By GARRY RAYNO, InDepthNH.org
CONCORD — The data used by the Department of Education to flag nearly 25 percent of the eligibility decisions for Education Freedom Account students in a compliance report, will not be made available to the Legislative Budget Assistant’s Office for a performance audit of the program required by law.
The program has grown exponentially since its inception three years ago, but whether the non-profit organization administering the program is properly verifying eligibility requirements for the program as well as differentiated state aid, or if parents are spending the grants for qualified educational expenses and the organization is identifying any misuse of funds will be nearly impossible to determine under limitations set by the Department of Education and backed by the Attorney General’s Office.
The department and the attorney general have said the data from the program belongs to The Children’s Scholarship Program New Hampshire under the state’s “standard contract,” and not the state, although the contract with the organization states the data belongs to the state.
The organization has not been willing to share the granular data with the LBA, and the DOE is not willing to ask the organization to allow unfettered access by the LBA, but the department is willing to share documents it possesses on the program and its oversight of the program’s practices and policies.
The Joint Legislative Performance Audit Committee Tuesday approved a scaled back scope statement of what the audit will entail given the limitations with a target for completion in the Spring of 2025, which could impact what lawmakers are willing to appropriate in the new state biennial budget for the EFA program.
Several members of the audit committee expressed frustration there has been little progress expanding the scope of the audit beyond what Education Commissioner Frank Edelblut told the committee would be made available to auditors in March.
Sen. Rebecca Whitley, D-Hopkinton, said not much has changed since last March when some members of the committee expressed concerns as legislators they may not be able to do their job to ensure public money is used appropriately.
“This is a situation where millions upon millions of public dollars are put into a program operated by a private organization and due to the Department of Education’s unwillingness to allow the LBA to go in and audit directly this organization which is utilizing and giving out public dollars,” Whitley said. “The public puts trust in us to make sure public dollars are being used appropriately. Do you have any concerns based on the way this has proceeded, we are not going to be able to do that?”
LBA Audit Manager Paige Lorenz said her office would fulfill its obligation and will produce a report. If after the report is issued, legislators have concerns about the scope it would be their prerogative to make changes.
Lorenz said the auditors should be able to report observations of problem areas and the risks, but will not be able to determine the depth of the risks.
Rep. Mary Jane Wallner, D-Concord, asked if the auditors would be able to use the compliance report recently issued by the department reviewing data from the first two years of the program last fall.
Lorenz said they could review the report but have no way of independently verifying the findings. She said if the department retained the documents they could be available when they audit the agency’s oversight, noting it would be a good start.
Wallner asked if the auditors anticipated any further conversations with Children’s Scholarship Fund, and Lorenz said her understanding was they would not have access to their data.
The department’s compliance report indicated 12 of 50 students’ applications filed for the first two years of the program — the 2021-2022 and 2022-2023 school years — indicated the CSF’s New York City office which processes the applications and decides eligibility, did not use required documentation such as adjusted gross income or valid documentation to satisfy special education and English as a second language requirements in approving the applications, according to an analysis by InDepthNH.org that first reported the findings of the report.
In several cases, the organization dismissed adjusted income on tax returns that were above the threshold saying the families’ financial situation had changed, instead using check stubs to determine net income, which is not the same as adjusted gross income.
Once a parent is eligible for the program, they no longer have to meet income requirements for their children to continue to participate until they either graduate or withdraw.
The organization’s problematic eligibility decisions resulted in the Department of Education requiring the organization to reverify all the applications from the first two years of the program.
The compliance report did not indicate if the organization has completed the re-verification.
At the performance audit meeting Tuesday, LBA audit supervisor Jay Henry told the committee their office has audited third-party organization’s use of state or federal money like the Community Action Program, noting the contract may be different.
Joint Legislative Performance Audit Committee Chair, Sen. Cindy Rosenwald, D-Nashua, noted the committee had seen the contract with Children’s Scholarship Fund, and “it pretty clearly states the data belongs to the state.”
She noted the Executive Council approved the contract with that provision, which is similar to the one for the Medicaid managed care contracts with three health organizations which gives the department access to all of the data they collect.
Henry said that is not the education department’s interpretation. His office’s initial view was they would ask for the data, look at it and do the audit, he said.
“The (DOE) saw it as a program set up away from the state, run by the scholarship program and with a sort of separation there. We are abiding by their interpretation,” Henry said. “You’ll still get a good audit, it just won’t be as thorough as you normally have.”
Whitley noted it is an unusual situation with the department having little involvement in the EFA program and instead turning over almost all its authority to the scholarship fund, “resulting in a very, very troubling lack of transparency for a significant amount of state dollars.”
Although the money the organization had to return to the state after the compliance report was relatively small — $18,163 of the $103,507 the state found at issue in its compliance review — compared to the $45 million the state has spent on the program over its first three years.
However, using last school year’s 4,875-student enrollment, the percentage of problem applications translates into about $2 million and much more if you use what the state flagged for potential money owed from the 50 applications.
Sen. Howard Pearl, R-Loudon, asked if the LBA had encountered similar problems with other performance audits, and Christine Young, Audit Division Director, said she does not recall running into an issue of this magnitude.
“We’ve done audits of departments with contracts with third parties, but because the scholarship organization runs most of the program, this is different,” she said. “We’ve worked through minor scope limitations before and we have always been able to come to agreement and received the records we needed to do the audit.”
The law requiring the audit requires the LBA to review: eligibility of participants, controls for determining qualifying expenditures, identification and recovery of ineligible disbursements, procedures and controls for transferring funds to the scholarship organization, procedures and controls for the phase-out grants, public reporting of participation, student outcomes, and expenditures, and the demographics of qualifying applicants for the first year of the program.
In the scoping statement, the LBA notes its audit will be limited to determining how effectively the department oversaw the program to date by determining initial and continued eligibility of students to participate in the EFA program and their eligibility to receive differentiated aid, each student’s account is credited with the correct amount of funds, the funds are only used for qualified educational expenses, identifying, reporting, and addressing cases of suspected misuse of funds, and ensuring educational service providers are compliant with program specifications.
Auditors will also assess if the department had adequate controls over the scholarship organization’s compliance with program requirements, monitoring the CSF and ClassWallet contracts, students grants are correct, identifying and recovering ineligible grants, transferring EFA funds to the scholarship organization, ensuring administrative fees paid to CSF are correct, ensuring phase-out grants paid to school districts are correct and public reporting of participation, student outcomes and expenditures.
The scope statement also notes the limitations of the audit due to the limitations placed on data.
“According to the NHED Commissioner and legal counsel, NHED cannot be compelled to request this information from the CSF for LBA audit purposes, as requiring NHED to request these items from CSF would violate the separation of powers between the Legislative and Executive branches,” the scope statement notes.
The program was touted as helping low-income parents find alternative education opportunities for their children if they did not do well in a traditional public school setting.
However about 75 percent of the state money goes as subsidies to students who were in religious and private schools and homeschooling before the program began.
When the program began, the income cap was 300 percent of the federal poverty level, but was raised last year to 350 percent and Republican lawmakers attempted to raise the threshold again this session, but the attempt failed.
Garry Rayno may be reached at garry.rayno@yahoo.com.
