Audit Report on the Department of Education’s Administration of the Early Grade Class Size Reduction Program

AUDIT REPORT IN BRIEF

According to the State Education Department (SED), research indicates that class size reduction in early grades (kindergarten to third grade) leads to higher student achievement. To reduce class size, the State passed legislation to create the Early Grade Class Size Reduction program (EGCSR). In 2007, EGCSR funding was incorporated into State Foundation Aid. Foundation Aid funding is used for increases in general operating costs and ongoing programs, with the major part of the funding also subject to the provisions of the State’s 2007 Contracts for Excellence legislation. That legislation required DOE to develop a five-year plan to reduce class size. DOE’s plan was approved on November 19, 2007, and DOE continues to receive EGCSR funds to reduce class size in kindergarten to third grade.

Although the State combined EGCSR funding with Foundation Aid in 2007, during Fiscal Year 2008, DOE administered the program under the original funding requirements. The EGCSR program used both State and federal funds, each funding stream having its own program requirements. State funds must be used where space (capacity) is available to create new classrooms and reduce class size to an average of 20 or fewer students. New classes are defined as classes created in addition to those that would have existed without the EGCSR funds. DOE is precluded from using EGCSR funds to supplant (substitute for) City tax levy money that would normally pay for classrooms. In Fiscal Year 2008, DOE received approximately $88.8 million from the State and supplemented the program with $14.9 million in federal contributions and $76.2 million in City tax levy funds to maintain the total EGCSR classrooms established in previous years. The total of these funds, $179.9 million, was to be used to create approximately 1,600 additional classes, with an expectation of reducing the average early grade class size to 20 students.

The objective of this audit was to determine whether those schools that received EGCSR funding created the number of classrooms required to reduce class size.

Audit Findings and Conclusions

During Fiscal Year 2008, DOE did not spend $48.4 million (26.9 percent) of the $179.9 million of EGCSR funds in accordance with EGCSR guidelines and fell significantly short of providing the required number of additional classrooms paid for with State EGCSR funds. DOE used nearly $46.8 million of the $179.9 million earmarked for reducing early grade class size to supplant $46.8 million in tax levy funds. By using EGCSR funds in place of tax levy funds, schools free-up less restrictive money to spend on other budget items instead of further reducing classroom averages.

The $46.8 million should have been spent on creating an additional 414 general education classes at 245 schools across the City, but these funds were improperly used to pay for teacher positions that would have existed without the EGCSR program. The tax levy monies that should have been spent to pay those salaries were spent on other budget items.

Of the total $46.8 million that was misused, 115 elementary schools used more than $17.9 million to supplant tax levy funds instead of creating 159 additional classes, even though they had the need and capacity to add classrooms. An additional $21 million was improperly allocated to 108 schools that did not have the capacity to add 185 additional classrooms. Finally, $7.9 million was given to 46 schools to add 70 additional classrooms, which already had class sizes of 20 students or less in kindergarten to third grade and consequently had no need of additional EGCSR funding.

In addition, 15 schools misspent $1.6 million, claiming to have spent it on per diem absence coverage, cluster teachers, and teacher removals (transfers, resignations, maternity leave, etc.) instead of using the funds to create 14 new classrooms.

DOE could have reduced average class size for general education in kindergarten through third grade if new classes had been created. DOE’s insufficient monitoring and planning, and poor allocation of funds, however, significantly contributed to the failure to create the required number of classrooms. Furthermore, enhanced ISC oversight could have identified schools that received EGCSR funds but did not comply with early grade guidelines, lacked the capacity to add classrooms, or did not need additional classrooms.

Audit Recommendations

Since DOE now states that it conforms to the more flexible federal EGCSR guidelines, the audit’s recommendations address the new federal policy in place as of Fiscal Year 2009. We make 8 recommendations to the DOE Central Office (Central) and Integrated Service Centers (ISCs), among them that:

DOE Central should:

• Continue to give priority to new classroom formation.
• Require schools to prepare a formal annual plan detailing whether funds will be used to add classrooms or to fund push-in teachers.
• Require ISCs to monitor the use of EGCSR funding to verify that it is in accordance with the plans established by those schools within their districts.

ISCs should:

• Closely monitor the schools that plan to add a classroom to ensure that funds are used only to create classrooms additional to those that would have existed without the EGCSR funds.
• Make use of Enrollment, Capacity, and Utilization Reports and projected enrollments for those schools that plan to add a push-in teacher to determine whether an additional classroom can be added instead.