[House Hearing, 107 Congress] [From the U.S. Government Publishing Office] THE DISTRICT OF COLUMBIA SCHOOL REFORM ACT OF 1995--BLUEPRINT FOR EDUCATIONAL REFORM IN THE DISTRICT OF COLUMBIA ======================================================================= HEARING before the SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA of the COMMITTEE ON GOVERNMENT REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS FIRST SESSION __________ DECEMBER 7, 2001 __________ Serial No. 107-128 __________ Printed for the use of the Committee on Government Reform Available via the World Wide Web: http://www.gpo.gov/congress/house http://www.house.gov/reform U.S. GOVERNMENT PRINTING OFFICE 82-565 WASHINGTON : 2002 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON GOVERNMENT REFORM DAN BURTON, Indiana, Chairman BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California CONSTANCE A. MORELLA, Maryland TOM LANTOS, California CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania STEPHEN HORN, California PATSY T. MINK, Hawaii JOHN L. MICA, Florida CAROLYN B. MALONEY, New York THOMAS M. DAVIS, Virginia ELEANOR HOLMES NORTON, Washington, MARK E. SOUDER, Indiana DC STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland BOB BARR, Georgia DENNIS J. KUCINICH, Ohio DAN MILLER, Florida ROD R. BLAGOJEVICH, Illinois DOUG OSE, California DANNY K. DAVIS, Illinois RON LEWIS, Kentucky JOHN F. TIERNEY, Massachusetts JO ANN DAVIS, Virginia JIM TURNER, Texas TODD RUSSELL PLATTS, Pennsylvania THOMAS H. ALLEN, Maine DAVE WELDON, Florida JANICE D. SCHAKOWSKY, Illinois CHRIS CANNON, Utah WM. LACY CLAY, Missouri ADAM H. PUTNAM, Florida DIANE E. WATSON, California C.L. ``BUTCH'' OTTER, Idaho STEPHEN F. LYNCH, Massachusetts EDWARD L. SCHROCK, Virginia ------ JOHN J. DUNCAN, Jr., Tennessee BERNARD SANDERS, Vermont ------ ------ (Independent) Kevin Binger, Staff Director Daniel R. Moll, Deputy Staff Director James C. Wilson, Chief Counsel Robert A. Briggs, Chief Clerk Phil Schiliro, Minority Staff Director Subcommittee on the District of Columbia CONSTANCE A. MORELLA, Maryland, Chairman TODD RUSSELL PLATTS, Pennsylvania ELEANOR HOLMES NORTON, Washington, THOMAS M. DAVIS, Virginia, DC ------ ------ DIANE E. WATSON, California STEPHEN F. LYNCH, Massachusetts Ex Officio DAN BURTON, Indiana HENRY A. WAXMAN, California Russell Smith, Staff Director Howie Denis, Professional Staff Member Shalley Kim, Clerk Jon Bouker, Minority Counsel C O N T E N T S ---------- Page Hearing held on December 7, 2001................................. 1 Statement of: Chavous, Kevin, chairman, Committee on Education, Libraries and Recreation, Council of the District of Columbia; Peggy Cooper Cafritz, president, District of Columbia Board of Education; Paul Vance, superintendent of schools, District of Columbia; Josephine Baker, chairwoman, Public Charter Board; and Gregory McCarthy, deputy chief of staff, Policy/ Legislative Affairs........................................ 12 Gandhi, Natwar, chief financial officer, District of Columbia; and Charles C. Maddox, inspector general, District of Columbia, accompanied by William J. Divello, CFE, assistant inspector general for audits................ 89 Letters, statements, etc., submitted for the record by: Baker, Josephine, chairwoman, Public Charter Board, prepared statement of............................................... 54 Cafritz, Peggy Cooper, president, District of Columbia Board of Education, prepared statement of........................ 25 Chavous, Kevin, chairman, Committee on Education, Libraries and Recreation, Council of the District of Columbia, prepared statement of...................................... 15 Gandhi, Natwar, chief financial officer, District of Columbia, prepared statement of............................ 93 Maddox, Charles C., inspector general, District of Columbia, prepared statement of...................................... 114 McCarthy, Gregory, deputy chief of staff, Policy/Legislative Affairs, prepared statement of............................. 65 Morella, Hon. Constance A., a Representative in Congress from the State of Maryland, prepared statement of............... 4 Norton, Hon. Eleanor Holmes, a Delegate in Congress from the District of Columbia, prepared statement of................ 9 Vance, Paul, superintendent of schools, District of Columbia, prepared statement of...................................... 36 THE DISTRICT OF COLUMBIA SCHOOL REFORM ACT OF 1995--BLUEPRINT FOR EDUCATIONAL REFORM IN THE DISTRICT OF COLUMBIA ---------- FRIDAY, DECEMBER 7, 2001 House of Representatives, Subcommittee on the District of Columbia, Committee on Government Reform, Washington, DC. The subcommittee met, pursuant to notice, at 10:15 a.m., in room 2154, Rayburn House Office Building, Hon. Constance A. Morella (chairwoman of the subcommittee) presiding. Present: Representatives Morella and Norton. Staff present: Shalley Kim, staff assistant; Matthew Batt, legislative assistant; Robert White, communications director; Heea Vazirani-Fales, counsel; Russell Smith, staff director; Howie Denis, professional staff member; Jon Bouker, minority counsel; and Jean Gosa, assistant minority clerk. Mrs. Morella. We've been patient because of the sound system, but it sounds to me like it must be operating. Good morning. I want to welcome you all to our last hearing of the first session of the 107th Congress. This, in fact, is the 10th hearing conducted by the Subcommittee on the District of Columbia during this session. You know, as I was driving in this morning, I was reminded of the fact that this is the 60th anniversary of Pearl Harbor, that day of infamy, and you remember the slogan, ``Remember Pearl Harbor.'' For most of you, it was from a history book that you heard that. So now also it was 3 months ago, too, that we had another day of infamy, ``Remember 9/11.'' And as we look at that as an overlap, we can see how important education is, and that is what this hearing is all about. There is no more important task for a municipal government than providing quality education for its children. Good schools not only produce better citizens, the ones who become our next generation of leaders, but they make a city more attractive for businesses to locate and for people to live. Good schools make for a better community with less crime, a more stable tax base and strong home sales. Over the years, repeated efforts have been undertaken to improve the District of Columbia public schools. Frankly, the results have been mixed. Unlike just a few years ago, the city now opens its schools on time each fall, but many of those schools are in dire need of repairs. Five years ago, nearly three out of every five D.C. public school students performed mathematics at a below basic level for the grade. Today, that figure has been reduced to a little more than one in three--better, but not good enough. So today we're very interested in learning how the reform efforts, led by the superintendent, Paul Vance, and the Board of Education president, Peggy Cooper Cafritz, are proceeding. Special education, including transportation costs, continue to be a nagging problem, and there are clearly fiscal and management problems that are lingering. I must say, we were all shocked to learn in September that the school system had overspent its budget by $80 million. But I was even more stunned to learn that the Chief Financial Officer now says that the deficit was in fact more than $98 million. The CFO is already projecting an $108 million budget shortfall in fiscal year 2002, which just started in October. And we in Congress just approved the D.C. appropriations bill yesterday, and already the numbers don't add up. This is unacceptable, plain and simple. How are parents supposed to have confidence in a school system that can't balance its own books? How are children supposed to learn when their academic year is being cut short by 7 days because of fiscal and program mismanagement? I know Superintendent Vance says he was embarrassed by the disclosure of the deficit, and I trust the superintendent and the school board president will tell us today what steps they've taken to ensure that it does not happen again. I know we're going to hear today that the recent budget problems show that the D.C. Public schools need more money, or perhaps even a dedicated schools tax. Let me make clear that money alone does not determine the success of a school district. According to a U.S. Department of Education report published in October, the District of Columbia already spends more per pupil than Montgomery County, MD or Fairfax County, VA. And while those school districts do, of course, receive some funding from their respective States, neither has a dedicated revenue source. Before I conclude, I want to point out some of the positive things that are happening in the district schools; and, believe me, this is just a partial list. More students than ever are taking advanced placement courses, a sign that a culture of achievement is taking hold in D.C. schools. Literacy programs have been beefed up, as have summer courses. The school district has gotten creative in looking for new teachers through its D.C. Teaching Fellows Program that has transformed about 100 professionals from various fields into public schoolteachers. Dozens of charter schools are offering alternative educational opportunities. And, finally, nearly two out of every three District of Columbia public school students who graduated in 2001 enrolled in a 2 or 4-year college, many of them through the assistance of the District of Columbia Tuition Act Program, of which I in this committee am very proud to be an original cosponsor and Congresswoman Norton, who is so very active in that enactment. The bottom line is, D.C. schools are making progress, but we will not settle for mere progress. We want and the students and the parents of the District of Columbia deserve excellence in education. So I thank you all for being here today, and it's now my pleasure to recognize the distinguished ranking member of this subcommittee, Congresswoman Eleanor Holmes Norton, for her opening comments. [The prepared statement of Hon. Constance A. Morella follows:] [GRAPHIC] [TIFF OMITTED] 82565.151 [GRAPHIC] [TIFF OMITTED] 82565.152 Ms. Norton. Thank you very much, Mrs. Morella. I very much appreciate that you've called this hearing. It turns out to be timely indeed. I know you've wanted to have this hearing for some time. I want to welcome all of today's witnesses, and I want to ask everyone to excuse my voice, which is rapidly fleeing from my body, as I have a cold. It is too easy to look at the problems at the District of Columbia schools and conclude that the system has a long way to go. I look at where the system was 11 years ago when I first came to Congress, and I can see how far it has come. The progress has come from many sources but especially from where it has always come when improvement occurs in public schools in this country, from the system's leadership. We saw significant changes in the DCPS for the first time in many years beginning with Superintendent Arlene Ackerman, who was so good that she was stolen by San Francisco. In a stroke of plain good luck, Superintendent Paul Vance, who had recently retired from the very good Montgomery County school system, moved out of retirement and was persuaded to bring his outstanding professional experience and reputation to the district. In addition, the voters approved a new configuration for the school board, and the new board is off to a good start. It has put aside the quarrels and competence and interference with the superintendent's prerogative to run and manage the schools that had been the board's trademark for years. The subcommittee is naturally interested in the overall condition of the DCPS. However, we would be most useful if we concentrate on areas most related to our Federal jurisdiction. Special education is the one area of local school budgets where the Federal Government has promised significant help. To its discredit, Congress has continuously broken that promise. Help may be on the way as events are developing with our new education bill, which is still a work in progress. However, every school system in the country is in the hole for special education, and no matter what we do in the Congress public schools will continue to have a tiger by the tail, given the disproportionate increases in special education costs, unless innovation and skillful management take hold. A large financial management failure has added to DCPS special education costs that were already out of control. Then a dispute surrounding a deficit that kept growing threatened to throw the DCPS back to the bad old days, with several of the actors threatening their own audits until reminded that they were endangering the CAFR, or comprehensive annual audit of the District of Columbia budget. If all of this were not unmanageable enough, we have just finished the D.C. appropriation, held up in part because the D.C. government failed to develop a sensible and internally consistent home rule position on whether there should be any limits or caps on fees paid to attorneys who represent children seeking special education benefits. Eight D.C. council members sent a letter to Congress asking for no caps, while the Board of Education felt that there should be limits on fees. Since I have a strong and unalterable position to always uphold the position of the home rule government on local matters, I am placed in an untenable position if there is no unified D.C. government position. All the cap that the council members and schools accomplish by communicating contrary positions to the Congress is to toss a local decision to a Federal body, a posture hugely at odds with their view that local decisions for the District of Columbia should never be made by Congress. The council has an obligation to work out its differences with the board and vice versa, especially when another $10 million in attorneys fees that are not in the school's budget for next year may result, as they now have. The leadership of the board and the council need to solve the fee cap dispute once and for all at the local level. The dispute caused a bitter fight among both House and Senate Members. It is something close to a fluke that the no-caps position prevailed this year, unlike prior years. I am, therefore, asking the home rule government responsible for education, namely the Mayor, the council, the school board and the superintendent to make sure that whatever position you take next year, it is not a two or three-headed monster. I promise to fight to uphold the position of the D.C. government, no matter how controversial. All I need is a position from the D.C. government. Finally, this subcommittee has a major interest in increasing college attendance in the city, because jobs with decent income and benefits in this highly educated region virtually require college education today. This year, the subcommittee passed important improvements in the D.C. College Access Act of 1999. As it turned out, about the only bill we could pass here in the Congress that could be as popular as the D.C. College Access Act would be voting rights itself. The act gives our students what no others in the country enjoy, the right to attend any public college in the United States at low in-state tuition in order to receive $2,500 dollars to attend any private college in the city or region. Mrs. Morella and I will carry the new amendments entitled the District of Columbia College Access Improvement Act to the floor next week. These amendments are expected to pass the Senate as early as today. They will significantly expand the original D.C. College Access Act of 1999 in three ways. First, the original College Access Act only allowed the stipend to go to those who attend HBC--I'm sorry. The original College Access Act only allowed the stipend to attend HBCUs in the region. Now residents will receive a $2,500 stipend to attend any historically black college or university in the country. Over 600 D.C. residents are expected to take advantage of this provision in the first year of enactment alone. Second, originally students who were somewhat older, because they graduated prior to 1998, were not included in the College Access Act because of the Senate's fear that funding would be insufficient. We have now persuaded the Senate to allow tuition benefits to two groups of older students. The first group is D.C. residents currently enrolled in college, regardless of when those students graduated and regardless of the amount of time it took those students to enroll in college. This change will enable approximately 1,000 students previously denied in-State tuition, including many older students, to qualify next year alone. Third, the bill allows older students to take advantage of the bill by removing a requirement that a student enroll in a college no longer than 3 years from high school graduation. The Senate was persuaded to remove the 3-year constraint prospectively to allow older students to qualify no matter when they graduated, as the House bill allowed. Consequently, the first group of students who took longer than 3 years before enrolling in college can begin taking advantage of the College Access Act benefits as early as next year, and more and more older students are expected to receive tuition assistance in the years to come. These amendments to the College Access Act will provide assistance to thousands more D.C. residents left out of the original act and will expand college education opportunities for many of our residents. The timing of this hearing thus provides a coincidental but important opportunity to let the committee know of the new and improved D.C. College Access Act. These unique education benefits depend largely on the preparation and encouragement our young people get from the D.C. Public School System. The D.C. College Access Act means little if D.C. students are not well prepared to enter good colleges and remain until they graduate. I am very encouraged by current statistics showing a significant number of DCPS students going to college. Apparently, 64 percent of the class of 2001 went to college, compared to 43 percent nationally. At Banneker, 100 percent went to college, and School Without Walls, 96 percent. When I went to Bruce Monroe, Banneker when it was a junior high school and Dunbar, it never crossed my mind that we would not go to college, would matriculate and graduate forthwith. That was the standard set for students and accepted by them, regardless of income, in the segregated schools of the District of Columbia. It is, therefore, difficult for me to accept a school system today that cannot at least meet the standards of generations ago. I see real progress. I congratulate Superintendent Vance; the school board chair, Peggy Cooper Cafritz; and the board; and especially the principals, teachers and staff on the progress they are making as they engage literally in rebuilding the public school system of the city. Thank you, Madam Chair. [The prepared statement of Hon. Eleanor Holmes Norton follows:] [GRAPHIC] [TIFF OMITTED] 82565.153 [GRAPHIC] [TIFF OMITTED] 82565.154 [GRAPHIC] [TIFF OMITTED] 82565.155 Mrs. Morella. Thank you, Congresswoman Norton. I'm going to ask the first panel to come forward, and that is Kevin Chavous, chairman of the Committee on Education, Libraries and Recreation, Council of the District of Columbia; Peggy Cooper Cafritz, president of the District of Columbia Board of Education; Dr. Paul Vance, superintendent of schools for the District of Columbia; Josephine Baker, chairwoman of the Public Charter Board; and Gregory McCarthy, deputy chief of staff, Policy/Legislative Affairs. Don't sit down and get comfortable, because I'm going to swear you in. It is the policy of the full committee and all the subcommittees to ask those people who testify before our subcommittee to take an oath of office. And let me ask our State education officer, Connie Spinner, to be sworn in. [Witnesses sworn.] Mrs. Morella. The record will indicate a favorable response from all. I'm going to ask you if you would keep your testimony to 5- minutes, knowing full well that your total testimony will be included in the record, and that way you'll give us a chance to ask questions before our second panel. So if it is all right, we'll proceed in the order in which you are seated. We'll start off with you, Councilman Chavous. Thank you for being here. STATEMENTS OF KEVIN CHAVOUS, CHAIRMAN, COMMITTEE ON EDUCATION, LIBRARIES AND RECREATION, COUNCIL OF THE DISTRICT OF COLUMBIA; PEGGY COOPER CAFRITZ, PRESIDENT, DISTRICT OF COLUMBIA BOARD OF EDUCATION; PAUL VANCE, SUPERINTENDENT OF SCHOOLS, DISTRICT OF COLUMBIA; JOSEPHINE BAKER, CHAIRWOMAN, PUBLIC CHARTER BOARD; AND GREGORY MCCARTHY, DEPUTY CHIEF OF STAFF, POLICY/LEGISLATIVE AFFAIRS Mr. Chavous. Thank you very much, Chairwoman Morella, Congresswoman Norton and members of the committee. I appreciate having this opportunity to testify at this hearing today on the current status of the District of Columbia Public School System and the progress our government is making in implementing the requirements of the District of Columbia School Reform Act of 1995. I am here on behalf of my colleagues on the council, as well as our chairperson, Linda Cropp. As you both have stated, we are in the midst of major school reform here in the District of Columbia. With the selection of Dr. Paul Vance as superintendent, the composition of the new school board, the act of involvement of the Mayor and the council, I am more optimistic about the future of public education here in the District of Columbia than ever before. As education stakeholders, we have all formed an intimate partnership that includes regular contact, meetings and discussions and, ultimately, policy consensus in most areas. Specifically, the Council of the District of Columbia, through my committee, has been instrumental in providing both legislative and budgetary support for our schools, as well as aggressive oversight over their activities. Over the past 4 years, we have added nearly $300 million new dollars to public education, and this amount includes new money for our charter schools, of which I've been one of the stronger proponents. In addition, I have introduced a couple pieces of legislation that ultimately became law, and it contributed to the far-reaching school reform effort that we're in the midst of in this city. For example, the new school board is comprised--is based on the composition in legislation I introduced. We now have a composition of appointed and elected members, and they are working and moving forward toward resurrecting the dismal history of previous boards. Additionally, my legislation created the State Education Office, which was designed to be an independent monitor of State-related functions administered by both the District of Columbia public schools and the District of Columbia public charter schools. These successes demonstrate that we are poised to continue to implement the reform efforts in public schools. I do want to relate one other council initiative based on legislation I introduced earlier this year that I am extremely excited about. That is legislation that will lower the compulsory school attendance age from age 5 to age 3. The legislation will buildupon the success that has been experienced by the Office of Early Childhood Development; and to explore the viability of this unprecedented piece of legislation, the first of its kind in the country, I have created the Commission on Primary Education Reform and have partnered with American University under president Ben Ladner to develop a blueprint for it implication. I am also pleased to parenthetically add that the Mayor, superintendent Vance and Peggy Cooper Cafritz all are supportive of this effort. Now let me address the current financial crisis facing our schools. As you are aware, this fall our chief financial officer for the District of Columbia, Dr. Natwar Gandhi, announced that the DCPS would experience spending pressures initially estimated at $80 million, and you've indicated now that they are up to $98 million. At the core of these spending pressures was a failure to recover Medicaid revenue, overspending the special education programs and special education transportation costs. Before I speak on the special education Medicaid problem, let me inform you of the council's efforts to identify the scope of the problem. As you know, we have engaged the services of the Office of the District of Columbia Auditor. We've asked the auditor to look at these spending pressures and to determine whether they are systemic in nature. This audit will assist us in deciding what corrective measures to employ in addressing the problem for fiscal year 2002. Like many of you, I'm concerned about cutting 7 days from the school calendar, and that should be a last resort. But we should not begin that effort until we know exactly the full extent of the problem. With respect to special education, as chairman of the Committee on Education, Libraries and Recreation, we are now holding monthly hearings on special education programs, spending and transportation. We are also meeting with special education parents, providers and educators. Most of what we learn from these hearings and meetings has been presented in a special council Committee on Special Education's final report, which was issued earlier this year. But, working with these stakeholders and the superintendent, we are committed to finding solutions to the special education problem that has plagued the system for so long. At bottom, the real solution to solving special education here in the city really means a deeper commitment to providing services to our children within the city's borders and a more concerted approach to addressing special education transportation costs. Finally, with respect to Medicaid, we are working with Dr. Gandhi, who has formulated a governmentwide solution to the Medicaid reimbursement problem. We all know that the city is losing millions of Federal reimbursement dollars in the Medicaid area, but I am confident that this collaborative partnership, headed by our CFO, will move to addressing the problem and allowing us to capture those dollars that we have not been able to capture this the past. In conclusion, though many problems do persist, I am, as I indicated earlier, very much optimistic about where we're headed with D.C. public education. It is of paramount importance that the good work that has been accomplished by the educational stakeholders in the District not be overlooked, nor minimized. The council, the Office of the Mayor, the superintendent of schools and the president of the board, along with all of the board members, are committed to transforming the state of public education in the District of Columbia, and we will succeed. Once again, thank you for the opportunity to address this subcommittee this morning. Mrs. Morella. Thank you very much, Mr. Chavous. [The prepared statement of Mr. Chavous follows:] [GRAPHIC] [TIFF OMITTED] 82565.001 [GRAPHIC] [TIFF OMITTED] 82565.002 [GRAPHIC] [TIFF OMITTED] 82565.003 [GRAPHIC] [TIFF OMITTED] 82565.004 [GRAPHIC] [TIFF OMITTED] 82565.005 [GRAPHIC] [TIFF OMITTED] 82565.006 Mrs. Morella. Now I'm pleased to recognize Peggy Cooper Cafritz, who is the president of our D.C. Board of Education. Thank you for being here. Ms. Cafritz. Thank you very much. Good morning, Chairwoman Morella and members of the subcommittee, particularly our own Congresswoman Norton. I am Peggy Cooper Cafritz, president of the District of Columbia Board of Education. I am here today on behalf of my colleagues on the board and with their unanimous support and on behalf, of course, of the children of the District of Columbia. When this new board took office, we did so with a mandate from the citizens for change. The citizenry of the District has been very clear in that it wants to see reform, and it wants to see it now. Both the board and the superintendent are committed to that and have spent the last 10 months working to rebuild an infrastructure which will produce tangible results and which will lead to achievement. To that end, this new administration and board has accomplished things that haven't been achieved in decades. For example, the administration has broken ground for five new schools this year, when no new schools have been built in 35 years. With public input, the board developed and approved a 15- year master facilities plan to improve our dilapidated school buildings. We will work to do all we can to compress those 15 years. The administration has transformed the nine lowest- performing schools with the staff and materials necessary to turn them into high-performing schools over the next several years. The board recommended to Mayor Williams that, for better coordination and more efficient spending, city agencies and schools integrate the social services provided to children. As a result, wrap-around services are being provided to our transformation schools to ensure that all students' needs are met seamlessly. This is a pilot. We hope to extend this wrap- around plan to all of our schools over the next 3 years. The administration proposed and the board approved a central office transformation plan that will improve central office efficiency, while also saving the school system $17 million annually. This board has provided stability to the school system by agreeing to give Dr. Vance a 3-year contract. The board brought in McKinsey and Co. on a pro bono basis, following the example of the superintendent, to assess how we could improve our operations so that we could most effectively parse with the goal of the superintendent's transformation plan. The board hired an executive director for charter schools who has extensive charter school experience. In fact, we stole her from the other charter school board. She is charged with performing careful oversight of board-chartered schools and providing, when necessary, technical assistance. The board has also been very careful and is working very hard to bring its charter schools into full compliance with all charter school regulations. We approved only 2 of the 11 charter school applications submitted to us, 1 on a provisional basis, in an effort to ensure that all approved applicants are capable of providing District students with a quality education. We voted to close three charter schools for fiscal and/or management malfeasance. One is closed. The other two have us in court, testing the constitutionality of our procedures. The board and the superintendent are cooperating with the other charter board to improve a relationship that previously evidenced great animus. The board and the superintendent are creating partnerships with entities who can, in a new use of charter school legislation, create facilities for the many children we must now send away to residential facilities outside of the District. The administration and the board approved a reconciliation of the DCPS fiscal year 2002 budget to be responsibly prepared for any definitive amount of our deficit. The board is working with the city's CFO, the Mayor and the city council to align the school's budget with the city's in a way that best serves the school's needs and meets the city's requirements. The board and the administration have made a commitment to increase student achievement through the development of standards and core curriculum. The board and administration have made a commitment to the development of a strong vocational education program. The superintendent has assembled some of the best high school reform and vocational experts in the country. They are still in the planning phase. The administration developed, and the board approved, a fiscal 2003 DCPS budget that realistically takes into consideration what our children need to get, not a Cadillac education, but one that builds the foundation for our children to receive an equitable education, making them competitive with students in the surrounding jurisdictions. Our students must be provided with a chance to have that kind of preparation, which is the kind of preparation needed to compete with the best students from any school district in America. The astonishing thing on the board, if you know something about our history in Washington, is that all of these issues have been dealt with by unanimous vote by this board. And that is a major accomplishment. Nine people with a collective will can mightily contribute to the revolutionary change of our education system's needs. Before I elaborate on the fiscal year 2000 budget, let me give you a little history of the D.C. Public School System. In the late 1960's, the city made a conscious decision to grow the black middle class in the city, and toward that end, they hired many new positions in the city government and in schools, but because the city had not prepared the infrastructure necessary to absorb this new middle class, they took their new middle class checks and proceeded to build what is now the wealthiest African American county in America, Prince George's County, which we affectionately call Ward 9. As the city plunged deeper and deeper in debt with a more bloated bureaucracy, then schools became the easy whipping boy, because children and the poor have no voice and cannot protect themselves. Year after year, the post 1960's school system eroded and decimated by lack of money, will and skill turned out children and adolescents whose need for social services far outstrips the cost of even an Exeter education. I assure you that there is not a Congressman or a Senator who would dare send his or her children or grandchildren to school under such conditions. Until 1990, the Department of Public Works control the capital contracts for school buildings in the city. The level of their neglect is legendary. When this function was given back to DCPS, the buildings and playgrounds were in great disrepair. Can you imagine thousands of children being expected to learn with no sunlight coming into their prison-like schools? This is our children's everyday reality still on December 7, 2001. Further, when the Uniform Per Pupil Funding Formula was established in 1977, the recommended foundation funding level was $6,260. An agreement was made by city officials afraid of growing budgets, to change the amount to $5,500 and to restore the base when times got better. Boom times came, but the promised adjustment and the uniform for pupil funding formula never followed. District of Columbia public school children were never invited to the party. We are now in a position to rectify this unacceptable situation and to do right by our children. With the new leadership in the city and the school system, we can save more money in the long run by investing in our children instead of making victims of young adults. If we do not do this, our rapidly growing social cost, such as crime, illiteracy, alcoholism, drug abuse, teen pregnancy, mental illness and foster care will return the city to its precontrol- board state faster than you can say ``money.'' Simply adding the cost of social expenditures in the city's 2002 budget reveals that we're already spending disproportionate sums and social costs. The only reason I can deduce for this fiscal imbalance is our disproportionate commitment to social services, caused by underfunded schools and undereducated citizenry breeds social service costs with a vengeance. Montgomery County spends 51 percent of its annual budget on education; Fairfax County, 50 percent; Arlington, 35 percent; Alexandria, 34 percent; and in Washington, an anemic 20 percent. We are already imposing high expectations on our children. They have been undereducated for so long that we cannot honestly expect them to meet our expectations unless we give them the tools to do so. Our expectation and obligation and our children's right is that all students in the D.C. Public School System will receive the same quality education as any student in the Washington metropolitan area. As we go forward, we're going to push to have the system funded in a way that is equitable with other jurisdictions. The first time you see this will hopefully be when the city council forwards our next fiscal year budget to you. Fixing the D.C. schools will be expensive, because in many ways, Dr. Vance and his testimony are charged with building a school system from veritable scratch in a city that is 37 percent illiterate. We must make this investment. We cannot continue. The level of negligence that has consistently been leveled against a majority of our children for three decades. It runs counts to every element of President Bush's education agenda. The Board of Education and the administration have built a real budget based on real figures and real needs of real children. Dr. Natwar Gandhi, the city CFO, has committed himself to work with us to address the structural flaws in our approach to funding education, as well as the fiscal autonomy necessary to the good governments and administration of DCPS. Please join with us in the endeavor to educate our children. You have an opportunity to show your commitment to the youth of the city when you consider our fiscal 2003 budget. I hope you keep in mind the American ideal of education for all and the Presidential ideal of leave no child behind. The children of the Nation's Capital certainly deserve no less. And in closing, I would like to say of Dr. Vance for the first time in a very, very long time, we have a seasoned superintendent who knows what he is doing and who has assembled and is assembling a team that is competitive with any school system. These people know what they are doing. They're very, very good. We must give them the tools that they need to make this happen. Thank you very much. Mrs. Morella. Thank you, Ms. Cafritz. [The prepared statement of Ms. Cafritz follows:] [GRAPHIC] [TIFF OMITTED] 82565.007 [GRAPHIC] [TIFF OMITTED] 82565.008 [GRAPHIC] [TIFF OMITTED] 82565.009 [GRAPHIC] [TIFF OMITTED] 82565.010 [GRAPHIC] [TIFF OMITTED] 82565.011 [GRAPHIC] [TIFF OMITTED] 82565.012 [GRAPHIC] [TIFF OMITTED] 82565.013 [GRAPHIC] [TIFF OMITTED] 82565.014 Mrs. Morella. Well, Dr. Vance, she already introduced you, but all I can say is we seasoned you in Montgomery County, and I want to thank you for bringing your expertise and your commitment and your hopes to the District of Columbia Public School System, and I recognize you now for your comment, sir. Mr. Vance. Thank you. Good morning, Chairwoman Morella and Congresswoman Norton. Good morning, Madam Chairman Morella and Congresswoman Norton, and members of the subcommittee. I'm Paul Vance, superintendent of the District of Columbia public schools. We're appreciative of this opportunity to discuss school reform in Washington, DC, and our progress under the leadership of the school board president, Ms. Peggy Cooper Cafritz, and vice president, William Lockridge, and other members of the board. This is my second year as superintendent in Washington, DC, but I have been a close neighbor in Montgomery County for many years. I came to the D.C. schools, have been a teacher, school administrator and superintendent. I believe in public education. I advocate for urban schools and I believe fervently that we have the capability to improve the quality of public education for all children. I came with a philosophy that education is a community enterprise and a community responsibility. I came with a commitment to stay the course, to make the tough decisions and to move our school district aggressively forward on the path of school reform. And I have found in our city broad-based community determination and a commitment to public education that will make school reform a magnificent reality in due time. In addition to our written testimony, which is a bit longer than the oral presentation, we have submitted a briefing document that describes in greater detail our progress toward reform. The rumblings, you may have heard on Capitol Hill, are the sounds of new school construction. Lights turning on after school, the lively discussion of strategic planning sessions and parent forums, the roar of school buses and the boisterous pride for the mighty good teacher and students who led the Washington, DC, team to their victory, first place, in the prestigious Panasonic Academic Challenge, busting schools from 39 States in our country. This was a particular joy to me, because in my past life as superintendent of Montgomery County public schools, always came in first and second, never lower than second. And we busted them. They came in third this year with Florida--State of Florida coming in second. So that was a joyous event for all of us. Congresswoman Norton shared in that joyous moment with us. I want to thank her again. What you hear is change, change in progress right now. Mrs. Norton. We noticed that Mrs. Morella did not attend that event. Mr. Vance. Oh, I forgot myself and got carried away. I'm sorry. Reform is moving the school district forward, even if the pace has been slowed by instability. We have built upon the work of the last three superintendents, Dr. Franklin Smith, General Julius Becton and Mrs. Arlene Ackerman, as we set out to transform schools and permanently improve the way we do business. Our business plan for a strategic reform will support students and staff and will move us significantly closer to the school reform and world class status envisioned by the authors of the School Reform Act of 1995. The plan covers 3 to 5 years, has six transformational goals, three phases, was developed with broad community input and is the product of one of my first undertakings as school superintendent. The goals, when accomplished, will ensure an excellent teaching staff, first-rate learning environments, rigorous curricula and strong academic programs. Our goals are to create a service oriented, cost effective central administration that directs resources to schools and student achievement who will have energized parents and community involvement and strengthened partnerships with city agencies. We're well into the implementation of phase 1 of the business plan, in which we are tasked to get the fundamentals right, because we must get the fundamentals right once and for all, including our budget and finances, if we are to keep moving forward. I would list our many accomplishments in this phase, such as our aggressive work with curricula, standards and assessment, our new D.C. teaching fellows program, our principal leadership institute, our blue ribbon panels and senior high schools, our 7-point plan for reforming special education, our $4.2 million reading excellence grant initiative, the multimillion textbook adoptions, our afterschool programs, our comprehensive Summer STARS/SEAS, our expanded programs for women's athletics, our new advanced placement office, our new principal for the new technology school at McKinley. These and many more accomplishments and activities and progress are referenced in the written testimony and the briefing report. Later this month, we begin the realignment of central administration. The organization will not only create the first phase of an administrative structure required to support local school needs and better implement the business plan, but will also net approximately $14 million in savings, which are essential in light of the current budget challenges. The people's software that will soon come online will effectively integrate and manage our personnel and financial data as example of administrative reforms underway. Our personnel office is being revamped with a strategy of total work force development and focus on quality service delivery. The communications office is proactive in getting information to the community and promoting community engagement activities. Our new transformation, what we call the T-9 schools, identified at the end of last school year, represent turning points for our school district as a first step in the children-first initiative. We have assembled new instructional and administrative teams for these schools that will be accountable for the implementation of proven reform programs. The T-9 schools will serve as a model for what all schools should eventually be, true community schools that are distinguished by their onsite educational, social, public health and recreational wrap-around services for students and parents and eventually by their expanded school building facilities. We are pleased that the first education of sill have I's master plan, completed by the school district in over 30 years, provides the framework for all decisions regarding the improvement and utilization of school facilities. It calls for modernization or replacement of 143 facilities over a 10 to 15-year period at a cost of $2.4 billion. A phenomenal capital undertaking. The one that is sorely needed to provide the state-of-the- art nurturing learning environments that are needed for our schools to become quality educational centers. Special education continues to be one of our major challenges, one that we must solve as a critical ingredient to restoring stability to the school district. Our assessment shows the parents' systemic shortcomings that we believe may be contributing factors in the growing percentage of special education students in our slightly declining overall school enrollment. We have adopted a 7-point plan for the strategic reform of special education. A copy of the plan is included in the briefing report. Pages 2 and 3 of our business plan will solidify the work in progress and build on what we have aggressively begun. Details of the business plan are also contained in the briefing report. It is my intention to meet all challenges head on. Hard work, support and leadership will sustain our progress and build needed momentum. The road will be bumpy and steep but it leads to the other side of the rainbow for students who still dream of the other side. I thank you for this opportunity to provide testimony. I will be more than pleased to answer your questions, and thank you. [The prepared statement of Mr. Vance follows:] [GRAPHIC] [TIFF OMITTED] 82565.015 [GRAPHIC] [TIFF OMITTED] 82565.016 [GRAPHIC] [TIFF OMITTED] 82565.017 [GRAPHIC] [TIFF OMITTED] 82565.018 [GRAPHIC] [TIFF OMITTED] 82565.019 [GRAPHIC] [TIFF OMITTED] 82565.020 [GRAPHIC] [TIFF OMITTED] 82565.021 [GRAPHIC] [TIFF OMITTED] 82565.022 [GRAPHIC] [TIFF OMITTED] 82565.023 [GRAPHIC] [TIFF OMITTED] 82565.024 [GRAPHIC] [TIFF OMITTED] 82565.025 [GRAPHIC] [TIFF OMITTED] 82565.026 [GRAPHIC] [TIFF OMITTED] 82565.027 [GRAPHIC] [TIFF OMITTED] 82565.028 [GRAPHIC] [TIFF OMITTED] 82565.029 [GRAPHIC] [TIFF OMITTED] 82565.030 Mrs. Morella. Thank you very much, Dr. Vance, and please know, as I said early on, that your entire testimony, which I know is very extensive, will be included in the record. I also note that we have imported Steve Seleznow now from Montgomery County also to be part of the team. You see, we have a regional--we all care about education. I am now pleased to recognize Josephine Baker, who has the awesome task of being the chairwoman of the Public Charter Board. Thank you, Ms. Baker. Ms. Baker. Good morning, Congresswoman Morella and Congresswoman Norton. I am Josephine Baker, chairperson of the District of Columbia Public Charter School Board. The board welcomes this opportunity to share with the committee the many accomplishments this board has made in establishing charter schools. There are many challenges that public education in general and charter schools in particular face. We believe the charter schools are part of school reform and it is in that light that we function as we do. The District of Columbia Public Charter School Board was established as an authorizing board in February 1997. Since that time, we are indeed pleased with the track record that we have been able to establish. The board is now responsible for oversight of 20 schools on 23 campuses, which provide educational services to 7,792 students from prekindergarten to adult education. It is important to emphasize that the students attending charter schools mirror the overall student population of the District of Columbia, and many charter schools are serving a disproportionate number of low income students as well. The philosophy that charter schools are available on an equal basis to all who apply is rigorously implemented by the schools chartered by the board. The schools administer the SAT-9 to the students in the spring of each year and some schools elect to administer the fall test and use it as a diagnostic tool. The board reports not only the test scores that we receive from the publisher, but we use a statistical analysis to evaluate the gains students make from 1 year to the next. These gains are computed based on the scores of the previous year, with year one providing a benchmark from which subsequent results are evaluated. Research supports the fact that it takes time for changes to make a difference in the academic performance of students. We have seen progress in student achievement in many of our schools. Some schools are still working to start the upward trajectory that will show that the academic needs of students enrolled in these schools are being met, and they are indeed sharing those plans with us. Our process for oversight involves monthly/quarterly financial reporting, monthly attendance and contact with the schools that is both supportive and collaborative. Finance is a known area of difficulty for charter schools across the Nation. And the board has a contract with an accounting firm that looks at the monthly and quarterly finance reports so that any irregularities or concerns will be red flagged early. Schools are also reviewed by a team of monitors who gather information about the schools' progress in implementing its accountability plan, and that is one of the things that we consider extremely important, the accountability plan. The school has provided feedback on this information. A high level of performance is expected and schools exhibiting difficulty are required to execute an MOU that articulates what actions they will take to remedy identified problems. Subsequent reviewers will look for the elimination of the identified problems. Charter schools continue to encounter problems, finding adequate space within which they can effectively conduct their programs at a reasonable price. As the total enrollment of charter schools continues to expand, not only with new charter schools, but also with planned growth of existing schools, the growing need for space at an average of 75 to 100 square feet per student is served by a diminishing supply of affordable and suitable space. There are some concrete examples in my full testimony. Obtaining financing is an additional problem. Most schools have little or no equity to be invested in a major property investment, and they do not have the established track record of academic and financial success to become eligible for long- term bond financing. Charter school facilities financing has been improved by the establishment of the Credited Enhancement Fund of $5 million set aside through the House Subcommittee on District Appropriations in the 2000 budget. This fund is managed by the Office of the Mayor and an appointed Credit Enhancement Board. There is an opportunity for greater use of this approach if more money is made available for the fund, and there is concerted effort by the charter community to make lending institutions more aware and committed to support charter school facilities financing. In spite of these handicaps or the handicapping conditions, our residential charter school is one example of an ability to raise funds to renovate an old DCPS school that had been closed and also to build one dorm, with plans to build a second dorm. That school, of course, is the only residential charter school in the Nation. The D.C. Public Charter School Board believes that the independent public schools that it has authorized are indeed making a positive difference in the public education of children in the District of Columbia. We use the 3 A's as a concept worth promoting, autonomy, accountability and achievement. There is a fine line between autonomy and accountability, and the oversight process we have developed is designed to support both. Our collaborative approach and diligent implementation of the law are set on course to bring about the desired achievement. Thank you for the opportunity to testify, and look forward to any questions you may have. [The prepared statement of Ms. Baker follows:] [GRAPHIC] [TIFF OMITTED] 82565.031 [GRAPHIC] [TIFF OMITTED] 82565.032 [GRAPHIC] [TIFF OMITTED] 82565.033 [GRAPHIC] [TIFF OMITTED] 82565.034 [GRAPHIC] [TIFF OMITTED] 82565.035 [GRAPHIC] [TIFF OMITTED] 82565.036 [GRAPHIC] [TIFF OMITTED] 82565.037 [GRAPHIC] [TIFF OMITTED] 82565.038 Mrs. Morella. Thank you very much, Ms. Baker. And I am pleased to recognize Gregory McCarthy, deputy chief of staff for policy and legislative affairs, pretty much a surrogate for the Mayor this morning. Mr. McCarthy. Thank you very much, Mrs. Morella, chairwoman, and Mrs. Norton, my own Congressperson. It is a pleasure to be here representing Mayor Williams, who's attending the National League of Cities conference. Otherwise, he would certainly be here. I know later on we are going to talk about a lot of the problems and challenges facing the schools, and the superintendent has certainly outlined some of the wonderful successes we've had but I think it is worth posing a very basic question: Are schools better off than they were 10 years ago? I think the answer is absolutely, yes; 5 years ago? Absolutely yes. And even 1 year ago? Absolutely yes. And I think one of the things I need to stress that has changed is that you have now elected and appointed leadership, the Mayor, the council, the elected and appointed school board, the superintendent and his top staff all in strong positions and ready and able to do the heavy lifting that is required to turn around our schools. And at the core of this synergy is a strong policymaking board and a seasoned superintendent providing day-to-day leadership as well as wonderful teachers and parents who are on the front lines every day working extremely hard for our children. The Mayor has acknowledged the centrality of improving our school system to broader citywide efforts. In fact, our broader efforts to attract new residents, grow the economy, create jobs and even promote public safety and public health will not be as successful as they can be if we don't turn around our school system and provide a reason for people to come and live in this city. The Mayor's role in education involves supporting the good works underway at DCPS and also marshalling the resources under the executive to support them and other initiatives. The Mayor has thus far focused on supporting the superintendent's efforts at turning around low performing schools, attracting top-notch teachers and principals and modernizing facilities. He is also a supporter of a vibrant charter school system and has expanded early childhood intervention to newborn infants and young children, so at the time they enter school they are ready to learn. He is also working to provide wrap-around services to children already in school and of course regularize and standardize cooperation among executive branch agencies to support the work at the public schools. The School Reform Act of 1995 has succeeded in two very important ways. It has established an environment where public charter schools have thrived, and it also established the uniform per pupil funding formula. It has provided a stable and predictable funding for schools and also ensured equity in terms of funding for public schools and charter schools. Ms. Baker has already talked about our charter school system. It's also worth noting that we have a total of 36 charters opening on 39 campuses, enrolling more than 10,000 students. The funding formula again has provided at least a basis for steady increases in school funding. In the appropriations bill that this body just passed this week, we appropriated $669 million to the D.C. Public School System and an additional $142 million to the Public Charter School System, increases respectively of $39 million and $37 million over the year before. In fiscal year 2001, indeed the public education system here received an increase in excess of $100 million. And under the leadership of Mayor Williams and Councilman Chavous, who heads the council's Education Committee, public education funding for K through 12, has gone up 43 percent since 1999. Another major focus of the Mayor of course is aligning his agencies to support the reforms of the superintendent. To support his low performing schools transformation initiative, the deputy mayor for children, youth and families has launched an initiative to locate critical family services such as family literacy, health and recreation programs at or near some of the nine schools that the DCPS is focusing for intensive work. As already acknowledged, Councilman Chavous provided the leadership last year to create the State Education Office, which is performing limited State level functions that affect children in all educational settings, most notably management of the USDA summer feeding programs. And this year the council, under Chairman Chavous's leadership, also transferred management of the D.C. tuition assistance program to that office. Recently the SEO has completed a study about revising upwards the funding formula, and later on its director, Ms. Connie Spinner, can answer questions about that. And I'm delighted to also say she was confirmed unanimously by the council this week in her new job. Obviously there are some profound challenges before the school system. The problem of the deficits is very alarming. As we have already noted, these are likely driven by Medicaid overruns and special ed. The superintendent has a seven-point plan he is ready to implement, and the Mayor will be there supporting him in every single way. We are also helping to identify sites in the city where we might locate special ed schools so we can bring some of our kids into the city. And there's also a citywide task force on Medicaid cost recovery that the superintendent is leading. Obviously, in the course of all this, we are going to have a broader discussion of the structure and the amounts of overall funding for the schools. The solutions are certainly going to involve maximizing local resources that we can for the school system, increasing efficiencies within the school system, and perhaps even restructuring the financial system. And it also should involve, I think, some increased Federal support. As you know, Chairwoman, this city has a limited tax base. We have the responsibilities of a city and a county and a lot of State functions, and the tax base and ability to generate revenues, that doesn't come anywhere near that. So I think the Federal Government is going to have to help us in terms of upping some State costs in funding the schools. In fact, I saw a report earlier that said that in some municipalities, upwards of 44 percent of special ed funding comes from the State capital. And indeed in our case, that is a burden that falls solely on the backs of the city. And I always like to take the opportunity to mention the tuition assistance grant program. And thank you for all you've done to shepherd that. And if you like, I'd be happy to arrange a session where some of the more than 2,000 people who benefited from that can tell you personally how it has changed their lives, and there are dozens, if not hundreds, of children who would not have gone to college had that act not been in place. So thank you, Mrs. Morella and Congressman Davis, who also had an important role in that. And I'd be happy to answer any questions you have. [The prepared statement of Mr. McCarthy follows:] [GRAPHIC] [TIFF OMITTED] 82565.039 [GRAPHIC] [TIFF OMITTED] 82565.040 [GRAPHIC] [TIFF OMITTED] 82565.041 [GRAPHIC] [TIFF OMITTED] 82565.042 [GRAPHIC] [TIFF OMITTED] 82565.043 [GRAPHIC] [TIFF OMITTED] 82565.044 Mrs. Morella. Thank you. Speaking of that possible meeting on the D.C. tuition access, it might be something that all of Congress should be invited to. It may muster up even more support about what can be done. I want to thank you all for your excellent testimony concerning your plans and recommendations. I am going to get to the bottom line. One of the reasons I particularly wanted to have this hearing, and Congresswoman Norton agreed, was the fact that we were embarrassed, as the superintendent has said, only several weeks before the end of the fiscal year that we discovered there was an $80 million deficit and it was like how come you didn't know about this deficit. Where did it suddenly come from, particularly with the concept the control board was going out of existence at the end of that fiscal year and we were preparing legislation to give the District of Columbia autonomy, as I think they should have, over their own finances, a bill which incidentally we have submitted and has passed this subcommittee, and we hope to get some movement on that in the next session. And then we hear the $98 million projection and the fact that it may go even beyond that to 108 million. And then somebody, who myself as a former educator and has had many kids go through public school and believe that education is the key to find out that the school year may well be shortened by 7 days--that is like a week-and-a-half--at a very time when we talk about expanding the school year, expanding the number of hours that kids have with this supervision and guidance and inspiration. So if I could ask you all this question, and you can give me brief answers. And if you feel that someone else should answer more extensively, fine. I know we have Dr. Gandhi on the next panel. Specifically, with all the great achievements that you have, all the plans you have, how are we going to come to grips with why we didn't know that we had a shortfall that was 10 percent of the budget at a time when it was the end of the fiscal year and will we not have a reduction of the number of days in school? I mean have we decided that we are not going to go about that--of 7 days? Dr. Vance, do you want to start, or Ms. Cafritz is ready. Ms. Cafritz. I think that part of that is due to information and communication, and we have worked with and come to an agreement with Dr. Gandhi on how to fix that part of it. But the special education, you know, definitely had cost overruns, no doubt about it, and that is going to continue until we remove ourselves from court order and we bring the functions that we are now paying enormously for outside of the city and to private sources back into the city. The superintendent is working very, very hard on that, is assembling the right people. And I think, you know, you will see results. It is going to take 3 to 5 years to get it fixed, but you will see results. Now the budget overall, we worked very closely with McKenzie, the best in the world. And we have scrubbed this budget to the bone. And we do not have enough money to do what we need to do. We have, I mean--and even going forward into 2002, our children are going to have about $5,000 fewer than charter school children. And we have got to be able to bring into balance with all their social needs and with all the disarray and the erosion that is taking place in the school system and understand why it might apparently cost more. But if you look at the services that kids get comparatively, teacher salaries, facilities, they are not equitable. Mrs. Morella. Anyone else who wants to comment on that? I am also curious. Are you really going to make the school year 7 days shorter or is that just a trial balloon? Ms. Cafritz. First of all, William Lockridge, who is the chairman of our Fiscal and Facilities Committee, spent 24 weeks working on this with the superintendent and his people. I spent quite a few hours myself. And the board spent at its last meeting when we made this decision 7 consecutive hours examining every possible penetration of savings, and this is what we came up with that would affect people the least. If we did, we looked at a 6 percent across the board cut. That would require us to fire or RIF almost 500 teachers. Those 500 teachers, because of union rules, would come from those teachers we have just worked so hard to hire as we move toward, you know, full certification and a stronger work force. So we thought that was a very bad idea. We looked at it in terms of 3 percent plus adding some other things. What will harm the kids the least. It's horrible. We feel terrible about it. But we don't see any other way out. But we were surprised as anyone about having to do this. Mrs. Morella. Would this mean that the teachers would also not be paid for that week-and-a-half or 2 weeks? Is it a ripple effect that is going to affect your teaching force? Ms. Cafritz. No one would be paid. But the superintendent, you know, wisely I think, looking at a plan which would spread the pain across time, you know, adding a day to Christmas vacation and a day to Easter instead of clumping it at all in one pay period. Mr. Chavous. Madam Chair, it is the council's collective position that we view the 7-day reduction of instruction time as the absolute last resort, and frankly my committee is going to hold a hearing to make sure that we know what other avenues are explored to deal with this problem. So we have strong feelings against that. But we need to know what machinations the school board went through to come up with that approach. One thing about how we got here not knowing the information for several months, my committee as well as Dr. Vance requested of the school CFO monthly spending reports. That's one way that we're all able to track what's coming in and what's going on and we weren't able to receive them. Frankly, I think there was an incredible disconnect between the chief financial officer's office and the school system. And you know, we agreed with having a centralized financial system and a centralized procurement system, but we have found that there are some instances where it isn't practical nor does it work, and one is in education. That is why we transferred procurement authority back to Dr. Vance. And we really need to look closely to fashion a way to give Dr. Vance or any superintendent greater control over the financial shop. It just doesn't make sense to have such a disconnect, particularly in the education arena, and I do think to Dr. Gandhi's credit we are now working more closely together. The systems are being integrated. The communication lines are opening up, but the reason why we got here, frankly, is you had the one hand not knowing what the other hand was doing. Mr. McCarthy. Mrs. Morella, may I add something briefly? Obviously, the Mayor shares the concern that will be a very terrible outcome to have to shorten the school year. And one of the things that he offered to do right away to help the school system alleviate this or other pressures was to commit $60 million to help stem the funding gap that was identified, and this was a commitment that was made in fact before September 11th. And obviously since then the hits to the city treasury are quite concerning, but the Mayor is still making that commitment to provide the school system through reprogrammings and other cost savings elsewhere in the government $60 million to help cover some of the projected deficit. Mrs. Morella. So what I hear is that you're all going to be coming together and you're going to have a public hearing. The Mayor is going to try to assist. You now have communication, so you don't have this shock occurring as it did. So you're telling me that you're working your way out of the situation like this so it will not happen again. Ms. Baker, did you want to comment on that? Ms. Baker. My comment is not really on the deficit itself but on the comment that I heard that charter schools somehow are receiving an inequitable amount of money. And I am not sure how those figures were devised, but I believe the system that the money is received is very fair. And I certainly would like to have further conversation about how that statement can be made because I think the distribution of the funds is a very fair one. We don't see our schools swimming in money. They are fighting to try to stay above the flow just like everybody else is. So I just wanted to testify my concerns. Mrs. Morella. Mr. McCarthy mentioned uniform per pupil formula. Ms. Baker. Yes, exactly. We get the same X number of dollars. They have a small facilities allotment, but of course DCPS does not get that because they have facilities and they don't pay rent and they don't pay a lot of other things that charter schools have to figure out how to pay. So I think it is a statement that I do have some concern about. That's all. Mrs. Morella. And I think Ms. Cafritz mentioned the fact that the per pupil--or the amount of money from the budget is much less in the District of Columbia than it is in Montgomery County, but not the per pupil expenditure. So there is that distinction? Ms. Cafritz. Yes, because it is categorized as an enhancement. But the increase that the city is giving to charter schools in 2002 is $37 million for 7,700 students and to the school system $28 million for, you know, 68,000 or 69,000 kids. Mr. Vance. One factor that impacts that ratio, and it's quite alarming, is that 32 percent of the operating budget goes for the education of 16 percent of our student population. That is our special needs population, the special education population. We just sent entirely just far too many children into the outer areas of Maryland and Virginia to attend private schools to receive special education services. And not only have the costs of tuition escalated but likewise the cost and problems associated with transportation. I don't think that other school systems, Baltimore, Chicago, notable for the problems they had in special education, had a problem comparable to the one we had. So our major effort in our plan is to reduce those costs and to bring a sizable number of those youngsters back to the District and educate them per the legislation in schools in their community and not deprive them of that right and responsibility and provide the appropriate programs and facilities and staff for those young people and likewise to engage in more private and public partnerships and expand those that are currently in the District and to encourage others who are not in the District to locate or relocate in the District. We see that as a major cost saving initiative on our part. And in that regard, we are recently engaged in discussions with persons who have done that elsewhere in the Nation. Doctor Thomas Hare, who did that in Chicago is currently teaching and doing research at Harvard University and has agreed to come in for a brief period of time to support us in that area. And likewise, Mrs. Morella, you may know Linda Bluth, who is one of the officers in special education in the State Education Office in Maryland. And Linda was the one who primarily worked on those problems in Baltimore City and came away being quite successful. And we believe with Tom and Linda helping us and with the very able support of our current superintendent for special education doing the day-to-day and operational things, we will embark on a path that will not only save money but will abide by the law and will service those youngsters in a manner in which should have been serviced all along. Mrs. Morella. I appreciate your comments, and in our second round I do want to pursue that concept, what can we do with regard to special ed and transportation particularly, which is such a tremendous responsibility. But you also were shocked with the budget shortfall, weren't you? Mr. Vance. Yes. Mrs. Morella. And you are going to be a major stakeholder in pulling this all together. I am now pleased to recognize Ms. Norton. Ms. Norton. Well, I want to pick up where the Chair left off in discussing this shortening of the school year notion that shocked the whole city. I certainly understand enough about budgets so that I can understand why this is certainly the easiest thing to do. You lop it off. You lop off 7 days. Voila, you saved the money. All of us took a hit and some of us won't get as much money and the children won't get as much education, we go on with the next thing. I regard this as not the school board's problem, not the CFO's problems, not the council's problem, not the Mayor's problem. I regard it as a D.C. government problem that has not been fixed for this reason. Apparently this is Medicaid money. The notion that Medicaid money would pop up here again is an outrage. And let me just say for the record, the reason there is no D.C. General Hospital now is in large part because the Mayor when he was CFO and then when he was Mayor and the present CFO and the control board and the entire council let D.C. General go knowing full well that the Medicaid money was the most broken part of the D.C. government and was not, in fact, being received and the council just--and the Mayor and the CFO just continued to give money, and of course when Washington, D.C. General went down they acted as rescuers except for the Mayor who took the hit, and the control board. But the fact that the council sat there and continued to let D.C. General Hospital be run by managers who were not collecting the Medicaid money and then everybody ran to the rescue and we had one of the worst fights in the District of Columbia, and the fault was the fault of the government. So bad as that was, with people even running up here where the Congress favored what the Mayor was doing. We had members of the council coming up here where the Congress was in favor of what the Mayor was doing. At the very least I thought with all the demagoguery going on that somebody had fixed the Medicaid system. With the Medicaid problem from D.C. General hopping over to the school system, this committee has every reason to be outraged, because if the collapse of D.C. General at the hands of the council and the Mayor and the CFO and the control board did not get the government of the District of Columbia to fixing the Medicaid system, what will? Now we are having the collapse of a second institution, and it is not the school board's fault. It is the fault of the council and the fault of the Mayor, because you went through it with D.C. General Hospital. And the notion that this would happen again with the school system, what other institution is going to come up next, ladies and gentlemen? Is it going to be the welfare system? What other part of the D.C. government which uses Medicaid has not been fixed? Medicaid is a Federal program. And I am going to ask the Chair, given the fact that this problem has crossed over from D.C. General after all we have gone through now to the school system, I am really afraid because Medicaid is a part of many programs of the District of Columbia. And now it's about to bring down or at least cause serious disrepair to a second part of the D.C. government at least as important to us to the part that we are on the way down because of Medicaid. And at this time I don't want anybody running forward saying we are going to save it at the end. We are going to save it now because we are going to fix Medicaid in this city once and for all. Now the notion of--the Chair says well, we tried 6 percent, we tried 3 percent. The problem is when you do these kinds of cuts in the Congress we always resist across the board cuts, at least some of us do. They are all analytical cuts. They are the easy way to do it. Everybody gets hurt. And you end up reserving things that should have been cut anyway. The bad gets preserved with the good that way. Now part of this, of course, can't be helped because it has to do with Medicaid and not with anything anybody in the school system has done in particular with respect to education. But I do want to ask you, and I'm here not talking to the school system alone. I think the fact that the council and the Mayor and the CFO let this happen with Medicaid, this is not overspending on the other part of their special education. It means that you have got to help them find an alternative. And I don't simply mean sit down and bicker with them. I'm saying you who are financial experts, you and the council, who have to make all kinds of analytical cuts all the time. I am asking you to sit down with the school system and look for other slices of the pie. All they have looked at, at least the Chair says they have looked at various gradations of cuts by percentage. Even on a temporary basis, people who know budgets and know the finances of the school system may be able to find something that--or some other parts that could be cut and at least save us some more days unless you are telling us that 7 days don't matter to these children. It seems to be a huge number of days, a whole week or more. I think we have an obligation to do more, and I would ask that you do that and submit to the Chair within a month an alternative that is not put together by the school board alone. It's not their problem that has everybody around a table, the CFO, the council, the Mayor, and of course, the school board and superintendent. Let's try to make a more analytical cut. If you can't do it, you can't do it. But submit to this committee within 30 days what your options are so we can see at least what other options are besides percentage across the board cuts, which almost never make it in the Congress because, as I said, somebody has just decided to do it the easy way. Now let me ask this, since this is a shared problem, the D.C. Public School System, people who were supposed to keep the Medicaid records didn't keep it. The CFO depended on them to keep it and yet he's the one who had all the responsibility for records, so he should have made sure that they kept it. The council, which had oversight, didn't know about it. OK. So it's everybody's problem. Now I want to know what you think, whether everybody has made a contribution to the solving of the problem thus far. Has the council come forward with an amount of money? Has the Mayor come forward with an amount of money? And have the schools done so? I would like to know that, please. Mr. Chavous. Well, Congresswoman Norton, to answer your last question, yes, we have. We've had a number of meetings and have agreed on a consensus approach. The first order of business, of course, is to ascertain the real extent of the problem, and we are in the process of doing that. Second, we are working on a plan that would help rectify the situation financially and from a management perspective. But I dare say that we all are together in terms of trying to find some collaborative approach to solving the problem. Ms. Norton. 7 days---- Mr. Chavous. We don't agree with the 7 days. We are going to have a hearing. I said that. We don't agree with that. That is an absolute last resort. And I vow to you this, between the council and the Mayor we are going to make sure that doesn't happen. We do not support that in any way. But Congresswoman Norton, you raised the Medicaid issue. I think with all due respect, there is not the same type of analogy that you are making to D.C. General, and if there were Members of Congress who were so firmly committed to the Mayor's point of view, frankly they were either ill-informed or ill- advised. Ms. Norton. I don't want to rediscuss D.C. General. Mr. Chavous. You brought it up. Ms. Norton. I do want to say this. The only reason I raised D.C. General is that the Medicaid problem of the District of Columbia has not been fixed, and I am going to have a separate hearing on that. I don't mean to say that what happened to D.C. General is what is happening to the school system, but it is the failure to collect Medicaid money. These are children entitled to Medicaid money. Once it happened to D.C. General, that was a huge alarm bell that said let's take this system and let's concentrate on fixing this system. It is part and parcel of the same system. I am not going to reargue D.C. General here. Mr. Chavous. Well, Congresswoman, you brought it up, and I dare say I am going to comment on it because I think the analogy doesn't apply. Now with respect to Medicaid, clearly we have a problem with capturing Medicaid funds. Part of the reason is that the system has been broken across government lines. During my testimony I alluded to the fact that to Dr. Gandhi's credit he has put in place and he will testify to this, I'm sure, a governmentwide approach to recapture Medicaid dollars. And the council and the Mayor are all involved, particularly the Chair of the Human Services Committee, Council Member Allen, who has the lion's share of the Medicaid dollars. But I can tell you this and assure you this, since you raised the analogy, please take comfort in the fact that Medicaid is not going to shut down our schools. Whatever problem exists with Medicaid, it is small in comparison to the other problems the school system is facing and it is not going to rise to the level where we will shut down the doors of our public schools. Ms. Norton. But the fact that it would cross over at all is very disturbing, and I know it is disturbing to you as well. And I don't say that the whole system is for your committee, God knows, to fix. You're right. Most of that money isn't with the school system. But the notion that you would now find it yet in another committee, it could not be more disturbing to me because--and surely you must feel as well, Mr. Chavous, that it must be other places that are having the same wide problem. Mr. Chavous. Clearly it is a governmentwide problem and we are taking a governmentwide approach, and I am sure we will solve the problem. I do think we are well on our way to doing that. If you look at the deficit, while Medicaid is a big problem, frankly the biggest problem is special education. And that is the one that drives our budget, and that is frankly because the court situation is something we can't necessarily control. Medicaid is something we can control better, and I agree we need to do that. Ms. Norton. You raise an important point when you say the other part is special education. I haven't gotten the good sense from the testimony given here today how much about the rising costs generally of special education and whether if you left aside the Medicaid part of it, whether we are getting a handle on that or even how much Medicaid pays for special education. Could you give me some sense of whether or not this is just one part that has slipped out of control? Mr. Chavous. That is a fair question. It is all complicated by the court situation where we have to provide court transportation--I mean bus transportation to and from school for a number of children. And we have had extreme examples where one child gets on one bus with two aides and goes as far as Baltimore to receive services and is transported back and forth in that matter all because of the court order. It is an extremely expensive proposition. It is also complicated by the fact that we have so many out of State placements in private facilities outside the city. So we have conducted these monthly hearings and that follows up on a special committee that the council impaneled a year-and-a-half ago which issued a report earlier this year, and now we have reinstituted regular monthly hearings where we are looking at let's bring our children back into the city. We have a primary obligation to educate our children. They are our children. We should not be sending them out to California, Utah, Baltimore. Ms. Norton. Let me ask Mr. Vance because that is--the council has raised that over and over again. We know that some of these children need very special services that no city could provide. But could I ask you in response to what Mr. Chavous said, what proportion of our special education children are educated here in the District of Columbia? What plan do you have in what proportions to bring back children who are now educated outside the District of Columbia? You and Ms. Cafritz. Mr. Vance. We have set a rather ambitious target for ourselves for this school year to return 800 children who are placed in private tuition-based special education schools to the District to programs which we are currently in the process of developing. That is my immediate response. Ms. Norton. 800. And how many are going to schools outside the District of Columbia today? Mr. Vance. That is just a moving figure, and let me turn around and ask Ms. Gay. 1,829 private day programs. Ms. Norton. 1,800 actually have to travel outside the city and be brought home every night. Mrs. Morella. I have a figure on a chart here that I was going to ask about. The chart has 2,506 nonpublic placements versus 9,102 in public placements. The difference in price allocation per student for the public placement is $17,000 versus $34,000 for the nonpublic placement. So it seems to me that is key coming to grips. Ms. Cafritz. In addition, if I might add--we have 12,000 students, 21 percent of our student population is in special ed, which is the highest--I mean 17 percent--17 percent. And 21 percent of those are on private tuition grants, and this is extremely high. Ms. Norton. Nancy--if we were in a State, the State I take it would take up part of that tuition grant? Ms. Cafritz. They would pay for all the transportation. They would take care of all of the administrative costs related to filing for Medicaid. They would take care of many, many other costs in terms of special services to this population. But we have no place to go. Ms. Norton. Just let me say, I think that, even doing the best you can do, it would be very hard to come up against that. I am going to be putting in a bill to get more State functions moved to the Federal Government. This is not a--I don't--and, you know, and with education in general, everybody considers that a local function. If you get for me the State function such as the transportation, the part of it that the State would pay for special education, I will make sure that is a part of this bill. I think, doing the very best you can, you're not going to be able to do much better, given these costs. Ms. Cafritz. We really applaud your efforts on that and your challenge to work with everybody. But one thing I do want to say on behalf of the school board, we have already made about $35 million of extremely analytical cuts. We had to make about $9 million more worth of cuts, and that is how we came to the furlough, but only after we had gone through our budget line item by line item from, you know, janitors to nurses to paper. Ms. Norton. We're not--Mr. Chavous, when I said perhaps that there needs to be a contribution by everyone, you know that they are going to have $10 million added because of the-- there's no caps, and there's good--there's a reason for it. Mr. Chavous. Yes. Ms. Norton. But it means $10 million on top of a flood of deficit already. Do you think that the council is going to be able to help with that, inasmuch as a majority of the council apparently wrote and said they think that was a necessary expense for the school board to have, even given this large deficit? Mr. Chavous. Yeah. Well, Congresswoman Norton, you're right. The council is taking the strong position about the caps, and I had supported over the years. I will say, though, that this year I did sign a letter with the Mayor indicating that we need to look at some caps for the past situation because of the escalating financial circumstances. We are working on this issue. We've clearly, clearly need to address it, but it is driving our budget. And I'm concerned about why we have to preserve the rights of those children who aren't getting services. I am somewhat concerned about people who are taking advantage of the system, and that is a reality we've got to face. I do want to thank you and applaud your suggestion that you look at the State functions on special education, and I will convey some of the research we've done. I think that is a role for the Federal Government, to help supplement these clearly State-related costs. We're the only municipality in the country that has to bear these costs in special education, and it will go a long way toward reducing these escalating deficits. Ms. Norton. If you were perfect, you couldn't get out of that one. Yes, Mr. McCarthy. Mr. McCarthy. I don't know if you were here before, but in my testimony I mentioned that we have a study that says, for some municipalities, upwards of 44 percent of their special education costs are borne by the State Capitol. And here, with our limited tax base, that is something that we bear all ourselves. Ms. Norton. Would you believe that the States are here crying bloody murder because they are having to pay special education costs, and here the District of Columbia has a burden that is simply impossible to bear. We've got to do something about that. Mr. McCarthy. That's why I'd like to add, Mrs. Norton, in terms of the contributions that you're talking about, as I said earlier, I think the Mayor and the council have agreed to find savings in the main city budget, use limited reserves or make cuts in other programs to give schools an additional $60 million this year to cover some of these problems. In fact, the budget that was passed yesterday has some reserve relief. The reserve requirement was reduced, and the only part of that was actually allocated for any use was $12 million for public education. So that's a---- Ms. Norton. Could I ask this? I'd like to know, what is the ethnic background and income level of students using out-of- State and private schools for special education in the District of Columbia? Ms. Cafritz. We have done a survey of just the, I think, four most expensive schools; and of the student population, which is privately placed there, they come from, with very minor exceptions, the most expensive ZIP codes in the city and in complete disproportion to their presence in the school system. Ms. Norton. Y'all are sitting ducks. Come in and get your legal fees paid, and then send your child to the most expensive schools. Move in from Montgomery County. I have heard of instances in which that has happened, Madam Chair. I'm not just using your county pejoratively at this time. Ms. Cafritz. The other thing on spending pressure to be aware of, the $60 million that the Mayor is contributing to this solution is taken into account in the cuts that we made. So that doesn't affect the cuts that we've made at all. I mean, it affects that we would have had to have made more, but---- Ms. Norton. I have a few more, but I'm going to pass on to the Chair now. Mrs. Morella. I want to pick up on that same issue. It seemed--and, yes, there are special need students who do go to Montgomery County because they can get the education that the law says they should have. I would hope that you would have some plans to incorporate within your schools the classrooms, the environment that is necessary for special education. Maybe you need to do some dazzling things like certain scholarships to get teachers trained. You know, maybe there would be a startup cost you would need. But, you know, what I understand also is that even the transportation, that you have bus drivers who are at the behest of the recipients' families, so they stop Monday and Tuesday one place. Wednesday, they go to a different place. Thursday, it may be a different place. I mean, this is very expensive. It seems, again, that could be streamlined so that in the long run you could come up with a plan--I'm sure that in the Federal Government we would try to assist if we knew that this was a program that was going to take your nonpublic placements to bring them into public placements, and the District of Columbia could be a model. I know you have more students with special needs than other jurisdictions. I know this is an enormous challenge, but I believe you're up to it. I mean, we have a great board of education, a great superintendent, the council, the support services, charter schools. They're off the wall in terms of numbers. Why? Because people must be sensing that they are just not getting it in the public school system, other than charter schools. I'm not sure--you have a good question about space, what are you going to do about it? But do you see what I'm saying? The bottom line is that we've got to make plans and accommodations so the District of Columbia can be able to educate within the public placements. Does anyone want to comment on that? Ms. Cafritz. Congresswoman, we would love to have--perhaps, Dr. Vance and Mr. Sellas now come up and do a briefing for you on our plans to address some of the very things that you mention, and I think emerging from that will be some things that we can certainly work on together, perhaps even legislatively. Ms. Baker. I might also say that I guess it was back in 1998 when charter schools were really beginning to evolve that it was a kind of thought that it might be one way to provide service to children in the special ed population. So that might still be a resource. Yes, it would have to be handled by people who really understood and knew what they were doing, but there are a lot of people out there who might take on that challenge, which would provide another resource for actually providing special education to children through the public arena in a way that would be very cost effective. Let me also say that, early on, we talked a little bit about enrollment or whatever, but, in 1998 or 1999, that was the first time in the District of Columbia that the actual enrollment numbers overall for public education increased, because charter schools brought back students whose parents had elected parochial or private schools, not in huge numbers, but what we're saying is that all kinds of reform can make that kind of difference, and that same kind of reform in special ed could also make that kind of difference. Mrs. Morella. Which is why you should also be involved in any plan that is undertaken. Dr. Vance, do you want to comment on that? Mr. Vance. No. Mrs. Morella. I would be happy to meet with you and Steve and maybe Ms. Cafritz, and I know that Congresswoman Norton would join me. We could have a little briefing on what your plans are to do that kind of thing, and then we'd---- Mr. Vance. We'll be delighted to make those arrangements, and perhaps we can set a date or two before we leave here today. Mrs. Morella. And, Mr. Chavous, you agree, too, don't you? Mr. Chavous. Yes, absolutely. I think that is an excellent suggestion. We are working on a plan; and one thing about it, Congresswoman Morella, we're going to be making sure that, once the plan is set, that we'll have regular hearings to drive the implementation, which is always problem. We've made a lot of great plans in the city in a lot of areas, but if you don't drive and ride herd on it day in and day out, you may not be followed. Mrs. Morella. Absolutely. That is one of the reasons for this hearing, too. I'm going to defer now to Ms. Norton for maybe the last round of questions. We'd like to submit some further questions to you, but we need to get on with the second panel, and we held you for a long enough time, but we do plan to continue. Ms. Norton. Ms. Norton. Yes. Could I ask the superintendent if you would submit to this committee within 30 days the ethnic background and income level and school of children using private or out-of-State schools in the District of Columbia. That must be already available someplace. I'm not trying to cause you any extra work, but we need to know that. Mr. Vance. Yes, we will. Ms. Norton. Thank you very much. I'd like to ask a question about an old issue that has come up that we thought had been satisfied. It's mentioned in Mr. McCarthy's testimony. It has to do with enrollment. Indeed, Ms. Baker mentioned enrollment having increased. We were fairly surprised at the first enrollment audit, and, frankly, it did not seem to us entirely credible, but, you know, they said they did it, and that is that. That's good, enrollment not going down. And I certainly do believe that there would have been children attracted by the charter schools. If I may say so, Ms. Baker, who started from literally nothing and created a very credible charter school board--a charter school department right off, did, it seems to me--and the school board quickly got itself to the point where it, too, was drawing people. So there's no question that there may have been people who were drawn. But in Mr. McCarthy's testimony, he says, prior to this year, the enrollment audit included only a sample of students in DCPS schools and all students in public charter schools. That's the first I've ever heard of that. Ms. Cafritz. Would you repeat that? Ms. Norton. It said that the enrollment audit included only a sample of students in DCPS schools, and all students, of course, the public charter schools. Mr. McCarthy. That is true, Ms. Norton. And prior to the creation of the SEO, the audit of the DCPS enrollment was just that. It was just a sampling of a few students here and there to come up with the number. One of the reasons to have the SEO was to improve that process and structure it, and Councilman Chavous made sure that indeed now DCPS have an enrollment audit that was a census audit student by student. The SEO--Ms. Spinner can talk about that--has just undertaken the first one of that kind. And what can you say? Ms. Spinner. As has been indicated, for the first time we have undertaken a contracted full audit of the school system's enrollment process, where every school in the district of the-- every public school in the District of Columbia is being counted, and the records are in fact being audited. And it is true that in the past, while the charter schools did undergo 100 percent count, the public schools went through a sampling process. This was the first year that the council did in fact require that we do this, and we are even as we speak learning from that process. We have completed that process and look forward to being able to use those numbers and that audit count to really accompany the recommended full funding formula to come up with the most accurate assessment of costs. Ms. Norton. What's the number? How many children are there in New York--in the D.C. public schools, please? Somebody tell me, please. I mean--well, she says the audit has been done. Ms. Spinner. The audit has been completed. We will receive our final report toward the end of December. Ms. Norton. You don't have any number you could give this committee? Ms. Spinner. I don't have a number for combined that I can give you, but certainly---- Ms. Norton. I want to know for the D.C. public schools. How many children are there in the D.C. public schools? Ms. Spinner. We will get you a number before close of business today. Ms. Norton. You don't have a number? Ms. Spinner. I don't have it in my head right now. Ms. Norton. It's December, and you don't have a number. Do you have a number in Montgomery County? Ms. Spinner. No. Mrs. Norton, let's be clear. The D.C. Public School System did in fact do its count in October, as it is prescribed to do. What we don't have is a final audit count, because there is a resolution process that you go through around enrollment. Once you do the count, you then verify that these young people are in fact residents of the District. Mr. Vance. Our report, which we submitted to the Board of Education as of October 5, 2001, reported 68,449 students enrolled in the District of Columbia. Ms. Norton. Thank you for your candor. First of all, I appreciate--whenever you come before this committee--first, let me say to Mr. Chavous, because I guess it was your committee that really looked behind this and discovered the truth---- Mr. Chavous. Yes. Ms. Norton [continuing]. I want you to know that it was never reported to this committee that a sampling was done. Of course, this committee is not the oversight committee, sir. You are, and you have done your job. And you've made the school system do for the public schools what, of course, they were requiring of the charter schools. The number that said there wasn't a single child lost in the public schools and that we had the same number of children growing, growing, just didn't seem credible to us, and nobody said they were doing a sampling. So it's really important to do what the superintendent just did. He gave you the number he had. He's going to be willing to submit, if the audit finds that there are other numbers, but that's what you do when you come to a hearing, ladies and gentlemen. You give your best information. Ms. Cafritz. Congresswoman, I just want you to know, our numbers are not based on a sampling. What the superintendent has presented are the numbers---- Ms. Norton. I know. Ms. Cafritz [continuing]. For October--OK. Ms. Norton. I know. That's right. Because in Mr. McCarthy's testimony, it said for the first time you did, apparently, pursuant to the city council mandate, a real audit. And of course that's what every other school system in the United States does. Mr. Chavous. If I may quickly---- Ms. Norton. Yes, please. Mr. Chavous [continuing]. On that. You raise an excellent point. We introduced the legislation for the State Education Office for that purpose. We did not think it was fair, nor was it appropriate when we're going to a per pupil funding basis to evaluate how we fund public education, for one to have a sampling, the other to have a complete audit. And so---- Ms. Norton. It's apples and oranges. Mr. Chavous. Yeah. And so we wanted to have uniformity, and we wanted to have an independent monitor, and that's why we've created that office. And I'm very pleased with the work the State Education Office has done. I'm looking forward to the audited numbers. You will never have a question as to how many students are in--being educated in our public schools, because we will have the real count and an audited real count, and that's what the legislation intended to do. Ms. Norton. It's such an important step forward. This committee took--had a GAO report, went through the whole ball of wax just to try to find out how many students. I'd like to ask a question on scores, and I'd like to ask it of Ms. Baker as well as of our school officials. I'd like you to--you haven't said much about scores here today. I'd like to know, over the past 3 or 4 years, have scores in every one of the classifications gone up or down? The ones that of course are the lowest, you'd want to go down. The ones that were the highest, you want to go up. That's the first question. The second question is, would--I have read in the newspapers--and I need clarification--on the notion that the scores for our D.C. Public school system children are--have been consistently higher than the scores for our public charter school system. So would all of you who are relevant discuss that, please. Mr. Vance. While the standard for nine test scores indicate that we have significantly reduced the percentages of students scoring in the below-basic-proficiency level, over the past 4 years, Congresswoman Norton, our student's performance in reading, mathematics achievement is still deficient, where we've made--I'm reluctant to call it a gain--is where we've reduced the number of youngsters who have moved from that below basic to the basic level. But we are still, in terms of youngsters reading on grade level development tally, terribly flat and deficient. Ms. Norton. We are flat? Mr. Vance. Flat. The scores are just flat there. We cannot detect any progress in moving those youngsters along, and that's a major initiative of ours this year. Ms. Norton. Ms. Cafritz. Ms. Cafritz. Oh, another thing that I would like to point out, because I think the SAT 9s, you know, reflect on it, because so much has been made of them. But I think that, in terms of our student's reputation, even more important are the SAT scores, and they are awful. And you have in place a team here who readily admits that they're awful and who---- Ms. Norton. Can I ask you a question on that, Ms. Cafritz? We had a program here right at the time that the city went down that offered children SAT score help, and we had a person who made tremendous progress, and he was the first to go. You can understand, they had to just save the basic schools. Do we have any such program in the District of Columbia now? Ms. Cafritz. I think the programs that you have in the District of Columbia, which you've had for years, are becoming real. OK? But when we start at our high school for the gifted and talented--and, quite frankly, any charter school you can name--where the scores are--we have many scores in the 700's and 800's at Banneker, so you can imagine what it must be like in the rest of the system. I mean, that's what we're up against, and that's what we're facing when I address the question of equity. Mr. Vance. We have expanded the service you've mentioned. We're currently using in our high schools the Kaplan plan, we're using the Sylvan plan, and we're using the Princeton plan. Ms. Norton. Well, those are good plans. Mr. Vance. Outstanding plans. Ms. Norton. Of course, it assumes the children have been educated to the point where they can absorb those plans. Mr. Vance. Precisely. And we are beginning working with them. We made a presentation to the board on our effort to expand those plans in each of our senior high schools. We did have a representative in from ETS, an Educational Testing Service, and they indicated their willingness to work with us to reinforce what we were doing and also expand it to our intermediate, that is, our middle and junior high schools. So we're in the process this year of implementing that in every one of our high schools. Likewise, we did create an office for honors and advanced placement classes in all of our high schools. Mr. Chavous. Ms. Norton, quickly, if I may, if you would indulge me, I'm convinced we will not improve test scores just through education alone. The biggest problem is the social conditions our children live under, and we are embarking on an initiative to integrate some of those wraparound services with what the education folks are doing. I think it's going to make a tremendous difference. One of the reasons why our children aren't reading or they don't operate and do math at basic is because they have little or no reinforcement at home. And I think with the early childhood initiative, the compulsory attendance level that I'm going to introduce and the commission we put in place, working with the Mayor and Carolyn Graham as deputy mayor in this area I believe that we can put in place a program that will give our young people the support beyond that 8-hour school day or 6- hour school day that will make a huge difference. And then we will see that bear out in test results down the road. Ms. Norton. Could I encourage you--Mr. Chavous, I think that your early childhood initiative is an excellent one. D.C. has one of the best essentially childhood programs in the country as it is, because the council and the Mayor moved ahead of other jurisdictions, and all kinds of children in early childhood, they could not be in other jurisdictions. And I know you're going through a very thoughtful process, working with American University and the rest, but particularly as hard times set in, I would just look to encourage you, since there's already so much experience in the D.C. Public school system with early childhood, one of the great success stories of the D.C. Public school system, I would like to encourage you to move that program along even more quickly, and I would like to challenge you to have at least part of your program in place by September. That is just how important I think what you just said is. If you start there, then by the time we get to the Kaplan or the D.C. college access program and, God knows, the high schools, the job will be much easier, and we won't be asking the principal and the teacher to do everything. Mr. Chavous. Well, indeed we expect to have a report by the end of January. We'll have hearings. And then I can also say that this is a collaborative effort. The Mayor, the superintendent, the school board and I are working together, the council, and Carolyn Graham has been working with the superintendent's office. We're talking about some pilot programs in the fall. So we're really on the same page with where you are. Ms. Norton. Excellent. Ms. Baker did not get to answer the question on the difference in scores between the charter schools and the D.C. public schools. Ms. Baker. Right. I think that there was actually a flaw in the process that was used, and I guess that--a year or so ago in terms of that comparableness. I think that one of the things that if you start going into statistical analyses you have to look at if you are comparing 500 students to 5,000 students, you've got to make some adjustments, because that is not a clear---- Ms. Norton. Yeah, but they know---- Ms. Baker. No. Mathematicians and--in one case that was not done, is all I'm saying. That was not done. It was just a--you know, you add this up and you add that up and you don't make any allowances, and that does not work. But I would also say that, yes, we still have a good deal-- number of students who are, yes, below basic, but we also chart gains, and I think that's clear in the complete report that I did leave with you. And that is that it's important to see how much growth has occurred in children over the course of a year, and we do have a company that does that for us so that we look very carefully at whether--and what percentage of the students gains were in the school so that---- Ms. Norton. Are you saying that the schools are comparable now or not? Ms. Baker. I don't know that there has been an analysis--an actual comparison. Ms. Norton. Well, I wish you would report to this committee on that so we could know the truth on that, rather than read it in the newspaper. Ms. Baker. Well, I don't know--I just question---- Ms. Norton. Fair is fair. The fact is that I am a strong supporter of the charter schools. It was my bill that was the-- -- Ms. Baker. Right. I understand that. I'm not denying a comparison, but I just think that the comparison that we make needs to be sure that we compare apples to apples. I don't believe that we need to take X number of students and compare them just--I think you need to break it down, is what I'm saying. Ms. Norton. I think statistically, you need to look--you're absolutely right on this. You need to look at the composition of the income and other compositions of those students--they might be skewed in some way or the other--and compare that with---- Ms. Baker. There are a number of things that you ought to take into account, yes. Ms. Norton. Finally, I just want to get on the record one way or the other on this. The IG wrote to all of you and sent copies to all of us, and this is about the--and let me quote him. As a result--and he was referring back to possible audits by the D.C. public schools and the council. Then he goes on to say, timely completion of the CAFR is at risk. He said, I am recommending that all efforts other than the CAFR to audit DCPS financial records for 2001 be suspended until completion of the CAFR on February 1, 2001. Have all audits--how have the parties responded to his recommendation? Mr. Chavous. Well, earlier this week, the IG, the CFO, the superintendent, Ms. Cafritz, the Mayor and I and also KPMG, the D.C. auditor, we were all in the same room. The Mayor chaired the meeting to deal with that very issue. We have come to a meeting of the minds as to how to proceed in a way that would not be disruptive to the CAFR. The council needs to have an audit done, and now the request that the school board made has been folded into the work of our auditor. The reason why we need to have the audit is we need to understand how we got in this mess, which just follows up on the questions that Congresswoman--Chairwoman Morella indicated--I mean, asked on. But we aren't going to get in the way of the CAFR. We're going to make sure that, working with KPMG, the city's auditors and the IG, that we'll work in tandem and we don't get in the way of that effort, because that is a top priority of the city. But we do need to make sure as well that the city auditor is able to do her work so that, as we build the 2003 budget, we don't repeat any mistakes in the past. So we're--we have a working group. We're working through a memorandum of understanding, and we will make sure that the CAFR is done in a timely manner. Ms. Norton. That is exactly the way to do it. Thank you very much. Mr. Chavous. Thank you. Mrs. Morella. Thank you, Ms. Norton. I know we've been keeping you---- Ms. Cafritz. One last thing I wanted to point out. It's so important that we realize that all of these children are public school children, and there is not one panacea that is any better than another panacea. It's going to take a lot of hard work. The public school system is beginning work with Richard Wayne, who is a well-known researcher in the charter school area, and I think it's--the 21st Century Schools is the name of the company, to do a joint study on all the charter schools' scores and DCPS scores in a way that they are appropriately, statistically disaggregated. So, you know, we will be able to bring you across the board, you know--and I think that everyone is participating in that as far as I know. Ms. Baker. Our board has already used Rich and Joyce's strategies as a--for the analysis that we get annually, and so then they will be folding in those as well. Ms. Cafritz. We couldn't afford that. We had to wait till they got a grant. Mrs. Morella. That's good that--I was going to ask that kind of question. But just one final question. Do you have full-time kindergarten as a demonstration program or requirement? Ms. Baker. Full time. Mrs. Morella. You have full-time? Ms. Cafritz. Full-time, universal. Mrs. Morella. Excellent. Because that is, you know, your-- following up on your preschool education has been found in some recent studies---- Ms. Cafritz. We also have universal pre-K. Mrs. Morella. Yeah, universal pre-K. Excellent. Good. It's interesting, because your wraparound schools very much are like linkages to learning, where you need to bring all of the facilities together if you're going to give that kind of background and environment to the students. I have looked at the Stanford 9 tests in reading and mathematics, and it is true, as you have indicated, the improvement is very slight, particularly over the last few years. There's been some significant improvement from many years ago, but the last few years when you have 36 percent below basic, and basic is 36 percent with regard to math, and 25 percent below basic, and 46 percent just basic when it comes to reading--and so it just seems to me that there are programs you must be offering that start from the very beginning, not just SATs. When they're ready to take the preSATs or the SATs, they're going to help to develop this. And, again, I look forward to hearing more about what you are planning to do. I just want to ask our State education officer-- congratulations on your appointment, Ms. Spinner--are you doing any evaluation of test scores? Ms. Spinner. At this point, we haven't undertaken any evaluation of test scores, but it's important, I guess, that I say that at this point in time that the State Education Office in the District of Columbia came about, as you all know, through a legislative process that makes it a bit different from other State education offices. We really are focusing on monitoring and oversight and the kind of research and information gathering that will allow for better data-driven decisionmaking across the city. We're very hopeful that this time next year we'll be coming back to you with the kind of information about not just one set of our public schools but all of our public schools that will inform what you know and how you know it. Mrs. Morella. So are you planning to do an evaluation? Ms. Spinner. Yes, we are, and we'll be doing that in cooperation with our public schools. Mrs. Morella. Very good. Splendid. I want to thank the panel. We will be forwarding some questions to you. You know, education opens doors, but it also prepares people to go through those doors, and you are working with the potential leaders for the future. Thank you all very much for being with us. Dr. Gandhi and Mr. Maddox will be coming forward, and I think you were going to have Mr. DiVello--before you sit down, too, I'll swear you in. So if you would raise your right hands, gentlemen. [Witnesses sworn.] Mrs. Morella. Thank you. Affirmative response, for the record. Well, you've heard our long morning deliberation, the statements, the questions, the responses. So I think that you're all ready for us, and we're certainly ready for you. Thank you again for your patience in waiting so long to be able to testify. So we'll start off, then, again, in our usual way. Dr. Gandhi, you're a familiar person who appeared before this subcommittee, and so you know that your entire testimony will be in the record, and look forward to hearing from you, sir. STATEMENTS OF NATWAR GANDHI, CHIEF FINANCIAL OFFICER, DISTRICT OF COLUMBIA; AND CHARLES C. MADDOX, INSPECTOR GENERAL, DISTRICT OF COLUMBIA, ACCOMPANIED BY WILLIAM J. DIVELLO, CFE, ASSISTANT INSPECTOR GENERAL FOR AUDITS Mr. Gandhi. Thank you very much, Madam Chair. Good morning, Chairwoman Morella, Congresswoman Norton and members of the subcommittee. I am Natwar M. Gandhi, chief financial officer for the District of Columbia, and I'm here to discuss the financial management of the District of Columbia public schools. First, let me address the District's commitment to the children. The record is clear that Mayor Williams and the council have made a commitment to put children's education first in the District of Columbia. Because of this commitment, there has been a need to increase our investment in schools, and over the past few years this has been done. The combined operating budget for D.C. public schools and D.C. Charter Schools has increased from $568 million in fiscal year 1999 to about $801 million in fiscal year 2002. This is a 41 percent increase over a 4-year period, while during the same time total enrollment in schools has increased from about 79,000 to 82,000, a 4 percent increase. The public education local source budget for fiscal year 2002 constitutes about 23 percent of the total D.C. budget. As the chief financial officer, I can tell you that, in today's revenue environment, the District cannot continue this trend of an annualized 10 percent growth to this budget without radical change in the District's commitment to other components of its budget. Therefore, the long-term financial viability of the DCPS is substantially dependent on structural change in the management of its program and cost profile. In that cost profile, as we just heard, special education is the cost driver. The District's special education program, comprising about 16 percent of the student population, accounts for one-third of its operating budget. When we compare the fiscal year 2000 budget for special education to the fiscal year 2002 budget, we find a 38 percent increase in costs. Over the same period, the number of students requiring special education services increased by 11 percent. Others have already spoken about underlying problems with the special education program itself that contribute to making it so costly and why changing this cost will take some years to correct. Most of the costs are tied to compliance with Federal mandates, and the District has no control over these expenses and only a limited ability to anticipate them. Now let me turn to fiscal year 2001. The projected fiscal year 2001 financial deficit at the schools has unfortunately generated much controversy over the past few months. I fear that a good portion of this controversy stems from inadequate and untimely communication between the Office of the Chief Financial Officer and the superintendent and the Board of Education, a failing which I deeply regret. At the end of the day, however, what matters for the schools and the District is the audited financial statements and not our projections. We have gone over the books for fiscal year 2001 and the independent audit is in full force. The actual figures provided to the District's independent auditor show deficits of approximately $60 million after the gap closing measures of $38.2 million. Had no action been taken, the deficit would have been $98.2 million. It is important to note, however, that although this shortfall presents us with challenges as we enter the new fiscal year, it will not impact the District's goal of financial viability. Our financial forecasts for fiscal year 2001 included provisions for unanticipated spending pressures of potential revenue shortfalls, and this gives us the ability to manage unforeseen budgetary challenges. In the current fiscal year, the schools have major financial problems that could result, because the problems identified in fiscal year 2001 continue in fiscal year 2002. Before corrective actions are taken, we project a deficit of about $108 million in fiscal year 2002. The Board of Education has voted to make structural changes in fiscal year 2002 operations that will reduce costs by about $44 million. We have taken on the challenge of addressing Medicaid revenue shortfalls District-wide. We have also proposed that, in addition, $40 million be reallocated from other accounts in the city to the schools. The District's proposal approved by the Congress will make an additional $9.7 million available for the schools. Along with these and the cuts of new programs at the schools, these items will bring back solvency to fiscal year 2002 in the schools. Let me now turn to what I believe is a major source of friction between the schools' leadership and my office, the method the District uses to manage the financial affairs of the public school system. From a financial standpoint, the schools are managed by the District in the same manner as other agencies of the District government. It receives its budget on an October/September fiscal year; its financial flexibility is governed by the same reprogramming restrictions applicable to other agencies; it operates only partially through the District's financial systems, and its financial personnel report to the chief financial officer. Both the school board and the superintendents have contended that this model is not a good fit for the public school operations and point to the models of surrounding jurisdictions that have much wider latitude for independent action by the school management. The District already has moved to give the DCPS greater independence but not as a part of a comprehensive plan. For example, DCPS exercises independent personnel and procurement action. Also, steps are under way to give schools their own payroll system, and the Mayor has recommended changing the school's fiscal year to a July/June basis. As each of these incremental changes is made, the current financial operating matter becomes progressively less viable. For example, DCPS intends to integrate its personnel and payroll operations in a software package that includes budget, procurement, payroll and accounting. Even if the accounting module is well integrated with the District's accounting system, financial personnel would need to operate on both systems simultaneously, a cumbersome and expensive mode of operations the District does not have funds to support. I believe this would be a good time for the Mayor, the council, the Board of Education, the chief financial officer and, of course, the Congress to jointly review what model makes sense for managing the schools' finances going forward. I believe it is possible to devise a system that would give schools much greater financial flexibility, while at the same time protecting the District's Treasury from unauthorized spending. Moving in this direction could actually contribute to more efficient program operations by giving the schools both the authority and responsibility to manage their financial affairs. Here are what some of the components might be of that arrangement. One, establishment of the schools as a component unit of the District government, somewhat similar to the University of the District of Columbia. Two, creation of a statutorily binding DCPS maximum fund allocation for the fiscal year that cannot be exceeded. A binding limit would protect the District's Treasury and, at the same time, encourage innovative program solution to solve financial issues. Under such a binding limit, I can envision the establishment of the Office of the Chief Financial Officer at the schools as a unit of the schools. Three, implement at the Federal level a schools capital fund, to free up the District's debt service funds to cover necessary maintenance on new capital projects. The school's facility master plan cites capital improvement needs for up to $2.2 billion between fiscal year 2002 through 2007, but the District's capital improvement program funds only $868 million over the same period. In addition, the program has no funding for charter schools, and the District has no budgetary flexibility to fund routine maintenance for new buildings. Four, changes in the DCPS fiscal year to a July/June basis. Operating on a fiscal year that does not coincide with the school year is a unique handicap for the schools. Five, devise an oversight structure to periodically review both programs operations and financial statements. And, finally, amend the provision regarding the public charter school oversight to require audited financial statements by the District's independent auditor. Madam Chairman, this concludes my testimony, and I request that my written testimony be made part of the record. I'll be prepared to answer any questions you may have. Thank you. Mrs. Morella. Yes. Without objection, your statement in its entirety will be in the record. We thank you, Dr. Gandhi. [The prepared statement of Mr. Gandhi follows:] [GRAPHIC] [TIFF OMITTED] 82565.045 [GRAPHIC] [TIFF OMITTED] 82565.046 [GRAPHIC] [TIFF OMITTED] 82565.047 [GRAPHIC] [TIFF OMITTED] 82565.048 [GRAPHIC] [TIFF OMITTED] 82565.049 [GRAPHIC] [TIFF OMITTED] 82565.050 [GRAPHIC] [TIFF OMITTED] 82565.051 [GRAPHIC] [TIFF OMITTED] 82565.052 [GRAPHIC] [TIFF OMITTED] 82565.053 [GRAPHIC] [TIFF OMITTED] 82565.054 [GRAPHIC] [TIFF OMITTED] 82565.055 [GRAPHIC] [TIFF OMITTED] 82565.056 [GRAPHIC] [TIFF OMITTED] 82565.057 [GRAPHIC] [TIFF OMITTED] 82565.058 [GRAPHIC] [TIFF OMITTED] 82565.059 [GRAPHIC] [TIFF OMITTED] 82565.060 [GRAPHIC] [TIFF OMITTED] 82565.061 Mrs. Morella. I'm now pleased to recognize Mr. Charles Maddox, inspector general for the District of Columbia. Thank you, Mr. Maddox. Mr. Maddox. Good afternoon, Chairwoman Morella and Congresswoman Norton. My name is Charles Maddox. I am the inspector general for the District of Columbia. Accompanying me this afternoon is Bill DiVello, who is the assistant inspector general for audits. Mr. DiVello was also the Chair of the CAFR Committee during the course of the CAFR audit. I appreciate the opportunity to appear before you today to discuss issues that relate to continuing efforts by the District of Columbia to improve its public school system. Today, I would like to provide you a brief summary of work performed by the Office of the Inspector General since the enactment of the District of Columbia's School Reform Act of 1995. Specifically, I would highlight some of our work concerning current financial matters and special education. In addition, I will discuss some concerns regarding our ability to conduct audits of charter schools. We have expended considerable audit and inspections resources regarding facilities maintenance, property management, the capital improvement program and procurement. I am willing to provide information about these efforts according to your interests after this testimony. In the latter part of fiscal year 2001, the chief financial officer for the DCPS identified revenue shortfalls from Medicaid and other obligations that, while still subject to a final accounting, negatively affected operations of the District of Columbia's Public School Systems. The amount of the shortfall and spending pressures estimated recently at a combined total deficit of $80 million was initially disputed by the president of the Board of Education. In an attempt to resolve these matters, the OIG issued a management alert report requesting that the District's CFO provide details surrounding the possibility of all overobligation, including a determination whether an Antideficiency Act violation has occurred. Additionally, to address growing concern over the deficit and to determine the effect of the apparent deficit on the city-wide Comprehensive Annual Financial Report [CAFR], we decided to expedite the portion of the CAFR audit that involves D.C. public schools. We expected the audit work to be completed by the end of December, and it will be distributed immediately so that policymakers will have the benefit of our findings for short and long-term planning. In addition, we have expressed great concern about indications that the D.C. auditor and a firm hired by the DCPS independently to conduct their own assessment of the deficit-- specifically, we are concerned that such efforts could compromise timely completion of the CAFR. Furthermore, we are concerned that those efforts could violate appropriations language which restricts spending of appropriated funds for purposes of auditing the city's financial statement. Specifically, section 132 of public law 106.522 prohibits the use of such funds, ``unless the audit is conducted by the OIG.'' Accordingly, any audit efforts that would duplicate those performed by the District's CAFR auditors under contract to the OIG may not be financed by district funds. On November 7th and 9th, we notified the Congress and District leaders of our concerns and recommended specific actions, including both the recommendation that the D.C. auditor and DCPS suspend their efforts until completion of the CAFR on February 1, 2002. Copies of those transmittals are provided for the record. On a daily basis, I will continue to work with District leaders to monitor developments in this area so that we can avoid the potential conflict. We have issued findings on 17 audit reports and related inspections. Although I cannot comment on pending investigations, I can say that we are also have and continue to investigate a range of matters at DCPS. A list of the audit inspection reports is included as an attachment for the record. We have consistently reviewed programs and operations at DCPS, because DCPS delivers key services to many District residents and because many of the existing challenges at DCPS threaten the fiscal viability of the District. With regard to special education programs, we have completed two audits. The first was completed in calendar year 1999 and second in calendar year 2000. In our 1999 audit, we found that DCPS was not in compliance with Federal or District regulations in the administration of special education program. Specifically, DCPS did not do the following: Evaluate and place special education students in a timely manner; conduct due process hearings or implement determinations made by an independent hearing officer in a timely manner; provide student-remitted services specified in their individualized education programs; and report activities of the program annually to the Board of Education. We also noted that DCPS did not properly maintain Medicaid records. As a result, DCPS did not timely submit requests for Medicaid reimbursements, which totaled $14 million. This delay resulted in a loss to the District of approximately $1 million in interest. Our calendar year 2000 audit focused on transportation costs within the special education program. This audit disclosed that DCPS experienced difficulty in meeting the demands of providing transportation services to its special education students. This situation had been exacerbated in part because of the nationwide shortage of school bus drivers. Moreover, DCPS had not implemented measures to reduce transportation costs. Such measures include devising pair shared bus routes, implementing staggered bell times, establishing neighborhood schools special education programs and designing efficient and economic bus routes. Similar types of measures have been implemented in other school jurisdictions with significant savings in transportation costs. Implementing such measures could save the District at least $2.4 million annually. We also identified the following deficiencies in the administration of the special education program. They include an inaccurate data base of special education students, an inadequate review of special education tuition payments, and insufficient monitoring of nonpublic based schools and residential schools. As a result of insufficient monitoring, we found that students were attending schools that did not have special education programs or that did not meet the requirements for providing special education. We were able to confirm that DCPS paid over $175,000 for tuition costs to schools that did not meet the standards for providing special education programs. Factors causing these conditions include internal control weaknesses such as insufficient policies, procedures and personnel, and the failure of personnel to comply with regulations. In an effort to ensure that DCPS implements the recommendations they agreed to in our reports we are including DCPS in an ongoing, District-wide followup audit of actions by several agencies. We have completed field work on the followup audit and plan to issue our report by end of January 2002. In addition, we have included in our fiscal year 2002 audit and inspection plan a reaudit of the special education program, because we know that major challenges remain. We believe that there is an increased need for performance audits and for inspections of charter schools in order to address the risks for fraud, waste and mismanagement. Unfortunately, my office has no independent authority to initiate an audit or inspection of public charter schools because of the following restrictions: Section 2855(b) of the Reform Act, which limits the opportunities to conduct performance audits of charter schools, to request from the consensus commission section 2002, 10(a) of the Reform Act, which defines the term District of Columbia government, thereby establishing the parameters of the OIG's jurisdiction; and, second, 2002, 10(b) of the Reform Act, which specifically states that public charter schools are not included within the definition of the District of Columbia government and therefore not subject to the OIG's jurisdiction. Section (b) provides in part that the consensus commission may request the inspector general of the District of Columbia to audit the records of any public charter school to ensure, monitor and evaluate the performance of the charter school with respect to the contents, standards and District-wide assessments described in the act. In addition, D.C. Code section 38-1802.04(c)(3)(b) states that a public charter school shall be exempt from District of Columbia statutes, policies, rules and regulations established for the District of Columbia public schools by the superintendent, Board of Education, Mayor, District of Columbia Council or Authority except as otherwise provided in the school's charter or the subchapter. If this legislative impediment were removed, I would initiate an audit which would include a review of such areas as staff qualifications, tuition reimbursements and procurement. Improvements in these areas would likely have a major fiscal impact and improved service delivery for many students. In summary, Madam Chairman, I believe that the work conducted, ongoing and planned, by my office addresses important control areas that directly affect the quality of life for many residents of this great city. I look forward to working with District leaders to continue doing all we can. At this time, Mr. DiVello and I will be pleased to respond to any of your questions. 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Thank you very much, Mr. Maddox and Dr. Gandhi. You know, if I were doing this hearing again or I could start off again this morning--I think the hearing has been excellent, and I appreciate your patience--I would have started off with you, Mr. Maddox, because I am shocked to learn from your testimony the violations by the District of Columbia public schools. I mean, you have enumerated here the fact that they haven't been responding, they paid over $175,000 for tuition costs to schools that did not meet the standards for providing special education programs. Transportation is mentioned here by you as something that needed some special attention. You call it a list of--in your list of deficiencies, they have also an inaccurate data base of special education students, inadequate review of special education tuition payments, insufficient monitoring of nonpublic day school residents. They have not implemented measures to reduce their transportation costs. It goes on and on. They are not in compliance with Federal or District regulations in the administration of the special education program. Now, we will be meeting with those principals to talk about this special education reform that they are hoping to put together. I hope that will be at the table. Certainly we will have--we will get back to them with the list of your deficiency recognition, and that's just part of it. But do you see yourself as having a role at the table? Mr. Maddox. I think that, as always, when asked do I see the IG having a role in helping to shape policy or to answer questions, there is a reluctance in a part of the planning process, because then I have to sit down, make the evaluation of that same process that I am an equal partner in. I think there may be a limited part that the IG can play. We just have to see. Mrs. Morella. I understand what you're saying, and I know the role of the inspector generals. I'm a big supporter of inspector generals and have met with many of them. I know you're reticent, and you don't feel you make policy. That's true, but you have some accountability of an assessment of those policies in terms of are they accurate and where do you see problems. So I'm not saying you would be involved in the policymaking but that you would scrutinize the plans or the proposals to make sure that they reflect what you know in terms of the best management principals. Is---- Mr. Maddox. I certainly agree with that, Madam Chair. Mrs. Morella. Do you agree with that? Mr. Maddox. Yes. Mrs. Morella. Because I'd certainly like to know that you were there in some way to make sure they're not violating these problems and that they are responding. You even mention the-- what is it--the deficiency--you know, the nondeficiency--or discrepancy law that we have, that they in fact have been violating that. Now your turn, Dr. Gandhi, to respond to that, and then I have some other questions I'd like to ask you, sir. Mr. Gandhi. Madam Chair, I simply see my role to be in sitting down with them, and I have been doing that. And I do not want to beat on the special education situation, but I do need to point out one more time, and I think Dr. Vance already pointed it out, that roughly 16 percent of the student population is absorbing one-third of the budget. So, there is an incentive in the District to have one's child qualified in special education, primarily because it provides transportation and that you get to send your child to the best available school in the region, if not in the country. Let me just give you some numbers about the size of it, which is to say the formula. The foundation level per student is $5,907. Then we have some add-on to that, about $4,000. But then once you get into the special education, just to give you some estimate here, if you have a level 4 child, then per student you add on $18,903. We have 177 students like that. If you have a level 3 child, you add on $10,220 per child. And then moving to the charter schools, we have about 90 students where we spend $55,000 more as an add on to the foundation formula. So what we want to note is, that this portion of our total population is expanding over the last 4 years. It has grown by 41 percent, and there are thousands of cases lined up here. So to think in terms of our education and not to go after special education aggressively, effectively and now, it's like playing Hamlet without the prince, and as a student of Shakespeare, you will appreciate that. Mrs. Morella. That's right. Things without remedies should be without regard. What's done is done, but we need to move forward, because we can work on it. It is not a done deal. And we have to. And I agree with you and you've given me all these statistics, but let me ask you, the inspector general issued reports in June 1999, November 2000 that identified management deficiencies. We see even in the statement given now by the Inspector General private placement payment billing and Medicaid recordkeeping were two of the problems. What is the status of the recommendations that were made to correct these problems? Mr. Gandhi. As far as the financial function at the schools is concerned, I regret to admit that the financial function has failed at the school primarily in terms of the communication with the program people, the superintendent and the school board. We have taken effective action immediately, and removed top management plus certain personnel in their financial function. But the program statistics are a function of the program side of the house, and we also find a lot of problems in collecting and assembling that information. Mrs. Morella. And I noticed in today's paper Mr. Molina has changed his job. Do you want to comment on that? Mr. Gandhi. Yes. Mr. Molina has provided excellent service to the schools. He has performed brilliantly. His only problem was that he was there to give bad news. When I found that the earlier CFO and his management at the school was not performing up to my expectation and failed to report to me, to the city officials, as well as to the school officials the extent to which we were facing deficits, I removed him and his colleagues. I put a mole there. He joined a few months ago there. As soon as he went in there, he started digging, and what we found was an $80 million problem as of September 6th. At that time, it was an estimate. As I indicated in my testimony, we have finished the work at the school. He has finished his work at the schools. We completed the books, closed the books, given the numbers to KPMG for audit. So Mr. Molina's work has been done over at the schools. I expect all of us in the CFO cluster to work closely and cooperatively with the program people, and it was not happening at the schools. That was not the level of trust that should exist between the CFO and the program management. Consequently, I decided to remove Mr. Molina from the schools; and, indeed, given his excellent credentials--he was a CFO at the Milwaukee school district, a much larger school district, a senior accounting officer in the city of Houston and other places--I asked him whether he would be kind enough to accept the position of the deputy chief financial officer for budget and planning, meaning director of the budget for the entire city. Actually, this is a promotion for Mr. Molina. He will indeed be in charge of the whole city's budget, and I have great confidence in him. I must say the school's loss is the city's gain. Mrs. Morella. It appears as though what was neglected were the, essentially, warning signs. Mr. Gandhi. Yes. Mrs. Morella. And you have accepted some of the blame for that. I think it goes beyond that, and I hope that will be remedied. You did give us a dire report, mentioning that, in the future, $108 million; and I guess that says that we need to look at special education, but we also want to make sure, Dr. Gandhi, that we have the best management tools and implementation. How do you feel about that? Mr. Gandhi. I think it is extremely important. You're right on mark there, Madam Chair, that, in the ultimate analysis, the CFO is a bean counter. All one can do as a CFO is to tell the number. It is for the program people to manage this program effectively and efficiently. For that, of course, they need good information, and we have committed to Ms. Cafritz and Dr. Vance and other management at the schools that we would provide them information, as much as they want. I personally would brief the school management once a month at the minimum. So there will not be any dearth of information from CFO's side, but it is still they and they alone would have to manage it. Mrs. Morella. Uh-huh. And you will have to make sure that you're there to oversee it or to know something more about the management. Mr. Gandhi. Absolutely right. And I want to state one point further. Given the experience of the schools and given that in 2002 we do not have the revenue flexibility, I've written to the superintendent and the school board that I need a spending plan for fiscal year 2002, meaning I would like to know how much they would spend month by month. This is the concept of apportionment, and I would provide available cash on a quarterly basis. If I were to judge that in a given quarter they are spending more money than they should be spending, then I would simply alert them, and, if need be, we would cut the cash off. Mrs. Morella. Are you using the apportionment authority? Mr. Gandhi. Yes, ma'am. Mrs. Morella. Very good. I will now recognize Ms. Norton. Ms. Norton. Thank you, Madam Chair. With Mr. Gandhi and Mr. Maddox at the table, let me just start with the umbrella issue I raised for the next panel, and that is to say the Medicaid problem in the District of Columbia. With a great deal of effort, we were able to get the Medicaid percentage to the District of Columbia raised from a killing 50/50 to something like 70/30. We still are higher than any city in the United States, and it still is a killing amount of money, even if they were to pay every bit of it. As you know, while there's a District matter, and therefore I did not--you didn't hear from me on it--I do regard it as a failure of the entire government that not only did Medicaid send D.C. General down, but nobody blew the whistle. Nobody. Or if they did, they sure didn't blow it loud enough. So now we have, as I said before, this problem skipping to yet another and perhaps--God knows what other department. Mr. Chavous indicated, well, there's some differences. There's really not a dime's worth of difference, not a dime's worth of difference. It's the same problem. The agency does not apply for Medicaid money do it from the Federal Government. As a result, the agency is in the hole. You know, Mr. Chavous is right. It won't take the school system down, because somehow all the taxpayers of the District of Columbia and the rest of us will somehow rush forward. But it bothered me no end to see this problem crop up in the school system, because of what it said to me is that the Medicaid problem of the District of Columbia is still entirely broken. So, as I sit here today, I have no confidence that what we saw at D.C. General, what we now see in the school system is not to be found in each and every department of the D.C. government which receives or should receive Medicaid money. Can you assure me that is not the case? And, if not, what are you going to do about it, each of you, please? Mr. Gandhi. You are exactly right, Ms. Norton. This is exactly the message and our problem. They did not want me to tell them that the Medicaid money was not coming to them, and when the CFO---- Ms. Norton. You just kept giving them money until the overobligation--I don't even see how--how did what overobligation go on for so long, Mr. Maddox? This was a straight-out overobligation, violation of Federal law, violation of D.C. law. Mr. Gandhi. Because we kept a fiction on our books of counting assets that were not realizable. We had a---- Ms. Norton. How could you do that? I thought that the law says you have to spend what your budget says you have to spend. So each time--if they were on a monthly basis putting--adding money to the D.C. General budget, so everybody with his eyes wide open---- Mr. Gandhi. And that is why we put them on apportionment. From now on, we're not going to keep writing the checks on D.C. General. But coming back to the Medicaid problem, you're absolutely right. It is a city-wide problem. It is $1 billion issue, because it's about $1 billion of the city's budget that is in Medicaid. It's 20 percent of our budget---- Ms. Norton. Do you have any idea what percentage of that money we do not get back each year? Mr. Gandhi. Well, you are right in that it's a problem not only at the schools. It is in health, mental health, child and family services, and other agencies. So what we have decided and have already been doing the last 2 months is to have a city-wide task force headed by me and Mr. Koskinen. We have the agency director sitting in there. We have a very effective way of making sure that we would be very aggressive in, first, the billing and then retrieving every dollar that is coming to us. And, again, all of these Medicaid dollars that I'm questioning here, we're not going to give up on those dollars. We are going to hire the best available lawyers to get that money back. We're going to seek your help, Ms. Norton, to get that money back. But from an accounting perspective, when an auditor tells me that money is not coming, I cannot put it up on the books. We are not going to let that happen, and I can assure you that Medicaid is a top priority. The Mayor is aware of that. The council is aware of that. I have personally briefed the Mayor, Mr. Koskinen, Mr. Chavous, Ms. Allen, and Ms. Cropp. So we are all on board. We have an effective program ongoing on that front. Ms. Norton. Mr. Maddox, have you ever done an audit of the Medicaid system cross government? Not just in one or the other place that it has a problem, but the receipt and--of Medicaid funds and the filing for Medicaid funds by the District government? Mr. Maddox. Congresswoman Norton, if it pleases the committee, I'm going to have Mr. DiVello speak to you on that issue. Mr. DiVello. Good afternoon. It's a pleasure to appear before you today. My name is Bill DiVello. I'm the assistant inspector general for audits for the District of Columbia. No, we've never really done a cross-agency review. We've been looking at the agencies on an agency-by-agency basis. For example, in the area of special ed in 1999, we reported that there was problems with Medicaid documentation. Now, that causes a real problem, because the latest information I got-- we've received back in the area of special ed is that because of either poor documentation or a cost that was submitted to the Fed for reimbursement, the Fed took a look at it. Now the District has got to pay them back $17 million. So that's a problem that we've reported as far back as---- Ms. Norton. Mr. DiVello, shouldn't there be a governmentwide approach to how to file for Medicaid funds? I mean, what is the point of going agency by agency if you find that you have a systemwide problem in the entire government? Mr. DiVello. Well, let me say this. I don't disagree with that. The more we can tackle different audits from a systemic approach, the more bang we get for our buck. I'm absolutely on board with you. I would tell you this, that we're trying to get some of the big-ticket item, and that's an approach we'll consider, but we're looking at the Department of Mental Health right now. So I would---- Ms. Norton. Well, could I just ask Mr. Maddox, could I ask that you give priority--first of all, I think anybody that uses Medicaid money that has not been audited, you're right, you've got to do this first. You've got to do this first agency by agency, and then you've got to figure out or recommend something approaching a systemwide approach. And everybody is going his own way and nobody is collecting enough money. Could I ask that there be audits done of each and every agency that does--that files for Medicaid funding, so we can get a handle on this problem before it becomes a governmentwide disaster for us? Mr. Maddox. Yes, we will. Mr. DiVello. May I add that in our CAFRs we've also given some early warnings. If you look at our comprehensive annual financial report and you look at the accounts receivable, when KPMG or whatever auditor that we hire, they take a look at the receivables and they determine what's the collectibility; and those receivables are written down because our financial auditors that we hire have concern based on cost reports that we might not get back all this money from the Fed. So there has been indications. But I do understand your point. Ms. Norton. Well, I'm going to ask that the recommendation of the audits be hooked up with the CFOs so that we can fix the system system-wide and not continue to run these terrible deficits. What's the use of getting all this new money from the Federal Government if we are continuing to have to pay large amounts from the pockets of the taxpayers in the District. Would you please submit to us a plan for which agencies are going to be audited, that have not yet been audited on Medicaid? I recognize you can't proceed to fix it system-wide unless you know what's happening to all the agencies that in fact use Medicaid. Mr. Maddox, are you satisfied with what we heard from the last panel, that there was an MOU, an agreement, about these multiple audits? Are you satisfied that no audits that will interfere with the CAFR are being performed? Mr. Maddox. I can't sit before you right now and tell you I am 100 percent satisfied. Ms. Norton. You weren't at the table at that meeting, I take it? Mr. Maddox. Yes, I was. I was there when we all agreed, No. 1, that the No. 1 priority was to make sure that the CAFR would proceed unimpeded and that it would be completed on time. Now what took place at that meeting also was what role the D.C. auditor and possibly the law firm of Hogan and Hartson would play with auditing requests from the president of the school board. What came out at the end of the meeting was that the parties involved were to sit down and map out a memorandum of understanding as to what process they would use, taking into consideration that whatever the process was, it would not interfere with the ongoingness of the audit. That is still going on. We still have not come to closure on that. Ms. Norton. When are you going to come to closure on that, Mr. Maddox? After all the CAFR is due out in February. Mr. Maddox. I think you can take some comfort in knowing that, so far, as we speak today, nothing has interfered with the CAFR. We are moving along on schedule. It is just a matter of keeping everybody true to their word, and I'm watching it very carefully. Ms. Norton. Mr. Maddox, there is, by statute, a D.C. auditor. And of course if the school system or any agency--you can understand the school system finding itself with a surprise deficit would want to find out what happened. Now the D.C. auditor is a statutory office of the District of Columbia. And we can understand why the council would want to have its own auditor. And you cite stuff here that I don't consider relevant at all. No appropriated funds would be used for purposes of auditing the city's financial statement. Well, it is neither the auditor of the council nor whoever it is that the school system is hiring that is interested in auditing the city's financial statements. And the Congress never meant to say that people who find themselves overspending should not try to find out what was wrong. Where they may have gone awry is in the controversy that developed between them and those charged officially, the CFO. Nobody is interested in anybody else's audits ultimately except the CFO and the CAFR. But I don't think we want to say to agencies, if you find that there is a problem in your agency that you did not know about and should have known about, that you shouldn't try to find out what the problem is. It could be a management audit. It could be some kind of substantive audit to find out what was wrong. But I don't see how it would necessarily interfere with what you're doing, since they're not auditing the city's books. They are trying to find out what happened in their own agency, which I think as auditor, or as IG, you should want them to try to do. Mr. Maddox. You are absolutely correct, Congresswoman Norton, that if that were the case--you are absolutely right. The problem is, we don't know what the scope--we asked that question time and time again, what is the scope of the probe. And what we're saying is, my interpretation of the law is that if another audit is asking the same questions, going over the same documents, financial statements and auditing the same work that is contracted to the independent auditor, then that shouldn't be. The problem we are concerned with is--if I could, the problem we are concerned with is that the number that the independent auditor comes up with is the number. I think the Mayor---- Ms. Norton. And no matter what they do, that's the number. No matter what they do, there is an official audit and there is--Mr. Maddox, I don't want to belabor this. All I want to do is to say that for years when a government that--when mistakes like this were made, say, OK, let's go on to the next joke. And to the extent that somebody wants to find out what happened, it seems to me we ought to encourage this. I hope they are not spending money to find out. I hope that they are not interfering with the CAFR. And I think it is outrageous for them to get involved in arguments with the CFO or with the official auditor. If they want to do an internal audit that does not interfere or put people to multiple layers of work, then it seems to me that we ought to find a way to do that. I certainly don't think we ought to repeat your work, but I suppose I have been so used to the opposite that I don't want to discourage people moving forward. I do want to ask you a question about this rising special education deficit. OK, it is $60 million now. Before it was $98.2. And it is going to rise to $108 million next year. And so far as I can tell, the school system still doesn't accept that number; although it has to, because it doesn't have any special education money to make up for it, so that's the number. So I don't think--that kind of foolishness isn't even worth spending time on. You can have those kinds of discussions in your own kind of internal meetings. But to have those come out and be a whole big number is kind of silly and makes people look silly. But what bothers me is that if the number keeps going up, how can you assure this committee that the deficit is under control, Mr. Gandhi? Is it under control? I think you testified that by 2002, that will be the end of it? It wouldn't go up anymore? Mr. Gandhi. If the school board is effective enough to take those actions that they have promised--after all, they promised that they would cut $40 million, and those measures have to be implemented soon enough--effectively and efficiently, then you do realize that savings. That's one. Two, on special education, we expect improvement to show sooner and faster, so we can contain that spending, and we can contain that overspending. But again, in many ways, this is a moving target. If you do not do what you promise, then it is going to go on. For example, in other parts of the city they say we are going to RIF people. But the date by which you RIF, if you do not RIF by that day, or do not reduce your payroll by that day and extend into the next quarter, there is more money to be spent and it takes longer to get to the people. So the issue that this number is dependent upon, and contingent upon, is a series of actions that had been promised. We are currently evaluating the school's promise to pay back as much as $40 million, and we hope that those are the right measures in terms of the numbers. And again, we are not telling them what to cut. It is their decision. Ms. Norton. Well, you will know whether they're the right numbers because you're the CFO and you've got your own guy there to find out. Mr. Gandhi. Right. But again, these measures have been doubled basically by the school system itself and because of the breakdown of the communication that had existed there. But as Ms. Cafritz pointed out, I met with them last week several times; and we are working together at all levels with the schools to come up with these gap-closing plans. We're going to work on the 2003 budget. And we have extended all the available resources of the chief financial officer both at the schools level and the city level to meet these challenges. My overall assessment is that if this works out--and I think the city has committed to provide 60 percent, or $60 million roughly, toward the solution; and the schools some $40 million--I think we should be able to manage this. Ms. Norton. I am going to ask this one last question before closing off this round. We have a school deficit--unexpected, very large. We have the September 11th revenue shortfalls, and we have a tax cut still to be implemented. Do you think this city can correct this deficit, live with the September 11th revenue shortfalls and implement the tax cut that is supposed to go forward this year? Mr. Gandhi. In the Tax Parity Act, the overall impact is about $325 million annually when finally phased in. Ms. Norton. How much annually? Mr. Gandhi. $325 million. Ms. Norton. That is a school deficit right there. Go ahead. Mr. Gandhi. The next installment is $60 million. Now, at each year, there is a threshold. The threshold says that if in its winter forecast, the CBO--Congressional Budget Office, were to come out with a prediction of a 1.7 growth in the real GDP, then that trigger is alerted, the threshold is met, and the next installment of the Tax Parity Act, which is $60 million, is postponed. Now, what I have seen in the blue chip forecast, which has come out the last 2 weeks, is an expectation that the trigger will be met, the threshold will be met. Unless the CBO comes up with a higher forecast, you will have to postpone the next installment of Tax Parity, meaning you would have about $60 million available in the 2003 budget to manage it. For the fiscal year 2002 budget, I don't see that as a remedy. However, given that we have $120 million of budget reserves and have already have accumulated $100 million of cash reserves as I speak here today, and given that the council and the Mayor met just last Friday on how this can be met, we should be able to manage ourselves. A lot depends upon the loss of revenue. If the economy were to stabilize or perform as well as it has in the last 2 weeks, then our losses may not be $100 million; it may be less than that. We will have much better estimate by early January as to how we are doing. On February 1st, we will also provide you an official forecast for the revenues for fiscal year 2002 and going forward. But we are not waiting, as I said. I am working very closely with the Mayor and the council. I have shown them where the pressures are and I have also shown them where the resources are. The Mayor's office has already told me to prepare a package to forward to the council. So the city is busy working, meeting these pressures. And I am quite confident, quite confident, that the city will not accumulate deficits in fiscal year 2002 citywide. Ms. Norton. Thank you. Mrs. Morella. Mrs. Morella. We hope your projections are correct in terms of being able to resolve it. And that's why we gave you some independent authority, at least till July, and we hope before that time to have our legislation enacted to make it permanent. Mr. Gandhi. Madam Chair, I appreciate your leadership and Ms. Norton's leadership on the Morella-Norton bill. I think that really has given a great deal of assurance to the financial markets, where they're really worried about the status of the chief financial officer. Mrs. Morella. Also going back over your testimony, Mr. Maddox, I noticed, since we talked a lot also during this hearing about charter schools, you indicated that you do not have the authority to conduct performance audits or inspections over the charter schools? Am I understanding that statement? Mr. Maddox. That's correct. Ms. Norton. Would the gentlelady yield? I have some background on that, because the idea is entirely correct. There was a provision put in our charter school law, the Federal charter school law, that assumed there would be something called a ``consensus commission,'' which never in fact occurred. I wasn't for that in the first place; I was for putting everybody under the same auditor. And what I will do--and I will ask the Chair to cosponsor with me--I would put it in a bill to simply to take that out. It is obsolete. It never occurred, and you should have been able by now to do an audit of the charter schools. Sometimes you bring to me things that I think maybe the city government should do. This is something that had not been brought to my attention, or we would have had this out already. So I'm very pleased to do this. Please bring things like this to my attention. Mrs. Morella. We don't need to pass legislation. Ms. Norton. I think we just to need to erase it. Mrs. Morella. I am glad you pointed that out in your testimony. It just seemed like a glaring difficulty. And I would be happy to be involved with that legislation. I guess I want to ask you, Mr. Maddox, when you perform these audits and you point out, as you have, to us, you know, there are weaknesses with the internal controls, insufficient policies, failure to comply with existing policies, inaccurate data bases of special ed students, problems with transportation, tuition payments, not looking at the standards of the schools where these students are going, do you just ignore it? And I don't know if Mr. DiVello also wants to add to that. But what's happening? Why has it stopped? You conduct the investigation. You give your report, and I suppose they look at it. And then do they just put it aside? Do they get back to you? Mr. Maddox. I don't think that we're being outright blown off so to speak. What we do as far as our process, once we make recommendations to agencies--not so much D.C. public schools, but in all agencies--we give them a certain amount of time to comply with the recommendations or to give us reasons why that recommendation is inadequate and another solution is more appropriate. Then we do what we call a ``followup audit,'' and we look at those specific recommendations to see if there's compliance. In some areas with respect to the D.C. public schools, we are going to do a reaudit, which means it's a little better than a followup audit because not only do we look at those recommendations that everyone agreed to that they would change, but we do the entire thing all over again. But to answer your question directly, I would say, on balance, we do get cooperation from the agencies to make those corrections. Mrs. Morella. It just seems that so many of the statements that have been made should certainly be part of an overall policy trying to address the concern and the challenge of the special education--special education and the funding of special education and giving the very best to our young people. I did notice you said you were going to have a District- wide audit in January, ongoing District-wide audit in January 2002, right? Mr. DiVello. What that is is what Mr. Maddox was referring to. I would tell you this, and I feel I need to say it: The cooperation from the school, at least new people that have been in special education, they readily accepted our recommendations, and I think they are working hard toward them. The disappointing thing sometimes is, when we point to a condition in 1999 and we see the same condition in 2000. But I don't think there's any malintent there. That's how I feel. That's just a personal thing. I would tell you what we're doing as a check and balance, and the city, including the deputy mayor's office has adopted this readily, we're taking a look at all our audit reports dating back to 1998 through 2000, the 3-year period we're looking at; and we are selecting audits across the District to see if the agencies are implementing the recommendations that they agreed to. We're using that as a performance measure for us. In addition, the--and I am giving you the indicators before the final is out, but I think this is OK. So what I want to say, like, for example, we noted that the District didn't have a tracking system itself for making sure at the top management levels that recommendations were implemented similar to the Federal model and OMB circular 850. Well, John Koskinen has adopted that, and they're implementing such a system. So that will make sure that the deficiencies that are pointed out, they are tracked and they're acted upon. So I feel really encouraged by that. And our final report will be out the end of January on that. Mrs. Morella. I note that you will share it with us. And I know there is no malintent; everybody wants it to work. It's just sometimes things are dismissed because there is just too much of a problem at that moment, and they say, we'll do it later on. I wanted to give you each an opportunity for any final comment you want to make before we adjourn. Mr. Gandhi. You know, what I have found in Superintendent Vance and his top team there is an absolutely first-rate group of people, struggling with some of the most difficult problems of an urban school district. I cannot imagine you will find a better team or group of people. So the District is very lucky to have that group of people there. And this is as good a board as you can find. Working with them, I am quite confident that the city will be able to resolve many of the problems that we discussed here. Mrs. Morella. Mr. Maddox, any final comments? Mr. Maddox. I would like to go back to one of the points that Congresswoman Norton had asked me about with regard to the situation with the CAFR. I think you need to understand what was going on in our minds at the beginning when the question of the numbers came up. We were concerned because we did know what areas the other auditors wanted to look at--that we thought at least the CFO-- and I thought that if his auditors were tied up serving two masters, meaning to answer questions, provide documents, that would have a direct adverse effect on the timing of the CAFR. That was the one issue. And the second issue that really caused me to lay out for the record all of the rules and regulations with regard to this process was that the auditor advised me in writing, per their counsel, that if any auditing was going on covering the same areas prior to February 1, that they would refuse to give an opinion. It would be an unqualified opinion. That raised a lot of concern with me. That's why I thought it was important to alert everybody what the rules were and what the adverse effect would be. Mrs. Morella. Mr. DiVello. Mr. DiVello. No, thank you. Mrs. Morella. I want to thank you for your excellent testimony and especially for the work that you're doing; and I hope that you know that we are open to any suggestions you may have on our role in the Federal Government, because we all have a stake in the educational system of the District of Columbia. We will comment on some items to be part of the record. I do want to indicate our thanks to our staff on the minority side, Jean Gosa and Jon Bouker. On the majority side, Shalley Kim, Matthew Batt, Robert White, Heea Vazirani, Howie Denis and Russell Smith. Thank you all for being here. Thank you. The subcommittee is now adjourned. And I'm going to ask that--without objection, I want to add into the record a GAO report, number GAO 01963, and the record of the public hearing held at the Department of Education dated Tuesday, November 13, 2001. The hearing was convened to gather information to be used to determine whether a compliance agreement with the District of Columbia public schools is appropriate to allow DCPS additional time to develop an assessment system that meets the requirements of title I of the Elementary and Secondary Education Act, the largest Federal educational program, providing financial assistance to school districts. DCPS received $26.2 million in title I funds for the 2001- 2002 school year. The meeting is now adjourned. 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