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Analysis: Cash-strapped school districts burdened by federal grant regulations

By DAN BENSON

Fall is the busiest time of the year for Wisconsin school administrators as they deal with the annual flood of incoming students and teachers, new classes and programs — and problems.

So Dana Neumann was glad to hear that the federal government is relieving her of a long-standing bureaucratic burden that many see as duplicative, costly and inconsequential: the so-called annual Single Audit of federal funds that flow to local school districts.

“It’s a lot of work for one person to take on” preparing for her district’s 58-page audit performed by an outside accounting firm, said Neumann, director of business services for the Weston School District near Cazenovia in Richland County.

Neumann is off the hook this year because bureaucrats in the federal Office of Management and Budget decided to exempt from the requirement districts that spend less than $750,000 annually in federal grants. The old threshold was $500,000, and Weston each year spends a little more than that.

Thousands of government agencies, school districts and nonprofit organizations nationwide, and hundreds in Wisconsin, will be exempt from the Single Audit from now on as a result of the decision, which also requires the state Department of Public Instruction to do more follow-up on problems brought up by audits.

But hundreds of other districts in Wisconsin will still be saddled with the exercise, which adds little or no value to improving education. Thousands of hours of staff time and millions of tax dollars statewide will still be spent by school districts to prepare audits of the almost $600 million of federal grants still be subject to Single Audit requirements.

The very fact that even federal authorities apparently see little or no reason for the federal audits of districts receiving hundreds of thousands of dollars annually begs the question of what larger districts gain from the requirement, what they lose and whether there is a better way.

In Wisconsin, approximately $900 million in federal grants flow to the state’s 424 school districts. Those funds pay for everything from programs for disadvantaged children to school lunches, transportation, teacher training and physical education. No data exists on exactly how much Single Audits cost school districts statewide, officials say, but each audit costs $1,500 to tens of thousands of dollars.

“It’s not a lot (of money), but when you’re a small district, even $1,500 can pay for four or five Chromebooks,” said Karie Bourke, business services agent with the Walworth Joint School District No. 1. Her district is now exempt from the audit. 

School districts already perform a state-required “regular” audit of their finances, making the Single Audit redundant, some officials said. They are often uncertain how much federal money they’ve spent until the regular state audit is completed. So they follow a two-step process, in which an accounting firm prepares the state-required audit, and then, if it crosses the threshold, conducts a second audit at additional cost.

For larger districts where it’s certain their spending is above the threshold, the two steps are combined. Smaller districts contend that the federal requirements treat them the same as much larger districts, which can muster a corps of accountants and secretaries. Single Audit standards are “influenced by large accounting firms that don’t have little 3 people offices,” an unidentified school official is quoted as saying in a state DPI presentation used to train school business managers.

Even when audits find problems, they are often inconsequential, can’t be corrected because of limited staff, are never rectified or just missed.

For instance, the 2015 audit of the Fort Atkinson School District in Jefferson County was the third in a row that found the district did not keep adequate time sheets for staffers whose salaries were paid with federal grants. Questioned costs for 2015 totaled $236,000. In the West Allis-West Milwaukee district, the 2015 Single Audit determined that $2.3 million in teachers’ pay was not accounted for. It was something the district had never done, but it had never been noted in prior audits, officials said.

The problem is nationwide and one that some say needs to be rectified — and quickly, critics say.

“The (grant) system is a complicated mess, and it is getting worse all the time,” said Chris Edwards, director of tax policy studies at the Cato Institute in Washington, D.C., and editor of www.downsizinggovernment.org. “At all levels of the aid system, the focus is on regulatory compliance and spending, not on delivering quality public services.”

The rationale for the change in threshold is to reduce paperwork while increasing oversight by requiring DPI to do more follow-up. That begs a fundamental question: If the feds think the state (and, by extension, local schools) can do a better job of regulating how they spend federal dollars, why not go all the way and relieve all schools and the DPI of the federal burden altogether so they can focus on things that actually improve the education of our children?

Dan Benson is editor of the Wisconsin Policy Research Institute’s Project for 21st Century Federalism, of which this “Federal Grant$tanding” story is a part (wpri.org). Benson is a former reporter and editor with the Milwaukee Sentinel, Milwaukee Journal Sentinel and Gannett Wisconsin.

© 2015 Wisconsin Policy Research Institute, 633 W. Wisconsin Ave Suite 330, Milwaukee, WI 53203
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