This is the accessible text file for GAO report number GAO-11-16 
entitled 'District of Columbia Public Education: Agencies Have 
Enhanced Internal Controls Over Federal Payments for School 
Improvement, But More Consistent Monitoring Needed' which was released 
on November 18, 2010. 

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United States Government Accountability Office:
GAO: 

Report to Congressional Requesters: 

November 2010: 

District of Columbia Public Education: 

Agencies Have Enhanced Internal Controls Over Federal Payments for 
School Improvement, But More Consistent Monitoring Needed: 

GAO-11-16: 

GAO Highlights: 

Highlights of GAO-11-16, a report to Congressional Requesters. 

Why GAO Did This Study: 

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. 

What GAO Found: 

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. 

What GAO Recommends: 

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. 

View [hyperlink, http://www.gao.gov/products/GAO-11-16] or key 
components. For more information, contact Cornelia M. Ashby at (202) 
512-7215 or ashbyc@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

OSSE Used Federal Payments Primarily to Finance Charter School 
Facilities: 

OSSE Conducts Monitoring But Policies and Procedures Not Fully 
Documented: 

DCPS Used Federal Payments for a Range of Purposes, But Some 
Information Was Not Available Before 2009: 

DCPS Monitoring Policies Existed But Were Not Consistently Followed In 
Monitoring Contracts: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Information on DCPS File Review of Selected Contracts 
from 2008-2009: 

Appendix III: Comments from the D.C. Mayor's Office and District 
Education Offices: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Federal Payments for School Improvement, 2004-2009: 

Table 2: Facilities Financing Initiatives Funded by Federal Payments, 
Fiscal Years 2004-2009 Appropriations: 

Table 3: Quality Schools Initiatives Funded by Federal Payments, 
Fiscal Years 2004-2009 Appropriations: 

Figures: 

Figure 1: D.C. Public School System's Governance Structure: 

Figure 2: Uses of Federal Payments for Public Charter School 
Improvement in the District, Fiscal Years 2004-2009 Appropriations: 

Figure 3: Extent to Which Fiscal Years 2008 and 2009 Grantee Files 
Contained Narrative and Financial Reports: 

Figure 4: DCPS's Use of Federal Payments, Fiscal Year 2009 
Appropriation: 

Figure 5: DCPS's Use of Federal Payments for School Improvement, 
Fiscal Years 2004-2008 Appropriations: 

Abbreviations: 

D.C. District of Columbia: 

D.C. OIG: District of Columbia Office of the Inspector General: 

DCPS: District of Columbia Public Schools: 

LEA: local educational agencies: 

OCFO: Office of the Chief Financial Officer: 

OPCSFS: Office of Public Charter School Financing and Support: 

OSSE: Office of the State Superintendent of Education: 

PASS: Procurement Automated Support System: 

PCSB: Public Charter School Board: 

SEA: state education agency: 

SOAR: System of Accounting and Reporting: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

November 18, 2010: 

Congressional Requesters: 

The District of Columbia's (D.C. or the District) public school system 
has had long-standing problems related to overall management, student 
academic performance, and the condition of school facilities. Between 
fiscal years 2004 and 2009, Congress appropriated approximately $190 
million in federal payments directly to the D.C. public school system 
to improve education.[Footnote 1] In those years, $85 million in 
federal payments went to the state education office--currently the 
Office of the State Superintendent of Education (OSSE)--to expand 
quality public charter schools under its jurisdiction.[Footnote 2] 
Another $105 million was provided to D.C. Public Schools (DCPS) to 
improve education in the traditional public schools under its 
jurisdiction. Congress provides D.C. with direct financial assistance 
in the form of "federal payments" for a number of programs and 
initiatives. Federal payments for school improvement are different 
from most federal education funds in that they are appropriated 
directly to OSSE and DCPS and do not go through the U.S. Department of 
Education. While an examination of how these particular federal 
payments are managed has not been conducted, over the years GAO and 
others have identified deficiencies in both OSSE and DCPS management 
of federal monies. OSSE continues to be designated as a "high-risk" 
grantee by the U.S. Department of Education for its poor grant 
management, and audits of DCPS continue to identify systemic problems 
in its internal controls. 

To learn how the state education office and DCPS have used these 
federal payments for school improvement, Congress asked GAO to: (1) 
identify the activities for which OSSE has spent federal payments 
since 2004, (2) determine how OSSE currently monitors grant 
recipients, (3) identify the activities for which DCPS has spent 
federal payments since 2004, and (4) determine how DCPS currently 
monitors contract recipients. 

To perform this work, we gathered and analyzed expenditure data, 
financial reports, and other documentation provided by DCPS and OSSE 
to identify the activities these agencies funded with federal payments 
between 2004 and 2009. We analyzed existing information to describe 
the activities on which federal payments were used, but did not 
evaluate the impact or outcomes of the projects that OSSE and DCPS 
funded. We analyzed expenditure data from D.C.'s financial management 
system--System of Accounting and Reporting (SOAR)--and D.C.'s 
procurement data system--Procurement Automated Support System (PASS). 
[Footnote 3] We reviewed the data reliability processes D.C. has in 
place for these systems and interviewed staff at OSSE, DCPS, and the 
Office of the Chief Financial Officer--which maintains these systems--
to understand them, as well as reviewed existing information about the 
data and the respective systems that produced them. We found the data 
to be sufficiently reliable for our purposes. We evaluated OSSE and 
DCPS monitoring of federal payment recipients according to established 
federal practices and D.C.'s own policies. Because OSSE distributed 
the majority of federal payments through grants to public charter 
schools or other entities, we assessed OSSE's monitoring through file 
reviews. Specifically, we examined 30 grant files for recipients of 
federal payments for 2008 and 2009 as identified by OSSE. DCPS has 
distributed the majority of its federal payment funds through 
contracts; therefore, we also conducted a review of DCPS' contract 
files. However, because DCPS indicated that it would have difficulty 
compiling all contract files for 2008 and 2009, we selected a 
nongeneralizable sample of 17 files, of which we reviewed 14 because 
DCPS could not locate 3 files. The 17 files were the largest of the 
contracts awarded during this time, accounting for more than one-half 
of the contracts funded with federal payments for these years. We 
selected these two years to understand how DCPS and OSSE currently 
function with regard to federal payments given the new administration 
of DCPS and OSSE since 2007. 

We conducted this performance audit from October 2009 through 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. For more 
information on our scope and methodology, see appendix I. 

Background: 

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).[Footnote 4] 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.[Footnote 5] 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.[Footnote 6] 

The D.C. Council passed the Public Education Reform Amendment Act of 
2007 (Reform Act) in response to persistent challenges facing the 
school system.[Footnote 7] 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). 

Figure 1: D.C. Public School System's Governance Structure: 

[Refer to PDF for image: illustration] 

Top level: 
Mayor. 

Second level, reporting to the Mayor: 
PCSB (independent chartering agency); 
Department of Education headed by Deputy Mayor: 
OSSE. 

Third level, reporting to OSSE and the Mayor: 
DCPS headed by Chancellor; 
Public charter schools. 

OSSE provides oversight, monitoring, and technical assistance to DCPS 
and charter schools for federal and state education programs. 

Source: GAO. 

[End of figure] 

Federal Payments: 

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.[Footnote 8] 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).[Footnote 9] 

Table 1: Federal Payments for School Improvement, 2004-2009: 

Fiscal year[A]: 2004; 
DCPS for traditional public schools: $12.9 million; 
State education office for public charter schools: 2004: $12.9 million. 

Fiscal year[A]: 2005; 
DCPS for traditional public schools: $12.9 million; 
State education office for public charter schools: 2005: $12.9 million. 

Fiscal year[A]: 2006; 
DCPS for traditional public schools: $12.9 million; 
State education office for public charter schools: 2006: $12.9 million. 

Fiscal year[A]: 2007; 
DCPS for traditional public schools: $12.9 million; 
State education office for public charter schools: 2007: $12.9 million. 

Fiscal year[A]: 2008; 
DCPS for traditional public schools: $13.0 million; 
State education office for public charter schools: 2008: $13.0 million. 

Fiscal year[A]: 2009; 
DCPS for traditional public schools: $40.0 million[B]; 
State education office for public charter schools: 2009: $20.0 million. 

Total: 
DCPS for traditional public schools: $104.6 million; 
State education office for public charter schools: Total: $84.6 
million. 

Sources: GAO analysis of annual appropriations and the D.C. Office of 
the Chief Financial Officer data. 

[A] In 2010, Congress appropriated $42.2 million to DCPS and $20 
million to the state education office. A portion of the federal 
payments to expand public charter schools are to go through OSSE to 
the PCSB, which oversees D.C. public charter schools, to award high- 
performing schools. 

[B] The $40 million includes $20 million to "jump start" education 
reform in D.C. 

[End of table] 

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.[Footnote 10] The 
statutory language generally has not specified how or whether these 
offices should report on the use of the funds. 

OSSE and DCPS Federal Payment Management: 

The District's Office of the Chief Financial Officer (OCFO) uses SOAR 
to 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 their respective agencies. Within OSSE, the 
Office of Public Charter School 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 technical assistance for 
grants and supports the dissemination of best 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 initiatives. For those 
payments that fund contracts, program offices coordinate procurement 
activities with the contracting office which has the authority to 
enter into, administer, and terminate contracts. The program offices 
monitor and document contractor performance once the contract is 
awarded. 

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 OSSE had a total of 24 material weaknesses regarding 
internal control over compliance with federal grant program 
requirements and cash management.[Footnote 11] 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.[Footnote 12] 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. 

OSSE Used Federal Payments Primarily to Finance Charter School 
Facilities: 

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. 

Figure 2: Uses of Federal Payments for Public Charter School 
Improvement in the District, Fiscal Years 2004-2009 Appropriations: 

[Refer to PDF for image: pie-chart] 

Facilities financing: 77%; 
Quality school initiatives and unmet needs: 20%; 
Administration: 2%; 
Other: 1%. 

Source: GAO analysis of OSSE and OCFO data. 

[End of figure] 

Facilities Financing: 

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[Footnote 13] 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. 

Table 2: Facilities Financing Initiatives Funded by Federal Payments, 
Fiscal Years 2004-2009 Appropriations: 

Program or initiative: Direct Loan Fund[B]; 
Use of funds: Provided 20 loans to public charter schools for 
construction, acquisition, renovation, and/or maintenance of 
facilities through a revolving fund whereby repayments, including 
interest paid, are put back into the fund to finance additional loans; 
Amount[A]: $24.7 million. 

Program or initiative: City Build Initiative[B]: 
Use of funds: Provided 20 grants to support the development of quality 
schools in targeted neighborhoods through community revitalization and 
an emphasis on promoting public education through charter schools; 
Amount[A]: $17.5 million. 

Program or initiative: Public Charter School Facility Grants: 
Use of funds: Provided more than 20 grants for acquisition and 
systematic upgrades, for example, to heating and cooling systems, 
roofs, and elevators, as well as to specialty spaces such as science 
labs, music rooms, and athletic fields; 
Amount[A]: $11.2 million. 

Program or initiative: Incubator Initiative[B]: 
Use of funds: Provided at least seven new charter schools a home 
during their initial years of operation by taking out loans for 
schools and allowing the schools to keep up to 10 percent of their 
facilities' allowance in reserve; 
Amount[A]: $3.9 million. 

Program or initiative: Public school facilities grants; 
Use of funds: Provided 5 colocation and 12 public facilities grants to 
improve DCPS facilities that provide space to public charter schools 
or to develop innovative programs for DCPS and public charter school 
programs that share, or will share, a DCPS facility; 
Amount[A]: $3.0 million. 

Program or initiative: Credit Enhancement Revolving Fund; 
Use of funds: Provided enhanced credit, lease guarantees, and access 
to financial assistance for acquisition, renovation, and construction; 
Amount[A]: $2.0 million. 

Program or initiative: Other facilities programs; 
Use of funds: Provided funding for other facilities’ related projects;
Amount[A]: $3.0 million. 

Program or initiative: Total: 
Amount[A]: $65.3 million. 

Source: GAO analysis of OSSE and OCFO data. 

[A] Amounts represent expenditures and obligations of federal payments 
from the beginning of fiscal year 2004 through June 28, 2010. Some of 
these programs, including the Direct Loan and Credit Enhancement funds 
and the Incubator Initiative, have received additional funds from 
other sources such as the U.S. Department of Education. 

[B] In 2005, appropriations act language directed the state education 
office to use a certain portion of the funds for the Direct Loan Fund, 
City Build Initiative, and the development of an incubator facility 
for public charter schools. 

[End of table] 

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. 

Quality School Initiatives and Unmet Needs: 

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. 

Table 3: Quality Schools Initiatives Funded by Federal Payments, 
Fiscal Years 2004-2009 Appropriations: 

Program or initiative: Replication Fund; 
Use of funds: Encouraged existing charter management organizations and 
entrepreneurial education initiatives to expand within and into D.C. 
by providing growth capital, program start-up grants, or investments 
through investment intermediaries; 
Amount[A]: $5.7 million. 

Program or initiative: Incentive award grants[B]; 
Use of funds: Provided 41 grants to enhance or implement innovative 
programs that would improve the quality of operations and programming 
of a school or improve student learning and achievement to provide 
high quality education; 
Amount[A]: $2.9 million. 

Program or initiative: College Preparatory Program[B]; 
Use of funds: Provided funding for direct early college awareness 
services to those students and parents preparing and planning for 
higher education through activities such as summer enrichment programs 
and standardized test preparation; 
Amount[A]: $2.0 million. 

Program or initiative: Flexible Funds grants; 
Use of funds: Provided 44 grants to enhance, improve, or implement 
programs or services, including funding for art and music program 
supplies or equipment, sports equipment or uniforms, playgrounds, 
science labs, vocational education equipment, libraries, and staffing 
to implement such activities; 
Amount[A]: $1.5 million. 

Program or initiative: Quality Initiative grants; 
Use of funds: Provided 13 grants to enhance, improve, or implement an 
innovative program that will improve student learning and achievement; 
Amount[A]: $1.5 million. 

Program or initiative: College Access Program; 
Use of funds: Provided seven grants to increase the number of students 
pursuing a college preparatory curriculum, as well as to improve 
awareness of post-secondary options, college enrollment, and the 
tracking of public charter school graduates; 
Amount[A]: $0.4 million. 

Program or initiative: Other quality initiatives programs; 
Use of funds: Provided funding for several other initiatives including 
innovation incentive funds, charter school integration, and special 
programs; 
Amount[A]: $2.9 million. 

Program or initiative: Total: 
Amount[A]: $16.9 million. 

Source: GAO analysis of OSSE and OCFO data. 

[A] Amounts represent expenditures and obligations of federal payments 
from the beginning of fiscal year 2004 through June 28, 2010. 

[B] In 2005, appropriations act language directed the state education 
office to use a certain portion of the funds for the college 
preparatory program and the incentive awards. 

[End of table] 

Administrative and Other Areas: 

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. 

OSSE Conducts Monitoring But Policies and Procedures Not Fully 
Documented: 

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.[Footnote 14] 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. 
[Footnote 15] 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.[Footnote 16] 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.[Footnote 17] 

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.[Footnote 18] 

Figure 3: Extent to Which Fiscal Years 2008 and 2009 Grantee Files 
Contained Narrative and Financial Reports: 

[Refer to PDF for image: pie-chart] 

All reports in the file: 8; 
No reports in the file: 10; 
At least one, but not all reports in the file: 12. 

Source: GAO analysis of grantee file review. 

[End of figure] 

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.[Footnote 19] 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. 

DCPS Used Federal Payments for a Range of Purposes, But Some 
Information Was Not Available Before 2009: 

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.[Footnote 20] 

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).[Footnote 21] 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. 

Figure 4: DCPS's Use of Federal Payments, Fiscal Year 2009 
Appropriation: 

[Refer to PDF for image: pie-chart] 

Staff incentive pay: 24%; 
Supplemental education: 19%; 
Data reporting: 15%; 
Salaries: 15%; 
Professional development: 14%; 
Supplies: 8%; 
Other: 5%. 

Sources: GAO analysis of SOAR expenditure data as of June 2010 and 
additional information on specific program expenditures provided by 
DCPS. 

[End of figure] 

* 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. 
[Footnote 22] 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.[Footnote 23] 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.[Footnote 24] In 2007, for 
example, 27 schools received "high performance awards." Current DCPS 
officials were not able to ascertain why those schools received the 
funds. 

Figure 5: DCPS's Use of Federal Payments for School Improvement, 
Fiscal Years 2004-2008 Appropriations: 

[Refer to PDF for image: stacked vertical bar graph] 

Appropriation year: 2004; 
Unable to Categorize: [Empty]; 
Literacy Improvement Program: $11.4 million; 
Special Education: $0.7 million; 
Early Childhood Education: [Empty]; 
Professional Development: [Empty]; 
Supplies: [Empty]; 
Supplemental Education: [Empty]; 
Appropriation: $12.9 million. 

Appropriation year: 2005; 
Unable to Categorize: [Empty]; 
Literacy Improvement Program: $9.8 million; 
Special Education: [Empty]; 
Early Childhood Education: [Empty]; 
Professional Development: [Empty]; 
Supplies: [Empty]; 
Supplemental Education: [Empty]; 
Appropriation: $12.9 million. 

Appropriation year: 2006; 
Unable to Categorize: $7.6 million; 
Literacy Improvement Program: $4.6 million; 
Special Education: [Empty]; 
Early Childhood Education: $0.1 million; 
Professional Development: $0.5 million; 
Supplies: [Empty]; 
Supplemental Education: [Empty]; 
Appropriation: $12.9 million. 

Appropriation year: 2007; 
Unable to Categorize: $1.1 million; 
Literacy Improvement Program: $11.5 million; 
Special Education: [Empty]; 	
Early Childhood Education: [Empty]; 
Professional Development: [Empty]; 
Supplies: [Empty]; 
Supplemental Education: [Empty]; 
Appropriation: $12.9 million. 

Appropriation year: 2008; 
Unable to Categorize: $8.8 million; 	
Literacy Improvement Program: [Empty]; 
Special Education: [Empty]; 
Early Childhood Education: $0.2 million; 
Professional Development: $0.04 million; 
Supplies: $0.8 million; 
Supplemental Education: $3.1 million; 
Appropriation: $13 million. 

Source: GAO analysis of 2004 to 2008 SOAR expenditure data as of June 
2010. 

Note: In fiscal years 2004 and 2005, DCPS did not segregate all 
federal payments for school improvement from other federal payments it 
received; therefore the analysis includes only those expenditures 
which were clearly categorized as "Federal Payments for School 
Improvement." Some expenditure data between 2006 and 2008 was not 
detailed enough to categorize, and DCPS was unable to locate 
additional information, if any was created by the prior 
administrations, on how these funds were used. 

[End of figure] 

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 2005 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 
initiatives 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 Monitoring Policies Existed But Were Not Consistently Followed In 
Monitoring Contracts: 

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 
review of 2008 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 
performance, and program offices have flexibility on how to carry out 
these responsibilities.[Footnote 25] 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 reports and a final 
performance evaluation. Additionally, files maintained at the 
contracting office should consistently contain the name of the 
assigned program officer who is responsible for contract oversight. In 
our discussions with a number of program offices, we were shown 
different 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 subject-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 observed on a more regular basis. That 
office independently adopted 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 some 
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 a new program officer was assigned. DCPS officials stated that 
the monitoring function has been impacted by staff turnover, and one 
official 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 notified 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 vary by 
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.[Footnote 26] 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 office recently asked program officers to begin 
evaluating contractors on a 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.[Footnote 27] 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.[Footnote 28] 

Conclusions: 

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 
to address the long-standing problems with its public school system, 
and federal payments have contributed to some of these efforts. The 
statutory 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 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 
previously 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 application of a 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 their full potential to 
improve the District's schools. Documenting required and actual 
monitoring processes may not completely eliminate potential misuse of 
funds, but it could help to mitigate this risk. 

Recommendations for Executive Action: 

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 practices 
for how staff should document and maintain records of monitoring 
activities and identify other measures to ensure that grant monitoring 
is appropriately and consistently implemented. 

2. Direct the DCPS Chancellor to establish and implement procedures 
for contract monitoring to ensure that contract monitoring is 
appropriately and consistently done. Implementing this recommendation 
would include documenting monitoring activities throughout the term of 
the contract, directing DCPS to better enforce existing policies to 
ensure performance evaluations are complete, and developing protocols 
and procedures for transitioning contracting officer responsibilities 
and for notifying the contracting office. While 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. 

Agency Comments and Our Evaluation: 

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 
comments 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 federal 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 through the U.S. Department of 
Education, a fact we state in the report, 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 
programs 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 be better documented. As indicated in our 
recommendation, we agree that drawing 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 
files. 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 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 activities 
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 and 
program 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 report, at 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 
practices, we maintain that DCPS needs to better enforce new and 
existing practices throughout the life of the contract to ensure 
consistent and continuous monitoring. 

DCPS's response also identified areas of the report that they found to 
be misleading or incomplete. Specifically, DCPS was concerned that we 
did 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 funds and not monies from federal agencies; 
however, we have subsequently 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 well documented. We disagree. On page 15 and again on pages 18-19 
of this report, we state that D.C. provided expenditure data for all 
years we requested and that the current administration has created 
spending plans and other programmatic information describing the 
planned and actual use of funds since 2009. DCPS also commented that 
we did not adequately explain the steps DCPS took to locate 
documentation from the prior 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 providing 
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 indicated that the documentation should have been in 
the contract file or that they could not locate the information. Given 
our findings and the challenges DCPS had in locating information for 
our report, we continue to believe that DCPS can improve its 
monitoring processes and should 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 of the Chief Financial Officer which provided technical 
comments on the 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, the D.C. Office of the Chief Financial Officer, appropriate 
congressional committees, and others who are interested. We will also 
make copies available to others on request. In addition, the report 
will be available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

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. 

Signed by: 

Cornelia M. Ashby: 
Director: 
Education, Workforce, and Income Security Issues: 

List of Congressional Requesters: 

The Honorable Thad Cochran: 
Ranking Member: 
Appropriations Committee: 
United States Senate: 

The Honorable Lamar Alexander: 
Ranking Member: 
Subcommittee on Children and Families: 
Committee on Health, Education, Labor, and Pensions: 
United States Senate: 

The Honorable George V. Voinovich: 
Ranking Member: 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable John Ensign: 
Ranking Member: 
Subcommittee on State, Local, and Private Sector Preparedness and 
Integration: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable John A. Boehner: 
Minority Leader: 
House of Representatives: 

The Honorable John P. Kline: 
Ranking Member: 
Committee on Education and Labor: 
House of Representatives: 

The Honorable Darrell E. Issa: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable Jason Chaffetz: 
Ranking Member: 
Subcommittee on Federal Workforce, Postal Service, and the District of 
Columbia: 
Committee on Oversight and Government Reform: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

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.[Footnote 29] 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. 

OSSE's Grantee Monitoring: 

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. 

DCPS's Contractor Monitoring: 

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.[Footnote 30] 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. 

[End of section] 

Appendix II Information on DCPS File Review of Selected Contracts from 
2008-2009: 

Fiscal year: 2008: 

Purpose: School supplies for after school and summer school programs
Amount: $566,000; 
Performance evaluation completed: DCPS did not provide file. 

Purpose: Course development services; 
Amount: $453,000; 
Performance evaluation completed: Yes. 

Purpose: Strategic planning and quality schools review services: 
Amount: $351,000; 
Performance evaluation completed: Yes. 

Purpose: Data processing services; 
Amount: $450,000; 
Performance evaluation completed: Yes, but not submitted within 
required time frame. 

Purpose: Computer software license and services; 
Amount: $998,000; 
Performance evaluation completed: Yes. 

Purpose: Consulting services; 
Amount: $678,000; 
Performance evaluation completed: Yes. 

Purpose: Student tracking and reporting services; 
Amount: $435,000; 
Performance evaluation completed: Yes. 

Purpose: Master scheduling; 
Amount: $695,000; 
Performance evaluation completed: No. 

Purpose: Education and training consulting service; 
Amount: $793,000; 
Performance evaluation completed: No. 

Purpose: Professional development services; 
Amount: $503,000; 
Performance evaluation completed: No. 

Fiscal year: $2009; 

Purpose: Consulting services; 
Amount: $450,000; 
Performance evaluation completed: Yes, but not submitted within 
required time frame. 

Purpose: Consulting services; 
Amount: $370,000; 
Performance evaluation completed: DCPS did not provide file. 

Purpose: Educational support service for after school program; 
Amount: $400,000; 
Performance evaluation completed: Yes. 

Purpose: Programmatic support services; 
Amount: $950,000; 
Performance evaluation completed: Yes, but not submitted within 
required time frame. 

Purpose: Network maintenance services; 
Amount: $561,000; 
Performance evaluation completed: N/A[A]. 

Purpose: Web-based assessments; 
Amount: $687,000; 
Performance evaluation completed: No. 

Purpose: Textbooks; Amount: $177,000; 
Performance evaluation completed: DCPS did not provide file. 

Source: GAO review of selected contract files. 

[A] The performance evaluation was not due prior to the time of our 
review. 

[End of section] 

Appendix III: Comments from the D.C. Mayor's Office and District 
Education Offices: 

Government Of The District Of Columbia: 

October 22, 2010: 

Ms. Cornelia M. Ashby: 
Director, Education, Workforce, and Income Security Issues: 
United States Government Accountability Office: 
441 G Street, NW, Room 5940: 
Washington, DC 20548: 

Dear Ms. Ashby: 

I write in response to the draft October 2010 report on monitoring and 
documentation of federal payments made to the public education system 
of the District of Columbia. Thank you for the opportunity to review 
the draft report and provide feedback to you and your team. The 
District has made substantial progress since 2007 in monitoring and 
documenting how these federal payments are directed. The attached 
memos from the State Superintendent and the District of Columbia 
Public Schools Chancellor document the progress we have made and 
highlight areas of the report that the District finds misleading or 
incomplete. 

In finalizing the October 2010 report, we ask that the GAO attempt to 
address the issues outlined in the following memos in order to present 
a clearer, more balanced assessment. We appreciate the opportunity to 
provide this feedback. We strongly believe in evaluation and 
assessment, and we want to be held accountable to the public for our 
work. 

Sincerely, 

Signed by: 

Victor Reinoso: 
Deputy Mayor for Education: 

[End of letter] 

District Of Columbia Public Schools: 
Office of the Chancellor: 
1200 First Street, NE: 
Washington, DC 20002: 
T: 202-442-5665: 
F: 202-442-5026: 
[hyperlink, http://www.dcps.dc.gov] 

Memorandum: 

To: Deputy Mayor Victor Reinoso: 

From: Michelle Rhee, Chancellor: 

Date: October 20, 2010: 

Subject: Government Accountability Office ("GAO") draft report 
District of Columbia Public Schools: More Consistent Monitoring and 
Documentation Needed for Federal School Improvement Payments (GA0-11-
16): 

Background: 

This memorandum serves as the District of Columbia Schools' (DCPS) 
response to the Draft report issued by the Government Accountability 
Office (GAO) concerning the District of Columbia's use of Federal 
Payment funds (GAO-11-16). 

DCPS has made much progress over the past 3 years in both student 
achievement and fiscal management, and while there is more work to be 
done, we are on the right track. The Tri-Sector Federal Payment has 
been instrumental in moving DCPS forward. Through the direct support 
of the Federal Payment and through careful planning and spending, DCPS 
has been able to accomplish the following in just the past three years: 

* Signed a landmark collective bargaining agreement with the 
Washington Teachers' Union that values teachers by increasing their 
base salaries to make DCPS teacher salaries among the most competitive 
in the region and permits pay based on performance. 

* Developed an innovative evaluation tool for teachers that ensures 
that teachers are evaluated consistent with the DCPS Teaching and 
Learning Framework, multiple times a year, by their principal and a 
third party "master educator". 

* Implemented the Comprehensive Staffing Model bringing art, music and 
P.E. teachers to every DCPS school. 

* Implemented promising school turnaround models by bringing 
successful partners into failing DCPS schools. 

* Awarded top performing Principals with merit based compensation 
awards. 

This sample represents some of the critically important work that 
Federal Payment funds have supported over the past three years. 
Consistent with our commitment to improved accountability and 
transparency over the prior school administrations, DCPS has developed 
and followed detailed spend plans accounting for the use of these 
funds. These plans and corresponding financial documentation 
supporting the important initiatives advancing public education reform 
were provided by the agency In full to the GAO. Moreover, throughout 
the course of the inquiry DCPS provided complete financial data from 
the District's financial system of record demonstrating all 
expenditures against the federal payment funds dating back to the 
first appropriation in 2004. This data showed that the expenditures 
directly matched the initiatives in the projected spend plans created 
during the current administration and served as an accounting record 
for prior years. DCPS was able to document and verify every 
expenditure of Federal Payment funds through the financial system and 
where DCPS supported Innovative compensation, this too was supported 
with budget documents. 

Federal Payment Background: 

DCPS is concerned that the draft report neglects to clearly describe 
the historical context of the Federal Payment. The basis of these 
Federal Payments as part of the "Tri-Sector" Payment for School 
Improvement is relevant to understanding how these funds have been 
used and the reporting structure currently in place. Although DCPS 
officials explained the unique nature of these payments repeatedly 
throughout the study, beginning with the entrance conference, the 
draft report continues to generally characterize these payments as 
School Improvement Payments. This characterization could lead a reader 
to believe these payments are made pursuant to the Federal School 
Improvement Grant under ESEA. This is an important distinction because 
while accountability for these funds is paramount, they are not 
restricted in purpose by the same guidelines as SIG funds. Rather, the 
use of Federal Payment funds is directed Congress through the annual 
appropriations act. 

The language in the Federal Appropriations Act permits necessary 
flexibility in the use of these funds, however, ()CPS agrees that a 
public and transparent accounting for the use of these funds is 
critical. To that end, since Fiscal Year 2009, DCPS has developed 
detailed spend plans that have been delivered to the appropriators and 
local government officials. While the report does note in footnote 19 
that the current administration did not have the supporting 
information created by the prior administration, the report does not 
adequately address the fact that during the tenure of Chancellor Rhee 
and Mayor Fenty, programmatic initiatives and expenditures against 
those initiatives are clearly and well documented.[Footnote 1] 

In light of the findings, it is also worth noting that the initial 
DCPS spend plan for the Federal Payment for any given Fiscal Year is 
created approximately two calendar years in advance. For example, the 
initial spend plan for FY12 was developed in September of 2010. As a 
result of this time frame, the spend plans for any fiscal year prior 
to Fiscal Year 2009 would have been created by the prior Mayoral 
Administration. The current administration at DCPS has no knowledge of 
these plans and repeatedly reported this to the GAO. However, DCPS did 
make a good faith effort to research and request information 
concerning such plans from prior administration officials and reviewed 
any relevant files that the prior administration may have left. 
Unfortunately, DCPS was unable to recover any guiding documents that 
prior administrations may have developed or used. The repeated 
references to DCPS failing to provide additional information are 
misleading and DCPS has requested this clarification be made in the 
final report. (See note on Figure 5, p. 18). On multiple occasions, 
both orally and in writing, DCPS explained that programmatic 
information prior to Chancellor Rhee's tenure was simply not available. 

While the report identifies two recommendations, only one is directed 
towards DCPS. DCPS generally agrees with this GAO recommendation, 
however, we find the aforementioned areas of the report misleading or 
at best incomplete. 

Recommendation: 
Direct the DCPS Chancellor to establish and implement procedures for 
contract monitoring to ensure that contract monitoring is 
appropriately and consistently done. Implementing this recommendation 
would include documenting monitoring activities throughout the term of 
the contract, directing DCPS to better enforce existing policies to 
ensure performance evaluations are complete and developing protocols 
and procedures for transitioning contracting officer responsibilities 
and for notifying the contracting office. While 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 the contracts. 

The following is DCPS' response to GAO's recommendation specific to 
the District of Columbia Public Schools. 

Response: 

While it should be made clear that the Federal Payment that is the 
subject of this report is unique among federal funds typically 
received through the federal grant process, DCPS acknowledges that 
enhanced policies and procedures emanating from the DCPS Office of 
Contracts and Acquisitions would provide a more robust accountability 
structure for the use of these critical funds. To that end, the Office 
of Contracts and Acquisition has already begun to implement the 
following measures which address the challenges identified: 

Monitoring Contract Performance: 

1. Effective 8/27/10 DCPS Office of Contracts and Acquisitions will 
ensure: 

a. A Post Award Conference is convened for every bi-lateral contract 
awarded for $100K or more. 

b. Use of the attached Post Award Agenda to be distributed to the 
COTR/Contract Administrator, Contractor, Contracting Officer and 
Contract Specialist outlining Contractor, COTR/Contract Administrator 
and DCPS Responsibilities as attached. 

c. That each applicable individual acknowledges the roles and 
responsibilities by signing the Post Award Agenda. 

d. Each COTR/Contract Administrator receives copy of the COTR/Contract 
Administrator Letter as attached. 

e. That we emphasize the importance of monthly contractor performance 
evaluations as required and referenced in the revised COTR Letter and 
Section G of the Contract. 

f. Both Program and OCA are required to maintain copies of the 
performance evaluations in their respective contract files as outlined 
in the revised COTR letter. 

2. The above enhanced procedures will mitigate risk of not retaining 
an appropriate COTR assigned to each contract for the duration of the 
contract. 

3. Also, the above procedures will enforce the requirement for monthly 
contractor performance evaluations monitoring the contractor 
performance. 

Maintenance of Contract Files and Applicable Contract Documents for 
Inspection: 

With regard to the recommendation concerning contract files and 
applicable contract documents for inspection, DCPS could provide a 
more finite response if we were advised of the specific documents that 
were deficient as referenced in the report. Absent of this 
information, DCPS OCA staff is reminded via email directives and 
meetings of the critical need to maintain the contract files with all 
the required documents. The previous directives will be reissued to 
staff for the current Fiscal Year. Each staff will have to ensure 
review of the entire files and that each contract has the applicable 
documents retained even during emergency situations and request for 
expedited contract awards. As the report notes, many of the DCPS 
contract files have been moved to an off-site storage facility. DCPS 
is currently in the process of updating all files electronically to 
ensure proper accessibility. We will ensure the appropriate storage 
and archive of our files, taking into consideration our limited in 
house file storage. 

Footnote: 

[1] DCPS did provide GAO with extensive information concerning the 
spend plans developed by Chancellor Rhee starting in Fiscal Year 2009. 
Additionally, DCPS provided corresponding financial documentation 
detailing the manner in which the Federal Payment funds were spent 
consistent with the spend plans developed and submitted to Congress. 

[End of letter] 

Office of the State Superintendent of Education: 
District of Columbia: 
Mayor Adrian M. Fenty: 
810 First Street, NE, 9th floor: 
Washington, DC 20002: 
Phone: 202.727.6436: 
Fax: 202.727.2019: 
[hyperlink, http://www.osse.dc.gov] 

Memorandum: 

To: Deputy Mayor Victor Reinoso: 

From: Beth Colleye, Interim State Superintendent: 

Date: October 22, 2010; 

Re: Government Accounting Office ("GAO") draft report District of 
Columbia Public Schools: More Consistent Monitoring and Documentation 
Needed for Federal School Improvement Payments (GAO-11-16): 

Background: 

The purpose of this memorandum is to provide OSSE's response to the 
Government Accounting Office ("GAO") draft report District of Columbia 
Public Schools: More Consistent Monitoring and Documentation Needed 
for Federal School Improvement Payments (GAO-11-16). The report 
contains two recommendations — one applies to the Office of the State 
Superintendent of Education ("OSSE") and the other applies to the 
District of Columbia Public Schools ("DCPS"). This response addresses 
the recommendation directed toward OSSE. The State Superintendent 
generally agrees with the recommendation. It is aligned with OSSE's 
continued improvement of its oversight of recipients of federal grant 
funded programs. 

Subsequent to the initiation of the GAO study, OSSE implemented a 
monitoring policy to "provide guidance on the minimum requirements and 
standards...to monitor programs implemented by grant sub-recipients, 
including, but not limited to, local education agencies ("LEAs"), 
institutions of higher learning, community based organizations and not-
for-profit organizations". In addition, in December 2009 the Mayor 
issued Control Order 2009-228 that created and mandated compliance 
with the policies and procedures established in the Sub-recipient and 
Monitoring Manual to "assist the District of Columbia Agencies in 
understanding the federal requirements imposed on pass-through 
entities and to assist in complying with such requirements." These 
initiatives have assisted the Office of Public Charter School 
Financing and Support ("OPCSFS") to establish its own grants 
monitoring procedures. 

The following is the sole finding related to OSSE: 

Recommendation: 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 be 
drawn from OSSE's general monitoring practices, should outline OSSE's 
practices for how staff should document and maintain records of 
monitoring activities and identify other measures to ensure that grant 
monitoring is appropriately and consistently implemented. 

Below is OSSE's response to the GAO's recommendation specific to the 
Office of the State Superintendent of Education. 

Response: 

Over the last three years, the Federal Payment funds appropriated for 
public charter school improvement have been instrumental in assisting 
DC public charter schools to secure and develop new school facilities, 
as well as driving widespread improvements in the quality of education 
delivered. For example, since March 2007, the OPCSFS has closed 12 
Direct Loan and Credit Enhancement transactions, totaling $20.8 MM 
that leveraged $92.7 million of additional financing. In addition to 
the effective distribution of federal payment funds to public charter 
schools, since 2007 the OPCSFS has implemented the following 
operational improvements: 

* Created hard copy files for each grant and a parallel system of 
electronic files. 

* Developed a rigorous due diligence process — including on-site 
interviews with school management — to guide all major investment 
decisions. 

* Piloted written monitoring tools for several Federal Payment funded 
programs. 

* Designed a system of monitoring federal payment awardees through 1) 
complete review of all supporting documentation; 2) grant budget 
templates for tracking subgrantess use of funds; 3) standardized draw 
request forms; and 4) progress monitoring through on-site visits, 
review of progress reports, and oral communications. 

* Implemented a loan servicing software system for invoicing schools, 
tracking portfolio investments, and monitoring compliance with 
required repayments. 

* Enhanced the Direct Loan and Credit Enhancement underwriting 
processes through the use of standardized financial analysis models, 
in-depth due diligence reviews, and a comprehensive standard credit 
memorandum presented to the Credit Committee for all credit decisions. 

* The OPCSFS staff has begun reducing to writing what has already been 
implemented for monitoring all federal payment sub-grantees and 
intends to complete the process by June 2011. 

While the OPCSFS has developed written policies for monitoring several 
of its Federal Payment programs, the State Superintendent agrees that 
consistent written policies and procedures for monitoring all federal 
payment sub-grantees are necessary, and will further advance its 
mission. The grants management protocols established by OSSE of sub-
grantees currently address federal grants and not grants designed and 
implemented from the federal payment. OSSE will borrow from existing 
District and agency-wide protocols for monitoring federal payments 
funds, when appropriate. 

The U.S. Department of Education ("ED") often prescribes the specific 
monitoring requirements for the program grants under its purview, and 
ED also issues general regulations applicable to all of its grants 
under Education Department General Administrative Regulations 
("EDGAR"). There are no such regulations or direction for the multiple 
individualized programs to support public charter school improvement 
established by the funding from the federal payment. Although 
uniqueness does exist, the State Superintendent agrees that policies 
and procedures for monitoring can be created by incorporating the 
existing appropriate and applicable elements from OSSE's general 
monitoring practices as well as generally accepted best practices for 
monitoring any federally funded program. 

The OPCSFS, currently, has grants monitoring procedures in place for 
its Department of Education grants under Title V, Part B of the 
Elementary and Secondary Education Act of 1965. The OPCSFS, as a 
federal grant recipient, participates in the OSSE agency-wide grants 
management working group. The majority of grants established by OPCSFS 
is from the federal payment and is routinely monitored. An essential 
element of this monitoring consists of a complete review of all 
expenditures conducted before a sub-grantee can receive a 
reimbursement. Thus, no federal payment dollars are issued to a sub-
grantee until all expenditures and associated supporting documentary 
evidence have been reviewed. Another component of the fiscal oversight 
conducted by OPCSFS regarding its grants administration is the receipt 
and review of annual audit reports submitted by all District of 
Columbia public charter schools that receive sub-grants funded by the 
federal payment and ED grants. In addition, as a matter of practice, 
the OPCSFS conducts a rigorous application review process, to ensure 
that potential sub-grantees have the systems and controls in place to 
manage sub-grants properly. During the life of a sub-grant 
relationship, the OPCSFS maintains close contact with the awardee 
school, and communicates with the authorizer regularly. These regular 
practices provide ongoing opportunities to monitor school performance 
and the maintenance of sound internal controls. Finally, in GAO's on-
site review of OPCSFS grant files, it appears that the GAO only 
reviewed hard copy files and not electronic files maintained by 
OPCSFS. A concurrent review of the electronic files may have 
eliminated some of the findings outlined in the GAO report. 

The grants administration undertaken by OPCSFS provides for public 
charter schools to receive funding necessary to provide an excellent 
education for all students attending these schools. OSSE and the 
OPCSFS have been successful in creating both recurring programs as 
well as one-time innovative initiatives from the annual federal 
payment. These programs range from the multi-million dollar direct 
loan and credit enhancement programs, to large City Build facilities 
sub-grants, to a program comprised of $50,000 sub-grants available to 
all public charter schools in the District of Columbia. The pursuit of 
improving the quality of education provided to students in the 
District of Columbia has challenged OPCSFS to be innovative and 
relentless in creating a spectrum of sub-grants designed to meet this 
need. The work of OPCSFS is widely appreciated and respected by the 
public charter school community. With such a great emphasis placed on 
this work, OPCSFS recognizes that processes should be more formalized 
and documented for all of the sub-grants and programs it has created 
using the federal payment funds. The OPCSFS staff has begun 
documenting the appropriate policies and procedures for monitoring 
federal payment sub-grantees and intends to complete the process by 
June 2011. As indicated above, OSSE has developed resources to enhance 
its grants management and is pleased that the OPCSFS is fully engaged 
in the process of utilizing these tools to enhance its existing grants 
administration. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Cornelia M. Ashby, (202) 512-7215 or ashbyc@gao.gov: 

Staff Acknowledgments: 

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. 

[End of section] 

Footnotes: 

[1] Federal payments for school improvement are separate from 
Elementary and Secondary Education Act Title I and Individuals with 
Disabilities Education Act funds. 

[2] None of the appropriations acts for the years included in this 
study define what is meant by "quality." 

[3] SOAR provides detailed information at the school and program level 
on how federal payment funding was allocated, encumbered, and 
expended. D.C. employs encumbrance accounting for governmental funds. 
Under this method of accounting, purchase orders, contracts, and other 
commitments for the expenditure of funds are recorded in order to 
reserve the required portion of an appropriation. PASS is a 
procurement system interfaced with SOAR. 

[4] LEAs are public school districts. Enrollment data are based on the 
2009-2010 audited enrollment count. The number of LEAs is based on 
2009-2010 school year figures. 

[5] The U.S. Secretary of Education presents a list of individuals 
from which the District Mayor, in consultation with the D.C. Council, 
makes appointments to the PCSB. 

[6] GAO, Charter Schools: New Charter Schools across the Country and 
in the District of Columbia Face Similar Start-Up Challenges, 
[hyperlink, http://www.gao.gov/products/GAO-03-899] (Washington, D.C.: 
Sept. 3, 2003). 

[7] D.C. Law 17-9, D.C. Code Ann. § 38-171 et seq. 

[8] The National Capital Revitalization and Self-Government 
Improvement Act of 1997 (Pub. L. No. 105-33, Title XI) eliminated the 
annual federal payment to the District, but authorized a federal 
contribution. The act does not present a formula or methodology for 
translating the generalized notion of compensating the District for 
the federal government's presence into a predictable dollar amount, 
nor does it require that a contribution be made. 

[9] Since 2004, the federal payments for school improvement have also 
included funding to the Secretary of the U.S. Department of Education 
to provide opportunity scholarships for students in the District. This 
portion of funding is not included in our review. However, GAO has 
previously reviewed this program: see GAO, District of Columbia 
Opportunity Scholarship Program: Additional Policies and Procedures 
Would Improve Internal Controls and Program Operations, GAO-08-9 
(Washington, D.C.: Nov. 1, 2007). 

[10] According to OSSE, it considers these reports when determining 
how to allocate funds in a given year. In some years, these reports 
specified how the public charter school improvement and expansion 
funds should be spent. For example, they indicated the amount of funds 
allocated to the Direct Loan Fund for Charter Schools and the City 
Build Initiative, as well as other initiatives. 

[11] All nonfederal entities that expend $500,000 or more in federal 
awards in a fiscal year are required to obtain an audit in accordance 
with the Single Audit Act, as amended. 31 U.S.C. § 7501 et seq. 

[12] The review of internal controls was performed in conjunction with 
BDO Seidman's audit of the Budgetary Comparison Schedule-Governmental 
Funds of DCPS, for the year ended September 30, 2008. 

[13] D.C. funds public elementary and secondary education primarily by 
its Uniform Per Student Funding Formula, whereby all public schools 
receive a per pupil allowance; public charter schools also receive a 
facility allowance. In fiscal year 2010, the average per pupil 
allowance was $8,770, and the facility allowance was $2,800 per 
nonresidential student and $8,395 for residential students. According 
to a PCSB study, the estimated average facilities cost in 2010 was 
$4,783 per student. 

[14] Several of the processes OSSE stated they use, including 
collecting financial records and reports, on-site reviews, and putting 
the terms and conditions of the award in the grant agreement, were 
recognized as promising practices by the Domestic Working Group, Grant 
Accountability Project. Guide to Opportunities for Improving Grant 
Accountability (October 2005). 

[15] The District's fiscal year 2009 Single Audit also identified 
several federal grant programs for which OSSE did not have proper 
documentation or policies and procedures in place to comply with 
program requirements. 

[16] We reviewed 30 of the 42 grants identified by OSSE as being 
awarded in 2008 and 2009. We eliminated selected grants based on the 
type, and OSSE did not provide four files as of the time this report 
was drafted. For more information on our file review, see appendix I. 

[17] According to an OSSE official, while grant recipients must submit 
all reimbursement claims prior to the end of the award period, they do 
not have to follow a particular schedule. Therefore, a grantee can 
determine when to submit for reimbursement based on its need for 
funds. Additionally, this official stated that in certain situations 
OSSE may reimburse grantees for purchases made prior to the award 
period. 

[18] The official indicated that while some projects may not begin 
immediately, grantees are still required to submit these reports. 

[19] We were unable to assess the timeliness of some reports that were 
submitted because in some instances the reports in the files did not 
have a clear indication of when they were submitted. 

[20] According to DCPS officials, although the current administration 
assumed control of DCPS in 2007, federal payment spending plans and 
other supporting documentation for fiscal years 2007 and 2008 funds 
would have been created by the previous superintendent. 

[21] In 2009, DCPS also received a one-time federal payment of $20 
million to "jump start" education reform in D.C., which is included in 
our analysis. Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, 
Title IV, 123 Stat. 524, 654 (2009). 

[22] The teachers' contract was ratified by the Washington Teachers' 
Union in June 2010. According to the union's by-laws, the Washington 
Teachers' Union is the sole and exclusive bargaining representative 
for all matters related to rates of pay, wages, benefits, hours of 
employment, and working conditions of DCPS teachers and other covered 
employees. 

[23] These expenditures include $3 million for supplemental education, 
$800,000 to purchase athletic equipment and textbooks, $460,000 for 
professional development, and $280,000 for early childhood education. 

[24] SOAR expenditure data includes the program name, the office that 
received the funds, and general information such as whether it was 
awarded as a contract, purchased supplies, or paid salaries and 
benefits. 

[25] We use the term "program officers" to refer to the Contracting 
Officer's Technical Representative. 

[26] The purpose of the evaluations is to assess contractor 
performance related to, among other things, the quality and timeliness 
of the deliverables and whether the contractor stayed within budget. 

[27] D.C. Mun. Regs. tit. 27, § 27-1203.2 (2010). 

[28] Independent auditors have also identified issues with inadequate 
procurement documentation at DCPS. A 2009 report on internal controls 
found that DCPS could not locate some contract files and did not have 
proper documentation. The report made a recommendation that DCPS 
comply with D.C. regulations that require files to be maintained to 
ensure effective documentation of all procurement actions. 

[29] The Antideficiency Act prohibits District government officers and 
employees from making obligations or expenditures in excess of amounts 
available in an appropriation or fund unless they are otherwise 
authorized to do so by law. 31 U.S.C. § 1341. 

[30] We selected contracts of more than $100,000 because they require 
that a performance evaluation be completed. 

[End of section] 

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