Charter School Grants Aren't Adequately Monitored

U.S. Department of Education Office of the Inspector General’s FINAL AUDIT REPORT of The Office of Innovation and Improvement’s Oversight and Monitoring of the Charter Schools Program’s Planning and Implementation Grants

The objectives of this audit were to determine whether the U.S. Department of Education (Department), Office of Innovation and Improvement (OII) (1) had effective oversight and monitoring to ensure grantees of the Charter Schools Program’s State Educational Agency (SEA) Planning and Implementation Grant (SEA grant) and the Charter School Program non-SEA Planning and Implementation Grant (non-SEA grant) met grant goals and objectives and (2) ensured that SEAs have effective oversight and monitoring to ensure subgrantees of the SEA grant met the goals and objectives of the grant. The review covered the grant period August 1, 2007, through September 30, 2011.

To accomplish the objectives of this audit, the auditors reviewed OII’s monitoring procedures for both the SEA grant and non-SEA grant. The auditors judgmentally selected three SEAs to use as case studies to aid in answering our objective. The SEAs selected were the California Department of Education (California SEA), the Arizona Department of Education (Arizona SEA), and the Florida Department of Education (Florida SEA). The auditors made these selections based on a risk matrix we developed of SEAs that received the SEA grant during our audit period. For the non-SEA grant, The auditors reviewed all of OII’s files on charter schools in Arizona that received the non-SEA grant during the audit period.

The auditors determined that OII did not effectively oversee and monitor the SEA and non-SEA grants and did not have an adequate process to ensure SEAs effectively oversaw and monitored their subgrantees. Specifically, OII did not have an adequate corrective action plan process in place to ensure grantees corrected deficiencies noted in annual monitoring reports, did not have a riskbased approach for selecting non-SEA grantees for monitoring, and did not adequately review SEA and non-SEA grantees’ fiscal activities.

In addition, The auditors found that OII did not provide the SEAs with adequate guidance on the monitoring activities they were to conduct in order to comply with applicable Federal laws and regulations. The auditors identified internal control deficiencies in the monitoring and oversight of charter schools that received the SEA grant at all three of the SEAs The auditors reviewed.

Specifically

The auditors found that none of the three SEAs

_ adequately monitored charter schools receiving the SEA grants,

_ had adequate methodologies to select charter schools for onsite monitoring, or

_ monitored authorizing agencies.

Additionally, the Florida SEA did not track how much SEA grant funding charter schools drew down and spent. The California SEA had unqualified reviewers performing onsite monitoring.

The auditors also found that OII did not ensure SEAs developed and implemented adequate monitoring procedures for properly handling charter school closures. Specifically, OII did not ensure SEAs had procedures to properly account for SEA grant funds spent by closed charter schools and disposed of assets purchased with SEA grant funds in accordance with Federal regulations.

The auditors recommend that the Assistant Deputy Secretary—

_ develop and implement policies and procedures for issuing and tracking corrective action plans for each monitoring finding or specific recommendation made as a result of monitoring reports produced, to ensure all reported deficiencies are corrected timely;

_ develop and implement a risk-based approach for selecting non-SEA grantees for monitoring activities;

_ develop and implement policies and procedures for monitoring grantee fiscal activities, specifically for quarterly expenditure review and annual review of Single Audit reports;

_ establish and implement requirements for SEAs to develop a detailed monitoring plan explaining the extent of monitoring that will be conducted during an SEA grant cycle;

_ provide necessary guidance and training to SEAs for the development and implementation of procedures to ensure SEAs have effective monitoring and fiscal controls for tracking the use of funds; and

_ ensure SEAs have procedures to properly account for SEA grant funds spent by closed charter schools and for disposal of assets purchased with SEA grant funds in accordance with Federal regulations.

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