Finding 1: OII Did Not Conduct Effective Oversight of Grantees Receiving Charter School Grants

Late in 2010 near the end of his second term, Gov. Phil Bredesen of TN worked up the courage to suggest shutting down one of Tennessee's unnecessary private prisons run by CCA.  When the new governor, Bill Haslam, swept into office with the backing of CCA and ALEC, the plan to shut down the CCA facility in West Tennessee was quickly cancelled, even though Haslam admitted to reporters that the the prison was not needed, and even though Haslam cut $20 million from public colleges and $40 million from Medicaid patients to come up with the $31 million to pay for it.  When asked to respond, Bredesen quipped, "business wants government to act like a business except when they act like a business."

As we now contemplate the significance of Mitt Romney's Gatorade and canned yams relief supplies that he is sending to the Jersey shore to curb the economic pain of starting over from scratch, Bredesen's response to Haslam's public largesse for Corrections Corporation of America is worth keeping in mind.  This kind of dopey hypocrisy is symptomatic of the Right's view of government: when government must respond to public need, we can't trust it because we know government is a bunch of corrupt, free-spending incompetents who can't be trusted.  On the other hand, those same incompetent, free-spending incompetents are just what the private sector expects and demands when it comes to opening up the public safe privatize public services.  See Bill Haslam.

Or see the 2010 OIG  report here on federal non-oversight of charter welfare schools, or see the post on the most recent OIG Report entitled "The Office of Innovation and Improvement’s Oversight and Monitoring of the Charter Schools Program’s Planning and Implementation Grants."  

The OIG examined records in three states: Florida, California, and Arizona.  Amounts of grants below:

Some highlights from the Finding 1 of the Report:

FINDING NO. 1 – OII Did Not Conduct Effective Oversight of Grantees Receiving

the SEA and Non-SEA Grants

OII did not conduct effective oversight of SEAs [State Education Agencies] and charter schools receiving the SEA and non-SEA grants.  Specifically, we found that OII did not

 require that grantees and subgrantees develop corrective action plans to address monitoring

issues and deficiencies identified,

 have a risk-based approach for selecting non-SEA grantees for monitoring, or

 adequately review SEA and non-SEA grantees’ fiscal activities.

Lack of an Adequate Corrective Action Plan Process

OII did not require that grantees and subgrantees develop corrective action plans to address

monitoring issues and deficiencies identified in WestEd’s monitoring reports. This occurred

because OII did not have policies and procedures in place to ensure grantees corrected

deficiencies noted in monitoring reports. In addition, OII did not follow up effectively on issues

identified in monitoring reports. OII did not take any alternative means to ensure corrective

action took place, such as including followup activities in the WestEd contract if OII did not

have adequate resources to perform this function itself. As a result, OII was unaware of whether

grantees and subgrantees took corrective actions to address issues that WestEd identified in its

monitoring reports. . . . .

Florida Monitoring Report

The Florida SEA’s first monitoring report, issued in November 2008, identified many serious

deficiencies that were similar to issues we identified during our audit (Finding No. 2). OII made

its only documented followup phone call to the Florida SEA in April 2011 (29 months later),

regarding the deficiencies noted in the monitoring report. According to OII’s documentation, all

deficiencies noted in the 2008 monitoring report were deemed “resolved” without any supporting

documentation. Since our audit work identified issues similar to the deficiencies WestEd

identified in 2008, we concluded that OII’s determination that all identified deficiencies were

resolved was not accurate. Both WestEd and our audit noted that Florida left most subgrantee

monitoring to the LEAs. Further, OII’s followup phone call process was not effective for

ensuring deficiencies identified in WestEd’s monitoring reports were correctly resolved.

In addition, by the time OII made its documented followup phone call to the Florida SEA to

address deficiencies identified in 2008, WestEd had already conducted its second monitoring

visit of the Florida SEA in February 2011. In fact, according to OII documentation, WestEd’s

February 2011 monitoring visit was mentioned during that followup phone call. WestEd went

on to issue its second report in July 2011. We concluded that OII waited for WestEd to conduct

its second monitoring visit of Florida, almost 3 years after the first one was conducted, before

following up with deficiencies noted on the first monitoring report. The revisit monitoring report

did not note any serious deficiencies in Florida, finding that “Florida has demonstrated the

necessary program management and fiscal controls to meet the application’s objectives.” Our

audit work in the Florida SEA found the contrary.. . . .

For recipients of the non-SEA grant, we reviewed charter schools in Arizona that received the

non-SEA grant during the fiscal years 2007–2010. Of the 17 charter schools in Arizona that

received the non-SEA grant during the fiscal years 2007–2010, 11 received WestEd monitoring

visits. We examined the monitoring reports for all 11 charter schools as part of our audit. For

the 11 monitoring reports we examined, OII could not provide support for any corrective actions

to rectify the significant deficiencies noted. Significant deficiencies WestEd noted in its

monitoring reports of these 11 charter schools included (1) Federal definition of a charter school

was not met; (2) parents and other members of the community were not involved in the planning,

design, and implementation of the school; (3) lack of a high‐quality strategy for assessing the

achievement of the non-SEA grant objectives; (4) uses of Charter School Program funds were

not allowable, allocable, and reasonable; (5) lack of fiscal control and fund accounting

procedures; and (6) financial and programmatic records related to the Charter School Program

funds were not adequately maintained. OII did not have documentation in its files to support

adequate followup to the non-SEA charter school grantees. OII did not require any of the charter

schools to develop corrective action plans in response to the WestEd monitoring reports.

OII did not implement an adequate corrective action plan for SEA or non-SEA grantees to ensure

they corrected instances of noncompliance noted in the WestEd monitoring reports. OII stated

that, for SEA grant recipients, it was the SEA’s responsibility to verify whether its subgrantees

complied with applicable laws and regulations. OII’s use of followup phone calls to grantees did

not ensure the grantees would resolve significant deficiencies identified in WestEd monitoring

reports in a reasonable amount of time.. . . .

OII did not review SEA and non-SEA grantees’ fiscal activities as part of its monitoring

activities. Specifically, OII could not provide evidence that grantee’s expenditure information

was reviewed as required by the Department’s “Handbook for the Discretionary Grant Process,” . . .

For the three SEA grantees we reviewed, OII could not provide evidence that it reviewed

expenditure information using the Department’s grants management system (G5) as required.7

OII officials stated that they reconciled expenditures with G5 annually; however, we could not

find adequate evidence in the SEA grantee folders that OII performed this activity. The OII

Charter School Division director stated that OII needed to improve their process for collecting

and reconciling expenditures with information in the G5 system.

For the 11 non-SEA grantees we reviewed, OII could not provide evidence that it reviewed

expenditure information using the G5 system as required. . . . .

Because OII did not (1) require that grantees and subgrantees develop corrective action plans to

address monitoring issues and deficiencies, (2) have a risk-based approach for selecting non-

SEA grantees for monitoring, and (3) adequately monitor fiscal activities, there is a heightened

risk that grantees were not fully complying with program goals and objectives as well as Federal

laws and regulations. As a result, there is increased risk that Department funds were not used for

the intent and purpose of the program