District of Columbia Opportunity Scholarship Program:

Actions Needed to Address Weaknesses in Administration and Oversight

GAO-13-805: Published: Sep 30, 2013. Publicly Released: Nov 15, 2013.

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What GAO Found

The DC Children and Youth Investment Trust Corporation (the Trust) provides information to prospective and current families of children participating in the District of Columbia (the District) Opportunity Scholarship Program (OSP) through a variety of outreach activities. To reach prospective OSP families, the Trust advertises through print, radio, and bus ads, as well as in newspapers and flyers posted in neighborhood libraries, recreation centers, and local government service centers. However, the Trust provides incomplete and untimely information about participating schools to OSP families. The participating school directory, which is published by the Trust, lacks key information about tuition, fees, and accreditation. The Trust published the directory 9 months after the start of the 2012-13 school year, too late to assist families in selecting a school for that year. Without such information, parents cannot make fully informed school choices. Additionally, the Trust awarded scholarships to students several months after many schools completed their admissions and enrollment processes, limiting the amount of time and choice in selecting schools. Most families GAO spoke with were generally happy with OSP but some were concerned about the availability of program information.

The Trust's internal controls do not ensure effective implementation and oversight of OSP. Adequate policies and procedures can provide reasonable assurance of effective, efficient operations, reliable financial reporting, and compliance with applicable laws. However, the Trust's policies and procedures do not include a process for verifying eligibility information that schools selfreport. As a result, the Trust cannot ensure that schools are eligible to participate in the program and, therefore, risks providing federal dollars to students to attend schools that do not meet standards required by law. Furthermore, the Trust's database is not well structured and hampers the effectiveness of program implementation. For example, the Trust lacks written documentation for the database, and staff must rely on institutional memory to ensure processes such as data entry are conducted properly, which could contribute to errors in the database. As required by law, the Trust groups eligible applicants into three priority categories by which scholarships are then awarded by lottery; however, weaknesses in the database's structure puts into question the Trust's ability to provide accurate priority categories. Additionally, the Trust has not submitted its mandatory financial reports on time, despite a legal requirement that these reports be filed within 9 months of the end of the entity's fiscal year. The Trust's fiscal year 2010 financial report was almost 2 years late, and the Trust's fiscal year 2011 and 2012 reports had not yet been submitted as of August 2013. In August 2013, the Trust also made amendments to its policies and procedures in three areas GAO identified. However, these amendments do not address all weaknesses identified in this report, and have not yet been fully implemented.

The Department of Education (Education) has provided limited assistance to the Trust in certain areas outlined in the memorandum of understanding (MOU) with the District and in the cooperative agreement with the Trust. Specifically, Education is responsible for helping the Trust make improvements to its financial system, enhance its site visit policies and procedures, and improve the accuracy of information provided to parents. Trust officials acknowledged that Education has provided general assistance regarding administrative and operational functions, but it has not assisted with specific improvements in these areas. Although the MOU is a written agreement between Education and the District, it holds the Trust, as the grantee, responsible for notifying District agencies to conduct required building, zoning, health, and safety inspections of participating schools—a requirement that is not detailed in the cooperative agreement signed by Education and the Trust—but would assist the Trust in providing continued oversight of schools participating in OSP. As a result, Trust officials were not acutely aware of this responsibility, and required inspections were not being conducted in the manner described in the MOU between Education and the District.

Why GAO Did This Study

School vouchers, a school choice program designed to provide students with public funds to attend private schools, feature prominently in policy discussions about education reform. The OSP was reauthorized by Congress in 2011 by the Scholarships for Opportunity and Results Act, and has garnered national attention as the first federally-funded voucher program. Since the program's inception in 2004, Congress has provided almost $152 million for the program benefitting almost 5,000 students, currently providing scholarships of about $8,000 for grades K-8 and about $12,000 for grades 9-12. As requested, GAO examined (1) the extent to which the Trust provides information that enables families to make informed school choices, (2) whether the Trust's internal controls ensure accountability for OSP, and (3) how Education and District agencies responsible for overseeing OSP have performed their stated roles and responsibilities.

To conduct this work, GAO visited 10 participating schools; interviewed school officials; conducted discussion groups with 14 parents of scholarship students; analyzed key program documents; reviewed generally accepted guiding documents for internal controls; and interviewed officials at Education, relevant District agencies, and the Trust.

What GAO Recommends

GAO is making 10 recommendations to Education to improve OSP, such as ensuring that the Trust publishes a more complete school directory and updates key aspects of its policies and procedures. Education did not indicate agreement or disagreement with our recommendations. The Trust disagreed with some findings and both provided additional information.

For more information, contact George A. Scott at (202) 512-7215 or scottg@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: In September 2013, Education stated that they planned to continually review the implementation of the cooperative agreement and that Department staff will work with the Trust to ensure that the Trust is aware of its responsibilities for collaboration with District agencies.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should revise the June 2013 cooperative agreement between Education and the Trust to include Education's expectations for the Trust regarding collaboration with District agencies to ensure they conduct required building, zoning, health, and safety inspections.

    Agency Affected: Department of Education

  2. Status: Open

    Comments: In September 2013, Education stated that the Trust is now fully informed of its responsibility to notify the District to conduct OSP school inspections, and is aware that the next step is to define the process by which it will communicate with the District. Education stated that it planned to suggest that at the beginning of every school year, the Trust send the District a list of every participating OSP school for the District to use when scheduling its inspections. We will close this recommendation when these plans have been implemented.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should work with the Mayor of the District of Columbia to revise the memorandum of understanding that governs OSP implementation to include processes that will help ensure that the results of OSP school inspections, when they are conducted, are communicated to the Trust.

    Agency Affected: Department of Education

  3. Status: Closed - Implemented

    Comments: In July 2014, Education stated that the Trust was current with all required audits, including 2013. In addition, Education provided its 2014 Grant Award Notification (GAN) for the Trust's operation of OSP, which included a special condition imposed on the Trust due to its history of untimely financial reporting. Specifically, the GAN states that if the Trust fails to submit a timely financial audit or written explanation with documentation establishing that the Trust was not required to undergo a financial audit, drawdown conditions will apply until one of these items is provided. In addition, further award conditions and/or sanctions may apply including, 1) the Trust may be placed on cost-reimbursement; 2) Education may withhold a percentage of federal awards until the financial audit is completed satisfactorily; 3) Education may withhold or disallow overhead costs; 4) Education may suspend federal awards until the financial audit is conducted; or 5) the grant award may be terminated. According to the GAN, timely submission of required financial audits would result in this special condition being removed.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should explore ways to improve Education's monitoring and oversight of the Trust. For example, Education could require the Trust to develop and implement a plan for how it will address its timeliness in mandatory financial reporting.

    Agency Affected: Department of Education

  4. Status: Open

    Comments: In September 2013, Education stated that it would work with the Trust to determine a mutually agreed upon time for the OSP participating school directory to be published, and that future years' directories will be expected to be available by November of the preceding school year. GAO encourages Education and the Trust to consider publishing the Directory earlier than November or December to help families start making school decisions as early as possible, ensuring that families have the full range of school options available to them. Education also stated that it will discuss ways for the Trust to explain to parents that some schools have varying tuition and fees and that parents should contact either the Trust or the school for further information, but that decisions regarding the inclusion of additional data or information in the directory must be balanced with the impact on its size and usability for parents. GAO agrees with this point, but continues to believe this this could be accomplished without overburdening families with excessive information.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should conduct activities to ensure that the Trust publishes the school Directory prior to participating schools' application deadlines with more complete information.

    Agency Affected: Department of Education

  5. Status: Open

    Comments: In September 2013, Education stated that it is committed to working with the Trust to explore ways to expedite the steps leading up to the lottery, but cannot ensure that the Trust will more closely align its scholarship timelines to schools' admissions timelines because of the variety of activities that must take place prior to the lottery. In addition, Education stated that the Trust would need to submit a proposal to Education if it wanted to use a different approach for screening student eligibility, such as using a different year's income information, that could help expedite the steps leading up to the lottery. GAO supports Education's consideration of any such proposal and will await future efforts in this area.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should conduct activities to ensure that the Trust more closely aligns its scholarship timeframes with schools' admissions and enrollment schedules. Education could find ways to assist the Trust in executing the OSP lottery earlier in the school year, for example, by allowing the Trust to use the prior year's income information to make preliminary determinations regarding eligibility.

    Agency Affected: Department of Education

  6. Status: Open

    Comments: In September 2013, Education stated that it will update its cooperative agreement with the Trust to include periodic status updates on improvements to the OSP database. We will close this recommendation when the agreement is updated.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should conduct activities to ensure that the Trust improves its OSP database by creating and maintaining documentation for the use of the database, adding automated checks to the system, creating flags and/or variables for the key priority categories called for in the SOAR Act, and streamlining the data entry process for new applications in order to ensure there is sufficiently reliable data regarding the operation of the program.

    Agency Affected: Department of Education

  7. Status: Open

    Comments: In September 2013, Education stated that it is reviewing the Trust's proposed revisions to the letter of agreement that includes language requiring all OSP schools to provide immediate notification of any financial or legal actions taken against the school. The Trust is also proposing to require all schools that are members of an umbrella organization to provide audits and all fiscal year-end financial statements. In addition, Education stated that it will review fiscal programmatic documentation relative to the utilization of OSP funds while on school site visits. Previously, the Trust was allowing schools to self-report this information. In addition, the updated school site visit reports will be revised to include the process by which financial documentation reviews will occur. GAO will not consider these policies and procedures fully implemented until these activities take place on a regular basis.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should require the Trust to update its policies and procedures in several key respects, and monitor the Trust's activities to ensure that these updates are made. These updates should include identifying the steps the Trust will take to verify reported information on participating schools' compliance with reporting and program requirements specified in the Scholarships for Opportunity and Results Act (SOAR) Act.

    Agency Affected: Department of Education

  8. Status: Open

    Comments: In September 2013, Education stated that the Trust is in the process of updating its school site visit form, and that it plans to use this as one vehicle for working with the Trust to strengthen its risk assessment responsibilities with regard to OSP schools. Education said that it will work with the Trust to update its school site visit report and help ensure that the Trust is carrying out its responsibilities appropriately. We will close this recommendation when these efforts are completed.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should Require the Trust to update its policies and procedures in several key respects, and monitor the Trust's activities to ensure that these updates are made. These updates should include identifying the specific risks that should be included in the evaluation performed when assessing participating schools' financial sustainability information, including a record of the analyses performed, and ensure that the conclusions reached with regard to schools' financial sustainability are documented.

    Agency Affected: Department of Education

  9. Status: Open

    Comments: In September 2013, Education stated that the Trust's most recent proposed revisions to the letter of agreement between OSP schools and the Trust reserves the Trust's right to limit and/or suspend a school's participation in the OSP. Education stated that any OSP schools that require a further compliance discussion will be handled on a case-by- case basis. GAO continues to believe that the Trust needs to develop a more clearly defined, comprehensive written policy to address schools that are noncompliant.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should require the Trust to update its policies and procedures in several key respects, and monitor the Trust's activities to ensure that these updates are made. These updates should include specifying a process for addressing schools that are noncompliant with program requirements.

    Agency Affected: Department of Education

  10. Status: Open

    Comments: In September 2013, Education stated that, given the procedures that it currently employs and the additional administrative expense language in the cooperative agreement, it will hold discussions with the Trust about options for implementing processes to further ensure that the Trust calculates yearly administrative expenses correctly and documents this for its own records. Education stated that it will update the cooperative agreement with more detailed procedures, if necessary. GAO will await the completion of these efforts.

    Recommendation: To ensure families receive expanded opportunities for school choice and OSP is implemented and overseen effectively, the Secretary of Education should require the Trust to update its policies and procedures in several key respects, and monitor the Trust's activities to ensure that these updates are made. These updates should include providing more detailed procedures in key areas including calculating yearly administrative expenses, and performing monthly and year end reconciliations of the OSP bank account, and ensure the document reflects current practices and that key decisions associated with administrative expenses are documented

    Agency Affected: Department of Education

 

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