State DOE audit
finds lack of budgetary,
managerial monitoring

Dozens of programs run by the Department of Education suffer from inadequate or nonexistent financial and managerial oversight, according to an independent audit that recommends merging many redundant programs.

State of Hawaii

Grading the DOE

An audit of Department of Education programs found a widespread lack of financial and managerial oversight and inadequate funding. Below are some of the specific problems and recommendations by independent auditor PricewaterhouseCoopers LLP:

» At least 89 programs suffer from inadequate monitoring of program effectiveness, and 57 from inadequate spending oversight.
» Recommends creation of a chief financial officer to oversee financial management and serve as liaison with Legislature, executive branch and Board of Education on fiscal matters.
» The activities of at least 88 programs overlap with other programs.
» Managers routinely do not collect or monitor program or student data to ensure programs are operating efficiently and effectively.
» "Extremely cumbersome" hiring procedures discourage many qualified workers from applying for jobs with DOE.
» Recommends raising the 35-cent daily cost of school bus transportation services to help address the program's multimillion-dollar operating deficit.
» Seven different programs provide teacher positions to schools to enhance standards-based learning. They are managed by three different program managers in three different sections of the department who do not communicate.
» At least four offices handle training and professional development, "which may lead to inefficiencies and the inability to monitor the quality and effectiveness" of training.

The audit by accounting firm PricewaterhouseCoopers LLP said the lack of transparency made it difficult, and in some cases impossible, to determine whether many public-school programs were achieving their objectives and whether taxpayer dollars were being spent wisely.

The review was commissioned by the Board of Education and is believed to be the first complete audit of the department, which commands the largest single share of the state budget.

The audit said roughly one-third of the department's 278 state-funded programs had inadequate systems in place to monitor their effectiveness and at least one in five suffered from insufficient oversight of program spending. Many programs completely lacked either.

State Schools Superintendent Pat Hamamoto called it a "valuable document" that will help assess which programs support the department's efforts to meet steadily rising student achievement goals.

"It's very clear and it has identified those elements that we suspected ... were not providing what we wanted," she said.

About one out of every three programs overlapped with others and 13 were directly duplicative, the audit said.

Hamamoto agreed that there was a lot of "replication and duplication" and that significant change is ahead for some programs.

"Ultimately, many may be combined, some may be ramped up or strengthened, some may be amended, and some may no longer be viable to meet our goals," she said.

The audit reviewed each individual state-funded item in the DOE's budget. It is based largely on the 2002-03 financial year, the most recent complete set of budgetary data at the time the audit was begun last year.

In all, it examined 278 state-funded programs ranging from student transportation services to information technology systems to programs for pregnant teens. Federally funded programs were excluded.

The report was presented to the board earlier this summer but has not yet been widely publicized.Though it noted that many programs had no clear purpose, the audit stopped short of accusing the department of large-scale waste.

It recommended eliminating only one minor program and said many of the problems stemmed from tight funding, noting that "inadequate resources limit the ability to implement major system improvement and new systems" across the DOE.

"We were looking for more and bigger programs to be eliminated or improved, but we didn't really find any," said Patrick Oki, Honolulu senior manager for PricewaterhouseCoopers.

"It may seem like circular logic, but if anything, many programs need more money to lead to greater efficiencies," he said.

For example, the audit noted that the DOE's own Office of the Internal Auditor was staffed during the review period by just one person tasked with monitoring fiscal accountability and internal financial controls. That's a "very challenging" task considering the department's budget of $1.7 billion at the time, it said.

However, asked whether too many programs might be the problem, Oki said, "That might be another way of looking at it."

Though the department's budget has grown steadily in recent years to the current $1.78 billion, much of the increase has been due to the mounting cost of employee benefits and to court-mandated spending on special education.

A separate independent study released in January said the department's budget allocation is $278 million short of what is needed to provide an "adequate" education to all 180,000 public-school students.

The audit said tight funding forces many programs to share funds, further blurring the financial picture.

"It has become common practice for a program to share resources with another program to supplement operational needs," the audit notes.

Hamamoto said board members asked her for, and she will provide, preliminary plans for responding to the audit when the Board's budget committee meets on Sept. 29.

She said the audit is "timely" since the department is grappling with how best to meet the student-achievement demands of the federal No Child Left Behind law.

It also is implementing wide-ranging state-mandated reforms including a new system for allocating fundsand awarding school principals more control over their school's funds.

Board Chairman Breene Harimoto also welcomed the findings.

"This is a healthy exercise to go through. Any large department will have problems to fix. The key is to want to identify them, and we do," he said.

The audit noted "systemwide" confusion over the role and authority of individual program managers. Many feel they lack the clout to monitor how program funds are actually used at the school level.

As a result, the audit said it was often impossible to tell whether spending aligned with each program's purpose, noting that funds were often instead used to address urgent school needs such as classroom supply shortages.

One of the audit's key recommendations is the creation of a chief financial officer position to oversee financial management and to serve as liaison with the Legislature, executive branch and Board of Education on fiscal matters, an idea Hamamoto said she supports.

As an example of program overlap and lack of coordination, the audit said at least four different offices handled training and professional development, "which may lead to inefficiencies and the inability to monitor the quality and effectiveness of all training activities."

There also were seven different programs that allocate teacher positions to schools, all managed by three different program managers in different sections of the department who did not communicate.

Board member Karen Knudsen, who chairs the budget committee, said the board will be looking for a long-range plan for gradually adopting some of the audit's recommendations.

"We don't want to cause panic throughout the department. We don't want to be on a witch hunt. We're just looking for ways to strengthen the department and that might mean collapsing some programs together," she said.

State Department of Education

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