Fresno County Office of Education

FRESNO COUNTY OFFICE OF EDUCATION Audit Report MIGRANT EDUCATION PROGRAM July 1, 2013, through June 30, 2014 BETTY T. YEE California State Controller August 2016 BETTY T. YEE California State Controller August 19, 2016 Veronica Aguila, Director California Department of Education English Learner Support Division Migrant Education Program 1430 N Street, Suite 2204 Sacramento, CA 95814-5901 Dear Ms. Aguila: The State Controller’s Office, pursuant to an Interagency Agreement with the California Department of Education, conducted an audit of the Fresno County Office of Education’s (COE) Migrant Education Program (MEP) for the period of July 1, 2013, through June 30, 2014. The purpose of the audit was to determine whether the Fresno COE complied with the United States Department of Education Office of Migrant Education’s MEP requirements; specifically, that the Fresno COE maintains proper internal controls to ensure that the program-related costs were incurred for eligible and approved activities, and the accounts and records substantiate that the funds were expended for allowable activities. We determined that the Fresno COE maintained adequate internal controls to ensure its compliance with applicable federal and state laws and regulations, and that MEP funds were expended for allowable, approved activities. However, we determined that the Fresno COE did not fully comply with the California MEP Fiscal Handbook, 2007, as it misreported expenditures in the incorrect object codes, excluding them from calculation of indirect costs. We also determined that the Fresno COE did not fully comply with Title 34, Code of Federal Regulations, Part 80.36 and the California MEP Fiscal Handbook, 2007 when it sought procurement of its contracts. If you have any questions, please contact Andrew Finlayson, Chief, State Agency Audits Bureau, by telephone at (916) 324-6310. Sincerely, Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits Veronica Aguila, Director -2- August 19, 2016 JVB/ls Attachment cc: Jim Yovino, Superintendent Fresno County Office of Education Ruben Castillo, Administrator Migrant Education Region IV Fresno County Office of Education Dr. Kathryn Catania, Deputy Superintendent Educational Services Fresno County Office of Education Richard Martin, Deputy Superintendent Business Services Fresno County Office of Education Kevin Chan, Director Audits and Investigations Division California Department of Education Celina Torres, Education Administrator I English Learner Support Division California Department of Education Fresno County Office of Education Migrant Education Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objectives, Scope, and Methodology ............................................................................... 2 Conclusion .......................................................................................................................... 3 Views of Responsible Officials .......................................................................................... 3 Restricted Use .................................................................................................................... 4 Schedule 1—Summary of Reported, Audited, and Questioned Costs .............................. 5 Findings and Recommendations ........................................................................................... 6 Attachment—Fresno County Office of Education’s Response to Draft Audit Report Fresno County Office of Education Migrant Education Program Audit Report Summary The State Controller’s Office (SCO) conducted an audit of the Fresno County Office of Education’s (COE) Migrant Education Program (MEP) for the period of July 1, 2013, through June 30, 2014. The purpose of the audit was to determine whether the Fresno COE complied with the United States Department of Education Office of Migrant Education’s MEP requirements; specifically, that the Fresno COE maintains proper internal controls to ensure that program-related costs were incurred for eligible and approved costs, and that the accounts and records substantiate that the funds were expended for allowable activities. We determined that the Fresno COE maintained adequate internal controls to ensure its compliance with applicable federal and state laws and regulations, and that MEP funds were expended for allowable, approved activities. However, we determined that the Fresno COE did not fully comply with the California MEP Fiscal Handbook, 2007, as it misreported expenditures in the incorrect object codes, excluding them from calculation of indirect costs. We also determined that the Fresno COE did not fully comply with Title 34, Code of Federal Regulations, Part 80.36 (34 CFR 80.36) and the California MEP Fiscal Handbook, 2007, when it sought procurement of its contracts. Background The MEP is authorized under the federal “No Child Left Behind Act” and is funded by Title I, Part C, with the mission of providing supplementary services to ensure that migrant children meet the same academic standards that non-migrant children are expected to meet. Funds support high-quality education programs for migrant children and help ensure that those children who relocate are not penalized in any manner by disparities among states in curriculum, graduation requirements, or state academic content and student academic achievement standards. Funds also ensure that migrant children are provided with appropriate education services (including supportive services) that address their special needs and that migrant students receive full and appropriate opportunities to meet the same state academic content and student academic achievement standards that non-migrant children are expected to meet. Federal funds are allocated by formula to state educational agencies, based on each state’s per-pupil expenditure for education and counts of eligible migrant children, ages 3 through 21, residing within the state. The allowable MEP efforts are identified, formulated, and developed in concert with the California Department of Education (CDE) and the State’s 23 MEP regions/sub-grantees. The regions/sub-grantees include county offices of education and/or school districts. At the state level, the CDE also administers and monitors the federal pass-through funds for the MEP sub-grantees and recipients. -1- Fresno County Office of Education Migrant Education Program The Fresno COE provides, administers, and directly oversees 23 school districts, with 16 districts through District Service Agreements and seven districts through Memorandums of Understanding (MOU). These sub- recipient districts are responsible for directly providing and administering MEP services to their students and are subject to regional oversight. The Fresno COE also funds a consortium of school districts, typically with an enrollment of fewer than 200 migrant students, in which MEP services are provided through MOU. The Fresno COE and sub-recipient districts offer migrant instructional services to eligible migrant students through various extended day settings: after school instruction, Saturday school, summer school, etc. These services are offered to provide instructional support to meet the unique needs to migrant students. The Office of Migrant Education conducted a review of the MEP program and issued the review in September 2011. The California State Auditor audited the administration of the federally-funded MEP administered by the CDE and issued its audit report in February 2013. The reviews did not identify any specific administrative oversight concerns of the region or its sub-recipients. The CDE requested that the SCO assess administrative oversight efforts1 and conduct this performance audit of the MEP sub-grantees. The SCO’s authority to conduct this audit is given by:  Interagency Agreement No. CN 140308 effective February 1, 2015, between the SCO and the CDE, which provides that the SCO will conduct an independent management review of the CDE’s administrative oversight efforts, including technical assistance provided to MEP sub-grantees, and an independent management review of MEP sub-grantee fiscal administrative and reporting practices over MEP funding.  Government Code section 12410, which states, “The Controller shall superintend the fiscal concerns of the state. The Controller shall audit all claims against the state, and may audit the disbursement of any state money, for correctness, legality, and for sufficient provisions of law for payment ….” Objectives, Scope, The purpose of the audit was to determine whether the Fresno COE and Methodology complied with the federal MEP requirements; specifically, that the Fresno COE maintains proper internal controls to ensure that its efforts and program-related costs were incurred for eligible and approved MEP program activities, and that accounting records and source documents substantiate that the MEP funds were expended for approved allowable activities for the audit period of July 1, 2013, through June 30, 2014. 1 This assessment will be covered in a separate management letter to the CDE. -2- Fresno County Office of Education Migrant Education Program Audit methodologies included, but were not limited to the following:  Reviewing applicable state and federal requirements related to the MEP, including the California MEP Fiscal Handbook, 2007;  Reviewing prior audits and single audit reports, and written policies and procedures relating to the MEP;  Reviewing the MEP regional application, and budget and quarterly expenditure reports;  Conducting inquiries with personnel, and reviewing and assessing related internal controls; and  Obtaining and reviewing supporting documentation to ensure that MEP expenditures for costs were necessary, reasonable, and allowable. We conducted this performance audit in accordance with generally accepted government auditing standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Conclusion We determined that the Fresno COE maintained adequate internal controls to ensure its compliance with applicable federal and state laws and regulations, and that MEP funds were expended for allowable and approved activities. However, we determined that the Fresno COE did not fully comply with the California MEP Fiscal Handbook, 2007, as it misreported expenditures in the incorrect object codes, excluding them from calculation of indirect costs. We also determined that the Fresno COE did not fully comply with 34 CFR 80.36 and the California MEP Fiscal Handbook, 2007 when it sought procurement of its contracts. Views of We issued a draft report on July 15, 2016, with four preliminary findings. Jim Yovino, Superintendent of Schools, Fresno County office of Responsible Education responded in a letter dated July 21, 2016, with additional Officials documentation to resolve Draft Findings 1 and 3. Based on the follow-up documentation provided, we renumbered the final report with two findings remaining. The Fresno COE’s response has been incorporated in this final report as an Attachment. -3- Fresno County Office of Education Migrant Education Program Restricted Use This report is solely for the information and use of the Fresno COE, the United States Department of Education, the CDE, and the SCO. It is not intended to be and should not be used by anyone other than these specified parties. The restriction is not intended to limit distribution of this report, which is a matter of public record. Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits August 19, 2016 -4- Fresno County Office of Education Migrant Education Program Schedule 1— Summary of Reported, Audited, and Questioned Costs July 1, 2013, through June 30, 2014 (includes 5th Quarter 1) Reported/Audited Allowable Questioned Object Code Description Costs Costs Costs Reference Certificated Personnel Salaries 1100 Teachers $ 6 75,850 $ 675,850 $ - 1200 Pupil Support Services 116,762 116,762 - 1300 Supervisor/Administrators 735,108 735,108 - 1900 Other Certificated Salaries 88,508 8 8,508 - Subtotal $ 1 ,616,228 $ 1,616,228 $ - Classified Salaries 2100 Instructional Aides $ 3 86,560 $ 386,560 $ - 2200 Support Services Salaries 1,208,182 1,208,182 - 2300 Supervisor/Administrators 138,813 138,813 - 2400 Clerical, Technical and Office Staff 575,001 575,001 - 2900 Other Classified Salaries 560,703 560,703 - Subtotal $ 2 ,869,259 $ 2,869,259 $ - Benefits 3000-3900 Employee Benefits $ 1,506,120 $ 1 ,506,120 $ - Subtotal $ 1 ,506,120 $ 1,506,120 $ - Books and Supplies 4100 Textbooks Curricula Materials $ - $ - $ - 4200 Books & Reference Materials 3,938 3,938 - 4300 Materials & Supplies 348,256 348,256 - 4400 Noncapitalized Equipment 12,310 1 2,310 - 4700 Food 4,250 4,250 - Subtotal $ 3 68,754 $ 368,754 $ - Services and Other Operating Expenditures 5100 Subagreements for Services $ 73,255 $ 73,255 $ - 5200 Travel & Conference 180,258 180,258 - 5300 Dues & Memberships - - - 5400 Insurance 5,926 5,926 - 5500 Operations & Housekeeping Services 5,272 5,272 - 5600 Rentals, Leases, Repairs & Noncapitalized Improvements 368,022 368,022 - 5700 Transfers of Direct Costs 66,524 6 6,524 - 5800 Professional and Consulting Services and Expenses 1,063,427 577,637 485,790 Finding 1 & Finding 2 5900 Communications 9,893 9,893 - Subtotal $ 1 ,772,577 $ 1,286,787 $ 4 85,790 Capital Outlay 6000 CAPITAL OUTLAY $ - $ - $ - SUBTOTAL $ - $ - $ - Subtotal $ 8,132,938 $ 7 ,647,148 $ 4 85,790 Indirect Cost 465,656 465,656 - Total 2 $ 8 ,598,594 $ 8,112,804 $ 4 85,790 ____________________________ 1 The 5th Quarter is the first quarter of the following fiscal year, during which the region is allowed to spend the funds that were not expended in the current fiscal year. 2 Schedule 1 is $499 more than in the Fresno COE’s final expenditure report due to rounding. -5- Fresno County Office of Education Migrant Education Program Findings and Recommendations FINDING 1— In performing substantive testing of expenses in the Professional Consulting Services and Operating Expenditures Account (Object Code Misreported object 5800), we noted that services provided by the Education and Leadership codes Foundation, in the amount of $454,375 and reported by the Fresno COE to the Object Code 5800, were instructional in nature and should have been recorded in the Object Code 5100 and excluded from the indirect costs calculation as required by the California MEP Fiscal Handbook, 2007. Criteria Section 8.0, Additional Information, Object Classification Codes, of the California MEP Fiscal Handbook, 2007 states: Subagreements for Services are indicated when a part of all of an instructional or support activity for which the LEA is responsible is conducted by a third party rather than by the LEA. . . For purposes of indirect costs, Subagreements for Services must be excluded from the calculation of the indirect cost rate, except that up to $25,000 of an individual subagreement may be coded to Object Code 5800 <…> and included in the calculation of the rate. Recommendation In reporting its expenses to the CDE for reimbursement, the Fresno COE should report all instructional services provided by vendors to the Object Code 5100 and excluded from the indirect costs calculation. Fresno COE’s Response Based on the Fresno COE MEP interpretation of the sub-agreements, interpretation of the California MEP Fiscal Handbook 2007 Edition, and direction from CDE, we conclude that the sub-agreements were properly coded to 5100 and 5800 object lines. We believe Fresno COE MEP correctly charged indirect based on the allowable expenses…. SCO’s Comment We determined that, based on a description of services, all of the contracts with the Education and Leadership Foundation should have been recorded in the Object Code 5100 and excluded from indirect cost calculation. The contracts were sub-agreements for instructional services for which the Fresno COE was responsible, but contracted with the vendor to provide. The finding remains unchanged. -6- Fresno County Office of Education Migrant Education Program FINDING 2— In performing substantive testing of contracts and procurement, we noted Insufficient that the Fresno COE was unable to provide documentation related to the documentation for procurement of contractors/consultants sufficient to substantiate that it was in compliance with the procurement standards required by contracts and 34 CFR 80.36 and the California MEP Fiscal Handbook, 2007 for the procurement following selected contracts:  Education and Leadership Foundation, for $6,415.20  Resolve Right, Inc., for $25,000 Specifically, the Fresno COE lacked the following:  Maintenance of sufficient records to detail the significant history of the procurements, including but not limited to: the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.  Documented evidence that a cost or price analysis was performed, including making independent estimates before receiving proposals.  A clear process or written criteria for judging proposals, assessing technical qualifications of contracted personnel, and assessing the quality of a technical approach.  Documented evidence that awards were made to the offeror whose proposal was most advantageous, with price considered. Criteria 34 CFR 80.36 (b) (9) states: Grantees and subgrantees will maintain records sufficient to detail the significant history of a procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. 34 CFR 80.36 (c) states: Competition. (1) All procurement transactions will be conducted in a manner providing full and open competition consistent with the standards of section 80.36. 34 CFR 80.36 (d) states: Methods of procurement to be followed- (1) Procurement by small purchase procedures… (2) Procurement by sealed bids… (3) Procurement by competitive proposals… (4) Procurement by noncompetitive proposals . . . . -7- Fresno County Office of Education Migrant Education Program 34 CFR 80.36 (f) states: Contract cost and price. (1) Grantees and subgrantees must perform a cost or price analysis in connection with every procurement action including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, grantees must make independent estimates before receiving bids or proposals. Recommendation To ensure its adherence to the standards as prescribed by federal and state laws and regulations, the Fresno COE should improve its current procurement procedures and practices to include the following:  Maintenance of records sufficient to detail the significant history of procurement, including but not limited to: the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.  Documented evidence that a cost or price analysis was performed, including making independent estimates before receiving proposals.  A clear process or written criteria for judging proposals, assessing technical qualifications of contracted personnel, and assessing the quality of a technical approach.  Documented evidence that awards were made to the offeror whose proposal was most advantageous, with price considered. Fresno COE’s Response The Fresno COE MEP concurs with the finding…The Fresno COE MEP currently has a way to maintain records with sufficient history of procurement including rationale for method of procurement, selection of contract type, contractor selection or rejection and the basis for the contract price. The Fresno COE MEP will develop a method to document evidence that awards were made to the offeror whose proposal was most advantageous, with price consideration. SCO’s Comment The finding remains unchanged. -8- Fresno County Office of Education Migrant Education Program Attachment— Fresno County Office of Education’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S16-MEP-0005