oversight

Puerto Rico Department of Education's Special Education Expenditures for the period, July 1, 2002 to December 31, 2002.

Published by the Department of Education, Office of Inspector General on 2004-03-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             U.S. DEPARTMENT OF EDUCATION

                                   OFFICE OF INSPECTOR GENERAL 

                                        75 Park Place, 12th Floor 

                                       New York, New York 10007 


                                                       March 30, 2004

                                                                                                    Control Number
                                                                                                    ED-OIG/A02-D0020

Honorable César A. Rey-Hernández
Secretary of Education
Puerto Rico Department of Education
Calle Teniente González, Esq. Calle Calaf – 12th Floor
Urb. Tres Monjitas
San Juan, Puerto Rico 00919

Dear Secretary Rey-Hernández:

This is our Final Audit Report entitled Puerto Rico Department of Education’s (PRDE) Special
Education Expenditures for the period, July 1, 2002 to December 31, 2002. The objective of our
audit was to determine if the non-salary, Individuals with Disabilities Education Act (IDEA),
Part B, Special Education expenditures reported by PRDE for the six-month period ending
December 31, 2002, were allowable and spent in accordance with Federal law and regulations.
During the course of the expenditure review, we found that PRDE had allowed approximately
$38.1 million to lapse for the grant award years 1997 through 2001. We also found that PRDE
could not provide supporting documentation for expenditures totaling $122,901. Additionally,
PRDE paid $17,000 for a trailer that was not used for Special Education students.

We provided a draft of this report to PRDE. Based on PRDE’s response, dated March 12, 2004,
and documentation provided with the response, we made changes to the final audit report
regarding unsupported expenditures. The remaining findings and recommendations did not
change due to PRDE’s response. We have summarized PRDE’s comments after each finding
and have included PRDE’s entire response as an Attachment.

                                                     BACKGROUND

IDEA, Part B, was designed to ensure that all children with disabilities have available to them a
free appropriate public education that emphasizes special education and related services designed
to meet their unique needs and prepare them for employment and independent living.

On May 29, 2002, the U.S. Department of Education (ED) designated PRDE as a “high-risk”
grantee under 34 C.F.R. § 80.12 because of problems in PRDE’s fiscal and program
accountability such as:

ƒ   late submission of Single Audits,
ƒ   failure to adhere to procurement regulations and procedures,
ƒ   lack of proper internal controls, and

          Our mission is to promote the efficiency, effectiveness, and integrity of the Department’s programs and operations.
Audit of PRDE’s Special Education Expenditures                                                   Final Report
for the period July 1, 2002 to December 31, 2002                                           ED-OIG/A02-D0020

ƒ      actions leading to the indictments of the former Secretary of Education and other associated
       individuals.

On June 27, 2002, PRDE submitted a Corrective Action Plan that outlined steps already taken
and those to be taken to address the problems and ensure compliance with all of the
requirements applicable to ED’s programs.

On September 4, 2002, ED informed PRDE that the Office of Special Education and
Rehabilitative Services (OSERS) conditionally approved Puerto Rico’s Eligibility Document
Submission for Federal Fiscal Year 2002 under IDEA, Part B. These Special Conditions
included providing quarterly expenditure and progress reports for each program.

On January 31, 2003, PRDE submitted to ED the first quarterly report, which covered the six-
month period, July 1, 2002 to December 31, 2002. The report covered $258 million in
expenditures incurred by PRDE from Federal education funds for this six-month period. Our
audit covers non-salary related Special Education expenditures that totaled $13,535,521, as
reported by PRDE.

                                                  AUDIT RESULTS

Finding 1 	         PRDE had approximately $38.1 million in Special Education funds that have
                    lapsed

PRDE did not effectively manage its Federal grant funds. As a result, PRDE will be unable to
use $38,115,522 in five Special Education grants, awarded from July 9, 1997, through July 1,
2001. These funds could have been used to benefit Special Education students. Of that amount,
$2,965,555 from one of the grant awards was de-obligated and reverted to the U. S. Treasury on
September 30, 2003. The remaining $35,149,968 from the other four grants lapsed and will
revert to the U.S. Treasury unless PRDE can provide evidence to ED of outstanding expenses
obligated during the grant periods.

According to 34 C.F.R. § 80.20(b)(2),1 “Accounting records . . . must contain information
pertaining to grant or subgrant awards and authorizations, obligations, unobligated balances,
assets, liabilities, outlays or expenditures, and income.”

The regulations at 34 C.F.R. § 80.20(b)(3) state, “Internal Control . . . Effective control and
accountability must be maintained for all grant and subgrant cash . . . .”

Pursuant to 34 C.F.R. § 80.23(a) and (b), “Where a funding period is specified, a grantee may
charge to the award only costs resulting from obligations of the funding period unless carryover
of unobligated balances is permitted, in which case the carryover balances may be charged for
costs resulting from obligations of the subsequent funding period. . . . A grantee must liquidate
all obligations incurred under the award not later than 90 days after the end of the funding
period. . . . The Federal agency may extend this deadline at the request of the grantee.”


1
    Unless otherwise specified, all regulatory citations are to the July 1, 2002 volume.

                                                             2
Audit of PRDE’s Special Education Expenditures                                   Final Report
for the period July 1, 2002 to December 31, 2002                           ED-OIG/A02-D0020

Under the “Tydings Amendment,” Section 421(b) of the General Education Provisions Act, 20
U.S.C. 1225(b), any funds not obligated and expended during the period for which they were
awarded become carryover funds and may be obligated and expended during the succeeding
fiscal year.

ED’s Grant Administration and Payment System (GAPS) shows information on grant awards,
such as authorizations, confirmed deposits, draws, and available balances. As of March 12,
2004, GAPS reported the following Special Education grant award funds as lapsed:

       Grant Award                     Authorization               Lapsed Funds
       H027A970115                     $ 21,308,942                $ 2,965,555
       H027A980115                       31,761,179                   2,476,942
       H027A990115                       37,448,755                   6,421,710
       H027A000115                       43,909,097                  21,897,123
       H027A010115                       56,447,698                   4,354,192
       Totals                          $190,875,671                $ 38,115,522

Of the $38,115,522 in lapsed funds, $2,965,555 from award H027A970115 reverted to the U.S.
Treasury on September 30, 2003.

PRDE did not closely monitor available grant balances. According to PRDE officials, the
problem began when PRDE’s Budget Division did not open grant accounts timely in the Puerto
Rico Treasury Department’s Puerto Rico Integrated Financial Accounting System (PRIFAS).
PRDE officials stated that this forced them to charge payroll for the new grants to the previous
grant year or any other grant that had an available balance, resulting in untimely multiple
adjusting entries in GAPS.

Additionally, PRDE officials stated that their Accounting Division did not obtain the payroll
report, known as the GL 200, from the Puerto Rico Treasury Department until two to three
months after the payroll had been processed. Consequently, PRDE had to make multiple
adjusting entries months after the charges were made and, in some instances, after the grant had
been closed in GAPS.

PRDE officials stated that they allowed charges to be made to previous grant years because the
account codes in PRIFAS remained open for five years, as opposed to three years in GAPS. This
allowed charges to be made against the grants for funding periods already closed in GAPS.

We concluded that, had internal controls been in place to prevent lapsed funds, approximately
$38.1 million could have been better used to provide Special Education services to Puerto Rico’s
students.




                                                   3

Audit of PRDE’s Special Education Expenditures                                    Final Report
for the period July 1, 2002 to December 31, 2002                            ED-OIG/A02-D0020

Recommendations

We recommend that the Assistant Secretary for OSERS require PRDE to:

1.1 	 Provide evidence to OSERS of any valid obligations made within the authorized award
      periods so that grants, with funds that have not yet reverted to the U.S. Treasury, can be
      reopened and funds liquidated;

1.2 	 Access and use the data in GAPS to closely monitor available grant balances;

1.3 	 Implement a system that will require PRDE’s Budget Division to open new grant account
      codes upon the receipt of the Grant Award Notification;

1.4 	 Open the grant account codes in PRIFAS timely and make payroll charges to the
      corresponding grant year only;

1.5 	 Implement a system that will allow the receipt of the GL 200 payroll report from the
      Puerto Rico Treasury Department no more than two weeks after the payroll has been
      processed; and

1.6 	 Implement a system that will require PRDE’s Accounting Division to make timely
      reconciliations to the GL 200 payroll report and timely adjusting entries to GAPS, as
      appropriate.

PRDE’s response

PRDE stated that it is working in cooperation with ED to ensure that lapsed Special Education
funds can be reimbursed to PRDE as quickly as possible. During recent conversations with ED,
PRDE explained that it properly obligated the funds in question during the authorized period, but
ED had not reimbursed the funds. PRDE indicated that once it provides evidence to ED of
obligations that were properly incurred, but not reimbursed, ED would reopen the grants and
permit PRDE to liquidate the funds.

OIG’s reply

We considered PRDE’s response, but did not change our finding or recommendations. Although
PRDE is working with ED to ensure that funds can be reimbursed, PRDE must provide evidence
that the obligations were incurred within the grant period. As of March 12, 2004, the amount of
lapsed funds for grant award H027A010115 changed to $4,354,192. As a result, PRDE had
lapsed funds totaling $38,115,522.

Although PRDE reported it is in the process of implementing recommendation 1.1, it did not
present a corrective action plan addressing the remaining recommendations to avoid this
situation in the future. Specifically, PRDE did not address recommendations 1.2 through 1.6.
As a result, PRDE is unable to ensure that Special Education funds will not continue to lapse and
revert to the U.S. Treasury.


                                                   4
Audit of PRDE’s Special Education Expenditures                                       Final Report
for the period July 1, 2002 to December 31, 2002                               ED-OIG/A02-D0020

Finding 2 	    PRDE could not provide supporting documentation and used Special
               Education funds for purposes other than to serve Special Education students

Our review of a sample of non-salary Special Education expenditures reported by PRDE for the
period July 1, 2002, through December 31, 2002, disclosed that PRDE could not provide
supporting documentation for expenditures totaling $122,901 for transportation services. This
occurred because PRDE did not maintain an adequate filing system for supporting
documentation of expenditures. As a result, PRDE could not assure ED that funds were
expended properly.

Additionally, PRDE used $17,000 of Special Education funds to purchase a trailer that was
intended for the use of Special Education students. Instead, the trailer housed the school’s
counselor and social worker. The Special Education students were not benefiting from the trailer
because PRDE’s Office for Public Schools Improvement still needed to repair the unsafe
condition of the trailer’s ramp.

According to 34 C.F.R. § 80.20(a), “[F]iscal control and accounting procedures of the State, as
well as its subgrantees and cost-type contractors, must be sufficient to . . . (2) Permit the tracing
of funds to a level of expenditures adequate to establish that such funds have not been used in
violation of the restrictions and prohibitions of applicable statutes.” Further, 34 C.F.R § 80.20
(b)(2) states, “Grantees and subgrantees must maintain records which adequately identify the
source and application of funds provided for financially-assisted activities. These records must
contain information pertaining to grant or subgrant awards and authorizations, obligations,
unobligated balances, assets, liabilities, outlays or expenditures, and income.”

The regulations at 34 C.F.R. § 80.20(b)(6) state, “Accounting records must be supported by such
source documentation as cancelled checks, paid bills, payrolls, time and attendance records,
contract and subgrant award documents, etc.”

Recommendations
We recommend that the Assistant Secretary for OSERS require PRDE to:

2.1 	   Return to ED $122,901 in unsupported costs or provide supporting documentation of
        costs expended;

2.2 	   Institute controls to ensure all expenses paid are allowable and all documentation
        supporting expenses paid to contractors are maintained; and

2.3 	   Complete the trailer’s handicapped facilities to make them accessible for Special
        Education students.

PRDE’s response

PRDE provided supporting documentation for the unsupported transportation expenditures for
the Bayamón region and described its process for reimbursement of transportation costs. PRDE
re-assigned the trailer for use by Special Education students. PRDE provided an affidavit signed
by the school director acknowledging that the Special Education teacher started using the trailer
                                                   5
Audit of PRDE’s Special Education Expenditures                                     Final Report
for the period July 1, 2002 to December 31, 2002                             ED-OIG/A02-D0020

effective February 23, 2004. Additionally, PRDE stated that although none of the students
required wheel-chair access to enter the trailer, they planned to decrease the slope of the ramp to
make the trailer wheel-chair accessible. Finally, PRDE stated it would use this trailer for the
Special Education program and students for the remainder of its usable life.

OIG’s reply

We reviewed PRDE’s response and numerous exhibits and determined that of the $612,429 in
unsupported transportation expenditures reported in the draft audit report, $122,901 remained
unsupported. PRDE did not provide payment vouchers supporting these transportation
expenditures. PRDE’s corrective actions should improve the process for approving, paying, and
maintaining supporting documentation for transportation services.

Our position and recommendation remain unchanged regarding PRDE’s use of the trailer. As a
result of our finding, PRDE became aware of the improper situation and relocated the Special
Education teacher to the trailer. Additionally, our recommendation has not been fully
implemented because PRDE was still in the process of making the trailer wheel-chair accessible.

                                       OTHER MATTERS

During our audit work, we noticed significant lapsed funds in program areas that are in addition
to the scope of this audit. On December 9, 2003, we issued an Interim Audit Memorandum
(State and Local No. 04-02) to ED’s Chief Financial Officer identifying a total of approximately
$217.4 million in ED grant funds that would lapse by December 31, 2003. This amount included
the $38.3 million reported in the draft of this report, the $96.3 million reported in our concurrent
draft audit report on PRDE’s Title I Expenditures (report No. ED-OIG/A02D0014), and $82.8
million we identified in grant funds that are from programs outside the scope of these two audits.
As of March 12, 2004, PRDE had lapsed funds totaling $38.1 million and $109.8 million for
Special Education and Title I grants, respectively. Had internal controls been in place to prevent
lapsed funds, pending evidence of any outstanding obligations, approximately $230.7 million in
ED grants could have been better used to provide services to Puerto Rico’s students.

                       OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of our audit was to determine if the non-salary, Special Education expenditures
reported by PRDE for the six-month period ending December 31, 2002, were allowable and in
accordance with Federal law and regulations.

To accomplish our audit objective, we reviewed PRDE’s fiscal year 2002 Single Audit report
and documents supporting the expenditures selected for testing. In addition, we interviewed
PRDE’s Central Office officials and PRDE’s regional and school officials. We performed our
fieldwork at PRDE’s offices in Hato Rey, Puerto Rico, from June 25, 2003, through October 20,
2003, the date of our exit conference.

To test the expenditures for petitions of funds and transportation services, we made site visits to
schools and regional offices. We made site visits from September 10, 2003, through September
18, 2003, to the following schools: Benigno Fernandez Garcia, Abraham Lincoln, Ramon

                                                   6

Audit of PRDE’s Special Education Expenditures                                  Final Report
for the period July 1, 2002 to December 31, 2002                          ED-OIG/A02-D0020

Marin, Walter MC Jones, Ramon B. Lopez, S.U. Eugenio Maria de Hostos, and Almirante Sur I.
We also made site visits to the Ponce, San Juan, and Bayamón School regions on September 16,
19, and 22, 2003, respectively.

To achieve our audit objective, we selected both random and judgmental samples from the
universe developed from the $29,263,065 of Special Education expenditures reported by PRDE
in its January 31, 2003, report to ED. Of that amount, $13,535,521 represented non-salary
related expenditures. Included in this total were expenses not covered by the Special Conditions
reporting requirement (2002/2003 expenditures). We stratified our sample between non-salary
related expenses for those expenditures covered by the Special Conditions and those
expenditures not covered by the Special Conditions. The universe of non-salary expenditures
covered by the Special Conditions included 55 expenditures totaling $4,499,350. The universe
of non-salary expenditures not covered by the Special Conditions had 621 expenditures totaling
$9,036,171, including numerous negative adjusting transactions.

We sampled 14 expenditures from the universe of expenditures covered by the Special
Conditions; 25 expenditures from the universe of expenditures not covered by the Special
Conditions; and 5 judgmentally selected negative expenditures from the universe of expenditures
not covered by the Special Conditions.

The sample of 14 expenditures were stratified by dollar volume, omitting transactions under
$10,000 using the following strata:

       $10,000 - $399,999               10 expenditures
       $400,000 plus                    4 expenditures

The sample of 25 expenditures from the universe of positive expenditures not covered by the
Special Conditions was stratified by dollar volume, using the following strata:

       $10,000 - $99,999               12 expenditures
       $100,000 - $399,999              6 expenditures
       $400,000 plus                    7 expenditures

The judgmental sample of 5 negative expenditures not covered by the Special Conditions was
based on the highest dollar expenditures.

In total, our samples accounted for $8,072,669 (60 percent) of the total reported non-salary
related Special Education expenditures. However, included in our samples were seven “Petition
of Funds” transactions. These transactions represented the disbursement of funds to Community
Schools and were not actually seven transactions, but multiple (10 plus) expenditures, supporting
one transaction. As a result, we selected a judgmental sample based on the schools receiving the
most funds. Using this basis, we judgmentally selected seven schools receiving $3,000 or more.

To achieve our objective, we relied on the computer-processed data provided by PRDE to ED in
its report dated January 31, 2003. To test the reliability and completeness of PRDE’s data, we
attempted to reconcile the expenditures reported by PRDE to drawdowns reported in GAPS.
Based upon this test, we concluded that the data was not complete, but was sufficiently reliable

                                                   7

Audit of PRDE’s Special Education Expenditures                                        Final Report
for the period July 1, 2002 to December 31, 2002                                ED-OIG/A02-D0020

for audit purposes. While verifying PRDE’s GAPS reconciliations, we found five grants with
closed funding periods that had lapsed funds. Consequently, we incorporated this matter and its
effects in the AUDIT RESULTS section of this report.

We conducted the audit in accordance with generally accepted government auditing standards
appropriate to the limited scope of the audit described above.

                       STATEMENT ON MANAGEMENT CONTROLS

As part of this audit we assessed the system of management controls applicable to PRDE’s
administration of Special Education expenditures and Special Education account balances. Our
assessment was performed to gain an understanding of PRDE’s system. Based on previous
knowledge gained through our prior audits (ED-OIG/A01-90006, ED-OIG/A01-90007, ED­
OIG/A01-A0004, ED-OIG/A02-B0012, ED-OIG/A02-B0025, and ED-OIG/A02-C0017) and
ED’s designation of PRDE as a “high-risk” grantee under 34 C.F.R. § 80.12, we determined the
level of control risk, that is the risk that material errors, or irregularities, or illegal actions may
occur, to be high. We found that PRDE lacked adequate controls for managing its Special
Education account balances and for expending Special Education funds. These weaknesses and
their effects are fully discussed in the AUDIT RESULTS section of this report.

                                 ADMINISTRATIVE MATTERS

If you have any additional comments or information that you believe may have a bearing on the
resolution of this audit, you should send them directly to the following Education Department
official, who will consider them before taking final Departmental action on the audit:

                Troy R. Justesen
                Acting Deputy Assistant Secretary
                Office of Special Education and Rehabilitative Services
                U.S. Department of Education 

                400 Maryland Ave., SW 

                Washington, D.C. 20202 


It is the policy of the U.S. Department of Education to expedite the resolution of audits by
initiating timely action on the findings and recommendations contained therein. Therefore,
receipt of your comments within 30 days would be greatly appreciated.

Statements that managerial practices need improvements, as well as other conclusions and
recommendations in this report represent the opinions of the Office of Inspector General.
Determinations of corrective action to be taken will be made by the appropriate Department of
Education officials.




                                                   8

Audit of PRDE’s Special Education Expenditures                                   Final Report
for the period July 1, 2002 to December 31, 2002                           ED-OIG/A02-D0020

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued by the
Office of Inspector General are available to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.

                                       Sincerely,

                                               /s/

                                       Daniel P. Schultz
                                       Regional Inspector General
                                         for Audit




                                                     9

Audit of PRDE’s Special Education Expenditures                                                                                                                                     Final Report
for the period July 1, 2002 to December 31, 2002                                                                                                                             ED-OIG/A02-D0020

                                                                                   Attachment




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                                       DEPARTMENT Of EPUCAfION
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                                                                 rORlNDlVIPUALS Yin" DISAJl.\U'fl[J

             Of//~"   01 toe "",bIen! 5eG,ela,y




                      March 12,2004



                     Daniel P. Schultz
                     Regional Inspector General for Audit
                     U.S. j)ep~r1JllClll of Education
                     Offtcc oflllsp~dor G~neral
                     75 Puk Place, Roo:n 1207
                     New York, NY 10007

                     Dear Mr Scb\lJt%:

                    The PU'rlo Rico Department of Educa\ioil r.pprccirtc o the opp0rliinily to subl]]il
                    comments regardil1g Drall Audll Report Control NUl\;hcr ED-01CiIA02.DOOl.O.
                    Enclosed please Ilnd O'..lr CO:l1tTICn!s n~garJing the findings.

                    PROF. plans to review additional docul1lente.:ion regmdillg this andil, p,uticlIJaJ'ly Ihe
                    8udi1 \vo!'kpapcrs, Over the next few weeks, PRDE may augmenl its mspon~H.! as a l'e:-:uit
                    of (his review.

                    Picas feel free     (0   COlllaet our ofilcc if yor: have any additioml queslions.

                    Sincerely,

                     ---~~,-//
                    Sonia ROSClriO Rodriguel
                    Special Education Oftlcc
                    Assistant Secrcl~ry

                   Im1,




                                                         ":)HAPING THE F<I1'URE GI"NERAnOr'l"

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             thij basIs of 'tlce, color, sex, age, blrt'l,       na1Ion~, orlg~n,        5CCIal COlldJ[iQ0, P::Jiltic.::.1   idp,;t~,       IcJ::ioL.':; t'll:llif'r!; Dr 0ny h:..'qdic:)I".
Audit of PRDE’s Special Education Expenditures                                  Final Report
for the period July 1, 2002 to December 31, 2002                          ED-OIG/A02-D0020

                                            Attachment




                             OIG DRAFT AUDIT REPORT 

                     PRDE’s SPECIAL EDUCATION EXPENDITURES 

                       AUDIT CONTROL NO. ED-OIG/A02-D0020 


        The Puerto Rico Department of Education (PRDE) appreciates the opportunity to respond
to the Office of Inspector General (OIG) findings set out in its January 26, 2004, draft audit
report. This response was originally due thirty days after the date of the letter (February 25,
2004). On February 17, 2004, the PRDE requested an extension to respond to the findings due to
the ongoing negotiations with the U.S. Department of Education on the Finding One. OIG
granted the extension and required that this response be submitted no later than March 12, 2004.

       PRDE has the following response to the findings contained in the audit report.

Finding One – PRDE had approximately $38.3 million in Special Education funds
that have lapsed

       Finding One states that $35,374,583 of Special Education grant money “will revert to the
U.S. Treasury unless PRDE can provide evidence to ED of outstanding expenses obligated
during the grant period.”

        PRDE is working in cooperation with the U.S. Department of Education (ED) to ensure
that these funds can be reimbursed to PRDE as quickly as possible. During recent conversations
with ED, PRDE explained that it properly obligated the funds in question during the authorized
award periods. Federal accounts were properly opened, and expenses incurred to the relevant
accounts, but funds were not reimbursed to PRDE. It should be noted that because these Special
Education grants exceed $10 million, PRDE is required to use the zero balance/reimbursement
technique for these funds under the Treasury-State Agreement between the United States and
Puerto Rico.

PRDE has developed a methodology, which has been accepted by ED in recent conversations,
which will allow PRDE to demonstrate the timely obligation of the Special Education grants.
ED has stated that once PRDE provides evidence of obligations that were properly incurred, but
not reimbursed, ED will reopen these grants and permit PRDE to liquidate the funds in question.




Puerto Rico Department of Education                                            page 1 of 5
March 12, 2004
Audit of PRDE’s Special Education Expenditures                                  Final Report
for the period July 1, 2002 to December 31, 2002                          ED-OIG/A02-D0020

                                            Attachment

Finding Two – PRDE could not provide supporting documentation and used Special
Education funds for purposes other than to serve Special Education students

(a) Transportation Expenditures

    During its audit, OIG identified a series of transportation expenditures from the Bayamon
Region and requested that PRDE provide documentation supporting the allowability of the costs
to determine if the transportation expenses were provided to eligible students with disabilities.
During the audit period, PRDE staff could not locate supporting documentation at the Bayamon
Region, and its constituent school districts, Naranjito, Toa Alta, Bayamon, Catano, Dorado and
Guyanabo school district, for those transactions processed on the payment request numbers:
03AP0139 and 03001326. These transactions total $612,429.

    The unsupported expenditures were paid to vendors that provided transportation services to
students with disabilities. To obtain payment as a vendor, each vendor is required to submit a
reimbursement request to the District Office designated for transportation. This request
identifies the vendor’s name, social security number and date the transportation expenditure was
incurred. After receipt of the payment request or invoice, an official then completes a
certification document to authenticate the expenditures as valid expenditure for a child with a
disability. These requests for reimbursement are then combined into a payment document for
review at the regional level.

    The Regional transportation officer compiles a payment document with several invoices to be
paid for submission to the Treasury Department for payment. This payment document identifies
the payee, the payee’s social security number, the date services were rendered, the amount to be
paid, and the Federal funding source for payment. This document is reviewed and certified by
the Regional transportation official designated to review transportation expenses and is
submitted to the Treasury Department for processing and input into the PRIFAS system. Checks
are issued to the vendors after the review process is completed.

    PRDE has collected supporting documentation for the unsupported expenditures requested
for review by the OIG audit for transportation expenditures from the Bayamón region. Below is
a table summarizing the information from the Bayamón region for the expenditures not reviewed
by the auditors:

   [The table contained names and payment details. We removed the table due to the
   Privacy Act.]




Puerto Rico Department of Education                                            page 2 of 5
March 12, 2004
Audit of PRDE’s Special Education Expenditures                                     Final Report
for the period July 1, 2002 to December 31, 2002                             ED-OIG/A02-D0020

                                            Attachment

(b) Trailer

During the Spring Semester, the Benigno Fernandez Garcia Pre-Technical School purchased a
trailer for the use of special education students. This trailer was purchased to serve students with
disabilities in the pre-vocational program located at the school. However, due to a programmatic
change, the pre-vocational program was relocated to the Salvador Brau School. The Benigno
Fernandez Garcia Pre-Technical School redesignated the office for use of the social worker and a
school counselor from August of 2003 to February 20, 2004. The audit determined that because
the trailer was intended for the use of Special Education students, but the school temporarily
directed that the trailer house the school’s counselor and social worker, that the $17,000 be
converted to the exclusive use of eligible special education students.

PRDE has since reassigned the trailer for use by special education students. The special
education teacher for the Benigno Fernandez Garcia Pre-Technical School has been relocated to
the trailer. The students are those students who require a separate classroom at the local school.
None of the students requires wheel-chair access to enter the ramp. Since February 23, 2004, the
trailer has been used exclusively as a classroom location for twenty-five special education
students. See Ex. 68. PRDE will use this trailer for the special education program and students
for the remainder of its usable life.

RECOMMENDATIONS:

2.1. – 	 Return to ED $612,429 in unsupported costs or provide supporting documentation of
         costs expended:

PRDE has fully supported the identified costs. Should the OIG require additional documentation
to support these funds, PRDE can provide this documentation.


2.2 – Institute controls to ensure all expenses paid are allowable and all documentation
      supporting expenses paid to contractors are maintained; and

PRDE has taken steps to consolidate its ability to track expenditures for transportation. In the
fall of 2003, PRDE created a pilot program at the Caguas Region designed to streamline delivery
of services to students with disabilities and to consolidate much of the central administrative
functions at the local level. As part of the pilot program, the Caguas Region has designated an
official responsible for provision of appropriate




Puerto Rico Department of Education                                              page 3 of 5
March 12, 2004
Audit of PRDE’s Special Education Expenditures                                     Final Report
for the period July 1, 2002 to December 31, 2002                             ED-OIG/A02-D0020

                                            Attachment

transportation to students with disabilities and instituted new procedures to verify transportation
expenses. These procedures include:

   • 	 Verification of Attendance of students with disabilities
   • 	 Periodic Targeted monitoring of vendor’s routes
   • 	 Certification by school directors of each date of attendance


This pilot program, including the revised procedures for processing transportation expenses, will
be instituted in all regions on the Island for the 2004-2005 school year. PRDE also proposes the
following corrective actions to remedy this finding:

   • 	 Analysis of the documentation procedure at the Regional Level regarding expenditures
       paid through the PRIFAS system

           ¾ PRDE’s Manual for the new Pilot Program includes new procedures outlined
             above regarding transportation expenditures. These procedures will become
             mandatory for all regions for the 2004-2005 school year as those regions are
             converted into the new service delivery model.

           ¾ PRDE proposes to conduct an evaluation of the steps currently used to track
             expenditures. PRDE is currently developing a plan to restructure the financial
             and administrative procedures for the Special Education Department. This
             analysis will contain a cost-benefit analysis and a weighing of the potential risks
             in pursuing this option to determine if methods are available to simplify the
             process.

           ¾ The PRDE will enhance its system of controls by providing additional training to
             personnel from the Offices of External Resources and Finance. This training will
             be conducted during the first quarter of the upcoming year.

   • 	 Additional mechanized remedies. PRDE is investigating additional mechanized remedies
       that may improve its ability to track payments to vendors. Within the short term, PRDE
       is considering implementing the following actions:

           ¾ The revised procedures for the Caguas pilot project require that the transportation
             official include new requirements for verification and supporting documentation
             for transportation expenses.

           ¾ PRDE will implement the revised procedures currently being implemented in the
             Caguas Region on an Island-wide basis during the next school year. PRDE will
             review and, if necessary, revise the new procedures regarding processing of
             transportation expenses for private vendors to determine if further adaptations are
             required.




Puerto Rico Department of Education                                               page 4 of 5
March 12, 2004
Audit of PRDE’s Special Education Expenditures                                  Final Report
for the period July 1, 2002 to December 31, 2002                          ED-OIG/A02-D0020

                                            Attachment

2.3 – Complete the trailer’s handicapped facilities to make them accessible for Special
      Education students

As described above, the trailer has been redesignated for the sole use of Special Education
students. The existing ramp for the trailer is at too steep an incline for wheel-chair bound
students to enter the trailer. Currently, none of the students assigned for class in the trailer
requires wheel-chair access. However, PRDE will take the necessary steps to decrease the slope
of the ramp, so that it is wheel-chair accessible.




Puerto Rico Department of Education                                            page 5 of 5
March 12, 2004