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Education Funding

Ed. Dept.: 4 States Are Ripe for Stimulus Slip-Ups

By Michele McNeil — September 23, 2009 2 min read

Buried deep within the latest GAO report on states’ use of economic-stimulus funds is some interesting insight into how the U.S. Department of Education is trying to minimize the potential for fraud and misuse of money.

The first step, apparently, is to identify “high risk” states and give them intensive technical assistance to help them implement good practices in using stimulus funds. According to the report (advance to page 61 of the PDF document), states were selected because of things “such as the number of monitoring or audit findings in the state and the level of turnover in education leadership within the state.”

The four states that got the stimulus equivalent of their names written on the chalkboard are: California, Illinois, Michigan, and Texas. The District of Columbia and Puerto Rico also made the list.

The department will provide these states and territories with both financial and programmatic expertise, which could include on-site visits, according to the report by the Government Accountability Office, the investigative arm of Congress.

These six potential troublemakers have been identified as posing risks to a variety of programs, meaning the Education Department is concerned about their use of all stimulus aid, from State Fiscal Stabilization Fund money to smaller grant programs.

The department has also identified an additional 12 states as “high risk” when it comes to use of Title I funds—based on previous monitoring findings, state coordinator turnover, and size of the Title I allocation. They are: Arkansas, Colorado, Delaware, Florida, Idaho, Louisiana, Massachusetts, Missouri, New Jersey, New York, North Carolina, and Oklahoma.

It’s apparently a good thing that the Education Department is closely monitoring Illinois and California, because GAO already found cash-management problems with those two states. (Fast forward to page 65 of the PDF document.) Illinois, for example, is apparently sending State Fiscal Stabilization Fund money to local school districts before they’re prepared to spend the funds, which is a red flag for auditors.

And some school districts in California have large pots of stimulus funds just sitting around after the state drew down 80 percent of its Title I funds and immediately sent the money to districts, apparently before they were ready to spend it. (The Education Department’s inspector general raised red flags about this general issue in California in March.) This time, GAO auditors surveyed 10 districts in California that had received the largest amounts of Title I funds and found that seven had not spent any of these funds and that all 10 reported large cash balances--ranging from $4.5 million to about $135 million.

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