In school year 2009-2010, the District’s school system enrolled more than 72,300 students and was comprised of 58 local educational agencies (LEA). These included DCPS, the largest LEA with 129 schools, and 57 public charter schools. D.C.’s public charter schools act in most respects as independent and autonomous LEAs, some of which consist of more than one school location. The number of children attending public charter schools in the District has increased in recent years, with about 38 percent of the District’s children attending these schools in the 2009-2010 school year. D.C. charter schools are independent of traditional public schools and are authorized by the Public Charter School Board (PCSB), whose members are appointed by the District Mayor. The PCSB evaluates the schools’ academic performance and fiscal management, as well as their adherence to local and federal education laws, and has the authority to grant and revoke a school’s charter. D.C. public charter schools must independently lease or purchase school buildings for their use and, as previously reported by GAO, have consistently encountered problems obtaining cost effective and appropriate facilities. The D.C. Council passed the Public Education Reform Amendment Act of 2007 (Reform Act) in response to persistent challenges facing the school system. This act significantly altered the governance of the D.C. public schools by transferring the day-to-day management of the public schools from the Board of Education to the Mayor. It also created OSSE to serve in the same capacity as a state education agency (SEA). Effective October 1, 2007, DCPS transitioned its responsibilities for all SEA functions to OSSE. OSSE now fulfills the functions of an SEA under federal law, including grant-making, oversight, and maintaining standards, assessments, and federal accountability requirements for elementary and secondary education. OSSE performs these functions for both traditional public and public charter schools throughout D.C. (see figure 1). Both the President and Congress may propose financial assistance to the District in the form of special federal payments in support of specific activities or priorities. Upon being appropriated by Congress, federal payments are provided directly to D.C. agencies from the federal government and are subject to the requirements of the statutory appropriations language. Congress appropriated federal payments for school improvement in the District every fiscal year from 2004 to 2009 to the state education office (now OSSE) to expand D.C. public charter schools and to DCPS to improve public education in the District. During these years, about $190 million in federal payments were provided for these purposes (see table 1). With the exception of 2005, Congress has generally not included statutory language that offers additional specificity on the use of funds. Occasionally, committee reports accompanying the D.C. appropriations acts have stated the committee’s instructions as to the purpose and manner in which the funds should be used. These reports generally list projects and designate amounts for the expansion and improvement of public charter schools; committee reports have not consistently done this for payments to DCPS. The statutory language generally has not specified how or whether these offices should report on the use of the funds. The District’s Office of the Chief Financial Officer (OCFO) uses SOAR t budget and disburse federal payment funds in accordance with annual spending plans created by OSSE and DCPS. These spending plans outline how the agencies will use the funds, including the amounts to be available for specific initiatives or program offices. The agencies’ financial officers report to the District’s OCFO and monitor the financial activities of thei respective agencies. Within OSSE, the Office of Public Charter Schoo Financing and Support (OPCSFS), created in 2003, manages several federally funded programs that provide funding to charter schools for facility financing and grant programs to improve public charter school quality, including federal payments for these purposes. It also provides est technical assistance for grants and supports the dissemination of b practices and innovation at D.C. public charter schools. At DCPS, priorities regarding the use of federal payments are established and managed through the Chancellor’s office, which allocates funds to applicable program offices that implement various academic initiativ For those payments that fund contracts, program offices coordinate procurement activities with the contracting office which has the authori to enter into, administer, and terminate contracts. The program office monitor an awarded. es. d document contractor performance once the contract is According to annual independent audits, OSSE and DCPS have consistently had problems managing grants and contracts. These audits have identified, among other things, internal control deficiencies related to federal grants management at OSSE and procurement practices at DCPS. For example, the District’s fiscal year 2008 Single Audit found that OS SE had a total of 24 material weaknesses regarding internal control over compliance with federal grant program requirements and cash management. Also, an independent review by BDO Seidman, LLP, of DCPS’s internal controls during that time reported weaknesses related to insufficient procurement documentation and grants management. According to D.C.’s independent auditor, because its reviews likely included federal payment expenditures, their findings could also be relevant to these payments. Because of these and other findings, the U.S. Department of Education designated OSSE as a “high risk” grantee in 2007, when OSSE took over responsibility for the District’s education programs. While OSSE reports having taken corrective actions to address many of the longstanding financial, grants management, and program compliance issues that have plagued the D.C. public school system, the U.S. Department of Education has maintained a high risk designation for OSSE. Of the nearly $85 million in federal payment funds designated by Congress for the District’s public charter schools, OSSE has used approximately 77 percent—about $65 million—of these payments to help finance charter school facilities (see figure 2). OSSE has allocated approximately $17 million for other initiatives to improve the quality of public charter school education, such as supplemental education (e.g. a college preparatory program that included summer enrichment programs and standardized test preparation), and for other activities to address public charter school needs. OSSE also used nearly $1.5 million for administrative purposes and the remaining funds on other activities that included a truancy center and data collection efforts. OSSE has used roughly $65 million of federal payments to award more than 80 grants and loans to help public charter schools build, improve, lease, or purchase facilities (see table 2). According to OSSE, public charter schools often face challenges in funding facilities-related projects. Despite receiving an annual per pupil facility allowance to help pay for rent or mortgage and other facilities’ costs, public charter schools often need to supplement this with other sources of funding. Schools frequently need additional financing to purchase, renovate, or build facilities; to explore facility and financing options; and to make facility improvements. OSSE has funded various grants to not only improve school facilities but to also simultaneously meet other District needs such as creating community partnerships, revitalizing neighborhoods, and promoting the use of public facilities. The facilities projects that grantees, such as charter schools and nonprofit organizations, undertook range from building new campuses to conducting overdue maintenance on heating and cooling systems to updating security equipment and technology systems. For example, a public charter school that is a public facilities grantee used funds to help finance renovations and upgrades of a former D.C. public school to expand the number of students the school could serve. Among other things, the grantee updated mechanical, electrical, and plumbing systems; repaired roofing; replaced windows; and constructed a new gymnasium. Another public charter school that is a City Build grantee, received funds from OSSE to help build new classrooms so that it could expand the grade-levels that it serves, build vocational classrooms such as a barber shop, and create staff offices. OSSE allocated almost $17 million to award a range of grants on quality school initiatives or unmet needs (see table 3). These projects cut across several areas focused on supplemental education activities—which are activities that are provided in addition to those that occur during the course of the typical school day—and activities conducted during the school day to enrich students’ instruction. For example, between 2005 and 2008, OSSE awarded 41 incentive award grants to help schools enhance, improve, or implement an innovative program that would improve student learning and achievement or to start or expand their physical education programs. Some of the projects that schools undertook with this grant included the expansion of a reading buddies literacy volunteer program, a string instrument music program, and several physical education initiatives to address obesity. OSSE has also funded grants to help students prepare for and improve their access to college. For example, as directed in the conference report accompanying the District’s 2005 appropriations act, OSSE provided funding to the Educational Advancement Alliance to implement a college preparatory program. This program aimed to assist 9th through 12th graders with course enrollment, precollege advising, financial aid counseling, test preparation, college application completion, and career exploration and leadership development. Between 2004 and 2009, OSSE spent about $2.5 million to administer federal payment programs and undertake other projects. Specifically, OSSE allocated about $1.5 million for administration of federal payment programs, according to data provided by OSSE. OSSE funded several other projects such as a review of Medicaid billing policies and potential practices to help ensure that public charter schools received appropriate Medicaid reimbursement. OSSE also funded a data collection and analysis project to review public charter school data collection systems, coordinate data collection to ensure the systems are compatible with the entities that need to use them (e.g., the LEA, SEA, and charter school authorizers), and develop assessments to track student performance.