Department of Education Expenditures for Information Technology

This is an interim Massachusetts State Auditor report looking at certain Department of Education spending on information technology during fiscal years 1999 and 2000.

“This interim report discloses only those problems that we identified relative to IT expenditures made by DOE during our audit period.”

The audit reviewed whether DOE had proper controls over spending, whether expenses were authorized and documented, and whether the spending followed state rules.

“To determine whether DOE has established an adequate internal control structure over agency expenditures that provides reasonable assurance that agency transactions are properly authorized, recorded, and reported and that agency assets are being properly safeguarded against loss, theft, or misuse.”

The report says weak controls let public money be spent in ways that may have been wasteful, poorly documented, or against state rules.

“These deficiencies were the result of DOE’s failure to establish adequate internal controls within its IT “cluster” (DOE’s term for its various operating groups).”

For an ordinary taxpayer, this matters because the auditor says DOE may have spent public money unnecessarily on consultant markups, questionable perks, and expenses that were not properly supported.

“Because DOE uses these three companies as conduits rather than hiring these consultants directly, it incurred at least $3,652,433 in unnecessary consultant salary expenses.”

The auditor’s bottom line was that DOE needed stronger controls, better documentation, and an end to using consulting firms as pass-through payment channels.

“DOE should cease using IT consulting companies as fiscal intermediaries to procure IT consultants.”

DOE reported that it had begun making management and procurement changes, including ending its relationship with Nitro, adding permanent positions, requiring better documentation, and changing consultant practices.

“As a result of our audit and a review done by EOAF, OSC, and OSD, on January 8, 2001, DOE officials sent a memorandum to us detailing changes the department had made in its Educational Technology Group1.”

The findings were significant enough that the auditor issued this report before the full audit was finished, saying the problems needed immediate attention from DOE officials.

“Based on our audit work in this area, we found significant problems relative to these IT expenditures, which we believe warrant the immediate attention of DOE officials.”

A “fiscal conduit” means DOE used a consulting company as a middleman: DOE found or directed the worker or expense, the company processed it, and DOE paid the company plus a markup.

“These IT consulting firms then send these consultants back to DOE to work and charge DOE an hourly fee plus a markup or profit margin for each consultant.”