document: 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. According to OSSE officials, OSSE employs a range of activities to monitor public charter schools and other entities that receive grants funded by federal payments (federal payment grantees), but has limited written policies and procedures for conducting monitoring activities. OSSE typically outlines the monitoring activities it will employ in the request for grant applications and includes specific time frames for these activities and deliverables in grant agreements. In establishing their approach, OSSE officials stated that they try to balance OSSE’s monitoring functions with those of other organizations, such as PCSB, so they do not overburden schools with reporting requirements. Most often, these activities include reviewing financial and narrative performance reports that grantees must submit, reviewing 100 percent of all expenditures prior to providing money to grantees, conducting site visits, and in some instances auditing the grantee’s financial statements. To inform its monitoring process, OSSE officials told us that it also conducts a risk analysis based on the award amount and other information that the office reviews, such as a grantee’s independent audit results, PCSB reviews, and lender information. OSSE indicated that since 2007, it has implemented several operational improvements to monitor the use of federal payment funds. For example, OSSE also developed a document that outlines questions that staff should ask grantees and acceptable evidence the staff should review as part of their monitoring. However, we found OSSE lacks documented procedures on how staff should carry out and maintain records of these activities, including how to determine the level of risk based on the information from others’ reviews, and relies on more experienced staff to provide guidance and training. According to the Director of OPCSFS, staff generally should maintain documentation of their monitoring activities, such as grantee reports, in a grantee’s file. However, OPCSFS does not have written procedures or guidance on what should be maintained in the grantee files. The Director also stated that he would like to create a standardized file management process. According to the Director of OPCSFS, one of the main components of OSSE’s monitoring process is the review of invoices prior to reimbursing grantees for expenditures. OSSE developed a standardized form that grantees are to submit with invoices for staff to review prior to reimbursement. The files we reviewed included evidence that grantees submitted and staff reviewed the required reimbursement forms and invoices. According to the Director, the reimbursement process provides the opportunity for an extra level of monitoring in that OSSE compares expenditures with the intended purpose of the grant and approves or denies reimbursement based on this assessment. OSSE staff did not consistently document their collection and review of grantee narrative and financial reports. According to an OSSE official, these reports are used to help OSSE monitor grantees’ use of funds and their impact. Less than one-third of the files we reviewed contained all of the reports that were required during the grant award period, and one- third of the files had no reports (see figure 3). In instances in which files did not include all of the reports, the Director indicated that this may be because the grantee did not submit the reports or the staff responsible for monitoring the grantee did not put the report in the file. Of the files that did contain reports, several were submitted late—ranging from a couple of days to more than 3 months. Further, the files did not consistently have evidence that staff followed-up to obtain the reports. When there was evidence of staff follow-up, it was sometimes not until months after a report was due. For example, two files that had no reports included notices to grant recipients requesting that they submit final performance reports since they had been reimbursed for the amount of the grant award. An OSSE official stated that OSSE may withhold further payments on grants when grantees have failed to provide regular reports or other required documentation, but we saw no indication in the files that this happened. The files we reviewed also rarely had evidence that staff conducted site visits. An OPCSFS official told us that while the office conducts site visits “as necessary,” staff generally try to visit a school at least once during the grant award period. During these site visits, OSSE staff may interview school officials, review the school’s accounting practices, and request documentation on a program’s performance, among other things. We only found evidence of four site visits for the 30 files we reviewed. OSSE found that two of the schools visited needed to take corrective actions. Specifically, one school did not have adequate tools to measure the impact of the program as outlined in its grant agreement and the other did not maintain proper contractor records. According to the files, OSSE followed up with both schools to ensure that they were addressing the issues identified during the site visits. According to the expenditure data D.C. provided, DCPS has used its $105 million in federal payments for school improvement since 2004 for a variety of purposes—ranging from summer school programs to staff incentive pay. However, a lack of available information describing programs or initiatives funded with federal payments prior to 2009 precludes a full identification of the use of these funds. DCPS officials provided spending plans and other programmatic information that described program goals, objectives, activities, and outcomes related to DCPS’s use of federal payments since 2009; however, they could not provide similar information for prior years. DCPS officials stated that they searched for documentation that may have been created by the prior administration, including spending plans and guidance for 2007 and 2008, but were unable to recover any documentation that prior administrations may have developed or used. In 2009, under the current administration, DCPS used $40 million in federal payments primarily for supplemental education programs, staff incentive pay, and staff salaries, based on expenditure data (see figure 4). According to DCPS officials, it currently funds activities aligned with DCPS’s 5-year strategic plan and district-wide priorities designed to increase student achievement. Some of these funds were provided directly to schools, while others supported school administration functions within DCPS. These funding priorities are outlined in spending plans that guide the budgeting process and are submitted to Congress. Staff incentive pay. DCPS set aside almost $10 million of federal payments in 2009 to provide merit-based awards to eligible teachers and staff through a new assessment system called “IMPACT” when a contract agreement was reached with the Washington Teachers’ Union. Implemented in the 2009-2010 school year, the IMPACT system rates teachers and noninstructional staff, such as guidance counselors and custodians, on a combination of factors to assess and provide feedback on performance. For example, teachers are assessed on, among other things, the impact they and the school have on students’ learning over the course of the year, classroom observations, and commitment to the school community. Counselors, meanwhile, are assessed on DCPS counseling standards and commitment to the school community. Staff salaries. About $5.9 million was used to pay staff salaries and benefits distributed to schools through DCPS’s Comprehensive Staffing Model. According to DCPS, this model was first instituted in the 2008-2009 school year and is designed to ensure that all schools, regardless of size or location, offer a full complement of programs, including art, music, and physical education classes. It also helps schools provide services, such as social workers and psychologists, to support students’ nonacademic needs. The model distributes resources on a formula basis across the school district, and in 2009, according to DCPS, federal payment funds helped to hire and retain staff at 89 schools. Professional development. DCPS spent $5.7 million on teacher and principal development activities. Funds supported the Master Educator Program, whereby experienced educators traveled from school to school evaluating teachers and providing support as part of the IMPACT performance system. According to DCPS, educators provided targeted professional development to help teachers improve their instruction. Funds were also used for a “Principals’ Academy”—a monthly professional development session. According to DCPS, these meetings were used to train principals on effective parent and community engagement and share best practices on leadership. Finally, funds supported Partnership Schools where staff in low-performing schools received additional resources, expertise, and professional development opportunities from organizations hired to manage the schools. Supplemental education. DCPS used about $5.7 million for summer school activities and $2 million for the Saturday Scholars program. Saturday Scholars is a 12-week program that provides additional help in math and reading to students in grades 3-12. Data reporting. DCPS used about $6 million to fund data reporting activities that could provide parents with information on the performance of their children, classrooms, and schools. These initiatives included the DCPS School Scorecard, an annually released report on each school detailing school safety, culture, student growth, and family involvement in the school; stakeholder surveys; and a student information system to keep parents informed. Supplies. In 2009, DCPS used $3 million of the federal payments to purchase textbooks. Other activities. DCPS spent the remaining payments on other activities in 2009. For example, it provided $1.5 million to the Capital Gains Program, which, in partnership with Harvard University, provided financial literacy education and incentive payments for academic performance, behavior, and attendance to more than 3,000 students in grades six to eight. For the period between 2004 and 2008, D.C. provided expenditure data showing that DCPS used federal payments to fund a variety of programs for early childhood education, supplemental education, professional development activities, and supply purchases. While DCPS worked to provide information on programs funded prior to 2009, it could not locate detailed programmatic information on most expenditures to explain the goals, objectives, activities, and outcomes of these programs and we cannot, therefore, fully describe the use of federal payments for these years (see figure 5). According to DCPS, prior administrations may not have consistently created or maintained documentation on some of the programs they implemented. For example, expenditure data indicate that between 2004 and 2007, DCPS used $37.4 million to fund a literacy improvement program; however, DCPS was unable to provide information to describe the program’s goals, objectives, or outcomes. Additionally, we were unable to characterize approximately 36 percent of the other activities because DCPS could not provide information describing the expenditures beyond what was maintained for accounting purposes. In 2007, for example, 27 schools received “high performance awards.” Current DCPS officials were not able to ascertain why those schools received the funds. The lack of detailed information to fully describe the programs for which funds were expended also precludes us from assessing whether DCPS used funds as directed to do so by appropriations legislation. The 2005 District appropriation act states that DCPS shall use not less than $2 million of that year’s payments on a new incentive fund to reward improved schools and not less than $2 million on a transformation initiative directed to schools in need of improvement. While 20 expenditure data shows DCPS spent $9.8 million on a literacy improvement program, we cannot determine whether these or the remaining funds appropriated in that year were used for the two initia outlined in legislation. Expenditure data did not capture information linked to specific legislated initiatives, and according to agency officials, DCPS does not have records of the plans that would describe the incentive fund or the transformation initiative. DCPS program offices have employed a variety of methods to monitor contractor performance; however, in practice we found evidence of weaknesses in carrying out some monitoring responsibilities possibly attributable to staff turnover and a lack of a formal process to reassign responsibilities when turnover occurs. Specifically, in our revie and 2009 contract files, we found 7 of 14 files with incomplete documentation and evidence of review as well as missing files (see appendix II). DCPS’s Office of Contracts and Acquisitions has policies that specify a program officer’s responsibilities to monitor contractor pe program offices have flexibility on how to carry out these responsibilities. Pursuant to their monitoring responsibilities, program officers are to ensure that technical work is performed in accordance with the terms and conditions of the contract, maintain a contract file, review invoices, perform periodic site visits, and provide periodic written report and a final performance evaluation. Additionally, files maintained at the contracting office should consistently contain the name of the ass igned program officer who is responsible for contract oversight. In our discussions with a number of program offices, we were shown differen strategies they employ to fulfill their monitoring responsibilities. One program officer, who oversees a contract that provides an after school program, showed us a tool designed to track site visits. The document records observations of tutoring sessions to assess the tutor’s subje ct- matter knowledge, presentation style, and classroom management abilities. Another program officer did not conduct site visits because the contractors were often located at the program office and could be t observed on a more regular basis. That office independently a program to track deliverables across contracts it managed. In our review of contracting office files, we saw inconsistent documentation of monitoring activities related to the assignment of program officers and the lack of required evaluations on contractors’ performance. In our review of 14 contract files, we found that som contained notes from the contracting staff that the program officer left before the end of the contract term, and the file had no evidence that anew program officer was assigned. DCPS officials stated that the monitoring function has been impacted by staff turnover, and one offici said it is not uncommon for a contract to be overseen by two or three different program officers over the life of the contract. However, staff turnover alone does explain the lack of adequate monitoring. Program officials we spoke with stated that their respective offices did not have written protocols and procedures for transitioning responsibilities when a program officer leaves, nor did they have written processes for how to notify the contracting office. According to officials, staff generally the contracting office via e-mail when a program officer left, however, we did not see evidence of correspondence in those files. Recognizing that the specific nature and extent of contract administration may contract, one program official told us that it would be helpful for DCPS to develop a list of basic information that should be collected across program offices to ensure continuity in the event of staff turnover. Moreover, 4 of the 14 contract files we reviewed—totaling $2.7 million— were missing performance evaluations, and evaluations of 3 additional contractors were not completed within the required time frames. Performance evaluations are an important tool to help the contracting and program offices determine whether to extend a contract, and these evaluations must be submitted before a contract extension can be awarded. The evaluations are required to be submitted within 30 days of the end of the contract; however, one of the evaluations was submitted more than 1.5 years late. Further, one contract file that lacked a performance evaluation and two files that were submitted late were awarded contract extensions. According to a contracting official, staff from his office should take steps to gather this information from program staff, but we did not find evidence in the files that officials followed up to obtain these documents, or that many of the files had supervisory review. An official with the contracting office stated that it might also be helpful to have more regular formal assessments of contractor performance, and the on a office recently asked program officers to begin evaluating contractors monthly basis. The DCPS contracting office, which is responsible for maintaining all contract documentation, could not locate 3 of the 17 contract files we requested. According to a contracting official, DCPS recently moved and sent its contracts to storage and was having problems locating the files during the period of our review. DCPS could not locate the original file for one of the contracts, was unsure whether one contract was in fact awarded, and told us the other file could not be located because the name of the company had changed. According to D.C. Municipal Regulations, each D.C. office performing contracting functions is responsible for maintaining files containing records of all contractual actions pertinent to that office’s responsibilities, including documents sufficient to constitute a complete history of the transactions. These files are essential in providing a complete background as a basis for informed decisions at each step of the procurement process as well as providing information for reviews and investigations. Over the years, D.C. public schools have wrestled with numerous challenges: deteriorating facilities, low student performance, and lax administrative and management oversight. D.C. has recently taken steps address the long-standing problems with its public school system, and federal payments have contributed to some of these efforts. The statu language appropriating these funds does not generally direct OSSE and DCPS on how to use these monies for school improvements. It appears that OSSE and DCPS have expended federal payments on a range of activities related to “school improvement”—from facility renovation to summer school programs; however, the lack of detailed information on tory some of these payments dating back to 2004 precludes a complete understanding of their use. A lack of information describing how these funds were used highlights the need for stronger internal controls related to information management across administrations. Moreover, the financial management challenges that others, such as the U.S. Department of Education and D.C. Inspector General, have previous identified also persist with OSSE’s and DCPS’s monitoring of grants made with federal payment funds and contracts, respectively. Specifically, the policies OSSE and DCPS have are not consistently followed and sometimes fall short of commonly accepted standards. Because OSSE and DCPS distribute a large portion of federal payment for school improvement funds through grants and contracts, respectively, effective internal controls over grants and contracts are critical to their missions. Without proper documentation on the use of funds and the applicati strong monitoring framework, these funds may more easily be misused. Further, grantees and contractors may not be held accountable for meeting the agreed upon performance outcomes. In addition, OSSE and DCPS may risk implementing initiatives that fall short of reaching the potential to improve the District’s schools. Documenting required and actual monitoring processes may not completely eliminate potential m isuse of funds, but it could help to mitigate this risk. To improve internal controls for managing the use of federal payments and to provide continuity of information across administrations, we recommend that the Mayor of the District of Columbia take the following two actions: 1. Direct the State Superintendent of Education to establish and implement written policies and procedures for monitoring federal payment grantees. These policies and procedures, which can draw from OSSE’s general monitoring practices, should outline OSSE’s ds of practices for how staff should document and maintain recor m monitoring is appropriately and consistently implemented. onitoring activities and identify other measures to ensure that grant 2. Direct the DCPS Chancellor to establish and implement p contract monitoring to ensure that contract monitoring is appropriately and consistently done. Implementing this recommendation would include documenting monitoring activities ce throughout the term of the contract, directing DCPS to better enfor existing policies to ensure performance evaluations are complete, and rocedures for developing protocols and procedures for transitioning contracting officer responsibilities and for notifying the contracting office. Wh implementing this recommendation, DCPS should develop specific guidance on maintaining contract files and other documentation relevant to the use of these funds to ensure that contract records are available for inspection and as a means of retaining institutional knowledge of contracts. We provided a draft of this report to the D.C. Mayor’s Office, OSSE, and DCPS for review and comment. These entities provided written comme on a draft of this report, which are reproduced in appendix III. DCPS and OSSE generally concurred with our recommendations; however, they expressed concern with the way in which we evaluated their use of fed payments for school improvement and the tone of the draft report. Both OSSE and DCPS indicated that federal payment funds are unique and different from other federal funds and do not require the same reporting and monitoring. While these payments are different than funds provided ucation, a fact we state in the report, through the U.S. Department of Ed we maintain that both OSSE and DCPS should have better practices in place to monitor the use of them. OSSE stated that our recommendation is in line with its continued improvement and oversight of recipients of federal grant funded program and highlighted several of the steps it has taken since 2007 to improve its overall operations as well as the management of federal payment funds. OSSE also indicated that it will borrow from existing District and agency - wide protocols for monitoring federal payment funds, when appropriate. In our report, we recognize the processes OSSE has in place to monitor grantees; however, we continue to believe that these processes should b better documented. As indicated in our recommendation, we agree thatdrawing from existing practices that are documented is a good step for OSSE to take in ensuring that federal payment funds are appropriately monitored. OSSE also stated that our on-site review only included hard copy f During the course of our review, OSSE did indicate that it maintains some information electronically. We subsequently requested additional information that OSSE maintains on federal payment grantees, including electronic information that tracks the receipt of grantee reports. As of the time we drafted our report, OSSE had not responded to our repeated requests for this information. Regardless of whether information is maintained in hard copy or electronic form, we continue to believe that iles. OSSE should have in writing its procedures for documenting and monitoring grantees. OSSE agrees that is necessary and indicated that it would take steps to address our recommendation by June 2011. DCPS agreed with our recommendation to improve monitoring acti and maintain contract files and other applicable documents. In its response, DCPS provided information on several procedures it has recently put in place to implement more effective monitoring. These include, among other things, instituting and maintaining documentation on monthly performance evaluations and requiring contracting an officers to sign documentation acknowledging their roles and responsibilities at the beginning of the contract term. DCPS stated that these steps will mitigate the risk of not retaining an appropriate program officer for the duration of the contract. As indicated in our draft repo the time of our review, DCPS did have policies in place that clearly outlined the roles and responsibilities of the program staff. While establishing monthly performance evaluations and reinforcing staffs’ roles and responsibilities are important steps towards more effective monitoring sting practices, we maintain that DCPS needs to better enforce new and exi practices throughout the continuous monitoring. life of the contract to ensure consistent and DCPS’s response also identified areas of the report that they found to be d misleading or incomplete. Specifically, DCPS was concerned that we di not provide a sufficient explanation of the historical context of federal payments, including the use of the term “school improvement payments, which might be confused with other federal school improvement funds provided by the U.S. Department of Education. In our opening paragraph and the report background we state that federal payments are unique and separate from other federal funding, and that our use of the term “federal payments” throughout the report refers to these differentiated fund , we have subsequently not monies from federal agencies; however changed our title to help clarify this point. ” In addition, DCPS was concerned that the report does not adequately address the fact that during the current administration, programmatic initiatives and expenditures against those initiatives were clearly and w s documented. We disagree. On page 15 and again on pages 18-19 of thi report, we state that D.C. provided expenditure data for all years we requested and that the current administration has created spending plan and other programmatic information describing the planned and actual use of funds since 2009. DCPS also commented that we did not adequ explain the steps DCPS took to locate documentation from the prior ately administration that we requested. In response to this, we have provided additional clarification in the report, where appropriate, to explain that current DCPS officials took steps to locate information we requested on federal payment use prior to 2009, but spending plans or programmatic information that they could not locate may not have been created by prior administrations. DCPS also stated that it could have been more responsive in providin missing information for applicable contract files and documents for inspection if it were advised of the specific documentation deficiency referenced in the report. At the time of our file review, we worked with contracting office officials, and did, on several occasions, identify and request from them missing contract files and information. These officials or indicated that the documentation should have been in the contract file that they could not locate the information. Given our findings and the challenges DCPS had in locating information for our report, we continu ld to believe that DCPS can improve its monitoring processes and shou have practices in place to ensure these processes are implemented. We also provided a copy of the draft report to the independent D.C. Office ed technical comments on the of the Chief Financial Officer which provid draft that we incorporated as appropriate. We are sending copies of this report to the D.C. Mayor’s Office, the Office of the State Superintendent of Education, the DCPS Chancellor’s Office, al the D.C. Office of the Chief Financial Officer, appropriate congression committees, and others who are interested. We will also make copies available to others on request. In addition, the report no charge on GAO’s Web site at http://www.gao.gov. will be available at If you or your staff have any questions about this report, please contact me at (202) 512-7215 or ashbyc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs can be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. To identify the activities that both the Office of the State Superintendent of Education (OSSE) and the District of Columbia Public Schools (DCPS) funded with federal payments, we analyzed allocation and spending data, reviewed documentation provided by the offices, and conducted interviews with officials in these and other knowledgeable offices. We then categorized this information into activities that we identified based on previous GAO work, U.S. Department of Education program descriptions, and categorizations used by DCPS and OSSE when tracking their use of federal payments. Primarily, we analyzed data from the District of Columbia’s (D.C. or the District) financial management system—the System of Accounting and Reporting (SOAR)—and its procurement tracking system—Procurement Automated Support System (PASS). SOAR isolates federal payments from other revenue streams and provides OSSE, DCPS, and the D.C Office of the Chief Financial Officer (OCFO) with real-time information related to revenue and expenditures, among other things. SOAR is interfaced with PASS. We supplemented these data with interviews, spending plans that identify how the offices allocated federal payments, and other documents provided by OSSE and DCPS to describe the purpose and more specific use of funds as well as how they prioritized the use of funds. For example, we used SOAR and PASS data to understand the amount of funds DCPS used for a specific contract or program, but used additional information from DCPS to understand the purpose. For public charter schools, we supplemented the SOAR data with other information received from OSSE, including grant descriptions in the request for applications and summary data on allocations of federal payments. We also reviewed documentation provided by the D.C. Public Charter School Board. Using SOAR data, we identified fields that provided descriptive information on the program or general purpose of funds and the appropriated and expended amount for a given year’s appropriation. These funds were often used across several fiscal years. For example, we used these data to identify public charter schools that received grants and the amount of these grants. We used additional information provided by OSSE to determine the amount of funding in a given appropriation year that was used. We were unable to obtain transaction level data for appropriation year 2004 because, according to an OCFO official, federal payments for charter schools were managed by the Department of Insurance, Securities, and Banking. The department did not respond to our request for this information. We took several steps to assess the reliability of the data provided. We reviewed existing documentation about SOAR and PASS and prior GAO, D.C. Office of the Inspector General (OIG), and Independent Auditor reports that discussed these systems. We also interviewed knowledgeable staff in OCFO, OSSE, and DCPS about how these data were collected, stored, used, and the access controls in place. We interviewed officials within the D.C. OIG and Independent Auditor’s office. We conducted electronic testing on transaction-level data, including checks for missing data elements or out-of-range variables. Given the objectives and scope of our review, we did not conduct transaction testing (e.g., compare data input into the SOAR or PASS systems to invoices or other expenditure documents) to verify the accuracy and classification of data in the SOAR system, nor did we test specific transactions for noncompliance with Antideficiency Act requirements. We did, however, review previous assessments conducted by D.C.’s Independent Auditor that, among other things, included transaction testing. Overall, we found the data to be sufficiently reliable for the purposes of providing an understanding of how federal payments were allocated and expended. To assess OSSE’s monitoring of grantees that received federal payments, we reviewed available information on OSSE’s monitoring practices for federal payment grantees. We also reviewed information on OSSE’s general monitoring practices and reports from the D.C. OIG, U.S. Department of Education, and GAO to understand previously identified weaknesses with grantee monitoring. We also interviewed OSSE officials on their practices. We reviewed 30 of the 34 grantee files for grants that were awarded with fiscal year 2008 and 2009 federal payments to assess OSSE’s monitoring of federal payment grantees that we identified as within our scope. OSSE identified 42 grants that were awarded during this time. However, we eliminated eight from our scope, and OSSE did not respond to our request for four additional files, although OSSE indicated that these files were maintained. Specifically, we eliminated seven grants that, according to data provided by OSSE, were awarded as a “reimbursement” for costs that a school already incurred in developing an application for the use of surplus DCPS facilities. We eliminated these grants because they would not necessitate on-going monitoring given that the deliverable was already completed as a part of the application process. We also eliminated a special education grant, which was for Medicaid Billing and Technical Assistance, because it was an amendment to a November 2007 grant between OSSE and the D.C. Public Charter School Cooperative. We selected 2008 and 2009 grantees because these were the first years that OSSE was responsible for federal payment use and we could capture the most currently available monitoring information. We developed a data collection instrument to record information from the grantee files. We reviewed files for evidence of grantee monitoring, timeliness of grantee reporting, follow-up actions by OSSE staff, submission of required documents by grantees, and other documented actions by OSSE. To ensure that our data collection efforts conformed to GAO’s data quality standards, all files were independently reviewed by two GAO analysts. When the analysts’ views on how the data were recorded differed, they met to reconcile any differences. To assess DCPS’s monitoring of contractors that received federal payments, we reviewed available information on DCPS’s monitoring practices. We obtained this information from the Office of Contracts and Acquisitions, which is responsible for contracts management and oversees purchasing goods and services for DCPS, as well as additional information from four program offices that were responsible for monitoring performance of those contracts funded through federal payments we selected. We also reviewed information on DCPS’s general monitoring practices and reports from the D.C. OIG, BDO Seidman LLP, and GAO to understand previously identified weaknesses with procurement practices and contract monitoring. We originally planned to review all 42 contracts awarded by DCPS for 2008 and 2009; however, based on discussions with DCPS on the challenges of compiling the requested files, we limited our selection to 17 contracts. We were only able to review 14 files because DCPS was unable to provide files for 3 contracts for our review. The 17 contracts we selected represented just under $9.5 million, or 61 percent, of federal payment funds that were distributed through contracts of more than $100,000 in 2008 and 2009. We selected those years to be consistent with our review of grant files from OSSE. We selected our contracts based on the type and size of contracts. Specifically, we selected the highest dollar amount in service contracts that would allow us to assess the monitoring processes throughout the term of the contract as well as the highest dollar amount contracts for goods such as textbooks. Results from this nongeneralizable sample cannot be used to make inferences about all contracts awarded for this time period. To ensure that our data collection efforts conformed to GAO’s data quality standards, all files were independently reviewed by two GAO analysts. When the analysts’ views on how the data were recorded differed, they met and reconciled any differences. While the sample allowed us to learn about many important aspects of DCPS’s monitoring, it was designed to provide an overview of DCPS’s monitoring functions, not findings that would be representative of practices at all program offices within DCPS. We reviewed the purpose of the contract and DCPS offices’ policies and practices for monitoring these contracts. We reviewed files maintained at the Office of Contracts and Acquisitions that included documentation on contractor performance submitted by the program offices, as well as obtained additional information from these program offices. Because none of the DCPS program offices that managed contracts we reviewed maintained contract files, we were unable to fully assess the steps these offices took to monitor the contracts. We did, however, review some of the monitoring tools that individual staff and offices created to track their monitoring. For example, we reviewed project plans, samples of invoices, and other types of information staff maintained to document performance. We did not hold an exit conference with the relevant D.C. agencies because the designated point of contact for the District was unresponsive to our repeated requests to schedule an exit conference. However, at the request of the Mayor’s Office, we met with representatives of the Mayor, OSSE, and DCPS, prior to receiving official comments on the draft report. We conducted this performance audit from October 2009 to November 2010 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Janet Mascia (Assistant Director), Rachel Beers, Sue Bernstein, Scott McNulty, Jean McSween, James Rebbe, and Nyree M. Ryder Tee all made key contributions to this report.
summary: Between fiscal years 2004 and 2009, Congress appropriated nearly $190 million in federal payments for school improvement to the District of Columbia (D.C.). This includes $85 million to the state education office--currently the Office of the State Superintendent of Education (OSSE)--to expand public charter schools and $105 million to D.C. Public Schools (DCPS) to improve education in public schools. Over the years, GAO and others have identified challenges that DCPS and OSSE face in managing federal monies. This report identifies, on the basis of available information, activities for which OSSE and DCPS used federal payments between 2004 and 2009 and describes how OSSE and DCPS monitored grant and contract recipients, respectively. GAO reviewed expenditure data and interviewed and collected documentation from OSSE and DCPS, among others. GAO reviewed all available grants awarded by OSSE in 2008 and 2009 and 14 of the largest contracts awarded by DCPS during that time. Approximately 77 percent of federal payments for public charter school improvement in D.C. have been awarded for facility costs, including acquiring, renovating, constructing, or leasing facilities. The funding for facilities has mainly been disbursed through direct loans to schools and grants to expand schools in certain neighborhoods as part of a city improvement initiative. OSSE used the remaining funds for initiatives intended to improve the quality of education through efforts such as academic enrichment and supplemental education activities (provided beyond the normal school day), as well as a variety of other charter school expenditures. OSSE officials reported having established some policies and procedures for monitoring its grant recipients, but, with one exception, these were not documented. Furthermore, the procedures as explained to us by OSSE were not consistently followed. OSSE did create a list of information that program staff are to acquire from grantees. However, the grant files we reviewed often lacked evidence that staff collected this information or performed other monitoring activities. Specifically, most of the files did not include all the narrative and financial reports as required by OSSE in many of their grant agreements. Also, few included any record indicating that staff had followed-up to obtain such documents. According to the expenditure data D.C. provided, DCPS has used federal payments for a variety of purposes--ranging from summer school programs to teacher incentive pay--but available information prior to 2009 does not provide enough details for GAO to fully identify specific activities funded with federal payments. In 2009, DCPS used $40 million primarily for teacher incentive pay, salaries for staff such as physical education and art teachers at underserved schools, and supplemental education activities such as summer school. Expenditure data show that between 2004 and 2008, DCPS funded a variety of programs such as supplemental education and professional development; however, DCPS could not locate information that may have been created on specific activities funded with federal payments during this time. For example, about half of these expenditures were for a "literacy improvement program," but DCPS was unable to provide information to describe the program's goals, objectives, activities, or outcomes. DCPS has policies on responsibilities for monitoring contractor performance; however, these policies do not cover how to do the monitoring and they were not consistently followed. According to program office staff, they have some flexibility in how they implement their monitoring responsibilities and have employed a variety of methods to monitor contractor performance. Of the contract files we reviewed, we found that several lacked any evidence of a performance evaluation by a program officer, or any subsequent review. Notes added to several of the files indicated a program officer had left before the end of the contract term; however, we found no indication that these contracts had been reassigned. Furthermore, the contracting office could not locate 3 of the 17 files we requested for our review. To improve internal controls, GAO recommends that the Mayor direct OSSE and DCPS to establish and implement written policies and procedures for monitoring use of federal payments for school improvement, and DCPS to maintain contract files and other expenditure documentation. The District agreed with GAO's recommendations and provided additional information on steps taken to improve internal controls.