STATE OF HAWAII
BOARD OF EDUCATION
Queen Liliuokalani Building
1390 Miller Street, Room 404
Honolulu, Hawaii 96813
Tuesday, August 4, 2015
Donald Horner, Chairperson
Brian De Lima, Esq., Vice Chairperson
Margaret Cox, Ex officio
Hubert Minn, Ex officio
Kathryn Matayoshi, Superintendent
Amy Kunz, Senior Assistant Superintendent, Chief Financial Officer
Amy Suratt, Audit Specialist, Internal Audit Office
Yi Chen, Audit Specialist, Internal Audit Office
Jennifer Luke, Audit Specialist, Internal Audit Office
Alison Kunishige, Executive Director
I. Call to Order
II. Public Testimony on Audit Committee (“SAC”) Agenda Items
The Board of Education (“Board”) Audit Committee Meeting (“Committee”) was called to order by Committee Chairperson Don Horner at 9:30 a.m.
III. Approval of Minutes of May 5, 2015
Committee Chairperson Horner called for public testimony. Vanessa Ott testified that a member of her organization, DOE Watch, had tried to get information on WebEx from the Board of Education website but was not able to find anything.
IV. Discussion Items
Minutes were approved as circulated without objection.
A. Update on the Department of Education’s (“Department”) Internal Audit Plan, Fourth Quarter (April 1, 2015 – June 30, 2015)
Audit specialists from the Internal Audit Office, Amy Surratt and Jennifer Luke presented an update on the Department’s Internal Audit Plan for the fourth quarter. There are proposed changes to the Internal Audit Plan, which will be addressed as a part an action item that appears later on the agenda.
Per the Committee’s request, a new feature was added to the Internal Audit Plan – a summary of activity on the Department’s fraud hotline. Anyone can contact the fraud hotline to report fraudulent activity. The individual can remain anonymous if he or she wishes. The fraud hotline was started in May 2013, is administered by a third party, and is available 24 hours a day. About two-thirds of the cases are management issues and the most cases relate to human resources issues and theft of time. About a third of the cases have been substantiated.
Committee Member Jim Williams said that it was important to point out that the entire data set, with a combination of substantiated and unsubstantiated cases, shows that the Department is taking these reports seriously. If anyone has information, it is worth contacting the fraud hotline so the Department can follow-up. Some of the cases are not substantiated, so the fraud hotline also protects individuals against false allegations. Committee Chairperson Don Horner also pointed out that allegations are given to an individual in a different level to follow-up on. For instance, if there is an allegation against a principal, the complex area superintendent follows-up; this is a good system.
The audit presentation summarized activity for the last fiscal year and pointed out that there were no outstanding items that were overdue and some areas had completed all of the recommended corrective action.
V. Recommendation for Action
A. Committee Action on the Department’s updated risk assessment and Internal Audit Plan (July 1, 2015 – June 30, 2019)
Audit specialists from the Internal Audit Office, Yi Chen and Jennifer Luke presented on the proposed changes to the Internal Audit Plan. Luke went over the process for developing the plan through determining risks and establishing auditable areas. The original risk assessment was completed in 2011 and each year since, the plan has been reassessed and updated to reflect any changes. There are 42 auditable areas that have been deemed high risk but the resources to address them are limited. The plan proposes four assurance projects this fiscal year, six next fiscal year, five for fiscal year 2018 and six for fiscal year 2019. The plan provides a breakdown of hours for each project. This fiscal year’s plan includes: a procurement and contracting process follow-up review, operational review of special education, information security management review, and a hiring practices review as the four assurance projects. The fiscal year’s plan also includes: baseline assurance projects, monitoring based on management action plans, data mining and baseline monitoring projects, internal control and operational efficiency consultation, fiscal reviews, administering the fraud and ethics hotline and other administrative duties.
Committee Chairperson Horner asked the presenters to elaborate on how they conduct data-mining. The presenters explained that they use data-mining software and gave the example of how they use the data they receive from the banks and the data from the schools’ check registers to look for discrepancies so that they can address them.
The presenters also described one of the proposed changes to the Internal Audit Plan regarding moving the “Operational Review of the Special Education Section” from the fourth quarter of the 2015 fiscal year to the second quarter of the 2016 fiscal year to accommodate scheduling conflicts within the Special Education Section.
Committee Chairperson Horner recommended that as the auditors go through the process of reassessing the Internal Audit Plan at the end the fiscal year and that they also meet with all the Board members to get their input on their areas of concern.
Committee Vice Chairperson De Lima said that he supports the special education review. He believes that the major problem is that it is too compliance-based instead of actually meeting the needs of special education students. He is concerned about how the services are delivered, how the resources are delivered into the field, and how the resources are controlled.
Committee Vice Chairperson De Lima also said that he is concerned about lawsuits against the Department and would like to see an up-to-date list of present, ongoing lawsuits. He stated that the Board does not review lawsuits in the DOE. He also stated that a lot of these lawsuits generate policy issues, particularly in the area of special education. Kathryn Matayoshi, Superintendent stated that she can go over this with Board Members. She clarified that this would have to be done in executive session with deputy attorney generals present because of the nature of the subject matter material.
Board Member Margaret Cox, Ex officio, inquired about the level of help and support that the schools are receiving. Amy Kunz, Senior Assistant Superintendent and Chief Financial Officer stated that the schools receive systems and support functions. As an example, the state office trains complex area business managers and school administrative support assistants, or SASAs.
Committee Member Patricia Halagao requested an audit of the English Language Learners program (“ELL”) be combined with the special education review. She expressed her concerned about ELL operations and resources at the school level. Surratt clarified that a review of ELL was one of the assurance projects originally scheduled, but could not remember the details and would check on it.
Committee Vice Chairperson De Lima stated that, to ensure there are enough hours in the plan to adequately audit special education, the addition of ELL would be moved to a future agenda for further discussion. Committee Member Williams requested a report from staff on how they plan to address this. There may be other avenues that can be used to address it outside the audit process and stated that he would like to talk to the Assistant Superintendent of the Office of Curriculum, Instruction, and Student Support about this. Committee Chairperson Horner said that one possible area to re-examine might be the P-Card review. This review takes up a lot of administrative time and he is not sure that it is necessary at this point in time. Committee Chairperson Horner also suggested that Internal Audit should consider raising civil rights from medium risk to high risk.
ACTION: Motion to recommend the updated risk assessment and Internal Audit Plan for Full Board approval (De Lima/Williams). The motion carried unanimously with all members present voting aye.
Chairperson Horner adjourned the meeting at 10:30 a.m.