Federal agency joins criticism of Oklahoma education department's financial controls

A federal performance review of the Oklahoma State Department of Education shows that U.S. officials — like state lawmakers — have serious questions about the spending practices within the state agency that’s headed by state schools Superintendent Ryan Walters .

The 98-page report, dated July 25, addressed the status of fiscal and program monitoring indicators within the state agency for the just-completed fiscal year. In the report, the U.S. Department of Education said the review process was intended to provide oversight of and aid to state agencies as they administer federal formal grant programs for kindergarten through 12th-grade education.

The state Education Department review was conducted Dec. 11-14 and covered processes in how the agency handled about $2.72 billion in 10 different categories of federal money, including funds from Title I , Title II , Title III , Title IV , Title V , Emergency and Secondary School Emergency Relief (ESSER) and Emergency Assistance to Non-Public Schools (EANS) programs.

The grading chart for the report ranges from one star ― meaning an area requiring “urgent attention” by the state agency — to four stars, which means the agency “met requirements with commendation.” Oklahoma received one star in 32 of the 52 categories measured (62%) and two stars ― “met requirements with recommendation” ― in seven others.

In the majority of the 32 items requiring action, the federal agency gave the state agency 30 or 60 days in which to provide documentation on items, update or develop plans, take corrective action.

The federal report comes in the wake of multiple revelations of financial issues within the agency in the past two weeks. Those questions have concerned the withholding of security funds from school districts, the withholding of funds meant to purchase albuterol inhalers for school districts, the agency not fully implementing paid maternity leave for school employees mandated in a 2023 law, the agency failing to quickly implement a pay raise for teachers in school districts that don’t receive funding for teacher pay from the state ― " off the formula ," in Capitol parlance — and the agency’s slow pace in informing districts of their projected allocations of Title I money, which state Education Department passes along when the money is received. Title I money is allocated based on the number of low-income students served by families.

Last Thursday, House Speaker Charles McCall, R-Atoka, and state Rep. Kevin Wallace, R-Wellston, the chair of the House Appropriations Committee, announced an investigation into the state agency to be conducted by the Legislative Office of Fiscal Transparency . On Friday, Walters called on McCall to convene a House impeachment hearing immediately, but McCall declined.

Federal report questions the state Education Department's internal controls over finances

The federal report notes that federal law requires the state agency “to establish and maintain effective internal control over Federal awards that provides reasonable assurance it is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award.” Such a control, the report said, “serves as the first line of defense in safeguarding assets and helps achieve desired results through the effective stewardship of public resources.”

The federal agency said the state agency provided a draft internal control plan and that state officials told the federal agency the plan would be finalized “in early 2024.” The federal agency said within 60 days of receiving the report, the state agency must provide a finalized internal control plan that complies with federal law.

The federal agency also found, during its monitoring review, that the state Education Department “in some instances … lacked written procedures or was unable to locate records related to the use of Federal grant funds.” It listed eight areas in which the state agency failed to provide records, including for Title I funds, funds for the Rural Low-Income Schools program, ESSER funds and other COVID-era federal funding.

It gave the state agency 60 days “to conduct a review of its written policies and procedures, to provide any gaps in policies, and to update its policies to ensure effective internal control over Federal awards” and ensure the state agency “keeps records to show its compliance with Federal program requirements.”

The Oklahoman reported in April that more than 130 people had left the state agency since Walters took over as state superintendent in January 2023. Walters falsely claimed he fired them , when public documents show the vast majority of those people resigned or retired. In at least two cases in the federal report, the state Education Department blamed issues that were raised on the massive turnover of employees.

In a section concerning financial management, the federal agency wrote, “Due to recent and significant turnover in (state agency) staff, and to account for the resulting loss in institutional knowledge and experience, OSDE implemented an additional level of supervisory review for local applications and amendments” made by school districts concerning grants.

Another section concerning data quality noted that, “OSDE reported several issues contributing to the timely reporting of federal performance data, particularly accountability, including personnel challenges and lack of adequate documentation of processes.”

The Oklahoman sent Dan Isett, a spokesman for the state agency, a list of questions about the federal report. Isett was asked about the agency’s reaction to the report; if the agency would be able to provide evidence to the federal agency that it followed federal law in disbursing and spending federal funds; if it had provided a finalized internal control plan, as asked for by the federal agency; if anyone within the state agency had been disciplined for failing to properly manage the federal programs that run through the agency; how much it might cost the state agency to come into compliance in the areas cited by the federal agency within the allotted time frame; and if the state agency’s high turnover rate under Walters caused issues cited within the report.

In his response, Isett didn't answer those questions. He blamed Walters' predecessor, Joy Hofmeister, for the issues cited in the federal report, saying they were from the 2022-23 school year. Hofmeister left office in January 2023 and Walters has been the state superintendent ever since. Isett also said many of the issues raised in the report "have been addressed" in a report last summer from the Legislative Office of Fiscal Transparency.

"The now-dated report from the US Department of Education is the first multi-program performance review in the history of the state, and the first of any kind in seven years," Isett said. "The policies, procedures, and documents requested by the USDE were those used or developed in the 22-23 school year. The snapshot of data taken in December 2023 for the USDE report found some areas that needed improvement, the number of which are similar to other states that have undergone this process. The OSDE team has moved swiftly to address these findings, has already resolved many of them, and all will be resolved by the October deadline. Although the full report is not due to USDE until mid-October, the agency has worked quickly and diligently to resolve any remaining issues."

Multiple concerns raised by federal Education Department about how state agency spent federal funds

According to the report, the state agency also:

• Misidentified non-Title I schools as Comprehensive Support and Improvement-Low Performing in May 2023 and incorrectly allocated federal school improvement funds to those districts. “(N)on-Title I schools do not meet the … definition of a CSI-Low Performing school and, thus, should not be reported” to the federal agency as such. The state agency has 60 days to submit “revised business rules so its methodology for identifying (such) schools … is aligned with” the state agency’s approved plan.

• Doesn’t meet language accessibility requirements for state and local report cards for “(p)arents and other stakeholders who are not from the major language groups” in the state, such as those who speak Cherokee or Marshallese. The federal agency told the state agency to provide evidence “its State and local report cards are presented, to the extent practicable, in a language that parents and family members can understand.”

• Has “inaccurate” information regarding students who are eligible to receive services in its Title I, Part A Handbook and in its consolidated monitoring protocol for schools. The federal agency said the state agency’s example targeted assistance plans that it submitted for the review “appear to explain how the school is identifying eligible students. … The State’s procedures do not appear to ensure that the targeted assistance programs are identifying eligible children.” The state agency has 60 days to update its guidance, policies and procedures.

• Has failed to meet Title I requirements involving the membership of a “committee of practitioners,” a group that monitors the state Title I plan and advises the state as it carries out its responsibilities under Title I. Another requirement is that the state have a plan to “describe how low-income and minority children enrolled in Title I schools are not served at disproportionate rates by ineffective, out-of-field, and inexperienced teachers, and the measures the State will use to evaluate and publicly report the progress of the State with respect to such description.” The federal agency said the state agency “does not publicly report its progress” toward that goal. The federal agency said it wants to see “at least two years of data on these measures.”

• Has failed to develop “an established process to track or review its progress toward meeting the (Rural and Low-Income School, or RLIS, grant) program objectives and outcomes.” The federal agency said within the state agency’s application, “there is no formalized way to collect” a local education agency’s progress toward the program’s goals. The state agency has 60 days to provide the federal agency “with evidence that it has created or updated written procedures for tracking and reviewing its progress” toward meeting the program goals, or to try to amend its plan to establish new objectives and outcomes for the RLIS program.

• Provided no proof of how it handled RLIS funds. “During the RLIS portion of the (state agency) monitoring interview, OSDE staff described occasionally reallocating RLIS funds to minimize the total amount of unobligated RLIS funding left over at the end of a grant’s performance period. OSDE was not able to supply any documentation or procedures to verify how it reallocated these funds.” The federal agency said the state agency “must provide” it “with evidence that it has created or updated written procedures that reflect the full scope” of the state agency’s accounting practices for the financial management of the RLIS grant.

• Provided no evidence demonstrating it had met federal requirements to reserve not less than 5% of its total American Rescue Plan (ARP) ESSER grant to address the impact of lost instructional time, not less than 1% of the grant for evidence-based summer learning and enrichment programs and not less than 1% of the grant for evidence-based after-school programs. “Oklahoma was unable to substantively provide fiscal and programmatic information about its current reservation of these funds,” the federal agency said. The state agency has 30 days to provide that evidence.

• Might have illegally sub awarded funds from the state’s ARP ESSER state-level grant money to non-local educational agency subrecipients. The federal agency said, “Oklahoma stated that the awarding of funds to subrecipients … occurred through other offices at OSDE.” The state agency, in 30 days, must show proof those subrecipients “complied with the applicable requirements” to receive that money. The state agency also must provide documentation of the amounts awarded to each subrecipient and the reimbursement requests from the subrecipients “to ensure that funds were spent for allowable purposes. This detailed program report should include a description of any identified unallowable activities, including the amount of misspent funds for the Department to determine whether a repayment of funds to the Federal government is necessary.”

This article originally appeared on Oklahoman: Federal agency joins criticism of Oklahoma education department's financial controls