oversight

Camden City Public School District's Administration of its Supplemental Educational Services Program

Published by the Department of Education, Office of Inspector General on 2011-05-04.

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

                     UNITED STATES DEPARTMENT OF EDUCATION
                                           OFFICE OF INSPECTOR GENERAL

                                                                                                                      Audit Services
                                                                                                              New York Audit Region


                                                             May 4, 2011

                                                                                                            Control Number
                                                                                                          ED-OIG/A02K0011

Mr. Christopher D. Cerf
Acting Commissioner of Education
New Jersey Department of Education
100 River View Plaza
P.O. Box 500
Trenton, NJ 08625

Dear Mr. Cerf:

This final audit report, titled “Camden City Public School District’s Administration of its
Supplemental Educational Services Program,” presents the results of our audit. The purpose of
the audit was to determine whether Camden City Public School District’s (Camden)
Supplemental Educational Services (SES) expenditures, funded through the Elementary and
Secondary Education Act of 1965, as amended by the No Child Left Behind Act of
2001 (ESEA), were allowable and spent in accordance with applicable laws and regulations. Our
review covered the period July 1, 2005, through June 30, 2009. We determined that Camden’s
SES expenditures were not always spent in accordance with applicable laws and regulations.



                                                   BACKGROUND 



The ESEA was enacted for the purpose of enabling all students to become academically
proficient based upon each State’s assessment program. Each school’s progress toward meeting
the student proficiency target was measured annually. Schools that did not meet the
measurements of Adequate Yearly Progress (AYP) for 2 consecutive school years were
identified as schools in need of improvement (SINI). As required by ESEA, SES must be
offered to students if a school did not make AYP after the third year of SINI status. SES is
academic assistance, such as tutoring, that is tailored to the particular needs of participating
students. In addition, services must be of high quality, research-based, and consistent with local
educational agencies (LEAs) and State Educational Agencies (SEAs) academic standards.

An SEA is responsible for ensuring that SES is available to all eligible students by qualified SES
providers. The SEA must approve SES providers, maintain a list of approved providers, monitor
implementation of SES by LEAs, and monitor the quality and effectiveness of providers. New

        The Department of Education’s mission is to promote student achievement and preparation for global competitiveness by
                                    fostering educational excellence and ensuring equal access.
Final Report
ED-OIG/A02K0011                                                                      Page 2 of 16
Jersey currently has 591 operating LEAs. During our audit period, the number of LEAs that
were required to provide SES ranged from 120 to 145. (See Table 1 below).

                       Table 1: Schools and LEAs Required to Provide SES
             Fiscal Year1          New Jersey Schools in SINI   LEAs Required to Provide
                                   Status of 3 Years or Longer           SES
              2005-2006                         366                      135
              2006-2007                         380                      145
              2007-2008                         359                      135
              2008-2009                         316                      120

To help ensure that LEAs offered meaningful choices to students, ESEA required LEAs to spend
an amount equal to 20 percent of their Title I, Part A allocation to provide school-choice related
transportation and SES to eligible students, unless a lesser amount was needed to satisfy all
demands. During our audit period, Camden’s SES expenditures totaled $8,927,268, and Camden
students received services from 15 SES providers.



                                              AUDIT RESULTS



We found that Camden overpaid seven SES providers $392,323 in excess of rates approved by
the New Jersey Department of Education (NJDOE). The overpayments were a result of SES
providers who submitted rates in their agreements with Camden that were higher than the
NJDOE approved rates. Camden paid the erroneous rates because it did not have proper controls
to ensure that SES providers were paid using NJDOE’s approved rates. We also found that
NJDOE did not have adequate procedures for informing school districts that SES providers had
been removed from its approved provider list. As a result, Camden paid an SES provider
$21,393 after it had been removed from NJDOE’s approved SES provider list. Further,
NJDOE’s monitoring process was ineffective to ensure payments to SES providers were
allowable. In view of these issues, LEAs throughout New Jersey may be overpaying SES
providers or receiving services from ineligible SES providers.

We provided a draft of this report to NJDOE for review and comment on March 9, 2011. In
NJDOE’s comments to the draft report, dated April 4, 2011, it did not comment on whether it
agreed or disagreed with our findings. NJDOE concurred with our recommendations, with the
exception of Recommendations 1.1 and 2.1, which directed Camden to return the unallowed SES
expenditures. The entire narrative of NJDOE’s comments is included as Enclosure 2 to this
report.




1
    Camden’s fiscal year (FY) period is from July 1 to June 30.
Final Report
ED-OIG/A02K0011                                                                       Page 3 of 16
FINDING NO. 1 – Seven SES Providers Were Overpaid $392,323

Camden overpaid seven SES providers $392,323 for services at rates that exceeded NJDOE’s
approved rates. From July 1, 2005, through June 30, 2009, Camden students received services
from 15 SES providers. As part of NJDOE’s SES provider application, applicants must indicate
the rates they would charge for SES services, the subject areas for tutoring, the grade level, and
the schedule of provided services. If NJDOE approved an SES provider’s application, it
published the SES provider’s name and approved rate on its Web site.

ESEA § 1116(e)(4)(E) states that an SEA shall “provide annual notice to potential providers of
[SES] of the opportunity to provide services . . . and of the applicable procedures for obtaining
approval from the [SEA] to be an approved provider of those services.”

NJDOE’s SES application states that any scope changes must be submitted and approved by
NJDOE. In addition, at the mandatory SES provider technical assistance training, SES providers
were informed that significant scope changes, including rate increases, must be approved by
NJDOE, which would then be reflected on NJDOE’s Web site. NJDOE also provided guidance
for schools, LEAs, and providers to implement SES. The guidance explained that LEAs must
contact providers selected by parents and enter into contractual agreements on behalf of the
students.

In its effort to implement services, Camden contacted NJDOE’s approved SES providers to
ascertain whether they planned to provide services to Camden students. Based on the providers’
responses, Camden furnished blank agreements to the providers to complete by filling in their
name, address, the date that services were to commence, and the rate to be charged per hour of
instruction. However, despite being informed by NJDOE that the approved rates could not be
changed by a provider, seven SES providers filled in the blank agreements with rates that were
above the rates approved by NJDOE and submitted the agreements to Camden. Camden
accepted the agreements from the SES providers and paid the excess rates when the provider
submitted its invoices for services rendered.

According to the Office of Management and Budget Circular A-87, Part C (1)(e), to be allowable
a cost must be “consistent with policies, regulations, and procedures that apply uniformly to both
Federal awards and other activities of the governmental unit.”

Camden overpaid the seven SES providers because it did not have proper controls to ensure that
SES providers were paid using NJDOE’s approved rates. Although Camden verified that the
SES providers were approved by NJDOE to provide services within the district, Camden
admitted that it did not verify that SES charges were appropriate by checking the NJDOE Web
site to ensure the rate charged was also the rate approved by NJDOE. Without verifying the rates
in the submitted agreements against NJDOE’s approved rates, Camden accepted the erroneous
rates and paid the providers based on incorrect rates. Because the rates were not verified,
Camden overpaid $392,323 in unallowed expenditures to the seven providers.
Final Report
ED-OIG/A02K0011                                                                                  Page 4 of 16
We also found that the New Jersey monitoring process would be ineffective to find that SES
providers were being paid rates above the NJDOE approved rates. According to Title 34 of the
Code of Federal Regulations § 80.40(a), an SEA is responsible for monitoring “[g]rant and
subgrant supported activities to assure compliance with applicable Federal requirements.”

Starting in FY 2009, NJDOE planned to monitor each LEA’s SES program every 3 to 4 years,
either through a desk audit or site visit. NJDOE determined which LEAs were monitored based
on various risk factors including time elapsed between monitoring visits, late or incomplete
submissions to the NJDOE Electronic Web-Enabled Grant System,2 previous findings, and
reports of misuse. In May 2010, NJDOE conducted a site visit to monitor Camden’s SES
program for the 2009-2010 school year. According to the NJDOE SES coordinator, NJDOE did
not identify any issues with Camden’s SES program and had no regulatory findings. Prior to the
recent SES review, NJDOE’s last monitoring of Camden’s SES program was performed as part
of its Title I program review, issued November 14, 2005. That review did not identify any issues
with Camden’s SES program. However, we noted that the review periods that NJDOE
monitored (September 1, 2004, through August 30, 2005, and September 1, 2009, through
August 20, 2010) did not include the audit period we reviewed.

NJDOE’s monitoring process included the use of monitoring tools that outlined the steps to
review the Title I and SES programs. We reviewed the 2008-2009 Title I monitoring tool and
the 2009-2010 SES Oversight and Monitoring Tool that NJDOE used to review the LEAs’ SES
programs. Both tools included steps to review a sample of the agreements between the LEA and
selected providers to ensure that each agreement met statutory requirements. Neither of these
tools included steps to verify that the SES provider agreements included the approved NJDOE
rate and that the provider rates paid were the approved NJDOE rates.

Because NJDOE’s monitoring tools did not include steps to verify that the rates on provider
agreements and the rates paid by LEAs were the approved NJDOE rates, we concluded that
NJDOE’s monitoring process was ineffective to ensure LEAs were being billed the correct rates
and payments to providers were in accordance with the NJDOE approved rates. Because the
monitoring tools are used to monitor all New Jersey LEAs, it is possible that other LEAs
throughout New Jersey may be overpaying SES providers.

RECOMMENDATIONS
We recommend that the Assistant Secretary for Elementary and Secondary Education, in
conjunction with the Assistant Deputy Secretary for Innovation and Improvement, require
NJDOE to:

1.1	 Direct Camden to return the $392,323 for unallowed SES expenditures, with applicable
     interest, to the U.S. Department of Education.

1.2	 Issue guidance ensuring all NJDOE LEAs pay SES providers based on NJDOE’s approved
     rates.


2
  The Electronic Web-Enabled Grant System is the NJDOE system that allows grant applications to be submitted,
reviewed, and approved electronically.
Final Report
ED-OIG/A02K0011                                                                      Page 5 of 16
1.3	 Improve its monitoring tools for LEA implementation of the SES program in accordance
     with applicable laws and regulations to ensure that NJDOE’s approved rates are used to
     pay for SES services.

NJDOE Comments
NJDOE neither agreed nor disagreed with our finding. NJDOE concurred with
Recommendations 1.2 and 1.3 and did not concur with Recommendation 1.1. In its response to
Recommendation 1.1, NJDOE stated that Camden began immediate action to recapture the funds
from SES providers upon notification of the discrepancy and has already recaptured $158,325.
Camden is in the process of taking legal action against SES providers that went out of business
and those who are not currently working in the district in order to reclaim overpayments. In
addition, in its response NJDOE stated that Camden is requesting special consideration to use the
recaptured funds to increase SES services to additional students. For Recommendations 1.2 and
1.3, NJDOE plans to issue guidance to LEAs and SES providers to use rates published on the
NJDOE Web site as well as revise its monitoring tools to include a review of SES rates.

OIG Response
We considered NJDOE’s response to Recommendation 1.1 and our position remains unchanged.
All ESEA funds related to the unallowed SES expenditures from our audit period have lapsed.
Therefore, all unallowed expenditures, including those that have been or will be recaptured
should be returned to the Department, with applicable interest. In addition, we recognize that
NJDOE plans to issue guidance to LEAs and SES providers to use NJDOE approved rates, as
well as revise its monitoring tools to ensure LEAs are being billed the correct rates and payments
to SES providers are in accordance with the NJDOE approved rates. If implemented correctly,
we believe these corrective actions would address our concerns.


FINDING NO. 2 – NJDOE Did Not Have Adequate Procedures for Informing LEAs of
                      SES Providers Removed From Its Approved List

NJDOE did not have adequate procedures for informing LEAs of SES providers removed from
its approved SES providers list. Although NJDOE posted information regarding the removal of
SES providers on its Web site, it did not inform LEAs that the status of SES providers was
available for review on that Web site. In addition, NJDOE did not issue notices to LEAs
informing them that a particular SES provider had been removed. As a result, Camden
continued to use services of and paid $21,393 to an SES provider that had been removed as an
approved provider by NJDOE.

In FY 2008, one of eight providers of SES services to Camden students included the Regional
Enrichment and Learning (REAL) Center. REAL Center was approved by NJDOE to provide
services in seven counties in New Jersey, including Camden. Effective February 13, 2008,
NJDOE removed REAL Center from its list of approved SES providers. However, REAL
Center continued to provide SES services to Camden students through May 2008. Camden paid
REAL Center $21,393 for services provided after it had been removed from the approved SES
provider list.
Final Report
ED-OIG/A02K0011                                                                      Page 6 of 16
NJDOE removed REAL Center from its approved provider list for failure to submit its SES
provider self-evaluation survey, assurances, instructors and qualifications, as well as additional
required documentation. NJDOE used the survey and associated materials to assess the
effectiveness of SES provider services. Without the survey and associated materials, New Jersey
could not determine whether REAL Center provided effective services to Camden students.

According to ESEA § 1116(e)(4)(D), States are required to monitor the quality and effectiveness
of approved SES providers and withdraw approval from providers that fail to provide valuable
services for 2 consecutive years. In addition, NJDOE’s SES provider application states that
providers could be removed from the approved list and approval could be revoked during the
project period.

NJDOE is required to monitor LEAs’ SES programs to ensure compliance with Federal
requirements. NJDOE’s monitoring tools used to review SES programs would not have been
effective because it did not include steps to verify that providers subsequently removed from
NJDOE’s approved provider list were no longer providing services. In addition, NJDOE did not
directly notify LEAs that providers had been removed from its approved provider list.
Therefore, it is possible that other LEAs throughout New Jersey may be receiving services from
SES providers that had been removed from NJDOE’s approved list.

RECOMMENDATIONS
We recommend that the Assistant Secretary for Elementary and Secondary Education, in
conjunction with the Assistant Deputy Secretary for Innovation and Improvement, require
NJDOE to:

2.1	 Direct Camden to return the $21,393 for unallowed SES expenditures, with applicable
     interest, to the U.S. Department of Education.

2.2	 Timely inform Camden, and all NJDOE LEAs, when SES providers are removed from the
     approved SES provider list by developing an effective notification process.

2.3	 Assess the extent that SES providers that were removed from the approved SES provider
     list continued to provide services to students and were paid with Federal funds.

NJDOE Comments
NJDOE neither agreed nor disagreed with our finding. NJDOE concurred with
Recommendations 2.2 and 2.3 but did not concur with Recommendation 2.1. NJDOE stated that
the SES provider in question was permitted to continue servicing students until the end of the
school year because the provider was removed for administrative issues. NJDOE stated that its
notification procedures were insufficient and Camden should not be held responsible for the
State’s lack of a notification system. For Recommendations 2.2 and 2.3, NJDOE stated it has
developed and is operating an email system to notify all LEAs of removed SES providers. In
addition, NJDOE is analyzing the impact of removed providers across New Jersey LEAs and
will complete the analysis in April 2011.
Final Report
ED-OIG/A02K0011                                                                     Page 7 of 16
OIG Response
We considered NJDOE’s response to Recommendation 2.1 and our position remains unchanged.
NJDOE’s Director of Title I Program Planning and Accountability sent a notification letter to the
SES provider, dated February 6, 2008. The notification letter states that the SES provider was no
longer approved to provide SES services in New Jersey, effective February 13, 2008. It did not
state that the SES provider was permitted to continue servicing students through the end of the
school year. In addition, despite NJDOE’s stated lack of a dynamic notification system, Camden
should still be held accountable for the unallowed expenditures, because it was aware that
NJDOE posted notice of removed providers on its Web site. Camden did not check the NJDOE
Web site for removed SES providers during the three and a half months after the SES provider
was no longer approved to provide SES services in New Jersey. In response to NJDOE’s
comments regarding Recommendations 2.2 and 2.3, we recognize that NJDOE stated it has
developed an email system to notify LEAs of removed SES providers and that NJDOE is
analyzing the impact of removed providers for all New Jersey LEAs. If implemented correctly,
we believe these corrective actions would address our concerns.



                  OBJECTIVE, SCOPE, AND METHODOLOGY 



The objective of our audit was to determine whether Camden’s SES expenditures, funded
through ESEA, were allowable and spent in accordance with applicable laws and regulations.
Our audit period was July 1, 2005, through June 30, 2009.

To accomplish our objective, we:

   	 Obtained an understanding of Camden’s internal controls over its operations by
      reviewing Camden’s policies and procedures and conducting interviews with District
      officials during our preliminary review.
    Reviewed selected provisions of the ESEA, Code of Federal Regulations, and Office of
      Management and Budget Circulars.
    Reviewed the U.S. Department of Education No Child Left Behind SES Non-Regulatory
      Guidance.
    Interviewed:
          o	 Camden’s Director of Office of Grants, Federal and State Funds;
          o	 NJDOE’s Title I Coordinator;
          o	 NJDOE’s SES Coordinator;
          o	 NJDOE’s SES Specialist;
          o	 NJDOE’s Policy Coordinator; and
          o	 NJDOE’s NCLB Coordinator of Oversight & Monitoring.
   	 Reviewed Camden’s documents related to SES providers that were paid with ESEA
      funds, including (but not limited to):
          o	 Board of Education (Board) meeting minutes held during calendar years 2005,
              2006, 2007, and 2008;
          o	 Board resolutions;
Final Report
ED-OIG/A02K0011                                                                       Page 8 of 16
             o	 Purchase order files, invoices, and student attendance records;
             o	 Provider agreements; and
             o Expenditure reports for ESEA funds for FYs 2006, 2007, 2008, and 2009. 

         Reviewed NJDOE’s documents related to SES providers including: 

             o	 SES provider’s applications;
             o	 Technical assistance training overview;
             o	 Monitoring tool for SES programs in New Jersey;
             o	 Monitoring tool for Title I programs in New Jersey;
             o	 NJDOE’s approved SES provider lists for FYs 2006, 2007, 2008, and 2009 (The
                list includes vendor information, hourly cost per-pupil, scope of services, and
                geographical areas the vendor serves); and
             o NJDOE’s SES provider removed lists for FYs 2007, 2008, 2009.3

         Compared NJDOE’s list of SINI with Camden’s list of SINI.


The SES provider lists received from Camden's Director of Office of Grants, Federal and State
Funds established the universe of SES providers that provided services in Camden. Because the
number of providers of SES services in Camden was relatively small each year, we judgmentally
reviewed 100 percent of the SES providers, which were paid a total of $8,927,268. (See Table 2
below). Through a comparison of Camden’s Board resolutions and expenditure reports
regarding SES providers, we obtained reasonable assurance that the SES provider list provided
by Camden was a complete universe of SES providers.

                                Table 2: Camden’s SES Expenditures
          Fiscal Year                 SES Expenditures         Universe of SES Provider
                                                                     Agreements
           2005-2006                      $2,036,879                       7
           2006-2007                      $2,283,595                       6
           2007-2008                      $2,142,416                       8
           2008-2009                      $2,464,378                      10
             Total                        $8,927,268                      31

During our review, we used computer-generated expenditure reports to verify that expenditures 

documented on SES purchase orders corresponded to what Camden had recorded in its 

accounting system. The expenditure reports were used as an additional source of information 

and were sufficiently reliable for the purpose used. 


We conducted audit fieldwork at Camden’s office in Camden, New Jersey, from

November 10, 2008, through June 30, 2010. However, on April 3, 2009, the audit was placed on 

hold and resumed on December 14, 2009. We visited NJDOE’s office in Trenton, New Jersey. 

We held our exit conference with NJDOE and Camden officials on July 21, 2010. 


We conducted this performance audit 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 


3
    There were no providers removed in FY 2006.
Final Report
ED-OIG/A02K0011                                                                        Page 9 of 16
based on our audit objective. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objective.



                            ADMINISTRATIVE MATTERS



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, including the recovery of funds, will be made by
the appropriate Department of Education officials in accordance with the General Education
Provisions Act.

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 Department of Education
officials, who will consider them before taking final Departmental action on this audit:

                       Thelma Meléndez de Santa Ana, Ph.D.
                       U.S. Department of Education
                       Office of Elementary and Secondary Education
                       400 Maryland Avenue S.W.
                       LBJ, 3W315
                       Washington, DC 20202

                       James H. Shelton III
                       U.S. Department of Education
                       Office of Innovation and Improvement
                       400 Maryland Avenue, S.W.
                       LBJ, 4W317
                       Washington, DC 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 appreciated.

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

Enclosures
Final Report
ED-OIG/A02K0011                                                            Page 10 of 16
Abbreviations, Acronyms, and Short Forms Used in This Report

AYP                       Adequate Yearly Progress

Board                     Board of Education

Camden                    Camden City Public School District

ESEA                      Elementary and Secondary Education Act of 1965, as amended by
                          the No Child left behind Act of 2001

FY                        Fiscal Year

LEA                       Local Educational Agency

NJDOE                     New Jersey Department of Education

REAL                      Regional Enrichment and Learning

SEA                       State Educational Agency

SES                       Supplemental Educational Services

SINI                      Schools In Need of Improvement
Final Report
ED-OIG/A02K0011                                                                               Page 11 of 16


                               Enclosure 1: Camden SES Overpayments

                                Table 3 - Camden SES Overpayments
                                                     NJDOE
                                                                           Camden's     Amount
         SES Provider                 FY          Approved Max.
                                                                        Agreement Rates Overpaid
                                                      Rate4
     Power Communicators,                         $51 per pupil/per      $55 per pupil/per
                                  2005-2006                                                      $     341
             Inc.                                       hour                   hour
                                                  $60 per pupil/per         $63.74 per
                                  2005-2006                                                      $ 56,159
                                                        hour               pupil/per hour
     Platform Learning, Inc.
                                                  $60 per pupil/per         $62.72 per
                                  2006-2007                                                      $ 11,098
                                                        hour               pupil/per hour
                                                                            $60.30 per
                                                  $900 to $1,500           pupil/per hour
                                  2005-2006                                                      $ 73,497
                                                 per pupil/per year        not to exceed
                                                                              $2,231
     Education Station, LLC
                                                                            $73.93 per
                                                  $900 to $1,500           pupil/per hour
                                  2006-2007                                                      $ 51,934
                                                 per pupil/per year        not to exceed
                                                                              $2,070
       Arline Institute, A                        $50 per pupil/per      $60 per pupil/per
                                  2007-2008                                                      $158,325
    Subsidiary of Arline, LLC                           hour                   hour
    Communities in Schools                        $40 per pupil/per      $56 per pupil/per
                                  2008-2009                                                      $ 20,417
       of New Jersey                                    hour                   hour
       Brienza's Academic                         $40 per pupil/per         $40.90 per
                                  2008-2009                                                      $   8,252
           Advantage                                    hour              pupil/per hour
                                                  $45 per pupil/per      $65 per pupil/per
      American Tutor, Inc.        2008-2009                                                      $ 12,300
                                                        hour                   hour
                                                                              Total             $392,323




4
  The rates were based on documentation published by NJDOE regarding its approved SES provider rates. Where a
range was provided for the approved rate, in order to be conservative we used the maximum allowed NJDOE
approved SES provider rates to calculate overpayments.
Final Report
ED-OIG/A02K0011                                                                                                         Page 12 of 16
                         Enclosure 2: NJDOE’s Comments to the Draft Report




                                                  fobf. of .fu        tt .
  CHRIS CHRISTIE                                    DEPAKTMENT OF EDUCATION
     Governor                                                 PO Box 500
                                                      TREt-.'TON, NJ 08625-0500                                  CHRISTOPHER D, CERF
  KIM GUADAGNO
    Lt, Governor                                                                                                  Acting Commissioner




             April 4, 20 II


             Mr. Daniel P. Schultz
             Regional Inspector General for Audit
             U.S. Department of Education
             Office of Inspector General
             Financial Square
                            '"
             32 Old Slip, 26 rloor
             New York,NY 10005


             Dear Mr. Schultz:


             The New Jcrsey Department of Education (NJDOE) has received and reviewed the
             findings and recommendation contained in the United States Department of Education
             (USDOE), Office of Inspector General's Audit Report titled Camden City Public School
             District's Administration of Supplemental Educational Services Program                             (Control
            Number ED OIG/A02KOOII).                Below is the NJDOE's response to the findings and
             recommendations contained in the report.


             FINDING NO. J       -   Seven SES Providers Were Overpaid $392.323


             Camden overpaid seven SES providers $392,323 for services at rates that exceeded
             NJDOE's approved rates. From July I, 2005, through June 30, 2009, Camdcn students
             received services from 15 SES providers. As part ofNJDOE's SES provider application,
             applicants must indicate the rates they would charge for SES services, the subject areas
             for tutoring, the grade level, and the schedule of provided services. IfNIDOE approved
             an SES provider's application, it published the SES provider's name and approved rate
             on its Web site, ESEA § 1116(e)(4)(E) stales that an SEA shall "provide annual notice to
             potential providers of [SES] of the 0PPol1unity to provide services                           and of the
             applicable procedures for obtaining approval from the [SEA] to be an approved provider
             of those services."


             RECOMMENDATIONS


             We recommend that the Assistant Secretary for Elementary and Secondary Education, in
             conjunction with the Assistant Deputy Secretary for hmovation and Iinprovemcnl,
             require NJDOE to:

             1.1   Direct Camden to return the $392,323 for unallowed SES expenditures, with
                   applicable interest, to the U,S. Department of Education.
                                                        www.nj.govfeducation

                         New Jersey Is All Equal Oppontmity Employer· Primed on Recycled and Recyclable Paper
Final Report
ED-OIG/A02K0011                                                                        Page 13 of 16

  Mr. Daniel P. Schultz 

  Page 2 

  April 4, 2011 




  1.2 	 Issue guidance ensuring all NJDOE LEAs pay SES providers based on NJDOE's
      approved rates.


  1.3 	 Improve its monitoring tools for LEA implementation of the SES program in
      accordance with applicable laws and regulations to ensure that NJDOE's approved
      rates are used to pay for SES services.


  NJDOE RESPONSE


  1.1 	 The NJDOE does not concur with this recommendation. Upon notification of this
      discrepancy the district took immediate action to recapture the funds from providers
      that were currently providing services in the district (see attached chart I).


      First, the district recaptured $158,325 from the Arline Institute on July 21, 2010.
      Currently, the district is recapturing $12,300 from American Tutor for the April
      2011 payment schedule.     The district is in the process of taking legal action against
      the providers that went out of business (Power Communications, Platform Learning,
      Education Station and Bienza's Academic Advantage) and the providers that are not
      currently working in the district (Communities In Schools).


      Secondly, the district put procedures in place that all SES contracts will be reviewed
      by the SES Staff and the Business Administrator prior to execution. This review
      would include an analysis of all contract rates with the NJDOE Approved SES
      Providers Listing on their site.


      The Camden City School District is          requesting special consideration for the
      repayment of funds due to this oversight. We are requesting to use the funding
      recaptured from the SES Providers to increase the services to additional students (see
      attached chart II).


  1.2 	 The NJDOE concurs with this recommendation. The NJDOE is issuing guidance to
      both LEAs and SES providers to use the rates published on the NJDOE website. The
      information is also included in the SES provider applications and the provider
      assurances. The NJDOE plans to issue guidance to the LEAs and SES providers in
      April 2011.


  1.3: 	 The NJDOE concurs with this recommendation. The SEA is revlsmg its SES
      monitoring tool, the Title I monitoring tool and the audit guide to include a review of
      the SES rates included in the LEA contracts. The monitoring tools will be updated
      and be in use in April 2011.
Final Report
ED-OIG/A02K0011                                                                         Page 14 of 16

   Mr. Daniel P. Schultz 

   Page 3 

   April 4, 2011 





   FINDING NO.2 - NJDOE Did Not Have Adequate Procedures for Informing LEAs
                           of SES Providers Removed From Its Approved List


   NJDOE did not have adequate procedures for informing LEAs of SES providers removed
   from its approved SES providers list. Although NJDOE posted information regarding the
   removal of SES providers on its Web site, it did not inform LEAs that the status of SES
   providers was available for review on that Web site. In addition, NJDOE did not issue
   notices to LEAs informing them that a particular SES provider had been removed. As a
   result, Camden continued to use services of and paid $21,393 to an SES provider that had
   been removed as an approved provider by NJDOE.


   RECOMMENDATIONS


   We recommend that the Assistant Secretary for Elementary and Secondary Education, in
   Conjunction with the Assistant Deputy Secretary for Innovation and Improvement,
   require NJDOE to:


   2.1 	   Direct Camden to return the $21,393 for unallowed SES expenditures, with
           applicable interest, to the U.S. Department of Education.


   2.2 	 Timely inform Camden, and all NJDOE LEAs, when SES providers are removed
           from the approved SES provider list by developing an effective notification process.


   2.3 	   Assess the extent that SES providers that were removed from the approved SES
           provider list continued to provide services to students and were paid with Federal
           funds.


   NJDOE RESPONSE


   2.1 	   The NJDOE does not concur with this recommendation. The NJDOE reviews and
           makes decisions about the continued use of SES providers who are "removed" from
           the approved list on a case-by-case basis. NJDOE policy permits some providers to
           continue to service its existing students and not register any new students. In other
           instances, the NJDOE stops all services when the provider's continued operation
           poses a potential threat to student safety.      The NJDOE provider in question was
           permitted to continue servicing students until the end of the school year, as this
           provider was "removed" for administrative issues.        During this audit period, the
           NJDOE did not have a dynamic system to notify districts. Posting the information
           on the NJDOE website is insufficient.      The district should not be held responsible
           for the state's lack of a notification system.
Final Report
ED-OIG/A02K0011                                                                         Page 15 of 16


   Mr. Daniel P. Schultz 

   Page 4 

   April 4, 2011 




   2.2 	   The NJDOE concurs with this recommendation.              The NJDOE has developed an
           email system to notify all districts of "removed" providers and the limitations
           established by the NJDOE.            The posting will also continue on the NJDOE's web
           site. The notification system is operational.


   2.3 	 The NJDOE concurs with this recommendation. The NJDOE is analyzing the impact
           of "removed" providers across the districts. The analysis has begun and will be
           completed in April 2011.


   We trust that our responses and corrective actions satisfy the concerns raised in the
   report. Should you have any questions or need further information, please contact me at
   984-5593.


   Sincerely,     t2-\ .
      ;?
   Robert 1. 
Cicchi
                     .     .   L/'L..<.A··""Tl//1-V

                         , Director
   Office of Fiscal Accountability and Compliance 



   RJC/SOICP/Response to OIG Audit of Camden - SES
   c: 	     Christopher Cerf 

            Gregg Edwards 

            Barbara Gantwerk 

            Suzanne Ochse 

            Michael Azzara 

Final Report
ED-OIG/A02K0011                                                                                                                Page 16 of 16

                                           Chart I - Camden SES Overpayments

                                              NJDOE                                                Amollnt       Amount
                                            ApPfoved                                              Collectetl       To Be       To be Given to
                                               Max.            Camden's         Amount                "         Collected In      Solicitor
         SES Provider               FY         Rate'        Agreement Rates     Over�ld           2009-2010     2011).2011       to Collect

                                               SSI �,
                                   2005·      popiVpor       $SS�r��'p"r
  Power(ommunicalors,If1.C.        2006         "' "             ..,            $        341                                      $    341
                                               S60 PO '
                                   2005·      popiVpor      $6J.7.�rpu�V�r
                                   2006          .. ,             ..,           $   56.159                                        S 56,159
    Plalform Learning. Inc
                                               S 60 PO'
                                   2006       poplV�r       $61.7. pe' pu�V�r
                                   2007         ",",               ..,          $   11,098                                        S 11.098

                                                                �.lO�r
                                            $90010$1,500      p<JplV�,�r
                                   2005·     perpupiVpe,       non" e�cted

    Education Station, llC
                                   2006         ."               S2,m           $   73,497                                        $ 73,497


                                                                $13.93�
                                            $90010$1,500      pupiVper MUr
                                   1000.     perpupiV�'        noIIO�)IC�
                                   2007            "             S�"            $    51,934                                       $ 51,934
       Arline Instilule. A                     $50pe'
                                   2007·      pupiVpor       S 60�p<JpiUp"r
    Subsidiary of Arline.LlC
                                   2008         ..,               "'"           $ 158.325         S   158,325
                                              ""�,
    Communities in Schools
                                   2008·
                                              pupiVpe,       SS6�p<JpiVJ)@r
        of New Jersey
                                   2009          ..,              "'"           $   20,417                                        $ 20,417

     Brienza's Academics                      $oIOpe'
                                   2008·      pupiVpe,          $4iI.90P8
          Advanla8�
                                   2009         ..,           IlOplVperhow      $       8,252                                     S 8,252
                                               $fjper
     Amefk�n Tutor, Inc.           2008·      pupiVper       $6S pcrp<JpiVpe,
                                   2009         ..,                "," ,        $   12,300                       S 12,300


                                                                  Tot�1         S   392,323           158325           Illoo                  221698




                                           Chart 11- camden's SES Expenditures
                                                           Universe of SES                                      Number of             • of
                                                              Provider                     Annual                 Students        Students
  Fiscal Year                SES hpenditures                Agreements               Per Pupil Cost                Eligible       Serviced
  2005-2006          $           2,036,879.00                      7                $           2,231.00             7534                 1,419
  2006·2007          $           2,283,595.00                       6               $           2,070.00             9773                 1,918
  2007·2008          $           2,142,416.00                       8               $           1,709.00             9830                 1,733
  2008-2009          $           2,464,378.00                      10               $           2,255.00             9338                 1,515
     Total           $           8,927,268.00                     31