Budget & Tax, Education

Major irregularities found in school spending reports

July 26, 2022

Ray Carter

A cursory review of the state’s Oklahoma Cost Accounting System (OCAS), a program that compiles financial data from all public-school districts, quickly identified significant irregularities, including reports showing Oklahoma schools spent nearly a quarter-million dollars on firearms that were labeled as nutrition services and other non-weapon categories.

“In the 2020-2021 academic year, districts spent $257,425 on firearms and ammunition, which was coded across 14 separate function codes, including over $9,300 coded under ‘child nutrition programs and services,’” said Bradley Ward, program evaluator for the Legislative Office of Fiscal Transparency (LOFT).

LOFT staff found more than $135,000 in reported firearm and ammunition purchases were coded as “instruction,” while other reported school firearm purchases were listed as “psychological services,” “curriculum development services,” “instructional staff training services” and “state and federal relation services.”

Those financial-reporting irregularities were identified during LOFT’s review of the state’s K-12 public-school funding. LOFT’s report was presented to an oversight committee of state lawmakers during the group’s July 26 meeting.

The Oklahoma State Department of Education (OSDE), led by State Superintendent of Public Instruction Joy Hofmeister, is responsible for the OCAS system.

LOFT officials concluded OSDE has provided little to no meaningful oversight of school spending.

“After speaking with school-finance staff and reviewing OSDE’s processes, LOFT arrived at a conclusion similar to that of the auditor,” Ward said. “There is oversight of educational funding by OSDE, but not true accountability.”

As referenced by Ward, this is the second time a watchdog entity has dinged Hofmeister and the OSDE for lax financial oversight.

A 2020 state audit of Epic Charter Schools said that the OSDE typically “accepted at face value” any data reported to the agency by school districts “without on-site follow-up,” and that in some instances “a process to verify the accuracy of the reported information did not exist” at the Oklahoma State Department of Education.

The audit said the Oklahoma State Department of Education had “no process in place to evaluate actual compliance with the written policies and procedures, or with applicable laws, statutes, or Administrative Rules” that govern the use of funds [emphasis in original].

The LOFT report also follows a recent dust-up between Hofmeister and Oklahoma Secretary of Education Ryan Walters, whose duties include reviewing and signing off on OSDE spending that exceeds a certain threshold.

When OSDE recently asked Walters to approve a $12 million contract with a vendor in Tulsa, the agency balked for several weeks when Walters requested that the department provide additional information, including copies of associated reports on the program’s spending and outcomes. Hofmeister even issued a press release attacking Walters and Gov. Kevin Stitt before ultimately agreeing to provide the requested information.

During the LOFT oversight committee meeting, Carolyn Thompson, chief of government affairs for the Oklahoma State Department of Education, said OSDE officials were “surprised” when informed of the coding problems identified by LOFT’s cursory review.

When the agency reached out to the school districts that provided the questionable reports, she said school officials “all said that they did not spend this money on firearms and ammunition” and blamed the errors on the vendors hired by the districts to handle financial reporting.

“Each individual district uses their own accounting system,” Thompson said.

Hofmeister mostly dismissed calls for the agency to be more proactive.

“OCAS is not a mechanism for forensic or investigative auditing,” Hofmeister said, instead describing the system as a mere “data-collection tool.”

“Ultimately, local school boards and districts and their superintendents are responsible for the use of taxpayer funds, both local, state and federal,” Hofmeister said.

The state superintendent said she has hired only six people to work on the OCAS system at OSDE, and Hofmeister said her agency will require a significant increase in taxpayer funding if lawmakers expect OSDE to provide more credible financial oversight of school spending.

“There is certainly a way that we are able to do this kind of work, but it would mean an exponential growth to the State Department of Education personnel to be able to shift the model,” Hofmeister said.

Ward noted the OCAS system currently contains 2,824 different expenditure codes and 1,176 different revenue codes, and that OSDE officials must manually flag problems they find in OCAS reporting when incompatible data entries are identified. He said the system could be improved with automated coding-compatibility checks that would ensure “that common coding errors are not repeated.”

LOFT officials identified numerous problems involving millions of dollars in state school spending after only 16 hours of review of the OCAS system.

Among other things, LOFT officials found the same expenditure can be coded in multiple ways in OCAS. Ward said LOFT officials identified more than $5.8 million in questionable coding of expenditures listed as instructional expenses.

“Items such as laundry, plumbing services, and transportation insurance were found to be coded under ‘instruction,’” Ward said.

At the request of Gov. Kevin Stitt, the office of Oklahoma State Auditor & Inspector Cindy Byrd is currently conducting a comprehensive audit of the Oklahoma State Department of Education.

When he announced his request, Stitt said, “As we make record investments in our public education system, students and parents deserve to know that their schools are spending our tax dollars appropriately and in accordance with the law.”