Office of Inspector General Initiatives and Work Plan Brustein & Manasevit, PLLC Fall Forum November 29, 2012 Karen Lyons Sacramento Audit Region Office of Inspector General, U.S. Department of Education 1 Greetings from Washington, DC 2 AGENDA OIG Recovery Act Work Phases I, II, III, and IV Reviews Other Ongoing and Planned Work Ongoing State and Local Audits FY 2013 OIG Work Plan Areas Resources and Contact Information 3 1
OIG Recovery Act Phases I and II 4 Phase I: Internal Controls Covered State Fiscal Stabilization Fund (SFSF), ESEA Title I Part A, IDEA Part B, and Vocational Rehabilitation Focused on cash management, subrecipient monitoring, data quality, and use of funds Conducted work in 8 States and Puerto Rico Phase II: Use of Funds and Data Quality Covered SFSF, ESEA Title I Part A, and IDEA Part B Focused on compliance Conducted work in 11 States OIG Recovery Act Phase III School Districts Use of Recovery Act and Education Jobs Funds Covered SFSF Education Stabilization, ESEA Title I Part A, IDEA Part B, and Education Jobs Focused on (1) what districts spent the funds on, (2) factors influencing how they spent the funds, (3) whether they would spend all the funds, and (4) whether they expected to face funding cliffs Conducted work at one school district in each of 22 States Status: Issued nationwide report on 9/28/2012 [ED-OIG/A09L0006] 5 OIG Recovery Act Phase IV Final Recovery Act Expenditures Covered final SFSF Education Stabilization, ESEA Title I Part A, and IDEA Part B expenditures Focused on compliance Conducted work at nine LEAs located in 4 States and Puerto Rico Status: Preparing 4 State reports and a nationwide report 6 2
Phases I, II, III, and IV States Phase I: 8 States and Puerto Rico Phase II: 11 States 7 Phase III: One District in 22 States Phase IV: 9 Districts in 4 States and Puerto Rico Phase III Results 1. What Did School Districts Spend Stimulus Funds On? 8 Phase III Results (continued) 2. What Influenced How Districts Spent the Funds? Federal requirements covering use of funds State actions and budget decisions Each district s fiscal condition and funding priorities Concerns about funding cliffs Districts generally used SFSF Education Stabilization and Education Jobs to maintain existing services and activities Many districts used the grant money to offset or restore reductions in State or local funding 9 3
Phase III Results (continued) 3. Did Districts Spend All the Stimulus Funds? Grant Percent Spent (As of 12/31/11) Recovery Act Title I Part A > 99% Recovery Act IDEA Part B > 99% SFSF Education Stabilization 100% Education Jobs 84% Total 98% 10 Phase III Results (continued) 4. Will Districts Face Funding Cliffs? Most expected moderate to significant funding cliffs after stimulus funds were no longer available unless State or local revenues returned to prerecession levels in the near future Some knowingly used stimulus funds for unsustainable activities so more students could benefit from the one-time infusion of supplemental funds A funding cliff does not mean that a district s use of stimulus funds was unsuccessful or did not achieve the intended result 11 Phase III School District Snapshot 12 4
Phases I, II, and IV Findings Percentage of States Where OIG Recovery Act Audits Identified Compliance Issues 13 Source: OIG Recovery Act Audit Reports as of October 2012 Cash Management: Federal-State Cash Management Improvement Act (CMIA) States must draw down Federal funds only when needed to cover allowable expenditures Federal programs should be interest-neutral and result in no gains or losses by either the Federal or State governments Treasury-State Agreement (TSA) details the implementation of the CMIA and the exchange of funds between a State and the Federal government Identifies major Federal assistance programs, funding techniques, and interest calculation Updated each year 14 Cash Management: Federal-State Impact of the Recovery Act on TSAs Treasury regulations: Major Federal assistance programs in the TSA must be determined from most recent Single Audit available [31 CFR 205.5(e)] Lag time from award of grant funds to Single Audit results to annual TSA Major one-time programs might not be included in a TSA until after most or all of the funds were spent Including such programs in the TSA would protect State and Federal interests 10 of 12 TSAs reviewed did not include Recovery Act Title I, IDEA, and SFSF [ED-OIG/L05L0004, 6/21/2011] 15 5
Cash Management: State-Subrecipient 16 EDGAR covers the funding relationship between the State and its subrecipients 34 CFR 80.21 (State and local governments) 34 CFR 74.22 (institutions of higher education and other nonprofits) Timing requirement: States methods for disbursing Federal funds must minimize the time between subrecipients receipt and disbursement of Federal education funds Interest Requirement: Subrecipients must remit interest earned on Federal cash advances promptly 17 Cash Management: State-Subrecipient Payment Methods Advanced. Grantees and subgrantees may be paid in advance if they maintain or demonstrate the willingness and ability to maintain procedures that meet the timing requirement; or Reimbursement. The preferred method when the requirements for the advanced method are not met. OIG s prior and Recovery Act audits identified cash management issues [A09H0020; L09J007] SEA method for disbursing Federal education funds needs to ensure that LEAs receive the funds when needed to pay program costs SEA needs to strengthen controls to ensure LEAs remit interest earned on cash advances and remit interested earned on cash balances promptly Other OIG Recovery Act Audits Compliance audits of existing programs that included supplemental funds under the Act: School Improvement Grants. Covered SEA monitoring plans and award processes in 5 States; issued nationwide audit report on 3/29/2012 [ED-OIG/A05L0002] Centers for Independent Living. Covered Department monitoring as well as services, performance, and 1512 reporting at 12 Centers; issued nationwide audit report on 9/12/2012 [ED-OIG/A06K0011] 18 6
19 Ongoing and Planned State and Local Recovery Act Work Phase IV final Recovery Act expenditures IDEA maintenance of effort flexibility LEA eligibility and the use of freed up funds in 6 States; report in progress Lessons learned from implementing the Recovery Act Implementation challenges, how the challenges were addressed, and lessons for future legislation; report in progress Race to the Top recipient performance (planned) States Covered in OIG Recovery Act Audits 20 Note: We also performed Recovery Act work in the Virgin Islands. Ongoing State and Local Audits El Paso Independent School District Accuracy of Adequate Yearly Progress results; report in progress Controls over statewide student assessments Integrity of assessment results in 5 States; work in progress 21 st Century Community Learning Centers SEA oversight in 4 States; report in progress 21 7
Upcoming State and Local Audits Charter Schools Oversight of charter school independence from management organizations Oversight of closed charter schools Online charter schools ESEA flexibility waivers Vocational Rehabilitation State Grant Program 22 Helpful Resources OIG Web site: http://www2.ed.gov/about/offices/list/oig/index.html Includes links to our Recovery Act page and Reports & Resources page (for reports and work plans) U.S. Department of Education Web site: www.ed.gov/ Recovery Act page: www.ed.gov/recovery Recovery.gov: www.recovery.gov 23 ED-OIG Hotline Telephone: 1-800-MISUSED Email: OIG.hotline@ed.gov Fax: (202) 260-0230 Submit Complaint On-Line: http://www2.ed.gov/about/of fices/list/oig/hotline.html 24 8
Questions? Contact OIG s State and Local Advisory and Assistance Team Rich Rasa, Director rich.rasa@ed.gov, (202) 245-6954 Jeff Lunardi jeff.lunardi@ed.gov, (202) 245-6237 Brent Weston brent.weston@ed.gov, (202) 245-6983 25 9