Spinning the State Auditor’s report

Buckeye State Blog is reporting that $20M was misspent under Ohio’s charter school program. This is either spin or a misunderstanding of the Ohio Auditor of State’s report. Here’s BSB:

Doc Wood, BSB’s resident education expert, has some bad news for us. The Ohio Department of Education misspent $20+ million through problems with charter school’s/accountability. For comparison’s sake, the whole intern blunder cost us $2.2 mil. Wonder if the Republicans will be debating this one? -Jerid

It should not have been any surprise to read that Republican State Auditor Mary Taylor found that our own Ohio Department of Education mis-spent over $20,000,000 in the Community School program. These schools, also known as charter schools, were the focus of much of the debate around Governor Ted’s budget this past spring. While the Governor wanted to put the program on hold (and end payments to ‘for profit’ charters) while issues like this were straightened out, the General Assembly charged ahead and funded the program without any new controls.

The audit report doesn’t actually conclude that the money was misspent, but rather that the proper oversight wasn’t in place to insure that the money, all of which was federal grants, wasn’t misspent. Apparently, the state had rules in place that said that only schools spending over half a mil in federal funds had to file certain reports, but that schools spending less than that accounted for the majority of the money. From the 2006 state audit report (pdf, real page 189):

During SFY 2006, EDU disbursed $20.8 million in Federal Charter Schools grant funds to qualified charter schools in the form of start-up (planning and design) and implementation sub-grants. EDU’s Office of Community Schools (OCS) is responsible for monitoring the use of the Federal Charter Schools funds by the charter schools. However, during the majority of SFY 2006, OCS did not have an effective system in place to determine whether subrecipients were using these Federal funds in accordance with applicable laws and regulations.

As in previous years the Department has a number of potential monitoring tools in place such as required site visit reports and other monitoring procedures performed by charter school sponsors, reviews of Annual Performance Reviews (APRs) and Final Expenditure Reports (FERs), and the monitoring of A-133 audits performed on the schools. However, these tools either were not used effectively or did not provide for adequate subrecipient monitoring during SFY 2006.

OCS did not have procedures in place to ensure that charter school sponsors were performing their required compliance monitoring. Furthermore, the majority of these schools did not expend $500,000 or more in Federal money during SFY 2005, and therefore were not required to have an A-133 audit. Of the 137 charter school subrecipients that received funding during SFY 2006, only three were required to have an A-133 audit for SFY 2005, and none of these three were submitted to EDU until after SFY 2006. Finally, while the APRs and FERs do address these Federal funds, they do not provide a level of detail which would allow the Department to determine whether subrecipients are complying with applicable Federal regulations.

This is a problem obviously, and one that is being resolved. But lack of oversight of the money is quite a different thing from saying that it’s known that the money was misspent. It’s no doubt that some of it was misspent, statistically speaking, but I think quite unlikely that anything approaching most of it was.

As BSB mentioned, this problem was the one Gov. Ted Strickland used in an attempt to trash the whole program, certainly a case of throwing the baby out with the bathwater. The better solution is to fix the oversight problems.

NBC4i also covers this, and they get the story right:

Improper accounting practices led the state to overpay Medicaid providers $13 million last year and made it impossible to know whether $20 million in state payouts to charter schools was being properly handled, according to a state audit released Thursday.

In all, state Auditor Mary Taylor questioned $36 million in spending at six state agencies last year, most at the departments of Education and of Job and Family Services.

Don’t hold your breath waiting for BSB’s post on the $13 million in questioned expenditures “related to the Medicaid Cluster and State Children’s Insurance Program.”