The Buffalo City School District (District) is governed by the Board of Education (Board), which comprises nine elected members and is an independent body responsible for the general management and control of the City of Buffalo’s educational affairs. The Superintendent of Schools (Superintendent) is the chief executive officer of the District and is responsible, along with other administrative staff, for the day-to-day management of the District under the direction of the Board.

The District operates various special aid programs which are supported primarily by the proceeds of State or Federal grants. Most of these are accounted for in the District’s special projects fund, which had a 2005-06 budget of approximately $150 million financed by grants. A grant is a contribution of cash or other assets whose use is restricted to specific purposes or activities (as opposed to an entitlement, whereby the District is provided unrestricted revenues pursuant to an allocation formula). The District also operates a number of special aid programs supported by contributions from corporations and foundations. These funds must be used in accordance with the terms set forth by the contributor.

The District routinely engages professional service providers to address certain of its needs, including certain activities funded by grant proceeds. We concentrated our audit effort on those programs for which the District engaged the services of the Center for Applied Technology in Education (CATE) and the Education Innovations Consortium (EIC). Between 2002 and 2005, the District paid CATE and EIC a total of $8.3 million.

Scope and Objective

The objective of our audit was to examine the District’s internal controls relating to professional services provided to the District for the period July 1, 2001 to June 30, 2006. Our audit addressed the following related question:

• Were services to be performed by CATE and EIC appropriately authorized, were claims for payment itemized and were services rendered sufficient to justify the money spent?

Audit Results

We tested 30 payments to CATE and EIC, totaling $6.3 million and found that contracts stipulating specific services to be provided, as well as the timing of payments to the service providers, were not executed between the District and either vendor. In addition, in many instances claims submitted and approved for payment did not sufficiently itemize the work that was performed, and in certain instances, the District paid the vendors before they provided services to the District.

We found that, for certain programs, the vendors provided documentation that services were performed on requested initiatives, which were subsequently discontinued by the District despite the investment already made. For example, a prototype decision support system (DSS) for assessing student literacy skills was developed. The pilot project was completed in June 2005 and it was expected that the system would be ready for implementation in September 2006. However, the District put the project on hold and has never used the system.

We also found that for a number of programs the District did not document specific deliverables to indicate the level of service they expected to receive. For example, between 2002 and 2005, the District paid more than $2 million to CATE for the development of the “NYLearns” web portal.¹ The largest payment to CATE for NYLearns was made in January 2003 in the amount of $739,237 for the continued development of NYLearns. No specific services were identified for this payment, other than continued development of the website and its content, as well as training and technical assistance in the use of the site. A contract or purchase order should have detailed the specific tasks to be completed during that period, such as a listing of new content areas.

In a number of cases we could not determine from available documentation what services were actually provided. For example, the District paid CATE $585,529 in October 2003 from grant proceeds for the ATLAS initiative.² District officials were unable to provide documentation of the services that the District received.

Finally, in some instances the services that were provided to the District differed from those identified in the authorizing Board resolution, grant narrative, or purchase order. For instance, in November 2002, the Board authorized a payment of $515,000 for technology integration training for teachers and administrators throughout the District. The District paid CATE on March 21, 2003, before most training was provided, and the level of service provided was in some instances far short of what was identified in the Board resolution.

The District’s Chief Financial Officer (CFO) provided us with a document, dated October 25, 2005, which indicates that he had completed “…a compilation of every purchase order issued and paid to CATE/EIC from 2002 to date together with supporting documentation.” Among the “basic findings” that were listed on this document were “No contracts found for any of the work”, “No proposals from CATE/EIC found,” and “Invoices from CATE/EIC do not provide any detail to explain how the amount billed was derived.” The CFO told us that he had suggested improvements to the District’s controls and that Board members endorsed the actions he planned to take. The most significant corrective action to be implemented was a change in the District’s contracting process, most notably a tracking system to ensure that contracts are properly approved. This change occurred in early 2006 when the CFO established procedures for all contractual relationships. In addition, a contract checklist was designed to ensure that a number of key elements have been addressed before the contract is executed by District officials.

Comments of District Officials and Corrective Action

The results of our audit and recommendations have been discussed with District officials and their comments, which appear in Appendix D, have been considered in preparing this report. Except as specified in Appendix D, District officials generally agreed with our recommendations and indicated they had initiated corrective action. OSC comments on the District’s response can be found in Appendix E.

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¹ NYLearns is a standards-based educational website that offers resources to students, parents, teachers and school administrators to enhance teaching and learning, and is being used by a number of other school districts in New York.
² Refer to Appendix B for a description of Project ATLAS.