The North Carolina State Auditor’s Office found that the N.C. Department of Public Instruction had some issues during a Statewide Federal Compliance Audit.
The audit was for the fiscal year ending June 30, 2022.
State Auditor Beth Wood’s office said DPI didn’t complete all planned monitoring activities for 329 public school units (PSUs) that received $1.77 billion in federal funding from three programs during the audit period.
Auditors reviewed DPI’s fiscal monitoring plan over all three programs, which required site visits at 20 PSUs. Auditors found that DPI did not complete site visits for 10 PSUs that received $34.1 million in funding, half the total.
DPI management told Wood’s office that monitoring activities could not be completed as originally planned due to prioritizing other activities, such as assisting external agencies with investigations of PSU’s and performing additional work related to closeout reviews for multiple charter schools that closed during the year. They also blamed staffing issues and vacancies which required management to prioritize the investigations and charter school closings over fiscal monitoring.
Wood’s office noted that inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may reduce the funding available for addressing the impacts of the COVID-19 pandemic on public education and providing services to public educators to improve student academic achievement.
They also say that federal regulations require DPI to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes in compliance with federal statutes, regulations, and the terms and conditions of the subaward and that subaward performance goals are achieved.
A similar finding was previously reported in the 2021 Statewide Single Audit.
Auditors recommended DPI management should review and revise monitoring procedures as necessary in response to changes in operations, and they should prioritize the development of a contingency plan to ensure monitoring is completed when employee turnover occurs.
Wood’s office also found that DPI did not submit complete, accurate, and timely Federal Funding Accountability and Transparency Act (FFATA) reporting for the Education Stabilization Fund, Elementary and Secondary School Emergency Relief (ESSER), and Supporting Effective Instruction (SEI) programs.
Auditors reviewed all 298 SEI subawards, totaling $60.9 million, that were required to be reported to the FFATA Subaward Reporting System (FSRS) during the audit period and found that none were reported as required.
They also reviewed all 1,716 ESSER subawards totaling $3.3 billion that were required to be reported to the FSRS during the audit period and found that DPI stopped FFATA reporting on ESSER in December 2021. As a result, 1,291 subawards totaling $230.1 million made during 2022 were not reported.
Auditors then tested a sample of 60 ESSER subawards that were reported and found one or more errors. They include: 51 subawards totaling $760.1 million didn’t include required information on how the funds were utilized; 30 subawards totaling $732 million were reported 47-61 days late; and 6 subawards totaling $8.2 million were reported with either the wrong subrecipient or federal award information.
DPI management told auditors that the errors found in the ESSER subawards that were reported occurred due to limited staffing resources, and they stopped entering ESSER subawards into FSRS in December 2021 due to technical difficulties.
The audit says due to those difficulties, DPI didn’t attempt to report any subawards for the SEI program.
According to auditors, the FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the obligation was made.
A similar finding was also previously reported in the 2021 Statewide Single Audit.
Auditors recommended that DPI management prioritize seeking solutions from the federal oversight agency on technical difficulties and ensure staff is available to complete FFATA reporting as required.
Superintendent of Public Instruction Catherine Truitt said her office agreed with the findings and recommendations.
She also mentioned that vacancies and turnover within PSU positions, such as CFO and director of federal programs, resulted in delays throughout the monitoring process, and the complexity of various pandemic relief funding streams has burdened other agencies with additional audit procedures, which required interaction with the monitoring team as they serve as a conduit for other state agencies unfamiliar with PSUs.
During fiscal year 2023, management updated fiscal monitoring policies and procedures to incorporate the need for review and revision of the monitoring plan in response to changes in operations during the year and will consider additional resources, scope changes, and adjusting the number and type of monitoring events as part of the contingency planning to ensure monitoring is completed when employee turnover occurs.
Truitt said while additional resources were commissioned to complete FFATA reporting requirements, technical considerations in the FFATA system remain problematic. The system restricts the number of entries per month, which makes it impossible for DPI to report awards within the required time limit. The Office of Federal Programs has continued to make requests to the federal oversight agency for technical assistance with the system.
She said the Office of Federal Programs would continue to interface with the federal agency regarding the technical difficulties of the system, and a data entry plan would be developed and implemented to input required data as quickly as possible with system constraints. Staff will also enter and track subaward information in accordance with the plan.
“We believe implementation of these corrective actions will address the deficiencies noted,” Truitt concluded.