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Pilot Fiscal Review Report
The New Hampshire Department of Education (NH DOE) received an audit report from the U.S. Department of Education's (US ED) Office of State Support (OSS) for an audit completed last year, in 2016, and is in the process of preparing a response to that report.In 2014, US ED released new guidance for states, the Uniform Administrative Requirements, Cost Principals, and Audit Requirements (Uniform Guidance), that specified principles by which states manage the fiscal and administrative requirements of federal grant programs under both the No Child Left Behind Act (NCLB) and the Every Student Succeeds Act (ESSA).
The US Ed followed up with pilot audits – fiscal reviews – of states to determine the effectiveness of the implementation of the Uniform Guidance. New Hampshire was one of five states that agreed to allow OSS to complete such a fiscal review.
In September 2016 under the previous administration, a team from US ED’s OSS completed a fiscal review of the NH DOE’s administration of federal grant programs under Title I, Part A; Title II, Part A; Title III, Part A; and School Improvement Grants. US ED issued its report on this work to the NH DOE on August 1, 2017. The primary goal of the review was to ensure that grant administration met the fiscal and administrative requirements contained in the Uniform Guidance and the Education Department General Administrative Requirements (EDGAR).
OSS reviewed a total of 19 areas of internal control. Of these areas, eight were rated Satisfactory, five were rated Quality Concerns (met requirements with recommendations to strengthen internal controls) and six were rated Significant Compliance & Quality Concerns. Areas rated Significant Compliance & Quality Concerns require the NH DOE to develop an action plan within thirty business days of receipt of the report. Because that date fell on the same date that the ESSA Consolidated State Plan was due, the US DOE extended the action plan requirement to October 18, 2017.
“We take these issues very seriously,” commented Commissioner Frank Edelblut. “Fortunately, I spent many years of my career helping to develop strong systems of internal control. Within a very short time of my appointment as commissioner, we worked with the OSS to ensure that they had all the information needed for their audit and addressed the procedural and internal control concerns raised by OSS from the previous administration. We are confident in the effectiveness of the current systems of internal control we have in place now and going forward.”
“Some key findings that occurred under the previous administration and detailed in this report are both disappointing and troubling,” stated Governor Chris Sununu. “Under the leadership of Commissioner Edelblut, we are putting the state on a path of sound internal controls, meeting our fiduciary responsibilities to taxpayers and our regulatory obligations. I am appreciative of the work the Commissioner and his departments have done to respond to the action steps, as well as their efforts to ensure that systems are in place to achieve compliance going forward.”
Action Item 9 of the OSS report requires the NH DOE to “obtain an independent audit of the personnel expenditures made using funds from these programs during the time period in which it employed the braided funding approach” (for fiscal years 2014 – 2016). Accordingly, the NH DOE will be contracting with the State’s independent auditor, KPMG, to complete this review. Once the results of that audit are completed and the results submitted to US ED, “a further determination will be made as to whether additional corrective action, such as repayment of program funds, may be necessary.”
Other action items from this pilot fiscal review require the NH DOE to strengthen subrecipient risk assessments and monitoring procedures, and document department processes and controls around other grant requirements.