oversight

Caroline Wilder Harris Elementary School's federal grant expenditures for the period July 1, 1999, through June 30, 2001.

Published by the Department of Education, Office of Inspector General on 2002-09-17.

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

                                     U.S. DEPARTMENT OF EDUCATION
                                                   THE WANAMAKER BUILDING 

                                               100 PENN SQUARE EAST, SUITE 502 

                                                    PHILADELPHIA, PA 19107 


                                                                                             September 17, 2002
REGIONAL OFFICE OF
INSPECTOR GENERAL


     Dr. Paul L. Vance 

     Superintendent 

     District of Columbia Public Schools 

     825 N. Capitol Street, NE, 9th Floor
     Washington, D.C. 20002-42:i2

     Dear Dr. Vance:

     This Final Audit Report (Control Number ED-OIG/A03-B0023) presents the results of
     our audit of Caroline Wilder Harris (C.W. Harris) Elementary School's federal grant
     expenditures for the period July 1, 1999, thwugh June 30, 2001.

     District of Columbia Public Schools (DCPS) did not provide written comments to our
     draft report. A draft of this report, dated June 12,2002, was provided to DCPS. DCPS
     had 30 days from the date of the letter to provide written comments to the draft report.
     DCPS requested three extensions of time to provide comments. The last extension of
     time to provide comments expired on September 9,2002.

                                                       Background

     We received an anonymous complaint letter, which alleged that C.W. Harris, in
     Washington, DC, misused federal program grant funds, during the school years 1999­
     2000, and 2000-2001. C.W. Harris is part of the DCPS system. As the local education
     agency for C.W. Harris, DCPS is responsible for the processes used and expenditures
     made by C.W. Harris. Expenditures are processed through DCPS' accounting system
     and are paid by DCPS' Finance Office.

     The federal programs mentioned in the complaint were Grants to States for the Education
     of Children with Disabilities (Special Education), Improving Basic Programs Operated
     by Local Education Agencies, Part A (Title I), the Eisenhower Professional Development
     Grant (Title II), and the Innovative Education Program Strategies (Title VI).

     We performed an audit ofC.W. Harris' expenditures charged to the Title I, Title II and
     Title VI grant funds during the period July 1, 1999, through June 30, 2001. 1 During this
     period, C.W. Harris was allocated $349,157 for these programs, and expended $282,167.



     1 We did not review expenditures charged to the Special Education program grant funds
     because DCPS' accounting system commingles both federal and local funds for Special


       ~Our   Mission is to Ensure Equal Access to Education and to Promote Educational Excellence Throughout the Nation"
                                      Audit Results

Except for the expenditures questioned in this report, the Title I, Title II and Title VI
program expenditures made by C.W. Harris during the period July 1, 1999, through June
30, 2001, were generally reasonable, allowable, and allocable. The results of our audit
did not substantiate the complaint allegations. Our audit identified management control
weaknesses, which adversely affected DCPS and C.W. Harris' ability to administer the
grant funds. These weaknesses include inadequate records management, inadequate
processing of administrative premium payments, and a lack of separation of duties.

Finding No. 1 	       C.W. Harris Charged Unsupported Expenditures to Federal
                      Grant Funds

During the audit period, C.W. Harris expended $43,159 in Title I and Title VI grant funds
for educational materials. We reviewed all 15 of these expenditures and found that seven
of the expenditures, totaling $33,487, were inadequately supported. The following is a
breakdown of the inadequately supported expenditures:

                  Expenditure Amount       Program     Fiscal Year
                        $ 996              Title I         2000
                        $ 3,892            Title I         2000
                        $ 167              Title VI        2000
                        $ 222              Title VI        2000
                        $19,751            Title I         2000
                        $ 3,459            Title I         2000
                        $ 5,000            Title VI        2001

DCPS could not provide adequate documentation to show that these grant funds were
actually expended for program purposes. We were able to obtain photocopies of some
supporting documentation (e.g., a purchase requisition or purchase order) from C.W.
Harris for six of the seven expenditures, totaling $33,265. The photocopies did not
provide us with adequate documentation to determine if the expenditures were for
program purposes.

VCPS was not able to provide any documentation for the remaining expenditure of $222.

The regulations at 34 C.F.R. § 80.20 (b)(6) require that DCPS' account records be
supported by source documentation. Cancelled checks and paid bills are examples of
adequate source documentation. The source documentation maintained for a federal
grant expenditure should fully show how the grant funds were used, as required by
34 C.F.R. § 75.730 (b). DCPS was not in compliance with either regulation because it
failed to maintain complete and accurate records for $33,487 in Title I and Title VI grant



Education programs, except for personnel costs. We did not review the personnel
expenditures as a part of our audit.


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       expenditures. As a result, we could not determine if the expenditures were reasonable
       and allowable program expenditures.

       Recommendatiun:

       1.1            We recommend the Assistant Secretary for Elementary and Secondary Education,
                      U.S. Department of Education (ED), require DCPS to provide adequate
                      supporting documentation to show that the expenditures were appropriately paid
                      from Title I or Title VI funds or refund to the appropriate grant the portions that
                      ED determines have not been adequately documented.


       Finding No.2 	                 DCPS' and C.W. Harris' Payroll Processing Procedures Need
                                      Improvement

      We found that the procedures used to process payroll at DCPS' central office and at C.W.
      Harris need improvement. Specifically, we found that: 1) the administrative premium
      sheet (APS) used to record administrative premium payments did not capture sufficient
      information to validate payroll expenditures; 2) administrative premium payments were
      processed for payment without prior verification; 3) monitoring of administrative
      premium payments was not performed; and 4) segregation of duties relative to the payroll
      processing at C.W. Harris was not adequate.

      DCPS' Management Controls for Processing Administrative Premium Payments
      Need Improvement

      Administrative Premium Sheet

      DCPS policy requires that administrative premium payments be supported by an APS.
      The APS shows the school name, pay period, employee name, employee social security
      number, and a total amount to be paid by activity or funding source. We found that
      necessary information was not captured on the APS. First, the APS did not include the
      dates and hours worked by the employee. Second, the APS did not include the
      employee'S hourly or daily rate of pay. The APS should be revised to include all of the
      missing information so that DCPS' Payroll office can verify that the administrative
      premium amount requested is reasonable. Finally, the APS did not provide for all
      possible funding sources. Administrative premium payments not charged to the proper
      funding source can result in schools losing the use of their federal allocation. For
      example, we noted one instance during the audit period where C.W. Harris lost the use of
      $4,000 in Title VI funding because Title VI was not a funding category on the APS.
      These payments were listed under the category of "Other" and "charge to Title VI" was
      handwritten next to each payment. but because the payments were not identified under a
      column entitled Title VI, the payment was not charged to the school's Title VI funds.

      Revising the APS to include all of the information above will add an additional level of
      management control over the processing of these payments. The payroll specialist will



                                                           3


--------     ---   ---------   - - - - - - - - - - - - - - - - -
be able to verify that the administrative premium payments are correct and are charged to
the correct funding source. Revising the APS also is a way to ensure that there is
effective control and accountability over the administrative prcmium payments charged
to federal grant funds.

Administrative Premium Payment Processing

DCPS' procedures used to process the administrative premium payments were not
adequate. The APS was certified by the school principal and forwarded to DCPS'
Payroll office for processing. The payroll specialist processed the APS for payment. The
payroll specialist did not have supporting documentation to show that the employee was
authorized to receive administrative premium payments, the amount of time the employee
was allowed to work, or if the amount of payment requested was correct. No
documentation was submitted to or reviewed by the payroll specialist, other than the
APS. The payroll speclallst relled upon the school princlp[ll's approvlng signahlre as
assurance that the payments were reasonable and allowable. Our audit revealed that
C.W. Harris' principal did not always review supporting documentation (e.g., the sign-in
sheets for the activity) before approving the APS. Therefore, the payroll specialist's
reliance upon the principal's review of the APS was an ineffective management control
procedure. If the payroll specialist were provided with documentation to support the
administrative premium payments, such as the information stated above, there would be
an effective level of control over the payment processing.

Another area of management control that needs improvement was the monitoring ofthe
administrative premium payments. DCPS' Payroll office did not perform periodic
reviews of administrative premium payments. Periodic reviews will help to ensure that
DCPS' policies and procedures are being followed and that the administrative premium
payments are proper.

The regulations at 34 C.F.R. § 80.20 (b)(3) require that: "Effective control and
accountability must be maintained for all grant and sub grant cash, real and personal
property, and other assets." The administrative premium processing weaknesses noted
increase the risk of loss and misuse of federal funds because employees may receive
administrative premium payments that they are not entitled to receive,

C.W. Harris Management Controls Over Payroll Processing Need Improvement

C.W. Harris' secretary certified and input her own bi-weekly payroll into the payroll
system. In addition, she prepared the APS (which included her own administrative
premium payment) for one of the school's extracurricular activities that she worked on as
the program coordinator. Furthermore, the secretary was the only person at the school
who prepared and processed the biweekly payroll. In the absence of the principal or
assistant principal, she also had the authority to certify the school's payroll. No
employee should be responsible for preparing and processing their own payroll or
administrative premium payments. Effective management controls require that key




                                            4

duties and responsibilities in authorizing, processing, and recording transactions should
be separate among individuals.

C.W. Harris did not have effective control over the payroll process at the school, which is
a requirement under the federal regulations governing the administration of federal funds.
The regulations at 34 C.F.R. § 80.20 (b)(3) state, "Effective control and accountability
must be maintained for all grant and sub grant cash ... and other assets."

Recommendation:

2.1 	   We recommend that the Assistant Secretary for Elementary and Secondary
        Education require DCPS to strengthen management controls to ensure that the
        weaknesses identified above are corrected.


                                      Other Matters

In addition to the findings discussed in the Audit Results section of this report, we noted
the following minor finding issues. We are reporting these issues for appropriate
corrective action.

Unallowable Payroll Expenditures Were Charged to Title I Funds

c. W. Harris used $335 in Title I funds for unallowable payroll expenditures.Two
emplolees were compensated for working hours in excess of their tour of duty (TOD)
hours. There was no evidence to show whether the payment for the additional hours was
overtime or some other supplemental payment. The employees were not included on any
of C.W. Harris' administrative premium sheets for working on extracurricular activities
for the applicable period. Employees should not be paid more than their regular salary
unless there is adequate documentation to show why the employee is receiving the
additional compensation. Although the total amount noted is not material, DCPS should
perfonn a review of its payroll records for the period audited to detennine if other
employees were inappropriately compensated for more than their TOD hours. DCPS
should also develop procedures to ensure that employees are only paid for time actually
worked. Additionally, if employees are to be compensated for working additional hours,
DCPS should ensure that documentation supporting the extra payment is maintained.




2An employee's tour of duty is the normal number of hours they are scheduled to work
during a pay period. For example, an employee that is scheduled to work seven hours a
day has a tour of duty of 70 hours for each biweekly pay period.



                                             5

Unallowable Stipend Payments Were Charged to Title I Funds

We reviewed the 10 stipend payments, totaling $1,360, made to C.W. Harris' parent
partners 3 during the audit period. We found that $48 in unallowable payments was paid to
one ofC.W. Harris' two parent partners. We noted two occurrences where one parent
partner was overpaid because she was compensated for working over the maximum
number of days allowed by DCPS policy. DCPS' Accounts Payable office did not
always check to ensure that stipend payments to parent partners were paid in accordance
with DCPS' policies and procedures, thereby permitting unallowable stipend payments to
be made from Title I grant funds. The amount noted is not material; however, in the
future, DCPS should follow its policies and procedures to ensure that parent partners do
not receive stipend payments for days worked over the maximum limits.

Unsupported Payroll Expenditures Were Charged To Title I Funds

We found that $3,094 of the $107,020 identified as expended for C.W. Harris' FY 2000
Title I payroll costs was unsupported. DCPS should reconcile the payroll records to
detennine if the $3,094 was expended for reasonable and allowable Title I purposes.
Additionally, DCPS should ensure that expenditures charged to Title I funds are accurate,
and reasonable and allowable.

Unsupported Administrative Premium Payments Were Charged to Title I Funds

In FY 2000 C.W. Harris expended $1,316 of the Title I grant funds budgeted for
administrative premium payments to its employees. We reviewed C.W. Harris' APS' for
the period budgeted and found that the expenditures were not included on any of them.
In addition, we noted that the Title I expenditure report identified the expenditure as
holiday pay. DCPS could not provide supporting documentation detailing the specifics
of the expenditure. As a result, we could not determine if the grant funds were actually
expended for administrative premium payments or if the expenditures were reasonable
and allowable. DCPS should determine if the $1,316 was expended for administrative
premium payments for Title I related activities. In the future, DCPS should ensure that
charges made to the Title I program are adequately supported.

Inadequately Supported Stipend Payments Were Charged to Title I Funds

We noted inadequately supported payments, totaling $432, for seven of the 10 stipend
payments reviewed. Before parent partners are eligible to receive a stipend payment,
they must work at least four hours a day, two days a week. Parent partners are required
to sign-in and out daily to document that they worked during the week, and in order to be
paid. C. W. Harris maintained weekly sign-in sheets for the parent partners. For these
seven payments the parent partner did not sign-in or out on the days indicated on the


3 Parent partners are volunteers who assist teachers and students. DCPS policy allows the
parent partners to receive $16 a day to reimburse them for expenses incurred while they
are working.


                                            6
stipend worksheet C.W. Harris submitted for payment. For example, a parent partner
was compensated for working in June 2000, but C.W. Harris did not have a parent partner
sign-in sheet for the month. Additionally, there were several months where the parents
did not sign-in or out at all during the week, but were certified on the stipend worksheets
as having worked two or three days during that week. Without the parent signing in and
out, there is no evidence of the hours worked.

DCPS employees were not following DCPS' stipend policies and procedures. C.W.
Harris was certifying and submitting stipend worksheets for inadequately supported
stipend payments and the Accounts Payable office was paying the parents without
adequate documentation of services rendered. The amount noted is not material;
however, in the future, DCPS should follow its policies and procedures to ensure that
parent partners do not receive stipend payments for days they did not sign-in and out.

Improvement Is Needed in Accounting for C.W. Harris' Payroll Costs

There was an inadequate trail between the Title I payroll costs budgeted in C.W. Harris'
Local School Plan (LSP) and actual payroll costs expended. Specifically, in the FY 2000
LSP the funding sources listed for the employees may not be the actual funding sources
the employees were paid with. For example, one employee was listed in the LSP staffing
plan as being funded by the Title I grant, but DCPS' payroll system had the employee
being paid from another federal program grant and from another school's budget. C.W.
Harris' LSP budget listed three full-time equivalent (FTE) 4 positions that were to be paid
with Title I funds, while the staffing plan, contained in the LSP, listed eight employees
(5.2 FTE positions) were to be funded by Title 1. In contrast, DCPS' FY 2000 payroll
records identified six employees whose salaries were paid with Title I funds during this
year. Only two ofthe eight employees identified in the staffing plan were actually paid
from C.W. Harris' Title I grant. The other four employees that were actually paid from
the school's Title I grant were identified in the staffing plan as being paid from local
funds. In FY 2001, C.W. Harris budgeted eight positions (5.28 FTE) to be paid from
Title I funds. The same six employees, who were paid in FY 2000, and a portion of one
additional employee's salary, were paid in FY 2001 from Title I funds. The six
employees worked under C.W. Harris' Title I program during the audit period.

DCPS should reconcile the school's LSP budget to the payroll records. If an employee is
listed in the LSP as being paid from a specific funding source, then that employee's salary
should be charged to that funding source. Additionally, DCPS should ensure that a
school's LSP budget and staffing plan agree.

We suggest that DCPS ensures that adequate supporting documentation is maintained,
DCPS policies and procedures are followed, and that expenditures charged to a federal
program's grant funds are expenditures that relate to that program.



4One FTE represents one full-time employee who works 80 hours a bi-weekly pay
period.


                                             7

                           Objective, Scope and Methodology

Our audit objective was to detel111ine if C.W. Harris' Special Education,S Title I, Title II,
and Title VI program expenditures, during the period July 1, 1999 through June 30, 2001,
were reasonable, allowable and allocable program expenditures.

To accomplish our objective, we reviewed vcrs and C.W. Harris policies and
procedures, accounting records, and supporting documentation. We interviewed DCPS
officials from the Office of Categorical Programs and Development, the Office of the
Chief Financial Officer, the Accounts Payable office, the Payroll office, and the Office of
Special Education. We also interviewed C.W. Harris' principal, business manager, and
secretary. We reviewed DCPS' annual audit reports prepared by an independent public
accountant for the years ended September 30, 1999, and September 30, 2000. We also
reviewed other reports relating to financial management processes at DCPS. We
reviewed C.W. Harris' expendihlres charged to the federal grants (Title T, Title TT, and
Title VI) during the audit period to detel111ine if the expenditures were reasonable,
allowable, and allocable program expenditures. We separated the expenditures into two
categories, payroll (excluding fringe benefits) and other than personnel (OTP) services.

Payroll

We reviewed a judgmental1y selected sample of payroll expenditures for those employees
we identified as being paid from federal grant funds. We reviewed 16 payroll
expenditures, totaling $17,211, from a universe of265, totaling $198,080 ($105,242 6 in
FY 2000, and $92,838 in FY 2001). We selected our sample from DCPS payroll history
reports for the audit period. We selected expenditures for review that appeared to be
anomalies based on the payroll data contained on the employee's payroll history report.

Other Than Personnel (OTP) Services

We reviewed all OTP service expenditures, totaling $44,519, as identified in DCPS' 

accounting system, that C.W. Harris charged to the federal grant funds during the audit 

period. 


To achieve our audit objective, we relied in part on computer-processed data contained in 

DCPS' financial database. We assessed the reliability of this data and found it to be 

adequate. We tested the accuraey, authenticity, and completeness of the data by 

comparing source records to computer data, and comparing computer data to source 

records. Based on these tests and assessments we concluded that the data were 

sufficiently reliable to be used in meeting the audit's objective. 




5 As noted in the Background section, our audit objective was revised to exclude Special 

Education program expenditures. 

6 The payroll expenditures include $1,316 in administrative premium payments expended 

in FY 2000. 



                                             8

We conducted our fieldwork at DCPS, Washington, D.C. from August 7,2001, through
October 31,2001. We also performed fieldwork at C.W. Harris, Washington, D.C., from
September 19, 2001, through September 21, 2001. An exit conference was held on
February 7,2002. DCPS provided us with additional documentation for review on
February 21,2002. We conducted the audit in accordance with government auditing
standards appropriate to the scope of the audit described above.

                          Statement on Management Controls

As a part of our review we assessed the system of management controls, policies,
procedures, and practices applicable to DCPS' and C.W. Harris' administration of the
Title I, Title II, and Title VI grant funds. Our assessment was performed to determine the
level of control risk for determining the nature, extent, and timing of our substantive tests
to accomplish the audit objective.

For the purpose of this report, we assessed and classified the significant controls into the
following categories:

   •   Budgeting;
   •   Disbursements;
   •   Records Management; and
   •   Time and Effort Reporting.

Because of inherent limitations, a study and evaluation made for the limited purpose
described above would not necessarily disclose all material weaknesses in the
management controls. However, our assessment disclosed management control
weaknesses, which adversely affected DCPS and C.W. Harris' ability to administer the
grant funds. These weaknesses include a lack of separation of duties, inadequate
processing of administrative premium payments, and inadequate records management.
These weaknesses and their effects are fully discussed in the AUDIT RESULTS section
of this report.

                                 Administrative Matters

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

               Susan B. Neuman, Assistant Secretary
               U. S. Department of Education
               Office of Elementary and Secondary Education
               400 Maryland Avenue, SW
               Room 3W315
               Washington, D.C. 20202




                                              9
Office of Management and Budget Circular A-50 directs Federal agencies to expedite the
resolution of audits by initiating timely action on the findings and recommendations
contained therein. Therefore, we request receipt of your comments within 30 days.

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

If you have any questions or if you wish to discuss the contents of this report, please
contact Teri Lewis, Assistant Regional Inspector General for Audit, or me at (215) 656­
6900. Please refer to the control number in all correspondence related to the report.


                                            Sincerely,


                                             Bernard Tadley \ 

                                             Regional Inspector General for Audit 





                                            10 

                           REPORT DISTRIBUTION LIST 

                                       A03-B0023 

                                                                               No. of 

                                                                               Copies 


Auditee                                                                        1

Action Official

Susan B. Neuman, Assistant Secretary
Office of Elementary and Secondary Education

Other ED Offices (electronic copies)

Deputy Secretary, Office of the Deputy Secretary                               1
Chief of Staff, Office of the Secretary                                        1
Under Secretary, Office of the Under Secretary                                 1
Chief Financial Officer, Office of the Chief Financial Officer
Director, Office of Public Affairs
Assistant Secretary, Office of Legislation and Congressional Affairs
Assistant Secretary, Office of the Intergovernmental and Interagency Affairs   1
Director, Financial Improvement and Post Audit Operations                      1
Correspondence Control, Office of the General Counsel                          1
Post Audit Group, Office of the Chief Financial Officer                        1
Assistant General Counsel, Elementary, Secondary, Adult
 and Vocational Education Division                                             1
Audit Liaison, Office of Elementary and Secondary Education                    1

ED-OIG

Inspector General (A)                                                          1
Assistant Inspector General for Audit                                          1
Assistant Inspector General for Investigation                                  1
Assistant Inspector General for Analysis and Inspections                       1
Deputy Assistant Inspector General for Audit                                   1
General Operations Team                                                        1
Director, State and Local Advisory and Assistance                              1
Directors and Audit Managers                                                   1