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Education dollars: $3m in jeopardy after audit

State House Bureau

October 16. 2017 10:02PM

CONCORD — The federal government is not happy with how New Hampshire accounted for millions in educational grants since 2014, and could demand that some of the money be repaid, depending on the result of an audit to be conducted early next year.

“Our estimate is that a little more than $3 million is at risk,” Commissioner of Education Frank Edelblut said. “Obviously we know a good bit of that was spent correctly, but can we substantiate that? We don’t know what will be clawed back or not clawed back.”

The programs in question support low-income families, English learners and disabled students through portions of education law known as Title I, Title II and Title III.

In 2017, those three programs, along with School Improvement Grants, brought nearly $55 million to local school districts, with 1 percent allowed for administration at the state level.

In 2014, the U.S. Department of Education issued new guidance on how state education officials should account for the distribution of federal education dollars to local school districts. Several states, including New Hampshire, were audited to determine how they were complying.

The review concluded that the state did not adequately monitor federally funded programs at the local level or have accounting systems in place to ensure compliance with federal requirements by local school districts.

“This lack of fiscal oversight creates a significant risk that (local school districts) could mismanage federal programs, resulting in potential unallowable expenditures or instances of waste, fraud, or abuse,” according to the “Pilot Fiscal Review” from the federal Office of Elementary and Secondary Education.

The report was presented to the state Department of Education in July but not publicly released until late September. The state has until Oct. 18 to respond with a plan that addresses the most serious concerns.

Could prove costly

The practice that could prove most costly to the state is the method that was used to calculate how much of the federal money could be used to pay personnel in the Department of Education for administration of the grants.

The department determined a fixed amount from each grant for administration in its annual budget, and deducted the funds accordingly, in violation of the federal guidelines.

“Part of this uniform guidance clearly established that all personnel expenditures must be supported by records that accurately reflect the work performed,” said Edelblut. “It clearly says that budget estimates alone do not support the charges.”

Each pay period, NHDOE would allocate the total salary charged for each employee to individual programs according to the pre-determined percentages, with no after-the-fact evaluation as to whether the charges accurately reflected the actual time worked by the employee on activities related to any single program.

Edelblut, a CPA with extensive background in financial management, has since changed the accounting method.

“Employees now keep track of the hours they work on programs; we charge the programs for the level of effort expended; and we support that with the underlying documentation for the time claimed,” he said.

Claw back coming?

That’s going to depend in large part on an independent audit of the expenditures from fiscal years 2014-16 that the state is required to do as a result of the federal findings.

The accounting firm of KPMG has been retained and is expected to launch the $25,000 financial review some time after it completes the audit of the state fiscal year due by the end of December.

Gov. Chris Sununu said he found the results of the Pilot Review “disappointing and troubling.”

“I appreciate the work the commissioner and his departments have done to respond to the action steps, as well as their efforts to ensure that systems are in place to achieve compliance going forward,” he said in a statement.

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