NCLB Reauthorization Speculation Continues

There was much speculation on the reauthorization of the No Child Left Behind Act (NCLB) this week. On Monday, June 25, President Bush advocated for a 2007 reauthorization at the Presidential Scholars White House event. He stated his willingness to amend the law, but retained his commitment to accountability. “I know some members and senators have got concerns about the law, and we're more than willing to talk about flexibility. But there is no compromise when it comes to setting high standards and measurement.”

The “concerns about the law” referenced by President Bush are prevalent among Democrats in Congress and, more troubling for the President, among Republicans as well. After losing control of Congress last November, the Republicans are trying to re-define the party by returning to some of their pre-NCLB tenets. That means returning responsibility for education reform back to states, and Representative Peter Hoekstra (R-MI) began that endeavor in March by introducing H.R. 1539, the Academic Partnerships Lead Us to Success Act (A-Plus), a bill that allows states to opt out of NCLB and consolidate their federal funding. The bill has secured 60 co-sponsors to date.

This week, the Washington Post made it clear that the “concerns about the law” also extend to former administration officials. On Tuesday, the Post ran an article detailing the lack of support for the current law among former administration officials, with focus on Eugene W. Hickok, a former Deputy Secretary in the U.S. Department of Education (ED). Hickok and other former administration officials said they supported the law when it was first put in place because it targeted the achievement gaps between privileged and disadvantaged students, but that the law is too rigid and the federal role too expansive.

While the week’s NCLB activity made the political tension more public, it did not affect the timeline. Staffers in the House Committee on Education and Labor are still trying to complete a bill to introduce before the end of July. They are meeting frequently on the matter, but it is not clear if they will make that deadline. The Senate education committee staffers have yet to begin work on the reauthorization. They hope to begin at the end of July and produce a bill by the fall, but by then election politics could soil all that urgent work. It is becoming conventional wisdom in Washington that Congressional Republicans have little to gain by supporting an on-time reauthorization. They can either support their unpopular President and the Democratic leadership of the education committees or delay the matter and expose it to the trials of the 2008 election cycle. As the election season approaches, the latter option appears to be growing more appealing to the Republicans.

Resources:
“President Bush Congratulates Presidential Scholars, Discusses No Child Left Behind Reauthorization,” The White House, In Focus, June 25, 2007, http://www.whitehouse.gov/infocus/education/.
Amit Paley, “Ex-Aides Break with Bush on ‘No Child,’” The Washington Post, June 26, 2007, http://www.washingtonpost.com/wp-dyn/content/article/2007/06/25/AR2007062501897.html.
Author: DAD

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Congress Calls for Investment in Early Education

On Wednesday, June 27, the U.S. Joint Economic Committee held a hearing on "Investing in Young Children Pays Dividends: The Economic Case for Early Care and Education." The House and Senate also joined to introduce S. 1374 and H.R. 2859, the Prepare All Kids Act. The week’s focus on early education underscored the recent push towards investing in young American’s education at the earliest age possible. Members of Congress and early education advocates all seem to agree that investing in education at younger ages is a good way to help ensure that future generations are healthy and prosperous.

Wednesday’s hearing included witness testimony from:
• Dr. James Heckman, Nobel Prize-winning professor of economics from the University of Chicago;
• Kansas Governor Kathleen Sebelius;
• Harriet Dichter, Deputy Secretary at the Pennsylvania Office of Child Development and Early Learning; and
• Douglas Besharo, Director of the American Enterprise Institute’s Social and Individual Responsibility Project.

Research indicates that non-scholastic, social factors are vital in determining a child’s success in school. A landmark study that followed children in the Perry Preschool Program in Michigan found that for every dollar invested in that program, $17 were saved in other costs, including those for crime, welfare and education. Dr. Heckman testified that while the No Child Left Behind Act (NCLB) focuses on measuring early cognitive ability through achievement test scores in the fourth grade, a range of other factors spur success in school and later in life, including socio-emotional skills that promote motivation, self-confidence and tenacity.

To show their support for proposals and suggestions offered from the panel, members of the committee touted that joint effort in introducing the Prepare All Kids Act. Sen. Robert Casey (D-PA), introduced the bill in May, while Reps. Carolyn Maloney (D-NY), Allyson Schwartz (D-PA), and Maurice Hinchey (D-NY) introduced the House version on Tuesday. The bill works to provide at least one year of high-quality pre-kindergarten education to all children and free for the neediest low-income children, as the bill targets children from families at or below 200 percent of the federal poverty level, about $40,000 for a family of four. The programs will use a research-based curriculum that supports children’s cognitive, social, emotional and physical development, as well as individual learning styles.

Resources:
Frank Wolfe, “Congress presses investments for pre-K programs,” Education Daily, June 28, 2007.
Author: SAS

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WIA Reauthorization Hearing

On Thursday, June 28, the House Education and Labor Committee held its first hearing in a series on the reauthorization of the Workforce Investment Act (WIA), “Recommendations to Improve the Effectiveness of Job Training.” Subcommittee on Higher Education, Lifelong Learning, and Competitiveness Chairman Rubén Hinojosa (D-TX) was joined by fellow Democrats John Tierney (MA), John Yarmuth (KY), and Bobby Scott (VA), and Ranking Member Ric Keller (R-FL) and, briefly, Howard “Buck” McKeon (R-CA).

The panelists included:
• Dr. Sigurd Nilsen, Director, Education, Workforce and Income Security Issues Government Accountability Office (GAO);
• Dr. Rachel Gragg, Federal Policy Director, The Workforce Alliance;
• Ms. Evelyn Ganzglass, Director, Workforce Development Center for Law and Social Policy;
• Dr. Sandra Baxter, Director, National Institute for Literacy;
• Mr. Wes Jurey, President and CEO, Arlington Texas Chamber of Commerce;
• Mr. Bruce Ferguson, Jr., President and CEO, Worksource.

The entire panel endorsed the critical role of the law’s training services in the emerging global economy, but recognized that the law required improvement. Three corrective themes were common. First, and possibly most important, the reauthorized law must have data that are more accurate about the enrolled job seekers. As stated by Mr. Nilsen and detailed in the June 28 GAO report, Workforce Investment Act: Additional Actions Would Further Improve the System: “We have little information at a national level about what the workforce investment system under WIA achieves.

Outcome data does not provide a complete picture of WIA services.” Second, there should be less focus on infrastructure funding and more on training, and the law should provide more flexibility regarding the sequence of training and the ability to target funds on programs that are specific to particular regional industry needs. Third, WIA’s funding should be simplified and more flexible in order to create more innovative practices and to promote the sharing of successful practices among the training centers.

The hearing was the first in a series of House hearings scheduled for July. The remaining dates are not yet scheduled. We will continue to monitor WIA reauthorization as it progresses.

Resources:
“Workforce Investment Act: Recommendations to Improve the Effectiveness of Job Training,” U.S. House of Representatives, Committee on Education and Labor, Hearings, June 28, 2007, http://edworkforce.house.gov/committee/hearings.shtml.
Author: DAD

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Appropriations Behind Schedule

As Congress heads into the July 4th recess, House Majority Leader Steny Hoyer (D-MD) is not happy with the lack of progress the House is making with the fiscal year 2008 (FY08) appropriations bills. As of this point, the House has passed only six of the twelve spending bills, far short of Hoyer’s promise to have all bills passed before the week-long July 4th recess. In addition, five of the six remaining bills have not even been reported out of committee. Although the Senate appears to be moving along on schedule, delays in the House could spell trouble for the new Democratic majority.

Throughout the 2006 midterm elections, the Democrats pointed out the Republican majority consistently failed to pass all appropriation bills before the beginning of the new fiscal year, leading to a number of omnibus bills and continuing resolutions. The Democrats promised to succeed where the Republicans had failed. The Democrats got off to a rocky start when they decided to pass one final continuing resolution for fiscal year 2007 (FY07) appropriations bills, though they blamed the former Republican majority for failing to finish work on the FY07 bills before the new majority took control. The bill passed and the Democrats declared victory, and prepared to move on the FY08 issues.
Although it took Congress longer to pass the FY08 budget resolution than Democratic leaders planned, the ball started rolling and the new majority seemed to be on its way to fulfill one of their biggest campaign promises. However, when Republicans began to complain about the earmark timetable that House Appropriations Chairman David Obey (D-WI) set up, the clouds began to form. The storm finally broke as the Appropriations Committee postponed its markup of the Labor-HHS-Education bill. As the earmark debate created additional barriers for bills already on the House floor, Chairman Obey decided to send bills back to committee, such that each bill can come to the House floor with all earmarks already attached. This put the remaining bill into a holding pattern until the first few bills are reconsidered.
When Congress comes back on July 9th, the House Appropriations Committee is scheduled to work on the Labor-HHS-Education bill, as well as all the other remaining bills. This gives appropriators four weeks to finish as much as they can before the month-long August recess begins on Sunday, August 5th. To pass all of the appropriation bills, the Congress must report every remaining bill out of committee, pass the bills through their respective chambers, go to conference, and get past the White House, which has threatened vetoes on bills that go too far over the President’s requested funding levels. House Republicans claim they have enough votes to sustain a veto, which means even if Congress can finish every bill before August, it will have about four weeks in September to reconsider any bill that the President vetoes. The final choice may be to combine multiple bills into one large omnibus appropriations package, a tactic that Democrats once condemned Republicans for using. The outlook at this point is not promising.
Author: SAS

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Supreme Court Rules on Racial Factors in School Enrollment

On Thursday, June 27, 2007, the Supreme Court, in a 5-4 vote, rejected integration plans in Louisville, KY and Seattle, WA school districts stating that the plans violated constitutional guarantees of equal protection.

Federal appeals courts had upheld both plans after some parents sued. The Bush administration took the parents’ side, arguing that racial diversity is a noble goal but can be sought only through race-neutral means. The Louisville case grew out of complaints from several parents whose children were not allowed to attend the schools of their choice. The Seattle school district said it used race as one among many factors and relied on it only at the end of a lengthy process in allocating students among the city's high schools. Seattle suspended its program after parents sued.
Chief Justice John G. Roberts, Jr., who delivered the opinion of the Court stated, “[t]he way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” Justices Antontin Scalia, Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito, Jr. also concurred in part.
Justice Kennedy stated, in a separate concurring opinion, that while he agreed with the decision, he disagreed with that reasoning and that race may be a component of school plans designed to achieve diversity. “A district may consider it a compelling interest to achieve a diverse student population,” Kennedy said, "[r]ace may be one component of that diversity.”
Justice Stephen Breyer, in a dissent joined by Justices David Hackett Souter and Ruth Bader Ginsburg, said Roberts’ opinion undermined the promise of integrated schools that the court laid out 53 years ago in its landmark decision in Brown v. Board of Education. Justice John Paul Stevens filed a separate dissent and called the Chief Justice's reliance on Brown to rule against integration “a cruel irony.”
Justice Clarence Thomas, the Court's only black member, wrote a separate opinion endorsing the ruling and taking issue with the dissenters' view of the Brown case. “What was wrong in 1954 cannot be right today,” Thomas said. “The plans before us base school assignment decisions on students' race. Because ‘our Constitution is colorblind, and neither knows nor tolerates classes among citizens,’ such race-based decision making is unconstitutional.”
“The last half century has witnessed great strides toward racial equality, but we have not yet realized the promise of Brown. To invalidate the plans under review is to threaten the promise of Brown.” Breyer stated in his dissent. “This is a decision that the Court and the Nation will come to regret.”
Resources:
Parents Involved in Community Schools v. Seattle School Dist. No. 1, et al., located at http://www.supremecourtus.gov/opinions/06pdf/05-908.pdf
http://www.insidehighered.com/news/2007/06/28/supreme
http://hosted.ap.org/dynamic/stories/S/SCOTUS_SCHOOLS_RACE?SITE=LABAT&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2007-06-28-10-41-05
Author: TRW

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Audit Report Questioning Fiscal Flexibility in Schoolwide Programs

On June 20, 2007, the U.S. Department of Education’s Office of Inspector General (OIG) released a blockbuster audit report questioning long-standing guidance on the way states and school districts should document financial information in schoolwide programs. The audit is available on the U.S. Department of Education’s (ED) website at: http://www.ed.gov/about/offices/list/oig/auditreports/a05g0031.pdf

OIG audited a school district to determine if the district complied with financial accountability requirements under the No Child Left Behind Act (NCLB) programs. The objective of the audit was to determine if costs were allowable under the program, necessary, reasonable, allocable and spent in accordance with approved budgets. During the audit, OIG concluded the district did not provide appropriate time and effort records showing how much time employees spent on various cost objectives. Some of these employees worked on schoolwide activities in schoolwide programs.
The State (which is ultimately responsible for audit resolution in state-administered programs) objected, noting that funds lose their character as state or federal funds in schoolwide programs. Therefore, it would not make sense to require schoolwide employees to maintain documentation of their time and effort. The state pointed to ED’s Non-Regulatory Guidance on Designing Schoolwide Programs (March 2006), which states:
Schoolwide program schools use Title I funds to meet the needs of all students in the school, as determined through a comprehensive needs assessment. Individual students are not identified as eligible to participate. No distinctions are made between staff paid with Title I funds and staff who are not.
The State argued that if there is no distinction between staff supported with federal funds and staff that are not, it does not make sense to require employees to keep documentation of which programs they work on.
OIG rejected this argument, noting the schoolwide schools did not actually consolidate their funding in their accounting systems. The OIG states that “funds were accounted for in the same way whether or not the individual was employed by a schoolwide or non-schoolwide school.” Without evidence that the school district used an accounting method to consolidate schoolwide program funds at its schoolwide schools, OIG found no basis to distinguish between schoolwide and non-schoolwide costs.
OIG questioned $210,000, but estimated the total amount of unsupported costs might be as high as $2,360,000. OIG recommended that ED’s Office of Elementary and Secondary Education determine the full amount of unsupported costs and require the State to repay that amount.
This audit report highlights longstanding confusion over the extent of fiscal flexibility available in a schoolwide school. Although ED has encouraged schoolwide schools to “consolidate” their funding (and, in fact, NCLB requires states to lift all barriers to the consolidation of schoolwide funds and to encourage school districts to consolidate schoolwide funding), it has never provided clearly written guidance on what consolidation means. In May 2006, ED released Non-Regulatory Guidance on Title I Fiscal Issues attempting to clarify the consolidation requirement by introducing the notion of a “single account.” The guidance provides:
A school operating a schoolwide program that consolidates in a single account and uses, in a schoolwide program, funds from other Federal education programs administered by the Secretary (except Reading First) is not required to maintain separate fiscal accounting records, by program, that identify the specific activities supported by those program funds. The school must, however, maintain records that demonstrate that the schoolwide program, considered as a whole, addresses the intent and purposes of each of the Federal education programs whose funds were consolidated to support it.
From the start, however, this guidance raised more questions than it answered because it never explained what a “single account” is, or what steps a school must take in order to consolidate funds into a single account.
ED has been particularly inconsistent in how it treats time distribution in schoolwide programs. In guidance issued under the Improving America’s Schools Act of 1994, the predecessor to NCLB, ED stated that employees working exclusively on schoolwide activities do not need to maintain any time and effort records. This guidance was written by ED’s Office of Elementary and Secondary and Education. Yet, ED’s Office of the Chief Financial Officer (OCFO) later advised that a schoolwide program represents a single cost objective; accordingly, semi-annual certifications must be kept. The OCFO’s position was also reflected in the OMB Circular A-133 Compliance Supplement. This conflict was supposed to be clarified by ED’s May 2006 fiscal guidance, in which ED stated that schoolwide schools consolidating their funds into a single account are not required to maintain any time and effort records, while schools not consolidating their funds into a single account must follow the rules of time distribution set out in OMB Circular A-87. Without an explanation of what a “single account” is, it is difficult to understand the practical implications of this guidance. Further, it remains unclear whether a schoolwide program constitutes a “single cost objective” if a school does not consolidate its funds into a single account.
This audit finding may finally force a confrontation over what it means to consolidate funds in a schoolwide program and what practical implications that has for financial operations. Although the finding only specifically addresses time and effort certification, this issue impacts the documentation of any costs associated with a schoolwide program, as well as other financial management issues such as procurement, inventory management, cash management and record keeping. Ultimately, it is up to ED’s Office of Elementary and Secondary Education to determine whether to sustain the audit findings.
This audit also underscores ED’s overall focus on fiscal issues. It is our understanding that OIG is performing a number of financial accountability audits around the country.
Our firm has contacted the OIG and OCFO to get clarification on the policy interpretations underlying this audit report. We plan to address the issue of consolidated funding in a schoolwide program in great detail at trainings this fall, including AEFFA in October and our Forum in November. We will keep you posted on any additional information we receive from ED on this very important issue.
Author: SLK

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Congress Passes HEA Extension

On Wednesday, June 27, the Senate passed S. 1704, a 30-day extension for the Higher Education Act (HEA), which is set to expire on Saturday. The House, which had passed its own four-month extension earlier this session, followed suit and passed the Senate extension so the bill can go to President Bush before the Saturday deadline. The extension will run through July 31, 2007. Considering the week-long recess next week, this leaves Congress with less than a month to complete work on the HEA reauthorization.

Last week, the Senate Health, Education, Labor and Pensions (HELP) Committee unanimously passed its HEA bill. The Senate bill, S. 1642, increases the amount of information that schools and lenders must provide students about their loans. The bill will also ban lenders from providing school financial aid officials with perks such as student aid assistance in order to be on schools’ “preferred lender” lists. The measure would shorten the form that students must complete for financial aid and would direct the U.S. Department of Education (ED) to track tuition increases and assess the drivers behind increasing college costs, putting schools on notice that the government is concerned about rapid tuition increases. The Senate has not scheduled time for a floor debate for the reauthorization, and the House Education and Labor Committee has not marked up its own reauthorization, so there is still a lot of work to do.
Although the House has not moved on to HEA reauthorization, both Congressional panels passed a higher education reconciliation bill, as directed by the joint budget resolution Congress passed in May. The Senate bill cuts federal subsidies to lending companies by as much as $19 billion. The bill will channel most of those savings to student aid and ease repayment rules for borrowers. It also creates a new entitlement funding stream for Pell grants that would not be subject to the annual appropriations process. The bill intends to boost the maximum Pell grant by more than $1,000, to $5,400 by 2011. The bill would establish new "Promise Grants" for the neediest Pell recipients, cap student loan repayments at 15% of discretionary income and offer loan forgiveness for some public-service employees. The House passed a similar measure earlier this month, though neither chamber has considered their bills on their respective floors.
Resources:
Libby George, “House Clears Temporary Extension of College Aid Law,” CQ Today, June 28, 2007.
Author: SAS

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More Focus on Internal Controls in OMB Circular A-133 Revision

The Office of Management and Budget (OMB) published a revision to OMB Circular A–133 “Audits of States, Local Governments, and Non-Profit Organizations” in Tuesday’s (6/26/07)Federal Register. The revision updates terminology and definitions related to internal controls and simplifies reporting requirements to the Federal Audit Clearinghouse (FAC).

The revisions to the internal control terminology align OMB Circular A-133 standards with changes in the Statement on Auditing Standards issued by the American Institute of Certified Public Accountants (AICPA) and the Government Accountability Office’s revisions to Government Auditing Standards. Rather than requiring auditors to identify reportable conditions over internal controls, the revised OMB Circular A-133 will require auditors to classify findings as a “control deficiency,” “significant deficiency” or “material weakness.” The definition of each of these categories is available at: http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-12320.pdf. In addition, OMB announced the release of AICPA Auditing Interpretation No. 1 of Statement on Accounting Standard No. 112, entitled “Communicating Deficiencies in Internal Control Over Compliances in an Office of Management and Budget Circular A-133 Audit.” The Interpretation is available at: www.aicpa.org.
Starting on January 1, 2007, the auditee is no longer required to submit multiple copies of the reporting package to the FAC. Instead, only one copy is necessary, except for Part III, item 8, which states that all required agencies receive a copy of the package.
As a practical matter, these revisions may lead to an increase in the number of internal control findings reported in single audits. They may also change how auditors determine which programs to audit and how to determine an auditee’s overall risk-level. This could have a significant impact on recipients of federal education grants. As we have previously reported, the U.S. Department of Education (ED) has become increasingly concerned about managing risk levels in state and local education agencies. It has developed a scorecard to assess risk levels across the country and has begun to visit states to discuss risk mitigation strategies. Ultimately, ED plans to use its assessments to determine who to monitor when, and how closely to scrutinize state and local practices. Although we do not know precisely what criteria ED uses as part of its risk determination, ED officials have stated they review single audit findings – especially findings related to internal controls.
These revisions apply to audits of fiscal years ending on or after December 15, 2006. OMB invites interested parties to submit comments by August 27, 2007. Instructions for submitting comments are available at: http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-12320.pdf.
Author: TRW, SLK

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