Schools Won Inflated Grants

By overstating future enrollments, several Connecticut school districts have collected millions of dollars in excess state grants for school construction projects, state auditors have concluded.

And while schools are required to repay grant overpayments if follow-up audits find their enrollment figures were inflated, one school had a $5 million overage cancelled by the legislature on the final day of the 2008 session while another had a $1.7 million bill waived by state Education Commissioner Mark K. McQuillan.

A third school convinced the legislature to allow it two extra years to grow into its enrollment projections.

“The situation’s becoming more egregious,” said Richard G. LeMay, supervising accounts examiner in the Department of Education’s Office of Internal Audit. “School districts are relying more and more on the state legislature to bail them out.”

Enrollment projections submitted by schools are a key factor in determining state reimbursements for school construction projects. The state covers up to 80 percent of those costs, which are borne by taxpayers. The state raises the money for the projects by issuing bonds, so overpayments to schools unnecessarily inflate the size of school bond issues, auditors said.

In a review prompted by a whistleblower complaint, the audit team found that the state had neither a uniform process for schools to submit enrollment projections nor a consistent process to review those projections.

“This is a statewide grant program and there should be a consistent method for both developing the methodology and reporting the results from the methodology,” said Robert G. Jaekle, Auditor of Public Accounts. Jaekle said he didn’t see the overestimates as “sinister,” adding that “there may be a natural tendency to overbuild to make sure you have the capacity.”

The audit considered 20 school projects in 10 districts that cost local and state taxpayers $906 million, including $682 million in state grants. Three of those schools did not provide any documentation for their enrollment projections and 10 others failed to use school-specific projections. Instead, they opted for system-wide projections, an approach that “does not appear to be in compliance” with the law, the auditors said.

Overestimating By 14.9 Percent

During their review, auditors recommended four construction projects nearing completion should have lower enrollment counts. The four projects cost in total $91 million, and the districts overestimated enrollment by an average of 14.9 percent.

Final state audits are supposed to be completed eight years after a project is initiated to see whether enrollment projections were on target. At that point, the state can ask the district to pay back overpayments due to overestimates, or the state can deduct the difference from its next grant payment to the district. But schools have been able to find ways around making paybacks.

For example, the Portland Board of Education won relief from the General Assembly after State Sen. Eileen M. Daily (D-Westbrook) sponsored legislation to waive about $5 million it owed due to an over-projection of enrollment at the Portland Middle/High School.

The original projection for enrollment in the school in 2000 was 780 students. However, in September 2001 that enrollment projection was raised to 1,070, based in part on reports of 86 new homes planned for the area in the next three years. While auditors found the highest actual enrollment at the school was 596 students in 2006, the audit report recommended basing the grant recalculations on enrollment of 801 students.

“While the eight-year period for this project ends in 2008,” the auditors wrote, “it appears that actual student enrollment will not even reach the original projection of 780 students and will be far less than the revised projection of 1,070 students.”

Legislative Bailout

The difference between the 780 projection and the 1,070 projection was $5.2 million in additional state funds. That’s more than the town can afford to repay, Daily said.

“The Department of Education had approved all of the figures before construction, during construction, and now years later as they audit, they say it’s too high,” Daily said. “A town like Portland doesn’t have an extra $5 million.”

She recommended a fix to the audit system that would put more emphasis on early projections made by the school districts. The state “will not always be there to pick them up” if districts owe money at the end, she said.

The legislature also allowed for another special exemption for Conard High School in West Hartford, when the projection of 1,600 students fell short by 80. In July 2007, the legislature extended the eight-year final audit deadline for two more years.

In New Haven, The Sound School, a magnet high school for marine and agricultural science in New Haven, had received $1.7 million more in state grant money than actual enrollment justified, but McQuillan waived repayment.

The district projected 360 students, but there were only 319 enrolled at the time of the audit.

McQuillan said he waived the debt after determining the magnet school had potential for growth because it can draw students from outside the town school district, according the Department of Education spokesman Tom Murphy.

“When it comes to a school that serves a region, there can be more students than predicted,” Murphy said. “When it comes to a school district that has a finite number of students, there’s no way for them to expand.”

Starting July 1, the state will conduct a strict review of projections before approving a grant application to the districts, Murphy said. The state review will focus on what methods school districts used to make their predictions, which should help provide more accurate projections in the future.

“Now, not only do we ask them to attest that they’ve done an enrollment projection, we’ll ask to see it and review the methodology to see if it is sound,” Murphy added.