cooperative agreement between Education and  the Trust to include Education’s expectations for the Trust regarding  collaboration with District agencies to ensure they conduct required  building, zoning, health, and safety inspections.

Work with the Mayor of the District of Columbia to revise the  memorandum of understanding that governs OSP implementation to  include processes that will help ensure that the results of OSP school  inspections, when they are conducted, are communicated to the  Trust.

Explore ways to improve Education’s monitoring and oversight of the  Trust. For example, Education could require the Trust to develop and  implement a plan for how it will address its timeliness in mandatory  financial reporting.

Conduct activities to ensure that the Trust: publishes the school Directory prior to participating schools’  application deadlines with more complete information. more closely aligns its scholarship timeframes with schools’  admissions and enrollment schedules. Education could find ways  to assist the Trust in executing the OSP lottery earlier in the  school year, for example, by allowing the Trust to use the prior  year’s income information to make preliminary determinations  regarding eligibility.  improves its OSP database by creating and maintaining  documentation for the use of the database, adding automated  checks to the system, creating flags and/or variables for the key  priority categories called for in the SOAR Act, and streamlining the  data entry process for new applications in order to ensure there is  sufficiently reliable data regarding the operation of the program.

Require the Trust to update its policies and procedures in several key  respects, and monitor the Trust’s activities to ensure that these  updates are made. These updates should include: identifying the steps the Trust will take to verify reported  information on participating schools’ compliance with reporting  and program requirements specified in the SOAR Act. identifying the specific risks that should be included in the  evaluation performed when assessing participating schools’  financial sustainability information, including a record of the  analyses performed, and ensure that the conclusions reached with  regard to schools’ financial sustainability are documented. specifying a process for addressing schools that are noncompliant  with program requirements. providing more detailed procedures in key areas including  calculating yearly administrative expenses, and performing  monthly and year end reconciliations of the OSP bank account,  and ensure the document reflects current practices and that key  decisions associated with administrative expenses are  documented.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to Education, the Office of the Mayor of  the District of Columbia (the District), and the DC Children and Youth  Investment Trust Corporation (the Trust) for comment. Education officials  provided technical comments, which were incorporated into the final  report as appropriate. Written comments from Education and the Trust  are reproduced in appendices V and VI, respectively, and are also  summarized below. The District did not provide written comments on the  draft report. In its comments, Education did not indicate agreement or  disagreement with our recommendations. The Trust generally agreed with  our recommendations, but disagreed with some of the findings. Both  Education and the Trust provided additional information on issues raised  in the report.

In its letter, Education stated that it took the issues raised in the GAO  report seriously and would continue to consider them carefully, but noted  that the report did not fully reflect the Trust’s efforts to provide complete  and timely information about participating schools to OSP families.  However, in our final report, we discuss a number of different ways in  which the Trust provides information and assistance to current and  prospective OSP families, and we believe we adequately reflected the  Trust’s efforts. Education also noted that the report does not fully  recognize the significant staff turnover in leadership at the Trust, which  affected several aspects of the Trust’s implementation of the program in  school year 2012-2013. We recognize that the Trust faced a number of  challenges as it assumed responsibility for the program. However, several  issues that we identified in the report are not new, but rather contribute to  long-standing weaknesses in internal controls and oversight of the  program. Therefore, we believe that if Education had provided more  effective oversight of the program and more timely technical assistance to  the Trust, many of the challenges identified in the report could have been  addressed sooner. In addition, more effective internal controls, including  robust policies and procedures for program administration and school  oversight, could have helped to smooth the difficulties associated with the  transition in leadership and program administration.

The Trust disagreed with our finding that its Participating School Directory  provided incomplete and untimely information. More specifically, in its  comments, the Trust emphasized that this condition does not exist under  the current management and administration of OSP and that the Trust  provides information through a comprehensive array of tools, events, and  individualized assistance. We acknowledge the substantial change in staff  that occurred at the Trust and discuss in our report the number of ways in  which the Trust provides assistance to families through channels other  than the Directory. However, the most recent Directory—a key source of  school information for families—was still published too late and contained  incomplete information about tuition, fees, and accreditation. Education’s  written comments focus on the Trust making a deliberate decision to  maintain a reasonably sized, user-friendly directory with straightforward  information on average tuition and fees and on the efforts of the Trust to  provide individualized ongoing assistance to families and assistance  through school placement fairs. We agree that the Directory must be  prepared for a non-technical audience, but continue to believe that for a  program predicated on choice, it is imperative that the Trust provide  families with complete and timely information needed to make informed  decisions, especially with respect to tuition and fees. The Trust could  accomplish this without overburdening families with excessive information  by using a general notation for schools that have discounted or different  tuition rates, as the Trust noted in its written comments, or providing a  range of the potential total cost of attendance for families. As the Trust  indicated in its letter, it could also include more accurate notation of  school-accrediting bodies. We support the Trust’s efforts to update the  Directory for future school years by including more complete information  for OSP families.

In addition, in its comments, Education noted that substantial changes in  the Trust’s staff and leadership transition affected the timing of the Trust’s  site visits at participating schools. As we discuss in our report, these  circumstances resulted in site visits occurring later in the year, which in  turn affected the timeliness of the Directory’s publication. We  acknowledge that this is not a routine practice of the Trust and encourage  the Trust to continue to work toward conducting these site visits earlier in  the school year and publishing the Directory earlier. We also support  Education’s plans to work with the Trust to provide the Directory prior to  participating schools’ application deadlines. The plan to publish the  Directory by December 2013 for the 2013-2014 school year, and by  November in future school years, represents a marked improvement in  the timeliness of the school directories. However, we maintain that  families need to have information about schools prior to participating  schools’ application deadlines. We encourage Education and the Trust to  consider publishing the Directory earlier than November or December to  help families start making school decisions as early as possible in the  scholarship application process, ensuring that families have the full range  of school options available to them.

In response to GAO’s finding regarding the misalignment of scholarship  awards with participating schools’ admissions and enrollment schedules,  Education expressed concern that an earlier scholarship lottery date  could, among other things, result in the Trust conducting less outreach to  potential applicants. We acknowledge the steps that Education identified  the Trust needs to take prior to the lottery, such as screening applications  for eligibility, conducting multiple rounds of baseline testing, and ensuring  that the lottery pool of eligible applicants is sufficient so that the  evaluation can proceed with the necessary sample size. Education stated  that the Trust would need to submit a proposal to Education if it wanted to  use a different approach for screening student eligibility, such as using a  different year’s income information, that could help expedite the steps  leading up to the lottery. We support Education’s consideration of any  proposal to use a different approach that would ultimately enable the  Trust to award scholarships earlier and ensure that OSP families have the  widest range of choice possible, and we would encourage the Trust to  fully consider the issues, and if it deems it appropriate, develop such a  proposal for Education’s consideration.

The Trust also disagreed with our finding regarding its lack of policies and  procedures for implementing and overseeing OSP, stating that its policies  and procedures manual clearly and accurately reflects the policies and  procedures governing the program. Further, the Trust stated that although  amendments to the policies and procedures regarding allocation of costs  and reconciliation were codified in August 2013, these policies were in  practice prior to that date. GAO applauds the Trust’s efforts to increase  oversight of participating schools and update their policies and  procedures accordingly. Despite the Trust’s claims that these policies and  procedures were already in practice, GAO does not consider these  policies and procedures fully implemented until these activities take place  on a regular basis. In addition, the Trust’s revised policies and procedures  do not address all of the weaknesses for which GAO recommended  action, such as developing a process for addressing schools that are  noncompliant with program requirements. Education commented that the  Trust’s proposed revisions to the letter of agreement with participating  schools reserves the Trust’s right to limit or suspend a school’s  participation in OSP and that any OSP schools that require further  discussion about compliance would be handled on a case-by-case basis.  However, we continue to believe that the Trust needs to develop a more  clearly defined, comprehensive written policy to address schools that are  noncompliant.

With regard to weaknesses GAO identified in the structure of the Trust’s  database, the Trust stated they would take GAO’s comments under  advisement and consider key changes and improvements. The Trust  stated that the database is proficient in areas such as determining student  eligibility, student invoicing, school oversight documentation tracking, and  notation of communication with individual families and schools. The Trust  also noted that they must use outside spreadsheets to complete any  reporting on historical information about the program, and that automated  checks do not exist, but the database does not impede data collection or  identification of student sub-groups for inclusion in the scholarship lottery  (referred to in this report as “priority categories”). Based on our review,  we continue to believe that the Trust’s ability to determine the third priority  category described in the SOAR Act—applicants who received an OSP  scholarship award in a previous year but did not use it—is questionable  because, according to GAO’s analysis, a key variable in the database  used to determine this priority category is not reliable.

As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from its  issue date. At that time, we will send copies of this report to relevant  congressional committees, the Secretary of Education, the Mayor of the  District of Columbia, the Executive Director of the District of Columbia  Children and Youth Investment Trust Corporation, and other interested  parties. In addition, the report will be available at no charge on GAO’s  web site at http://www.gao.gov.

If you or your staff should have any questions about this report, please  contact me at (202) 512-7215 or scottg@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VII.

section_title: Appendix I: Scope and Methodology
paragraphs: We reviewed relevant federal and District laws and regulations and  analyzed key documents from the DC Children and Youth Investment  Trust Corporation (Trust), the federal Department of Education  (Education), and participating schools, as well as generally accepted  guiding documents for internal controls including those published by GAO  and the Committee of Sponsoring Organizations of the Treadway  Commission (COSO). We also conducted site visits at 10 of the 53  participating private schools in the program and interviewed relevant  school officials. In addition, we conducted two discussion groups—one in  English and one in Spanish—with parents and guardians of students who  received and used an Opportunity Scholarship Program (OSP)  scholarship in the 2012-2013 school year. We also interviewed key  officials at the Trust, Education, and select agencies in the District, as  well as representatives of accreditation organizations and nonprofit tuition  assistance organizations. In addition, we analyzed the structure of the  Trust’s database and the Trust’s program data.

We conducted this performance audit from May 2012 to September 2013  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 based  on our audit objectives.
subsections: section_title: Review of Program Documents
paragraphs: To determine the types of information available to families and the types  of schools participating in OSP, we reviewed the Trust’s Participating  School Directory (the Directory) for school years 2010-2011, 2011-2012,  and 2012-2013. We also reviewed the list of participating schools  available to families at the beginning of the 2012-2013 school year and  compared it to the Directory when it was issued in May 2013 to determine  if there were any discrepancies. We also examined OSP application  materials as well as documents given to OSP families at the 10  participating schools we visited. These documents included application  materials, tuition and fees information, and notices sent to families, such  as school newsletters and notices about safety incidents occurring in and  around the school.

To determine the types of information participating schools submit to the  Trust, we reviewed schools’ Key School Data Forms. These forms include  information on a school’s enrollment, facilities, number of days of  instruction, curriculum, and services offered and are used by the Trust to  compile the Directory. We also reviewed schools’ Tuition and Fees forms  to estimate a student’s total cost of attendance. Given the variation in  fees among participating schools, we estimated the total cost of  attendance using several assumptions, such as full-time attendance for  one school year for a new OSP student. We also used information  provided by schools about their admissions requirements and deadlines  to determine how their application deadlines aligned with scholarship  award timeframes implemented by the Trust.

To determine the extent to which the Trust implemented internal controls  over financial transactions and program administration, we reviewed the  Trust’s financial management policies and procedures. We also reviewed  the Trust’s financial statements, schedule of expenditures of federal  awards, and independent auditors’ reports required by government  auditing standards and OMB Circular A-133 for the year ending  September 30, 2010. In addition, we reviewed the Trust’s administrative  expense report and copies of monthly and annual bank reconciliations  and reviewed relevant federal laws and regulations. To determine the  roles and responsibilities of the Trust, Education, and the District, we  examined the grant transfer agreement between the Trust, the  Washington Scholarship Fund, and Education; the memorandum of  understanding between Education and the District of Columbia  Government; and the cooperative agreement between Education and the  Trust.

To determine the Trust’s assessment of participating schools’ financial  stability, we reviewed fiscal year end 2010-2012 financial statements and  other documentation submitted by schools, such as management letters  and reports. We also reviewed forms submitted by schools, such as the  School Participation Verification Forms, to determine the mechanism by  which schools attest to the veracity of the information they submit. In  addition, we reviewed COSO’s standards for internal controls for non- federal entities.

section_title: Analysis of Program Data from the OSP Database
paragraphs: To determine several aspects of the Trust’s administration of OSP, we  requested program data from the Trust, including participating school  characteristics, OSP student enrollment at participating schools, student  eligibility determination, scholarship payments, and student  characteristics, including the priority categories for awarding scholarships  as stated in the SOAR Act. We received program data from the 2004- 2005 school year, the first year in which the program was administered by  the Washington Scholarship Fund, to the 2011-2012 school year. We  assessed the reliability of the data through performing electronic testing  for obvious errors in accuracy and completeness and interviewing agency  officials knowledgeable about the data. We found substantial problems  with the data, including missing fields or partially entered applications. As  we previously stated in this report, the lack of documentation for the  database made it difficult to understand which fields were current or still in  use. As a result, we limited the scope of our analyses to data from the  2011-2012 school year, the most recent and complete year of data  available at the time of our review. We determined that these data were  sufficiently reliable for the purposes of our report.

The Trust did not have a documented query or process to determine the  number of OSP students enrolled at each participating school. Following  the instructions from the Trust’s data contractor, we initially determined  the number of OSP students at each school by using variables  representing the year, student and school identifiers, student school  placement, and the number of days the student was enrolled. We found,  however, that there was an extensive number of missing values for  several of the key variables needed to complete this analysis. As a result,  we determined that we could not use this method of calculating OSP  enrollment. Instead, we calculated OSP enrollment by using a count of  student identifiers by school and payment information. We also analyzed  OSP student enrollment by race and ethnicity to determine the  demographic characteristics of OSP students enrolled at each  participating school.

Under the SOAR Act, Education is required to give priority to grantee  applicants that will most effectively give priority to:  1.  Students who, in the preceding year, attended a public school in the  District that was identified as a school in need of improvement,  corrective action, or restructuring under the Elementary and  Secondary Education Act of 1965, as amended.  2.  Students who previously were awarded a scholarship in a preceding  year but have not used the scholarship, specifically emphasizing  students that were awarded a scholarship for the first time in 2009- 2010, when the 216 new scholarships awarded that year were  rescinded by the Department of Education.  3.  Students that have a sibling participating in OSP.

To assess the Trust’s application of these priority groups for the 2011- 2012 school year, we attempted to replicate the Trust’s process for  determining the number of students in each priority group. Since the Trust  has not documented these processes, we determined the number of  students in two of these priority groups—those attending a school  identified for improvement and those with a sibling in the program—using  detailed queries and clarifications from the Trust’s contractor. Despite  employing several different approaches, our results did not corroborate  the Trust’s results for these two categories. We were unable to determine  a reliable number of students in the third priority group—those who were  previously awarded a scholarship but had not used it. We found that one  of the key variables Trust officials use to determine this category was  unreliable. As a result, we could not use other variables in its place to  reliably determine the number of students belonging in this group.

section_title: Site Visits to Participating Schools
paragraphs: To review aspects of participating schools’ compliance with program rules  and regulations, as well as their admissions and enrollment processes,  we conducted site visits to 10 participating schools (see table 2). During  these visits, we interviewed key school officials; reviewed documents,  including certificates of occupancy, health certificates, and teacher  credentials; and toured school facilities. We also interviewed finance  officers at these schools to determine the schools’ financial stability and  the types of financial information schools submit to the Trust.

We selected a nongeneralizable sample of 10 schools to visit based on  two criteria: (1) the percentage of OSP students enrolled and (2) the  largest number of OSP students enrolled. Using this approach allowed us  to visit schools that potentially were almost entirely funded by OSP  scholarships as well as schools that were receiving the most absolute  OSP dollars. We used student enrollment data obtained from the Trust for  the most recent school year available (2011-2012) as well as information  from the 2011-2012 Directory.

Using these criteria, we determined the sample of 10 schools to visit by  selecting 5 schools with the highest concentration of OSP students  relative to the total school enrollment and 5 schools with the highest  number of OSP students, as shown in table 2.

In order to develop these criteria, we made multiple requests for  information from the Trust and made several clarifying inquiries to ensure  the accuracy of our approach. After we completed this analysis, through  the course of additional interviews with the Trust, we learned there were  some additional types of records in the Trust’s database that we needed  to exclude to execute a more exact query for OSP enrollment. However,  we received this information several months after nearly all the site visits  were conducted.

To provide balance, we also spoke with National Presbyterian School and  Aidan Montessori School—two schools that historically had few or zero  OSP students enrolled—to determine what factors impact their interest  and ability to enroll OSP students. We selected these schools based on  our analysis of the Trust’s 2011-2012 data on the number of OSP  students enrolled at participating schools.

section_title: Discussion Groups with Parents and Guardians of OSP Students
paragraphs: To better understand families’ experiences with OSP, we conducted two  semi-structured discussion groups with parents and guardians of students  who received and used an OSP scholarship in the 2012-2013 school  year. To ensure we had a diverse group of parents, we conducted one  group in English and one group in Spanish. The Trust recruited parents  and guardians to participate in these groups by randomly selecting 75 to  100 English-speaking and Spanish-speaking parents/guardians. Of these  randomly selected parents and guardians, 14 participated in these  discussion groups. Although asking the program administrator to recruit  participants may result in a biased group of participants, the Trust staff  knew this population best and could most effectively reach out to this  group. As a result, the extent to which these participants represent all  OSP families is unclear, and the results of these discussion groups are  not generalizable to the entire population of OSP families.

The Trust e-mailed letters written by GAO in both English and Spanish to  parents explaining the purpose of the discussion groups and encouraging  their participation. Two discussion groups were held in December 2012  and were about 1 to 2 hours in length. To ensure participants’ privacy,  parents and guardians were asked to use alternate first names during the  discussion.

In each of the discussion groups, we covered the following topics:  reasons why parents were drawn to the OSP; how they found out about the program;  the school selection and application process; and their children’s experience at their OSP schools.

Following the discussion group, we asked participants to provide us with  some basic background information in a short voluntary questionnaire.  Thirteen of the 14 participants completed the questionnaire, which we  provided in both English and Spanish. After we conducted the groups, we  obtained transcripts of both groups to ensure the accuracy of the groups’  discussions. For the discussion group conducted in Spanish, we obtained  a transcript in Spanish as well as a translation in English to ensure the  accuracy of the translation.

section_title: Interviews
paragraphs: We interviewed officials at the Trust to determine how they administered  OSP, their relationship with Education and the District, and their internal  control activities. During one of these interviews with Trust officials, we  conducted a walk-through where Trust staff demonstrated how they enter  and maintain their database. To better understand how the Trust  manages its database, we interviewed Trust officials and the Trust’s  contractor, who is responsible for maintaining the database. To determine  Education’s role in OSP and their relationship with OSP and the Trust, we  interviewed officials at Education’s Office of Innovation and Improvement  and Institute of Education Sciences. To understand the scholarship lottery  process and how OSP is evaluated, we interviewed officials from  Education and Westat, the contractor responsible for conducting the  lottery. To understand the relationship between the District, Education,  and the Trust, and to specifically understand the execution of the MOU,  we interviewed officials at key agencies in the District, such as the Office  of Deputy Mayor for Education and the Office of the State Superintendent  for Education. We also requested and received written responses to key  questions from certain District agencies, including the Department of  Health, the Department of Consumer and Regulatory Affairs, and the Fire  and Emergency Medical Services Department. To determine the  significance and role of accreditation, we spoke with representatives from  Middle States Association of Colleges and Schools Commissions on  Elementary and Secondary Schools, Association of Independent  Maryland & DC Schools, and AdvancED. We also spoke with  Independent Education, an association of private independent District- area schools that requires its member schools to be accredited. To better  understand the role played by nonprofit organizations that provide  additional private school tuition assistance, we interviewed  representatives from the Archdiocese of Washington, Latino Student  Fund, Capital Partners for Education, and the Jack Kent Cooke  Foundation’s Young Scholars Program.

section_title: Appendix II: Schools That Agreed to Accept Students in the District’s Opportunity Scholarship Program in School Years 2010-2011 and 2011-2012 (“Participating Schools”)
paragraphs: Appendix II: Schools That Agreed to Accept  Students in the District’s Opportunity  Scholarship Program in School Years 2010- 2011 and 2011-2012 (“Participating Schools”)

School name  Academia De La Recta Porta  International Christian Day School  Beauvoir – National Cathedral  Elementary School  Bishop John T. Walker School for Boys  Howard University Early Learning  Program  Kuumba Learning Center (MLK Campus)

School name  National Cathedral School  Our Lady of Victory School  St. Ann’s Academy  St. Anselm’s Abbey School  St. John’s College High School  Washington Middle School for Girls  (THEARC & Washington View  Campuses)

section_title: Appendix III: Total School and OSP Enrollment, School Year 2011-2012
paragraphs: Appendix III: Total School and OSP  Enrollment, School Year 2011-2012 School name  Academia De La Recta Porta Intl Christian  Day School  Beauvoir-National Cathedral Elem. School  Bishop John T. Walker School for Boys  Howard University Early Learning Program  Kuumba Learning Center (MLK Campus)

School name  Preparatory School of DC  St. Ann’s Academy  St. Anselm’s Abbey School  St. John’s College High School  Washington Middle School for Girls Dupont Park Adventist School has two campuses: Alabama Ave (grades PK-5) and Massachusetts  Ave (grades 6-10).  Washington International School has two campuses: Primary School Campus (grades PK-5) and  Tregaron Campus (grades 6-12).

Washington Middle School for Girls has two campuses: THEARC Campus (grades 6-8) and  Washington View Campus (grades 4-5).

section_title: Appendix IV: Internal Control Frameworks
paragraphs: Internal control is broadly defined as a process, effected by an entity’s  board of directors, management and other personnel, designed to provide  reasonable assurance regarding the achievement of objectives in the  following categories: effectiveness and efficiency of operations,  reliability of financial reporting, and compliance with applicable laws and regulations.

According to the Committee of Sponsoring Organizations of the Treadway  Commission (COSO), the five components of internal control for  businesses and other entities are:

Control Environment: The control environment sets the tone of an  organization, influencing the control consciousness of its people. It is  the foundation for all other components of internal control, providing  discipline and structure. Control environment factors include the  integrity, ethical values and competence of the entity’s people;  management’s philosophy and operating style; the way management  assigns authority and responsibility, and organizes and develops its  people; and the attention and direction provided by the board of  directors. The control environment has a pervasive influence on the  way business activities are structured, objectives established and  risks assessed. It also influences control activities, information and  communication systems, and monitoring activities. This is true not  only of their design, but also the way they work day to day. The  control environment is influenced by the entity’s history and culture. It  influences the control consciousness of its people. Effectively  controlled entities strive to have competent people, instill an  enterprise-wide attitude of integrity and control consciousness, and  set a positive “tone at the top.” They establish appropriate policies and  procedures, often including a written code of conduct, which foster  shared values and teamwork in pursuit of the entity’s objectives.

Risk Assessment: Every entity faces a variety of risks from external  and internal sources that must be assessed. A precondition to risk  assessment is establishment of objectives, linked at different levels  and internally consistent. Risk assessment is the identification and  analysis of relevant risks to achievement of the objectives, forming a  basis for determining how the risks should be managed. Because  economic, industry, regulatory and operating conditions will continue  to change, mechanisms are needed to identify and deal with the  special risks associated with change. All entities, regardless of size,  structure, nature or industry, encounter risks at all levels within their  organizations. Risks affect each entity’s ability to survive; successfully  compete within its industry; maintain its financial strength and positive  public image; and maintain the overall quality of its products, services  and people. There is no practical way to reduce risk to zero. Indeed,  the decision to be in business creates risk. Management must  determine how much risk is to be prudently accepted, and strive to  maintain risk within these levels. Objective setting is a precondition to  risk assessment. There must first be objectives before management  can identify risks to their achievement and take necessary actions to  manage the risks. Objective setting, then, is a key part of the  management process. While not an internal control component, it is a  prerequisite to and enabler of internal control. This chapter first  discusses objectives, followed by the discussion of risks.

Control Activities: Control activities are policies and procedures,  which are the actions of people to implement the policies, to help  ensure that management directives identified as necessary to address  risks are carried out. They help ensure that necessary actions are  taken to address risks to achievement of the entity’s objectives.  Control activities occur throughout the organization, at all levels and in  all functions. They include a range of activities including approvals,  authorizations, verifications, reconciliations, reviews of operating  performance, security of assets and segregation of duties. Control  activities can be divided into three categories, based on the nature of  the entity’s objectives to which they relate: operations, financial  reporting, or compliance. Although some controls relate solely to one  area, there is often overlap. Depending on circumstances, a particular  control activity could help satisfy entity objectives in more than one of  the three categories. For example, operations controls also can help  ensure reliable financial reporting and financial reporting controls can  serve to effect compliance. Although these categories are helpful in  discussing internal control, the particular category in which a control  happens to be placed is not as important as the role it plays in  achieving a particular activity’s objectives.

Information and Communication: Pertinent information must be  identified, captured and communicated in a form and time frame that  enables people to carry out their responsibilities. Information systems  produce reports, containing operational, financial and compliance- related information, that make it possible to run and control the  business. They deal not only with internally generated data, but also  information about external events, activities and conditions necessary  to informed business decision-making and external reporting.  Effective communication also must occur in a broader sense, flowing  down, across and up the organization. All personnel must receive a  clear message from top management that control responsibilities must  be taken seriously. They must understand their own role in the  internal control system, as well as how individual activities relate to  the work of others. They must have a means of communicating  significant information upstream. There also needs to be effective  communication with external parties, such as customers, suppliers,  regulators and shareholders. Every enterprise must capture pertinent  information, financial and non-financial, relating to external as well as  internal events and activities. The information must be identified by  management as relevant to managing the business. It must be  delivered to people who need it in a form and timeframe that enables  them to carry out their control and other responsibilities.

Monitoring: Internal control systems need to be monitored, a process  that assesses the quality of the system’s performance over time. This  is accomplished through ongoing monitoring activities, separate  evaluations or a combination of the two. Ongoing monitoring occurs in  the course of operations. It includes regular management and  supervisory activities, and other actions personnel take in performing  their duties. The scope and frequency of separate evaluations will  depend primarily on an assessment of risks and the effectiveness of  ongoing monitoring procedures. Internal control deficiencies should be  reported upstream, with serious matters reported to top management  and the board. Internal control systems change over time. The way  controls are applied may evolve. Once-effective procedures can  become less effective, or perhaps are no longer performed. This can  be due to the arrival of new personnel, the varying effectiveness of  training and supervision, time and resource constraints or additional  pressures. Furthermore, circumstances for which the internal control  system originally was designed also may change, causing it to be less  able to warn of the risks brought by new conditions. Accordingly,  management needs to determine whether the internal control system  continues to be relevant and able to address new risks. Monitoring  ensures that internal control continues to operate effectively. This  process involves assessment by appropriate personnel of the design  and operation of controls on a suitably timely basis, and the taking of  necessary actions. It applies to all activities within an organization,  and sometimes to outside contractors as well. For example, with  outsourcing of health claims processing to a third-party administrator,  and such processing directly affects benefits’ costs, the entity will  want to monitor the functioning of the administrator’s activities and  controls.

GAO Standards for Internal Controlthe five standards of internal control:   for federal agencies also comprise

Control Environment: Management and employees should establish  and maintain an environment throughout the organization that sets a  positive and supportive attitude toward internal controls and  conscientious management. A positive control environment is the  foundation for all other standards. Several key factors affect the  control environment including the integrity and ethical values  maintained and demonstrated by management and staff,  management’s commitment to competence, and philosophy and  operating style. In addition, the agency’s organizational structure and  the manner in which the agency delegates authority and responsibility  throughout the organization affect the control environment. Good  human capital policies and practices are another critical  environmental factor. A final factor affecting the control environment is  the agency’s relationship with Congress and central oversight  agencies such as the Office of Management and Budget. Congress  mandates the programs that agencies undertake and monitors their  progress and central agencies provide policy and guidance on many  different matters. In addition, Inspectors General and internal senior  management councils can contribute to a good overall control  environment.

Risk Assessment: Internal control should provide for an assessment  of the risks the agency faces from both external and internal sources.  A precondition to risk assessment is the establishment of clear,  consistent agency objectives. Risk assessment is the identification  and analysis of relevant risks associated with achieving the  objectives, such as those defined in strategic and annual performance  plans developed under the Government Performance and Results  Act, and forming a basis for determining how risks should be  managed. Management needs to comprehensively identify risks using  methods such as qualitative and quantitative ranking activities,  management conferences, forecasting and strategic planning, and  consideration of findings from audits and other assessments. Once  risks have been identified, they should be analyzed for their possible  effect. Because governmental, economic, industry, regulatory, and  operating conditions continually change, mechanisms should be  provided to identify and deal with any special risks prompted by such  changes.

Control Activities: Internal control activities help ensure that  management’s directives are carried out. The control activities should  be effective and efficient in accomplishing the agency’s control  objectives. Control activities are policies, procedures, techniques, and  mechanisms that enforce management’s directives, such as the  process of adhering to requirements for budget development and  execution. They help ensure that actions are taken to address risks.  Control activities are an integral part of an entity’s planning,  implementing, reviewing, and accountability for stewardship of  government resources and achieving effective results. Control  activities occur at all levels and functions of the entity. They include a  wide range of diverse activities such as approvals, authorizations,  verifications, reconciliations, performance reviews, maintenance of  security, and the creation and maintenance of related records which  provide evidence of execution of these activities as well as  appropriate documentation. Control activities may be applied in a  computerized information system environment or though manual  processes. Activities may be classified by specific control objectives,  such as ensuring completeness and accuracy of information  processing. Examples of control activities include top level reviews of  actual performance, reviews by management at the functional or  activity level, management of human capital, controls over information  processing, physical control over vulnerable assets, establishment  and review of performance measures and indictors, segregation of  duties, proper execution of transactions and events, accurate and  timely recording of transactions and events, access restrictions to and  accountability for resources and records, and appropriate  documentation of transactions and internal control.

Information and Communications: Information should be recorded  and communicated to management and others within the entity who  need it and in a form and within a time frame that enables them to  carry out their internal control and other responsibilities. For an entity  to run and control its operations, it must have relevant, reliable, and  timely communications relating to internal as well as external events.  Information is needed throughout the agency to achieve all of its  objectives. Program managers need both operational and financial  data to determine whether they are meeting their agencies’ strategic  and annual performance plans and meeting their goals for  accountability for effective and efficient use of resources. For  example, operating information is required for development of  financial reports. This covers a broad range of data from purchases,  subsidies, and other transactions to data on fixed assets, inventories,  and receivables. Operating information is also needed to determine  whether the agency is achieving its compliance requirements under  various laws and regulations. Financial information is needed for both  external and internal uses. It is required to develop financial  statements for periodic external reporting, and, on a day-to-day basis,  to make operating decisions, monitor performance, and allocate  resources. Pertinent information should be identified, captured, and  distributed in a form and time frame that permits people to perform  their duties efficiently. Effective communications should occur in a  broad sense with information flowing down, across, and up the  organization. In addition to internal communications, management  should ensure there are adequate means of communicating with, and  obtaining information from, external stakeholders that may have a  significant impact on the agency achieving its goals. Moreover,  effective information technology management is critical to achieving  useful, reliable, and continuous recording and communication of  information.

Monitoring: Internal control monitoring should assess the quality of  performance over time and ensure that the findings of audits and  other reviews are promptly resolved. Internal control should generally  be designed to assure that ongoing monitoring occurs in the course of  normal operations. It is performed continually and is ingrained in the  agency’s operations. It includes regular management and supervisory  activities, comparisons, reconciliations, and other actions people take  in performing their duties. Separate evaluations of control can also be  useful by focusing directly on the controls’ effectiveness at a specific  time. The scope and frequency of separate evaluations should  depend primarily on the assessment of risks and the effectiveness of  ongoing monitoring procedures. Separate evaluations may take the  form of self-assessments as well as review of control design and  direct testing of internal control. Separate evaluations also may be  performed by the agency Inspector General or an external auditor.  Deficiencies found during ongoing monitoring or through separate  evaluations should be communicated to the individual responsible for  the function and also to at least one level of management above that  individual. Serious matters should be reported to top management.  Monitoring of internal control should include policies and procedures  for ensuring that the findings of audits and other reviews are promptly  resolved. Managers are to (1) promptly evaluate findings from audits  and other reviews, including those showing deficiencies and  recommendations reported by auditors and others who evaluate  agencies’ operations, (2) determine proper actions in response to  findings and recommendations from audits and reviews, and (3)  complete, within established time frames, all actions that correct or  otherwise resolve the matters brought to management’s attention. The  resolution process begins when audit or other review results are  reported to management, and is completed only after action has been  taken that (1) corrects identified deficiencies, (2) produces  improvements, or (3) demonstrates the findings and  recommendations do not warrant management action.

section_title: Appendix V: Comments from the Department of Education

section_title: Appendix VI: Comments from the District of Columbia Children and Youth Investment Trust Corporation

section_title: Appendix VII: Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Gretta L. Goodwin, Assistant  Director; Jamila Jones Kennedy; Grace Cho; and Michelle Loutoo Wilson  made significant contributions to this report. In addition, key support was  provided by Carl Barden, Hiwotte Amare, Kimberly McGatlin, Carla  Craddock, David Chrisinger, Maria C. Belaval, Mimi Nguyen, Melinda  Cordero, John Lopez, Helina Wong, Ramon Rodriguez, Alexander  Galuten, Jean McSween, James Rebbe, Edward Bodine, Aron Szapiro,  and Kristy Kennedy.


Question-summary annotations: questions: question: What is the role of the DC Children and Youth Investment Trust Corporation (the Trust)?
answer: The DC Children and Youth Investment Trust Corporation (the Trust) provides information to prospective and current families of children participating in the District of Columbia (the District) Opportunity Scholarship Program (OSP) through a variety of outreach activities.

question: How does the Trust perform outreach to families?
answer: To reach prospective OSP families, the Trust advertises through print, radio, and bus ads, as well as in newspapers and flyers posted in neighborhood libraries, recreation centers, and local government service centers.
child_questions: question: How is their information lacking?
answer: However, the Trust provides incomplete and untimely information about participating schools to OSP families. The participating school directory, which is published by the Trust, lacks key information about tuition, fees, and accreditation.

question: How did the Trust fail to provide information for the 2012-13 school year?
answer: The Trust published the directory 9 months after the start of the 2012-13 school year, too late to assist families in selecting a school for that year.
child_questions: question: Why is the directory important?
answer: Without such information, parents cannot make fully informed school choices.

question: What happened as a result of the Trust’s scholarships being awarded late?
answer: Additionally, the Trust awarded scholarships to students several months after many schools completed their admissions and enrollment processes, limiting the amount of time and choice in selecting schools.

question: What did families say about the OSP?
answer: Most families GAO spoke with were generally happy with OSP but some were concerned about the availability of program information.

questions: question: How does the Trust fail to fully ensure the OSP?
answer: The Trust's internal controls do not ensure effective implementation and oversight of OSP.
child_questions: question: What internal controls should be met?
answer: Adequate policies and procedures can provide reasonable assurance of effective, efficient operations, reliable financial reporting, and compliance with applicable laws.

question: How does the Trust's internal controls fail in regards to self-reporting?
answer: However, the Trust's policies and procedures do not include a process for verifying eligibility information that schools selfreport.
child_questions: question: What risk does this pose?
answer: As a result, the Trust cannot ensure that schools are eligible to participate in the program and, therefore, risks providing federal dollars to students to attend schools that do not meet standards required by law.

question: How does the Trust's internal controls fail to be effective?
answer: Furthermore, the Trust's database is not well structured and hampers the effectiveness of program implementation.
child_questions: question: How could this cause errors?
answer: For example, the Trust lacks written documentation for the database, and staff must rely on institutional memory to ensure processes such as data entry are conducted properly, which could contribute to errors in the database.

question: What concerns are there in regards to the Trust’s awarding of scholarships?
answer: As required by law, the Trust groups eligible applicants into three priority categories by which scholarships are then awarded by lottery; however, weaknesses in the database's structure puts into question the Trust's ability to provide accurate priority categories.

question: How does the Trust's internal controls fail financially?
answer: Additionally, the Trust has not submitted its mandatory financial reports on time, despite a legal requirement that these reports be filed within 9 months of the end of the entity's fiscal year. The Trust's fiscal year 2010 financial report was almost 2 years late, and the Trust's fiscal year 2011 and 2012 reports had not yet been submitted as of August 2013.

question: How has the Trust tried to fix their policies and procedures?
answer: In August 2013, the Trust also made amendments to its policies and procedures in three areas GAO identified.
child_questions: question: How is their response still lacking?
answer: However, these amendments do not address all weaknesses identified in this report, and have not yet been fully implemented.

questions: question: How has the Trust been limited?
answer: The Department of Education (Education) has provided limited assistance to the Trust in certain areas outlined in the memorandum of understanding (MOU) with the District and in the cooperative agreement with the Trust.

question: What parts of the Trust is Education responsible for?
answer: Specifically, Education is responsible for helping the Trust make improvements to its financial system, enhance its site visit policies and procedures, and improve the accuracy of information provided to parents.
child_questions: question: How does the Trust regard Education's assistance?
answer: Trust officials acknowledged that Education has provided general assistance regarding administrative and operational functions, but it has not assisted with specific improvements in these areas.

question: How does the MOU affect the Trust?
answer: Although the MOU is a written agreement between Education and the District, it holds the Trust, as the grantee, responsible for notifying District agencies to conduct required building, zoning, health, and safety inspections of participating schools—a requirement that is not detailed in the cooperative agreement signed by Education and the Trust—but would assist the Trust in providing continued oversight of schools participating in OSP.
child_questions: question: How did this impact Trust's awareness of their responsibilities?
answer: As a result, Trust officials were not acutely aware of this responsibility, and required inspections were not being conducted in the manner described in the MOU between Education and the District.

questions: question: What feature prominently in discussions about education reform?
answer: School vouchers, a school choice program designed to provide students with public funds to attend private schools, feature prominently in policy discussions about education reform.

question: What is the OSP?
answer: The OSP was reauthorized by Congress in 2011 by the Scholarships for Opportunity and Results Act, and has garnered national attention as the first federally-funded voucher program.
child_questions: question: How has the program been funded since 2004?
answer: Since the program's inception in 2004, Congress has provided almost $152 million for the program benefitting almost 5,000 students, currently providing scholarships of about $8,000 for grades K-8 and about $12,000 for grades 9-12.

question: What was the GAO asked to examine?
answer: As requested, GAO examined (1) the extent to which the Trust provides information that enables families to make informed school choices, (2) whether the Trust's internal controls ensure accountability for OSP, and (3) how Education and District agencies responsible for overseeing OSP have performed their stated roles and responsibilities.