A report outlining ways Hawaii's public school system can save money and better educate students reveals how antiquated, manual record-keeping at the Department of Education could impede efforts to earn a hefty share of federal stimulus funding.

The report presented to the Board of Education earlier this month summarizes initial findings of the board's Ad Hoc Committee on Strategic Business Transformation, which was formed in May to identify ways for the Department of Education to trim costs, improve efficiency and align its operations to qualify for additional funding under the U.S. American Recovery and Reinvestment Act (ARRA).

The goal is to improve student achievement despite deep state budget cuts that have left public schools and libraries reeling, relying in some cases on fundraisers to preserve basic services.

Included in the $100 billion ARRA, designed to create jobs and boost U.S. education, is the “;Race to the Top”; program, which sets up a national competition among states for nearly $5 billion in education grants. States that make the grade also would be eligible for future funding.

The competition rewards states that make the most progress on reform goals outlined in the law, including improving student achievement by adopting internationally benchmarked standards and assessments that prepare students for success in college and the workplace; recruiting, developing and retaining effective teachers and principals; creating data systems that measure student success and inform teachers and principals how they can improve their practices; and turning around the lowest-performing schools.

“;Race to the Top”; also demands that school systems ensure transparency and accountability for the funding, to prevent fraud and abuse.

Janis Akuna, chairwoman of the BOE's ad-hoc committee and a vice president at Morgan Stanley who since being elected last year has focused on reorganizing the DOE to follow best business practices, said Hawaii is ahead in some areas key to winning the “;Race to the Top”; grants, such as in having educational standards.

But inefficient bookkeeping and accounting cited by the ad-hoc committee puts the state at a disadvantage when it comes to accountability and transparency, Akuna agreed.

Computer automation “;should have been done a long time ago, or at least improved, but it never was,”; she said. “;Now we need to get it done as quickly as possible. Showing progress will help. We believe that Hawaii has a very good chance to compete.”;

The ad-hoc committee's report lists numerous ways apparent to students and parents about how DOE departments are saving or plan to save money—including raising cafeteria meal prices, eliminating bus service for some students, and making it easier to consolidate schools.

But the initiatives with the biggest potential financial impact are less obvious, and some are hampered by a lack of initial funding that would create savings down the road.

Among them are efforts to automate inefficient manual systems in payroll and procurement, which besides requiring more workers than are necessary with today's technology make the functions of the state's largest department harder to audit.

In the DOE's Office of Fiscal Services, a private company hired to assess the department's 18-year-old fiscal management system recommended that it be replaced with an up-to-date system that would manage everything from vendor payments, grants management, inventory, human resources, donations, budget preparation and other tasks, the report said.

Such a statewide system would be more efficient and ultimately save money. But the project is on hiatus, because the initial phase is estimated to cost $25 million, the report said.

The same office may need additional funding to finish computerizing the DOE's human resources system, which has a large backlog created by the manual processing of employee leave balances and terminations, the report said.

It noted that an outside firm, Accuity LLP, hired to review the DOE's accounting, vendor payment and inventory procedures, found that many processes “;are still manual and were undocumented,”; impeding efficiency and accountability.

The department has beefed up fiscal oversight by adding two additional auditors to its Internal Audit Office, which for years had just one auditor responsible for the entire $2.5 billion system, the report said.

Akuna credited recent hires in the top ranks of the DOE for tackling the long-standing problems and expressed the hope that the governor and legislators—who control school funding—would take the long view.

“;I think the key here is really aligning operations for that (federal funding). That's going to be the overriding goal,”; she said. “;On the short-term basis we may not be saving money, but in the long term we will be and be getting even more money because of it.”;