State school chiefs failed to properly oversee millions in grants

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School Bus

State auditors recently found that the Texas Education Agency failed in ensuring school districts met agency requirements and eligibility to receive money for school facility improvements.

The inadequate controls garnered a high rating from auditors, which means the identified issues could substantially affect the TEA’s ability to administer the Instructional Facilities Allotment (IFA) if they are not addressed.

The TEA is the state agency in charge of overseeing primary and secondary public education.

Established in 1997, IFA helps local school districts with debt service payments on eligible bonds and lease-purchase agreements for the purchase, construction, renovation, or expansion of instructional facilities.

The Texas Legislature appropriated $55.5 million for new IFA grants in the 2017 fiscal year and TEA provided 115 awards.

However, after examining 20 applications, auditors found some school districts received grants whose bonds didn’t meet statutory requirements.

These include:

  • Nine of the 20 approved applications tested had blank project descriptions, detailed projects costs that were ineligible for IFA, or didn’t provide details of the facilities plan that would allow TEA to identify eligibility.
  • Fifteen districts based the amount of debt service eligible for IFA money on anticipated debt service schedules and failed to submit required amended debt service schedules based on the final debt service amounts.
  • On another 15 of the tested applications, TEA staff did not complete all checklist items (or made errors on the checklist) that are part of the agency’s standard review of applications.
  • One district got IFA funds for new school buses, which are not an eligible use of the grants.
  • Two districts issued bonds before applying for IFA grants, which violates the statutory requirement for the grants.

Note that auditors only examined 20 of 115 approved applications so this is likely just a small slice of the pervasiveness of the identified problems.

Auditors also determined that the TEA doesn’t have a consistent methodology to calculate and prioritize awards when school districts submit multiple applications. Because the state education code limits the amount of IFA assistance each district can receive, auditors said it’s important for the TEA to have a steady method to prioritize which projects are funded.

In one case, the TEA over-awarded a school district by $3.63 million when it failed to take into account the statutory limit of IFA grants.

Auditors also found major problems with amendment applications for IFA assistance, which school districts are required to submit when bonds have undergone changes, such as refunds before their maturity dates. Those refunds usually result in savings for the districts, which could lower the amount of IFA assistance for which they are eligible.

In all 27 amendment applications that auditors examined, school districts had not provided evidence that financial advisers had certified the present value savings schedules in the applications as required by state law.

The TEA also did not have a sufficient process for tracking and processing amendments in a timely fashion, auditors found. This is important because TEA’s own rules require it to suspend state assistance for bonds that have undergone changes until the agency has received and processed an amendment application.

While the agency uses a spreadsheet to track received amendment applications, it doesn’t have a process to identify and follow-up on bonds for which districts need to submit an amendment application.

“In addition, auditors identified inconsistent data entry in the Agency’s tracking spreadsheet that could impair the Agency’s ability to identify which amendments it needs to review,” the report says. “Based on the data in the spreadsheet, the Agency has not processed 116 (45 percent) of the 258 amendment applications it received in fiscal years 2016 and 2017.”

In its response to auditor recommendations that it strengthen controls of IFA application review and development better policies for administering the grants, TEA said it “has developed and is currently updating formal policies and procedures for its administration of the IFA.”

TEA’s media relations department didn’t immediately return an email with questions from The Texas Monitor.

Recommendations have a target completion date of Aug. 31, 2018.

Johnny Kampis can be reached at [email protected].

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