oversight

Alert Memo: Philadelphia School District Designation as a High-Risk Grantee.

Published by the Department of Education, Office of Inspector General on 2010-04-16.

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

                                UNITED STATES DEPARTMENT OF EDUCATION
                                                   OFFICE OF INSPECTOR GENERAL

                                                                                                           AUDIT SERVICES



                                                                April 16, 2010



FINAL ALERT MEMORANDUM

To:	                    Philip Maestri
                        Director
                        Office of the Secretary, Risk Management Service

From:	                  Keith West /s/
                        Assistant Inspector General for Audit

Subject:	               Philadelphia School District Designation as a High-Risk Grantee
                        Control Number ED-OIG/L03K0002

The purpose of this final alert memorandum is to apprise you of the need to consider
(1) working with the Pennsylvania Department of Education (PDE) to designate the
Philadelphia School District (PSD) as a high-risk grantee, and (2) coordinating
enhanced monitoring by U.S. Department of Education (Department) program
offices in recognition of the fact that Department funds, including American
Recovery and Reinvestment Act of 2009 (ARRA) funds, are at significant risk of not
being used in compliance with program requirements.

In our final audit report, entitled Philadelphia School District’s Controls Over Federal
Expenditures, Control Number ED-OIG/A03H0010 (see http://www.ed.gov/about/
offices/list/ oig/areports.html), issued on January 15, 2010, we reported that PSD did
not have adequate fiscal controls in place to account for Federal grant funds.1 The lack
of adequate controls contributed to our determining a total of $138,376,068 as
questionable costs ($17,284,250 in unallowable costs and $121,091,818 in inadequately
documented costs).

Our final audit report included the following instances of noncompliance with laws,
regulations, and Office of Management and Budget (OMB) Cost Principles:

        	 PSD needed stronger controls over personnel expenditures charged to Federal
           grants. This included adequate controls to ensure salary costs charged to grant
           funds were supported and personnel costs paid by the Title I, Part A grant were
           allocable. Also, PSD’s payroll policies and procedures were not adequate.
         PSD supplanted State and local funding with Federal funds.

         PSD did not have adequate controls in place to ensure that non-payroll

           expenditures met Federal regulations and grant provisions.


1
    The audit period was July 1, 2005, through June 30, 2006.
    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 Memorandum
ED-OIG/L03K0002                                                                  Page 2 of 5
    PSD’s policies and procedures were not adequate and/or enforced for journal
       voucher (JV) processing, travel, imprest fund reimbursements, inventory
       tracking, and contracting.
   	 PSD did not have written policies and procedures for various fiscal processes,
       which included monitoring of budgets, using Title II, Part A Nonpublic grant
       funds, purchasing from the Office Depot vendor, charging of transportation
       costs, allocating single audit costs, and calculating and charging of indirect costs
       to grant funds.

We also reported in the Other Matters section of our report that PSD lacked position
descriptions for some personnel in senior management positions, ordered excessive
amounts of food for activities, needed improvement in its coding of expenditures, and
did not maintain adequate supporting documentation for training and professional
development expenditures (see Attachment 1 for further detail on the reported findings).

Throughout its response to our draft audit report, PSD stated that its policies and
procedures were adequate and included a general statement that its “financial practices
provide sufficient internal controls to safeguard Federal funds against loss or misuse.”
Furthermore, PSD stated in the response that it had implemented procedures in January
2009 concerning the retention of time and effort certifications for employees working
on Federal awards. PSD did not provide the new procedures nor evidence of the
implementation of the procedures. As of the date of this memorandum, PSD had not
posted any new or revised policies and procedures to its Web site.

Similar issues have been reported in other recent reviews of PSD.2 For instance:

           	 PSD’s OMB Circular A-133 Single Audit Report for Fiscal Year (FY) ended
              June 30, 2008, dated October 8, 2009, reported that PSD did not have
              policies and procedures in place to ensure that grant funds were liquidated
              within the required periods, time and effort certifications were not
              maintained for employees working on Federal grants, and Department grant
              funds were used for unallowable salary costs. Furthermore, it was found that
              PSD’s procurement policies and procedures did not ensure that the awarding
              of contracts for purchased services complied with Federal regulations. Also
              reported was that PSD had three prior audit findings, totaling $1,032,961,
              because Department grant funds were not liquidated within the required time
              period. PSD had not implemented and/or enforced policies and procedures
              as recommended in prior audit reports.

           	 Report on Internal Control and on Compliance and Other Matters, Fiscal
              2008, dated December 29, 2008, also reported conditions similar to our
              audit. The audit period for this review was July 2007 through June 2008.
              Weaknesses and/or improprieties with imprest funds were reported at all 15
              schools reviewed. This included undocumented transactions, unexplained
              expenditures, missing receipts, pre-signed checks, questionable transactions,
              and insufficient segregation of duties. The report also noted personal
              property control deficiencies. Of the 50 items selected for review from
2
    All reviews were conducted by the City of Philadelphia, Office of the Controller.
Final Memorandum
ED-OIG/L03K0002                                                               Page 3 of 5
         district property reports, 13 (26 percent) could not be located, and
         3 of 39 items (8 percent) observed at schools could not be found on PSD’s
         personal property records. It was also reported that PSD still had not
         developed formal payroll policies and procedures for entering and approving
         payroll information or processing termination pay.

       	 School District of Philadelphia, Review of Credit Card and Other Employee
          Reimbursement Programs, dated March 14, 2008, reviewed the use of
          executive credit cards and employee reimbursements during FY 2007. This
          review found that PSD had reimbursed employees for items unallowable
          under its own travel policies (gas and out-of-town travel costs). Also, PSD
          reimbursed individuals for trips to vacation destinations, such as the Walt
          Disney World Resort and St. Petersburg, Florida, Beach Resorts.
          Additionally, it was found that for 67 percent of the reimbursements tested,
          the object code did not agree with the expenditure type. For example,
          reimbursements for florists, hotels, food, and groceries were recorded as
          bank fees.

The regulations at 34 Code of Federal Regulations § 80.12(a) allow the Department to
impose special award conditions when a grantee has exhibited any one of the “high
risk” attributes. A grantee or subgrantee may be considered “high risk” if an awarding
agency determines that a grantee or subgrantee:

           (1) Has a history of unsatisfactory performance, or
           (2) Is not financially stable, or
           (3) Has a management system which does not meet the management
               standards set forth in this part, or
           (4) Has not conformed to terms and conditions of previous awards,
               or
           (5) Is otherwise not responsible; and if the awarding agency determines that
               an award will be made, special conditions and/or restrictions shall
               correspond to the high risk condition and shall be included in the award.

PSD should be designated as a high-risk grantee based on: 1) the significance of the
findings in our January 2010 final audit report; 2) the fact that other recent reviews have
found the same or similar issues; 3) the fact that PSD does not seem to have developed
any new policies and procedures, or revised its inadequate policies and procedures, or
enforced the ones it had in place; and 4) the fact that PSD was awarded $1,167,181,584
in Department grant funds for school year 2007-2008 (see Attachment 2). Furthermore,
it is estimated that PSD is to receive $331,173,437 in Department funding provided by
ARRA (see Attachment 3).

Designation as a high-risk grantee will help provide reasonable assurance that
Department funds are safeguarded and used only for reasonable, allowable, and
adequately documented purposes.
Final Memorandum
ED-OIG/L03K0002                                                                Page 4 of 5
Recommendations

We recommend that your office:

       1.1	    Take immediate steps to safeguard the current funding awarded to PSD
               by working with PDE to designate PSD as a high-risk grantee, with
               special conditions placed on all future Department grant funds awarded
               to PSD; and

       1.2 	   Coordinate enhanced monitoring of PSD with the Office of Elementary
               and Secondary Education (OESE), the Office of Special Education and
               Rehabilitative Services (OSERS), the Office of Vocational and Adult
               Education (OVAE), the Office of Safe and Drug-Free Schools (OSDFS),
               the Office of Innovation and Improvement (OII), the Office of
               Postsecondary Education (OPE), and the Office of English Language
               Acquisition (OELA) in recognition that funds for all Department
               programs for the 2009-2010 school year and subsequent school years are
               at significant risk of not being used in compliance with program
               requirements.

Department Comments

A draft of this memorandum was provided to the Office of the Secretary, Risk
Management Service (RMS) for comment. In its response to the draft alert
memorandum, RMS generally concurred with our recommendations. RMS agreed that
Department funds may be at risk and that PDE should be instructed to consider
designating PSD as a high-risk grantee. RMS stated that it will strongly recommend
PDE consider designating PSD as a high-risk grantee and that PDE develop a plan to
bring PSD into compliance with Federal requirements. Furthermore RMS has begun
working with Department Program offices and PDE to obtain current information on
PSD’s administration of grant funds.

In addition, RMS noted that PDE is ultimately responsible for ensuring that PSD has
adequate fiscal controls and that PDE is the entity that the Department holds responsible
for the administration of the Federal funds that were discussed in ED-OIG/A03H0010.
The response is included in its entirety as Attachment 4 to this memorandum.

We conducted our work in accordance with the Office of Inspector General (OIG)
quality standards for alert memorandums.

Corrective actions proposed (resolution phase) and implemented (closure phase) by
your office will be monitored and tracked through the Department’s Audit
Accountability and Resolution Tracking System.
Final Memorandum
ED-OIG/L03K0002                                                               Page 5 of 5
Alert memoranda issued by the OIG will be made available to members of the press and
general public to the extent information contained in the memoranda is not subject to
exemptions in the Freedom of Information Act (5 U.S.C. § 552).

For further information, please contact Mr. Bernard Tadley, Regional Inspector General
for Audit, at (215) 656-6279.



Attachments

Electronic cc:
Anthony Miller, Deputy Secretary, Office of the Deputy Secretary
Martha J. Kanter, Under Secretary, Office of the Under Secretary
Thelma Meléndez de Santa Ana, Ph.D., Assistant Secretary, OESE
Alexa E. Posny, Assistant Secretary, OSERS
Margo Anderson, Associate Assistant Deputy Secretary, OII
Kevin Jennings, Assistant Deputy Secretary, OSDFS
Brenda Dann-Messier, Assistant Secretary, OVAE
Daniel T. Madzelan, Delegated the Authority to Perform the Functions and
     Duties of the Assistant Secretary, OPE
Richard Smith, Acting Assistant Deputy Secretary, OELA
Phil Rosenfelt, Audit Liaison Officer, Office of General Counsel
Tina Otter, Audit Liaison Officer, Office of Secretary/Risk Management Service
Delores Warner, Audit Liaison Officer, OESE
Melanie Winston, Audit Liaison Officer, OSERS
Liza Araujo, Audit Liaison Officer, OII
Michelle Padilla, Audit Liaison Officer, OSDFS
John Miller, Audit Liaison Officer, OVAE
Janie Funkhouser, Audit Liaison Officer, OPE
Samuel Lopez, Audit Liaison Officer, OELA
Final Memorandum                                                                  Attachment 1
ED-OIG/L03K0002                                                                     Page 1 of 5
    Attachment 1: Summary of Findings and Other Matters Reported in Philadelphia School
                      District’s Controls Over Federal Expenditures1


       1.	 PSD Needed Stronger Controls Over Personnel Expenditures Charged to Federal
           Grants

           A.	 Lack of Adequate Controls to Ensure Salary Costs Charged to Grant Funds
               Were Adequately Supported
               PSD charged personnel expenditures that were inadequately supported to Federal
               grant funds, resulting in inadequately supported salary and fringe benefit costs of
               $123,772,665. Specifically, PSD could not adequately support the compensation of
               employees: (1) for all types of remuneration paid from grant funds ($53,021,174);
               (2) whose salaries were included in adjusting journal entries ($33,474,626); and
               (3) who worked on multiple cost activities ($37,276,865). 

               (See final audit report, page 9.)


           B.	 Lack of Monitoring of Personnel Costs to Ensure Costs Were Allocable
               PSD charged personnel costs for Head Start teachers ($2,888,140) and school police
               officers ($22,800) to Title I, Part A grant funds that were not allocable to the grant.
               (See final audit report, page 20 and 21.)

           C.	 Inadequate Payroll Policies and Procedures
               PSD’s payroll policies and procedures did not address timesheet retention,
               documentation requirements for overtime and bonus payments, or provide an
               adequate definition of the sign-in and sign-out process. We reviewed $29,400 in
               salary costs and $2,009 in overtime payments. We found that $1,795 of the salary
               costs and $874 of the overtime costs could not be supported because of missing
               timesheets or the lack of a sign-out time being recorded on the timesheet. Of the
               $26,125 in bonus payments we reviewed, we found a $1,500 bonus was paid in error.
               (See final audit report, page 22.)

       2.	 Supplanted Federal Funds

           PSD used Department grant funds to supplant State and local funding totaling
           $6,979,063. We found district-level expenditures for contracting expenses, teacher
           training expenses, and computer equipment and software expenses that were funded by
           State and local funds in prior years and were transferred into Department grants during
           our audit period. PSD also may have supplanted local funding by charging a portion of
           the school choice transportation costs to the Title I, Part A grant ($1,293,386).
           (See final audit report, page 25.)

       3.	 Lack of Adequate Controls in Place to Ensure Non-Payroll Expenditures Met
           Federal Regulations and Grant Provisions

           PSD did not have an adequate accounts payable process; it did not include a review of
           expenditures for allowability or require that proper supporting documentation be obtained

1
    See http://www.ed.gov/about/offices/list/ oig/areports.html.
Final Memorandum                                                             Attachment 1
ED-OIG/L03K0002                                                                Page 2 of 5
     prior to payment from grant funds. Also, PSD did not have written accounts payable
     policies and procedures. PSD charged $1,175,623 in non-payroll expenditures to grant
     funds that did not follow Federal cost regulations or grant provisions, resulting in
     expenditures that were not reasonable, allocable, or adequately supported. We found
     inadequately supported expenditures, totaling $764,241, which included food, training
     materials, computers, Palm Pilots, and class trips. Unallowable costs, totaling $411,383,
     included finance charges and late fees, indemnity insurance for a Nonpublic school, tips
     for alcoholic beverages, iPods, pool tables, two 11-inch crystal vases, a crystal wine
     bucket, newspaper subscriptions for the Title I program office, and the purchase of two
     copier/printers. (See final audit report, page 29.)

  4. Policies and Procedures Were Not Adequate and/or Enforced

     A. Policies and Procedures for Processing Journal Vouchers
        PSD’s written policies and procedures relating to JV transfers were not adequate
        because they did not include adequate controls and processes. Specifically, the
        policies and procedures were not adequate because they did not clearly define or
        provide detailed examples of what documentation should be used to support JV
        transactions. Also, the policies and procedures did not require analysts or others to
        determine that expenditures transferred to a grant were allowable. The JV processing
        policies and procedures also did not require the analyst to determine that the grant
        funds were from the appropriate grant period when performing a carryover to fully
        expend grant funds.

        We reviewed $47,668,116 in JV transactions. We found JV transactions, totaling
        $6,349,260, were unallowable. These included a transaction that moved charges for
        salaries and benefits for teachers who were stated to be reduced-class size teachers
        but in fact were not, duplication of a JV, transfer of fringe benefits for a position that
        does not earn such benefits, and the transfers of salaries for those not working on the
        grant charged. We also found that $11,928,352 in JV transactions could not be
        adequately supported. This included transactions for principal and new teacher
        training, prior period carryover transactions, salaries for instructional and support
        staff, along with transactions for food service, facilities rentals, and copier usage
        costs. (See final audit report, page 34.)

     B. Travel Policies and Procedures
        PSD did not adhere to its travel policies and procedures, resulting in unallowable,
        unsupported, and unreasonable travel costs charged to the grants we reviewed. We
        reviewed 75 travel reimbursements, totaling $51,651. We determined that $9,532 of
        the travel expenditures was unallowable. The majority of the unallowable
        expenditures ($8,433) were for lodging costs over the government rate. Other
        unallowable expenditures included $264 for business class rail fare and $279 paid for
        tips for food, taxicab fare, and hotel maid service. Also, PSD could not locate four
        travel reimbursement forms, totaling $2,275. There was also a separate instance
        where a lodging expenditure for $278 was reimbursed without a receipt.
        (See final audit report, page 41.)
Final Memorandum                                                            Attachment 1
ED-OIG/L03K0002                                                               Page 3 of 5
     C. Imprest Funds Policies and Procedures
        PSD’s imprest fund policies and procedures were not adequate or enforced. The
        policies and procedures in effect during the audit period (issued in September 1978)
        did not provide examples of prohibited expenditures, other than prohibiting
        temporary loans, personal advances, or cashing of personal or other checks. The
        policy also did not require a review of expenditures to ensure compliance with the
        funding source, which included Department grants.

        We found that school imprest funds were reimbursed without receipts, the fund
        expenditure spending limit was not adhered to, and duties in the handling of the fund
        lacked adequate segregation (we found instances where the fund custodian signed and
        approved the Imprest Fund Reimbursement Requests). We reviewed 287 imprest
        fund transactions totaling $135,162. The total unallowable amount expended through
        school imprest funds was $10,593, and the inadequately supported amount was
        $20,084. Of the inadequately supported amount, $7,124 was found to be
        questionable. (See final audit report, page 44.)

     D.	 Inventory Controls
         PSD did not comply with its property inventory procedures. As a result, we found
         that $45,808 in equipment was unaccounted for in PSD’s records. Although PSD’s
         policies stated that a complete inventory should be maintained, PSD was not
         strenuous in the enforcement of its policy that required items valued at more than
         $500 receive property codes. Additionally, the transfer of inventoried property from
         closed schools to new locations was not performed. PSD also did not require items
         purchased for under $500 to be inventoried. (See final audit report, page 47.)

     E.	 Contract Provisions Were Not Adhered to and Contract Services Were
         Rendered Prior to Approval
         PSD did not always adhere to the requirements set forth in its contracts with vendors. 

         Specifically, contract provisions regarding invoice requirements were not followed. 

         PSD also did not follow the required protocol to obtain the approval of the contract 

         through resolution before entering into a contract with a vendor.

         (See final audit report, page 49.)


  5.	 No Written Policies and Procedures for Various Fiscal Processes

     A.	 Monitoring of Budgets
         PSD did not have written policies and procedures relating to the monitoring of grant
         budgets during the audit period. As a result, budget to actual reconciliations were not
         required and appeared not to have been performed on a periodic basis. We reviewed
         110 JV transactions, totaling $47,668,116 (excluding transportation and indirect costs
         transactions), and found seven transactions, totaling $1,504,101, were unallowable
         and two transactions, totaling $2,331,044, were inadequately supported. We found
         that expenditures were transferred between grants that had over-expended budgets
         and grants that had budgets with funds remaining to be spent, and were transferred
         from State funding to the Title II, Part A grant and then into the Title I, Part A grant.
         Also, grant analysts consistently overrode grant budgets to complete JV transactions.
         We found 55 instances in our samples where the budgets were overridden to complete
         JV transactions. (See final audit report, page 51.)
Final Memorandum                                                           Attachment 1
ED-OIG/L03K0002                                                              Page 4 of 5
     B. Use of Title II, Part A Grant Funds
        PSD’s Intermediate Unit 26 (IU 26) did not have policies and procedures in place to
        ensure Title II, Part A grant funds were expended in accordance with Federal
        regulations and guidance. PSD directly paid private schools and other vendors for
        professional development services with Title II, Part A grant funds. We reviewed 39
        Title II, Part A expenditures, totaling $436,756, for services to Nonpublic schools
        paid for by PSD’s IU 26 Office of Nonpublic Programs. We found that 23 of these
        expenditures, totaling $422,956, were unallowable because they were direct
        reimbursements to private school organizations. The majority of the expenditures
        ($248,572) paid to the Nonpublic schools would also be unallowable because many
        of these expenditures were for the incidental costs (i.e., travel, food, and lodging) of
        the professional development activity.

        PSD also did not provide guidance to Nonpublic schools on the use of Title II, Part A
        funds. The Nonpublic schools did not provide adequate supporting documentation
        when requesting reimbursement. Thirteen of the 39 expenditures we reviewed were
        reimbursed with only a request for reimbursement submitted by the Nonpublic school
        that did not include receipts to show that the costs were actually incurred. We
        determined that nine expenditures, totaling $10,050, were inadequately supported
        because of a lack of adequate supporting documentation. These were for payments to
        private school personnel who attended professional development activities as either
        an instructor or participant. (See final audit report, page 54.)

     C. Use of Office Depot Web site
        PSD did not have documented policies and procedures defining the process to be used
        for ordering items from the Office Depot vendor. We reviewed 779 Office Depot
        expenditures, totaling $97,953. We found that 584 expenditures, totaling $66,252,
        were unallowable. Unallowable Office Depot expenditures that were charged to grant
        funds included the purchase of a mini fridge, hand trucks, a microwave oven, greeting
        cards (all purchased by the Title I program office), cordless phones, cherry wood
        office furniture, hand soap, facial tissue, cleaning supplies, and many other basic
        office and education supplies. We found unallowable items expensed from the
        Title I, Part A, Comprehensive School Reform, Gaining Early Awareness and
        Readiness for Undergraduate Programs (GEAR UP), and Reading First grants.
        (See final audit report, page 58.)

     D. Bus and School Choice Transportation Costs Charged to Grant Funds
        PSD did not have written policies and procedures regarding the use of PSD’s bus
        service, and a review of the costs was not being performed. We reviewed nine JV
        transfers, which included 69 transportation expenditures, totaling $1,380,266. We
        found three unallowable expenditures, totaling $13,885. This included $13,145
        ($12,064 for token usage and $1,081 for busing) for transportation costs for public
        school choice students. We also found 22 expenditures (that included costs for buses
        for afterschool tutoring and field trips to PSD’s educational center), totaling $42,655,
        were inadequately supported ($30,880 of this was also questionable).
        (See final audit report, page 60.)
Final Memorandum                                                              Attachment 1
ED-OIG/L03K0002                                                                 Page 5 of 5
       E.	 Allocation of Single Audit Costs
           PSD did not have written policies and procedures regarding the allocation of single
           audit costs and did not allocate these costs appropriately. Therefore, grantors may not
           have been allocated their appropriate share of the audit costs. Additionally, PSD did
           not allocate the entire cost ($283,533) of the single audit. During the audit period,
           PSD allocated $183,220 in single audit costs to Federal grants. Department grants
           absorbed more than 89 percent of the 2006 audit costs allocated. The Title I, Part A
           grant absorbed 27 percent of the cost for the audit period, while the Vocational
           Education grant absorbed more than 17 percent. (See final audit report, page 62.)

       F.	 Charging of Indirect Costs
           PSD did not have written policies and procedures relating to the calculation and
           recording of indirect cost expenditures. Therefore, indirect costs were not calculated
           correctly. We reviewed $2,659,237 in indirect costs charged to the grants and found
           that the indirect costs were overstated by $11,063 (the Title I, Part A grant by $8,055,
           the Safe and Drug Free Schools grant by $2,312 and the Title II, Part D grant by
           $696). (See final audit report, page 64.)

Issues noted and reported in the Other Matters section of our report:

       	 A Lack of Position Descriptions for Personnel in Senior Management
          PSD could not provide job descriptions that were in effect during the audit period for
          the positions of Comptroller, Deputy Budget Director, and the Safe and Drug-Free
          Schools Director. (See final audit report, page 66.)

       	 Ordering of Excessive Amounts of Food
          PSD ordered excessive amounts of food for activities. In many instances PSD could
          not fully support the amount of food ordered, and too much food was ordered when
          considering the number of participants. We noted that school personnel were the
          main attendees at many functions where food was ordered.
          (See final audit report, page 66.)

       	 Expenditure Coding Needs Improvement
          PSD’s account coding was not clearly defined and the codes were used improperly.
          For example, trips to bowling alleys, and charges for portable toilets were coded as
          part-time extra-curricular salaries. (See final audit report, page 67.)

       	 Lack of Supporting Documentation for Training and Professional Development
          Expenditures
          PSD did not require sign-in sheets, course agendas, or training certificates to be
          maintained as supporting documentation for the reimbursement of professional
          development costs. Also, employees were reimbursed for travel associated with
          training without having to provide training certificates or even a course agenda from
          the training activity. Without these items PSD cannot be certain that those that
          registered or travelled for training actually attended the training.
          (See final audit report, page 68.)
   Final Memorandum                                                                                              Attachment 2

   ED-OIG/L03K0002                                                                                                 Page 1 of 1

                                 Attachment 2: Department Funds Awarded to PSD
                                        During the 2007-2008 School Year1
                                                                                        CFDA             Total Grant               Total
               Program Office and Program Title
                                                                                       Number             Awarded               Expenditures
OESE
Title I Grants to Local Education Agencies                                              84.010            $799,170,756            $133,909,383
Reading First State Grants                                                              84.357             $57,830,215             $11,827,442
Improving Teacher Quality State Grants                                                  84.367             $45,630,015             $20,864,089
Education Technology State Grants                                                       84.318             $17,965,736              $1,273,738
English Language Acquisition Grants                                                     84.365             $11,098,138              $3,254,871
Comprehensive School Reform Demonstration                                               84.332              $8,675,215              $2,086,989
Teacher Improvement Fund                                                                84.374              $4,815,856                $627,078
Mathematics and Science Partnerships                                                    84.366              $2,790,563                $982,874
Twenty-First Century Community Learning Centers                                         84.287              $1,991,624                $118,225
State Grants for Innovative Programs                                                    84.298              $1,931,629                $366,085
Advanced Placement Program                                                              84.330              $1,747,362                  $5,034
Title I Program for Neglected and Delinquent                                            84.013              $1,346,218                $443,375
Education for Homeless Children and Youth                                               84.196                $650,000                $318,481
Literacy Improvement Through School Libraries                                           84.364                $384,494                    $416
Impact Aid Area                                                                         84.041                $285,401                $285,401
Educationally Deprived Children-State Administration                                    84.012                 $11,500                    $239
               Total OESE                                                                                 $956,324,722            $176,363,720
OSERS
Special Education-Grants to States                                                      84.027            $130,258,686             $43,056,016
Special Education- State Personnel Development                                          84.323                 $24,781                      $0
             Total OSERS                                                                                  $130,283,467             $43,056,016
OVAE
Career and Technical Education–Basic Grants to States                                   84.048              $25,785,370              $5,719,026
Adult Education-State Grant Program                                                     84.002               $1,103,661                $537,889
             Total OVAE                                                                                     $26,889,031              $6,256,915
OSDFS
Fund for the Improvement of Education- Character Education                             84.215V              $27,259,968                      $0
Safe and Drug-Free Schools and Communities-State Grants                                 84.186               $7,002,487              $2,143,496
Safe and Drug-Free Schools and Communities-National                                     84.184
                                                                                                             $4,375,117              $3,110,058
Programs
              Total OSDFS                                                                                   $38,637,572              $5,253,554
OII
Magnet Schools Assistance                                                               84.165               $2,838,341                $878,751
Fund for the Improvement of Education                                                  84.215K               $8,776,263              $2,089,112
Arts in Education                                                                       84.351                 $934,577                $198,837
School Leadership                                                                       84.363                 $626,623                      $0
              Total OII                                                                                     $13,175,804              $3,166,700
OPE
GEAR UP                                                                                 84.334               $1,254,020                $390,831
OELA
Foreign Language Assistance                                                             84.293                  $616,968               $285,596

                Total Department Grants                                                                $1,167,181,584             $234,773,332

   1
    Data were obtained from PSD’s 2007-2008 Schedule of Expenditures of Federal Awards. This was the most recent data available as of the date
   of this alert memorandum.
Final Memorandum                                                                    Attachment 3
ED-OIG/L03K0002                                                                       Page 1 of 1
             Attachment 3: Estimated Department ARRA Funds Awarded to PSD1


    Program Providing Funding                            Program Office                 Amount
    Title I Grants to Local Education Agencies               OESE                     $164,088,459
    State Fiscal Stabilization Funds–Education
                                                               OESE                   $119,766,295
    Fund
    Special Education-Grants to States                        OSERS                    $47,318,683
                                                               Total                  $331,173,437




1
 Data were obtained from the Commonwealth of Pennsylvania’s recovery Web site (www.recovery.pa.gov) on
February 16, 2010.
Final Memorandum                                                                                                                 Attachment 4

ED-OIG/L03K0002                                                                                                                    Page 1 of 2

 Attachment 4: Response from Risk Management Services to Draft Memorandum




                                          UNITED STATES DEPARTMENT OF EDUCATION

                                                                OFFICE OF THE SECRETARY


                                                                      March 30, 2010



                        MEMORANDUM

                        TO:            Keith West



                       FROM:




                       SUBJECT:       Response to Draft Alert Memorandum 

                                      Philadelphia School District Designation as a High-Risk Grantee 

                                      Control Nnorber ED,OIGIL03K0002 




                       Ibank you for the opportunity to respond to the Draft Ai¢rl Memorandum (memo) cited
                       .!rove. The memo ,tal<, thnt the Office ofInspector General (OIG) reported in its final
                      audit report issued January IS, 2mO that Pbilndclphla School District (PSD) did not have
                      adequate fiscal <;ootrols in place to account for federal grant funds. Based on the
                      significance of the findings in the audit report and given that PSD participated 1029 other
                      U.S. Department of Education (Department) programs and expended $234,773,332
                      during the 2007 2008 school year, the OIG issued the memo cited above in order to alert
                      the Department" s Rlsk Management Service (RMS) of the need to consider (I) working
                      with the PCnIlSylvania Department of Education (PDE) to designate PSD as a high-risk
                      grantee, with special conditions placed on all future Department grant funds and (2)
                      coordinating enhanced monitoring by Department Program offices in recognition that an
                      ftmds for allDepartmentPrograms are at significant risk of not being used in compliance
                      with program requirements,

                      You requested comment.;;: 0:0 the infot'I118tio n presented in the m emo and a response on
                      the suggestions provided, Ri\l1S agrees that the findings are significant and that
                      Department funds are potentially at risk. lU1S, working with Department Program
                      offices and the P DE, 'Will obtain information regarding the current status ofPSD's
                      administration of Department funds and detennine the best course of action for
                      safeguarding those funds, We provide speeific responses on the suggestions provided as
                      follows:

                      Recomm   endation: The DIG recommends that RMS take immediate steps to safeguard
                      Recommendation:
                      the current funding provided to PSD by working with PDE to designate PSD a high-risk
                      grantee with special conditions placed on aU future Department grant ftmds awarded to
                      PSD.



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Final Memorandum                                                                                         Attachment 4

ED-OIG/L03K0002                                                                                            Page 2 of 2





            Page 2 - Keith West

            RMS response: RMS appreciates the seriousness of the current problem and agrees that
            steps should be taken to examinePSD s administration of Department ftmds. We note
            thatPDE is the Depar1ment's grantee for all State-administered fonnula grant programs
            under the Elementary and Secondary Education Act of J 965, and the Individuals with
            Disabilities Education Act. Therefore, PDE is,the entity directly responsible for ensuring
            that PSD has adequate fiscal controls in place to aceount for all Federal grant funds. PDE
            is the grantee that the Department ultimately holds responsible fur admitllstering Federal
            funds that were the subject offinal andit ED·OIGIA03HOOIO. C01lS<qucatiy, RMS
            agrees that PDE should be instructed to cnDsider designating PSD as a high-risk grantee.
            The RMS has already engaged DepartmentProgram offices: in a dialogue and reached out
            toPDE to work close and collaborative withPDE and will strongly recommendPDE
            considers designatingPSD a high risk grantee and develops a plan 10 bring PSD into
            compliance with all federal grant requirements.

            Recommendation: Coordinate enhanced monitoring ofPSD with the Office of
            Elementary and Secondary Edtu:ation (OESE), the Offiee of Speci al Education and
            Rehabilitative Services (OSERS), the Office of Vocational and Adult Education (0VAE),
            the Office of Safe and Drug-Free Schools (OSDFS), the Office of Innovation and
            !mprovement (OIl), the Office ofPostsecondary Education (OPE), and the Office of
            English Language Acquisition (OELA) in recognition that funds for all Department
            programs for the 2009 201 0 school year and subsequent school years are at significant
            risk of not being used in compliance with program requirements.

            RMS resoonse: As stated above, R.tVfS has already engaged in a partnership and is: in the
            process of obtaining information regarding the current status ofPSD's administration of
            Department fimds, and working with DepartmentProgram Offices and PDE to establish
            the best comse of action for safeguarding those funds.

            Again, we appreciate the opportunity to provide this response.