Resolution of 2012 Orcas School District Audit

from Barbara Kline, Superintendent, Orcas Island School District

Recently, there have been some questions about audit results of our 2010-2011 OASIS program. In the hopes of bringing clarity to the issue, I offer this timeline of events, the results, and how the OISD has responded.

In the spring of 2012, Alternative Learning Experience(ALE) programs around the state were audited. This audit covered fiscal year 2011 which was the 2010-11 school year. OASIS K-12, the ALE program in the Orcas Island School District was a part of that audit cycle. Many of the ALE programs around the state received large and serious audit findings. The size and scope of the audit issues caused a lot of discussion in the state and in the Washington state legislature. You can see the ALE audit report here:

https://www.sao.wa.gov/EN/Audits/LocalGovernment/Schools/Pages/default.aspx

In the 2012 audit, OASIS K-12 received a management letter. Our document from the Orcas Island School District no. 137, Exit Conference, May 7, 2012 states: “The management letter communicates issues not significant enough at this time to include as a finding in our report.”

The Management Letter, Orcas Island School District 137, September 1, 2010 through August 31, 2011 states:

“In the 2011 school year, the District reported an average 667.72 full-time equivalent (FTE) students district wide and received approximately $3.85 million in enrollment and teacher education and experience (staff mix) funding. The District’s ALE program had an average of 256 students enrolled and generated approximately $1.5 million of this.

During our audit of the ALE enrollment in the OASIS program we found:

For out of district students, state regulations require the District to obtain a written release from the resident District before the student can be counted for enrollment. The District counted five out of District students for a total of nine months prior to the written release.”

In other words, there is a required form for students who want to attend school in our district who do not live on Orcas or Waldron Island. It is a written release form that allows the district in which the student lives, to releases the student’s FTE (full time equivalent) to another district. The state pays each district based on the number of student FTE reported each month.

In order to count an out of district student as enrolled, the date when the resident district signed the form must be earlier than the date when we counted the student. For example, if the count date is September 5th, we cannot count a student whose form is dated September 6th. This release form has to be completed each year for each out of district student, even if the student was enrolled the year before.

The intent of the requirement is to make sure that the state is paying for that student in only one, not two districts, at a time.

The Management Letter continues with:

“We found the District over-reported FTE by 1.10 which resulted in overpayment of $6,354. The error rate of 14.64% projected on the entire funding results in an approximate overpayment of $215,905. We also determined that the District under-reported FTE by 1.85 which resulted in an underpayment of $10,673.”

The Management Letter recommended that we obtain written release forms for all out-of District students and that we work with the Office of the Superintendent of Public Instruction (OSPI) to resolve the over/underreporting of FTE.

We recognized that we lacked adequate controls for required paperwork and took steps to improve before the audit in 2012. We increased office staff in OASIS K-12 to provide more time for staff to carefully check each file before enrolling or re-enrolling students. In addition we undated our pre-enrollment checklist to help staff identify that required paperwork is complete prior to entering the student into the main computer student management system, Skyward. We established a system of cross-checks between the Skyward and Wings data systems to ensure that the student data and files are consistently up to date.

We have become more absolute with parents so that they clearly understand that we cannot enroll their student without the required paperwork. Students are not entered into Skyward until their file is complete. Students are not even placed on the waiting list until we have received all of the paperwork required.

This was a paperwork error. While we recognize that paperwork is required, we also know that all of those students had the required, approved written student learning plan and were provided with the appropriate educational services. So while we lacked the properly signed release form, we did provide an excellent education for these students. To our knowledge, none of the students who were counted at Orcas before the date on their release form were also counted in another district for the same month.

As recommended by the auditors, we have worked with OSPI to resolve the issues of overpayment and underpayment. Because the auditors noted that we had one of the best alternative programs that they had seen and because we had a letter and not a finding, we did not expect to have to pay back all of the questioned funds. However, because the audit findings for alternative learning experience programs were so large, the state legislature has directed OSPI to collect on ALE audits.

Therefore, after working with OSPI who noted that the sole error was the lack of properly signed release forms for some students, we have reduced the amount we are required to pay OSPI to $108,000. The funds will come out of general fund money over the next three years. We have arranged for payment to occur in April when we usually have our highest fund balance level because of local tax receipts. It could be that some of the districts with very large findings will convince the legislature to collect only part of the money. In that case, we may not have to pay for each of three years. We will see what happens with that.

There is no question that this was our error; we have accepted that responsibility from the beginning with the auditors and OSPI. There are a lot of rules and paperwork for OASIS K-12 and it is our job to be sure that everything is correct. We have worked to ensure that this error, or other costly errors, do not affect our district in the future.