Evaluating Adult Virtual School Funding

Introduction

Representative Sean Tarwater requested this audit, which was authorized by the Legislative Post Audit Committee at its April 24, 2024 meeting.

Objectives, Scope, & Methodology

Our audit objective was to answer the following questions:

1. Did the credits that adult virtual schools submitted for funding in the last few years comply with state funding rules?
2. Is KSDE’s process for auditing adult virtual school credits adequate for ensuring that funded credits comply with state law and is consistently applied across districts?

The scope of our work included reviewing adult virtual school credits that 9 districts submitted in either the 2021-22 or 2022-23 school years. We chose those years because they are the 2 most recent years that the Kansas Department of Education (KSDE) has audited. We chose 5 districts in each year but 1 district was included in both years. We also reviewed the process and results of KSDE’s audit of those adult virtual school credits for those same years.

Our method for question 1 included reviewing state statute related to how the state funds adult virtual school credits. We interviewed KSDE officials and reviewed documents to understand the process KSDE has implemented for districts to submit adult virtual credits. We also interviewed officials from 9 districts to understand how they track and submit credits. We compared the credits that districts submitted to statutory criteria to determine whether those credits met statutory criteria.

Our method for question 2 included interviewing KSDE officials to understand the process they use to audit the adult virtual credits districts submit. We reviewed their audit documentation for each of the 9 districts we selected. We compared KSDE’s audit results to the review of statutorily compliant credits we completed as part of question 1. When the number of credits that met statutory compliance was not the number of credits KSDE funded, we worked with department officials to understand the reasons.

More specific details about the scope of our work and the methods we used are included throughout the report as appropriate.

KSDE officials reported that current documents already incorporate the items we suggested in our recommendations.

Important Disclosures

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. Overall, we believe the evidence obtained provides a reasonable basis for our findings and conclusions based on those audit objectives.

Audit standards require us to report our work on internal controls relevant to our audit objectives. They also require us to report deficiencies we identified through this work. In this audit, we noted that some districts did not have adequate controls to ensure that they only submitted credits for students who were Kansas residents. KSDE also did not have adequate controls to ensure that they only approved credits that met statutory criteria.

Our audit reports and podcasts are available on our website www.kslpa.gov.

Generally, the credits the 9 districts submitted to KSDE complied with state funding rules, but there were a few small exceptions.

Background

Some Kansas school districts offer virtual diploma completion programs to adult students.

• In school year 2024, 47 school districts (out of 286) offered virtual programs to adults seeking to earn their high school diploma. These programs allow adults to earn high school credits towards their diploma through an online adult virtual school program. Virtual school officials review the student’s previous transcripts and determine how many and which credits the student needs to graduate from the district. Once the student has completed those credits, the district issues a high school diploma. These programs are generally self-paced, and students can enroll at any time during the year.

• Each district that chooses to offer an adult virtual program determines the curriculum and other details about how they operate it. For example, districts can require specific courses for graduation. Districts can also require more than the state minimum of 21 credits for graduation.

• In some cases, the district itself operates the program. In other cases, the district may contract with a service center or other provider to operate it.

• Districts must receive approval from the Kansas Department of Education (KSDE) to operate an adult virtual program. KSDE has policies that require districts to meet certain criteria such as having a certified program director, utilizing licensed teachers, and completing certain types of training. Districts must renew their approval every 3 years. KSDE requires districts to be approved before receiving adult virtual funding.

• Diploma completion programs are not the same as General Education Development (GED) programs. In Kansas, GED programs are administered by the Kansas Board of Regents. GED programs are not included in this audit.

The state provides funding to school districts for adult students earning a high school diploma through a virtual program.

• The state provides funding to districts that operate an approved adult virtual education program. Districts receive $709 per course when the following criteria set in K.S.A. 72-3715 are met:
  • The student must be at least 20 years of age. KSDE’s policy is the student must be 20 by September 20in the year the district is seeking funding. For example, a student would need to be 20 by September 20, 2023 if the district is seeking funding for that student in the 2023-24 school year. Districts can receive funding through a different program for students who are not yet 20 but have dropped out of high school and are returning. This program is not part of this audit.
  • The student should be a resident of Kansas. State statute is ambiguous regarding this issue. K.S.A. 72-3715(f) prohibits students who are not residents of Kansas from being counted in the virtual full time equivalent (FTE) student count. However, adult virtual students are no longer funded on an FTE basis (only K-12 students are). Strictly speaking, statute is silent on whether credits earned by non-resident adult students can be funded. Nevertheless, it appears that the legislative intent was for only Kansas residents to be funded. Further, KSDE officials told us they have interpreted this statute as prohibiting credits earned by non-resident adult students from receiving state funding.
  • The student must pass the course. The district determines the minimum grade necessary to pass. All the districts we talked to during this audit reported that 60% was the minimum passing grade.
  • The district can only receive funding for up to 6 credits per student per year. This means if a student earns 7 credits for the year, the district does not receive funding for one of those credits. Generally, a student earns half a credit (0.5) per course per semester. If a student takes the course all year, then they earn 1 credit for that course. Even though districts do not receive funding for any credits earned over 6 in a year, districts often allow students to complete as many credits in a year as they are able.

• In the 2023-24 school year, the state provided a total of a little more than $4 million in adult virtual school funding to Kansas school districts for about 5,700 credits.

KSDE established a process for districts to submit adult virtual student credits for funding.

• KSDE requires districts to take a few steps to receive funding for the credits adult virtual students earn:
  • In October of each school year, districts must submit an estimate of the total number of credits they expect adult students to earn. Funding is based on this number. For example, if the district estimates that its adult students will earn 20 credits, then the district’s funding for the year is $14,180 (20 x $709).
  • At the end of the year in early June, districts submit an updated estimate of the number of credits they think adult virtual students will have earned that year. This number includes the number of credits already earned and an estimate of credits students are likely to earn in the remainder of June. This estimate serves 2 purposes. First, it provides a more accurate estimate of how much funding the department will need to allocate for adult virtual credits. Second, it acts as a cap on the number of credits the department will fund. For example, if a district estimates 20 credits but some students finish with more credits than expected, the district will not receive funding above the 20 credits. KSDE officials told us they encourage districts to estimate high so that they will receive funding for all the credits students earn.
  • Districts also must upload details about the courses adult virtual students complete through the Kansans Can (KCAN) online portal. Districts report each adult student who has completed a course, their birth date, the courses they completed, and the student’s grade. KSDE auditors use this as a guide for which student transcripts they should review.
• KSDE audits all credits in the school year after they are submitted. They audit them to make sure the credit met statutory and other KSDE determined criteria. See question 2 for more details on how the department audits adult virtual credits.

School District Compliance

We reviewed about 5,900 credits that 9 school districts submitted for funding across 2 years to determine if those credits complied with state statute.

• We chose 5 districts to review in the 2021-22 school year and 5 districts in the 2022-23 school year. One school district was included in both years for a total of 9 districts. We chose districts to get a wide range in size. Additionally, we chose districts that had their adult virtual funding adjusted after KSDE audited them and districts that did not. In each year, we reviewed all the adult virtual school credits for those districts. In each year, the credits we reviewed represented a little more than 50% of all the adult virtual school credits districts claimed statewide.

• For the purposes of this audit, we considered state funding rules to include statute and regulations. KSDE does not have any regulations related to adult virtual school funding. As a result, our work evaluates whether district actions complied with Kansas statute.

• We interviewed school district and KSDE officials. We talked with district officials to understand what they do to ensure that the credits they submit to KSDE meet statutory criteria. We talked with KSDE officials about the process districts use to submit their credits for funding.

• We reviewed documentation for all the students the 9 districts submitted credits for in either the 2021-22 or 2022-23 school year. We chose these years because they are the 2 most recent years that KSDE has audited. To ensure the credits the district submitted for funding met statutory criteria we took a few steps:
  • We reviewed documentation (transcripts, driver’s licenses, etc.) the districts provided to us to ensure the student was at least 20 years old and a Kansas resident. We reviewed about 2,000 students across the two years. However, some students were counted twice because they appeared in both years.
  • We checked the credits to the student’s transcript to ensure the student passed the courses the districts claimed credits for. Student transcripts list all the courses the student took in high school, the year they were taken, and what grade the student earned. It also includes the name of the high school where the student earned the credit. In total, we reviewed about 5,900 credits.

• We reviewed all students and credits in each of the 9 districts. As a result, our findings are valid to the whole population in each of those districts. However, our results are not projectable to all districts because we did not choose the districts randomly.

Nearly all the credits the 9 districts submitted complied with statutory criteria but there were a few exceptions.

• We determined whether the credits the district submitted complied with statute. KSDE auditors apply some additional rules when determining whether they will fund the credit. For example, a KSDE policy is to only fund credits in districts that operate KSDE-approved adult virtual programs. In our work, we evaluated the credit against statutory criteria only.

• Nearly all (99%) the credits the districts submitted appeared to comply with the criteria set in state law, but there were a few exceptions. In total, districts submitted about 55 credits (out of nearly 5,900) that did not comply with statute. Figure 1 shows the number of compliant and non-compliant credits each of the districts submitted. As the figure shows, some districts submitted a few credits that did not comply with statute.
  • 2 districts submitted 13.75 credits for 11 students who were not at least 20 years old. State law requires students to be at least 20 for their credits to qualify for adult virtual funding. KSDE requires students to be 20 by September 20th. 
  • 2 districts submitted 9.5 credits for 4 students who were not residents of Kansas. Although statute is somewhat ambiguous regarding whether adult virtual students must be Kansas residents, KSDE officials told us they expect students to be residents.
  • 2 districts submitted 31.5 credits for 25 students that were not compliant for other reasons. Largely, district officials told us these credits were earned in a previous year and were mistakenly submitted.

Other findings

For the years we reviewed, the 9 districts had policies to verify age but some lacked policies to verify residency.

• We talked with all 9 districts about the steps they take to verify student age and residency. The districts’ practices were all self-reported by the district.

• All 9 districts reported policies to verify student age. This included verifying age through a driver’s license, birth certificate, or previous transcript.

• District policies to verify residency were less consistent. 5 districts required students to submit documents such as a bank statement or utility bill to verify residency. Conversely, 4 districts told us they did not take any steps to verify residency. However, starting with the 2024-25 school year KSDE told us they will require districts to verify student residency by requesting specific documentation, such as a utility bill. Districts then must provide those documents to KSDE auditors as part of their annual audit.

Some districts did not receive funding for credits students earned due to the statutory limit on the number of credits that can be funded each year.

• State law limits the number of credits a district can receive funding for to 6 credits per year per student.

• Most students do not earn more than 6 credits per year. In the districts and years we reviewed, 81% of students earned fewer than 6 credits per year. On average, students earned about 4 credits per year. These students are adults (the average age is 30) who may have jobs and families which makes it difficult for them to complete a full course load (6 credits) each year.

• However, on average, in the years and districts we reviewed about 200 students (19% of all students) earned more than 6 credits per year. This resulted in about 530 credits earned each year above the state limit of 6. These credits met state funding criteria in all other respects, but districts did not receive funding for them. For the districts we reviewed, it was equivalent to about $380,000 in funding each year.

KSDE’s audit process does not adequately ensure that the department funds credits that comply with statute, and the process is not consistently applied across districts.

Audit Process Adequacy

KSDE audits the credits that districts submit for adult virtual school funding each year.

• Auditing adult virtual credits is only one part of what KSDE audits each year. KSDE auditors audit a variety of data related to the school finance formula. This includes things like K-12 student enrollment, the number of students transported, and the number of students who are eligible for free lunch. Although KSDE auditors review many things, this audit focuses only on the processes and results related to adult virtual credits.

• KSDE audits all the credits districts submit for adult virtual funding in the year after the district submits them. Starting in the fall, the department takes a few steps to audit the credits the districts submitted the previous school year through the KCAN portal:
  • The department verifies the district is approved to operate an adult virtual program. KSDE’s policy requires a district to be approved to operate an adult virtual program before funding any credits.
  • KSDE requires the district to provide the transcript for each student that the district submitted credits for. Department auditors then use the transcript to ensure that the student passed the course and to verify the number of courses the district should receive funding for. KSDE officials told us they will only pay for the number of credits on the transcript (up to 6). For example, if the district submitted 3 credits for a student but the transcript shows the student earned only 2, then KSDE will only pay for 2 credits.
  • KSDE officials told us department auditors check the information the district provided through KCAN to verify that the student was at least 20 years old as of September 20th. The department does not independently verify the age of the student.
  • Auditors also check that the total number of credits they approve for the district does not exceed the number of credits the district reported in their end-of-year estimate. Districts must estimate the total number of credits students earned for the year in a report they submit to KSDE in June. This number acts as a cap on the number of credits the department will pay for. For example, if a district reported 15 credits on the end of year report but students actually earned 20 credits, KSDE will not fund 5 credits. This cap is a KSDE policy and not in statute.

• This process sometimes results in the department adjusting district funding in the year after the credits were submitted. Districts receive adult virtual funding in the year they submit the credits. However, if department auditors determine that a credit should not be funded, it “backs out” that funding in the following school year. For example, if a district submitted 20 credits for funding in the 2022-23 school year, KSDE will audit those credits in the 2023-24 school year. If department auditors determine that 3 credits should not have been paid, they will back out $2,127 ($709 X 3) from the district’s funding in the 2023-24 school year.

For half of the districts we reviewed, KSDE did not approve the number of adult virtual credits that were statutorily compliant.

• Because of the concerns regarding KSDE’s auditing process, we reviewed audit documentation for 9 districts to determine whether the department’s process is adequate and consistent. We reviewed audit documentation from the same districts we reviewed in question 1. We compared KSDE’s audit results to our results to determine whether KSDE auditors approved only credits that were statutorily compliant. We also evaluated whether they applied their policies consistently across the districts.

• K.S.A. 72-3715 requires that credits meet a few criteria to be eligible for adult virtual funding. Students must be at least 20 years old, a Kansas resident, and must have passed the course. Additionally, districts can only receive funding for 6 credits per student per year.

• In the 2021-22 school year, KSDE did not approve some credits that appeared to be statutorily compliant for 2 districts. For 1 district they approved some credits that were not compliant. This resulted in 3 districts not receiving the proper amount of funding:
  • For Central Plains, KSDE approved about 500 fewer credits than were likely statutorily compliant. We determined the district did not receive about $350,000 for credits that were statutorily eligible.
  • For Kingman-Norwich, KSDE approved 2.5 fewer credits than were statutorily compliant. The district estimated that students would earn only 12.5 credits. However, students earned 15 credits. KSDE did not pay for the additional 2.5 credits because of their policy to not pay for more credits than the district estimated. As a result, the district did not receive about $1,700 for otherwise statutorily eligible credits.
  • For Olathe, KSDE approved 16.5 more credits than were statutorily compliant. The department approved 228.75 credits for the Olathe school district. However, our review found only 212.25 credits that qualified for adult virtual funding. The department funded 43.25 credits that were not statutorily compliant. However, they did not fund 26.75 credits that were compliant. The net result was that KSDE funded 16.5 credits that were not compliant with state statute. We cannot precisely determine the financial impact of this error. That’s because in the 2021-22 school year, adult virtual credits for students under 20 were funded on an FTE basis. We do not have the necessary information to determine how those students would have been funded. However, because the students would have still been funded, the financial impact is likely small.

• In the 2022-23 school year, KSDE did not approve some credits that appeared to be statutorily compliant for 1 district. For another district they approved some credits that were not compliant. This resulted in 2 districts not receiving the proper amount of funding:
  • For Lawrence, KSDE approved 7.5 more credits than were statutorily compliant. The department approved 58.5 credits for the district. However, our review found only 51 credits that qualified for funding. 1.5 credits were for a student that was not yet 20 (the district would have received funding for that student under a different program). The remaining 6 credits were for a student who did not earn any credits in the district in that school year. The district received about $4,300 for these 6 credits that were not statutorily eligible for adult virtual funding.
  • For Central Plains, KSDE approved 16.5 fewer credits than were statutorily compliant. As a result, the district did not receive about $11,700 for credits that were likely statutorily eligible.

• These problems occurred for a few reasons. For example, in a couple districts, the department misread the transcript and approved an incorrect number of credits. In others, auditors did not verify age or Kansas residency. In another district, the department did not fund the credits the district submitted for a student if they thought there were any errors on the transcript.

KSDE lacked adequate written policies and procedures to help auditors review adult virtual school credits consistently.

• Having written policies and standard practices is important for ensuring that districts are audited in a consistent manner. Further, those policies can be provided to the districts to help them understand the audit criteria and how they will be audited.

• At the time of our audit, the department had few written audit policies to guide how the auditors reviewed adult virtual credits. The department had documents that described various administrative policies. They also had documents that provided instruction to school districts. However, these documents did not provide adequate direction to auditors for how to review adult virtual credits. The written audit policies the department did have instructed auditors to take a few steps such as verifying student age and confirming the district was approved to operate a virtual school.

• In the years we reviewed, the department lacked a policy requiring auditors to verify student residency. However, starting in the 2024-25 school year the department has a policy that will require districts to submit proof of residency for each student to the auditors.

• The department also lacked written policies and standard operating procedures that would provide consistent guidance to auditors for some important decisions related to adult virtual credits. Based on our review, we found 3 practices the department applied that are not codified in their policies. Further, these practices go beyond statutory rules:
  • KSDE does not have a written policy regarding what it considers to be “excessive” credits. Excessive credits are when a student has significantly more credits than necessary to graduate. For example, a student may have earned 30 credits even though only 21 are necessary to graduate. The department did not fund any credits for nearly 20 students whom the department noted as having excessive credits. However, the department does not have a policy defining what an excessive number of credits is or how they will review for it.
  • The department does not have a written policy regarding what steps it will take if a district does not implement a corrective action plan (CAP). The department issues a CAP to districts when they find problems during the audit. It describes the problem and recommends how the district should correct the issue. In 1 district, it appeared that some credits were denied in part because the district had not adequately implemented the CAP from the previous year. However, officials do not have any written policies regarding the steps they will take to verify the CAP was implemented. Additionally, they do not have any policies on what actions they will take if they determine the CAP was not implemented.
  • KSDE does not have a written policy that directs whether work experience credits will be funded. Some districts allow students to earn elective credits by working a job. We saw a couple districts that awarded work experience credits, but the department was inconsistent in whether they funded them or not.

• Department officials told us they previously had not seen some of these issues, so they did not have prior policies about them. However, most of these issues emerged in the 2021-22 school year and the department still has not developed policies.

The department does not consistently follow some of the written policies they do have.

• KSDE funded adult virtual credits for a district that was not approved to operate an adult virtual program. KSDE’s written policy requires districts to be approved to operate a virtual program to receive adult virtual funding. In the 2021-22 school year, KSDE officials decided to fund Olathe’s adult education program as an adult virtual program and funded 228.75 credits for the Olathe school district. The program previously was funded as an in-person adult education program. KSDE officials told us the program operated more like a virtual school so they thought it should be funded as such. The district did not seek this change. KSDE awarded the district funding for adult virtual credits. However, the department had not approved the district to operate such a program. KSDE documents indicate they allowed the district to receive adult virtual funding again in the 2022-23 school year because of a timing issue with the department’s approval process. The department did not fully approve the district to operate an adult virtual program until the 2023-24 school year.

• In 2 districts we found that auditors approved credits for students who were not at least 20. The department has a written policy that directs auditors to confirm the age of the student before approving the credit. Statute requires students to be at least 20 to qualify for adult virtual funding. However, the department’s audit documentation does not provide any evidence that auditors consistently confirm age. Further, we found nearly 30 credits the department approved for students who were not yet 20 on September 20. In these cases, it appears the auditors did not consistently seek out other sources to confirm the student’s age when the district did not submit date of birth in KCAN.

• KSDE did not fund certain credits that its written policy says they will fund. The department requires districts to submit all the credits they are requesting funding for through an online portal called KCAN. KSDE’s written policy is to fund credits even if the district did not submit them in KCAN. However, we saw that KSDE did not pay for some credits in Central Plains because the district did not submit a KCAN record. According to KSDE policy, this should not prohibit funding. KSDE officials told us they did not pay for them because they had previously told the district in a corrective action plan to submit records in KCAN.

• It is important that auditors consistently follow the department’s policies and standard practices. These rules help ensure that statutorily compliant credits are approved, and non-compliant credits are not. Further, it ensures that districts are held to the same set of rules.

The department lacks written policies for some important audit best practices.

• We did not conduct a comprehensive comparison of the department’s general audit policies to best practices. This was because this audit was specific to the processes the department uses to audit adult virtual school credits. Nevertheless, we noted a couple of important best practices were missing from the department’s audit policies.

• General audit best practices require supervisory review of audit work. Supervisory review is an important step in ensuring accurate work. KSDE officials told us all the adult virtual school audits the department conducts are reviewed by the audit director. However, we did not see adequate evidence of review of auditors’ work. Further, although the department’s job descriptions mention review of audit work, the department lacked written policies directing audit work to be reviewed and by whom.

• General audit best practices also emphasize the importance of documenting the work the auditors performed. This helps ensure that the auditors did the expected work. Additionally, it provides evidence of that work and the decisions auditors made should questions arise later. The department lacked adequate written policies regarding how auditors should document the work they completed and the decisions they made. We noted the department’s audit documentation was very limited. For nearly all the districts, the only thing the department documented was the number of credits it approved. Based on that documentation, it is unclear what information the auditor verified before funding the credit.

Issues with Central Plains

The Central Plains school district raised concerns with the results of KSDE’s audit of the adult virtual credits they submitted for the 2021-22 school year.

• This audit was requested because of Central Plains’ concerns about the KSDE audit results from school year 2021-22. As a result, we talked with Central Plains and KSDE to understand more about what happened. Central Plains contracts with Graduation Alliance, Inc. to provide their adult virtual program. Graduation Alliance is a national program that has worked with Central Plains since the 2020-21 school year. We talked with representatives from Graduation Alliance as well.

• Central Plains operates the largest adult virtual program in Kansas. In the last few years, its program accounted for about 50% of all the credits earned by adult virtual students in Kansas. For the 2021-22 school year, the Central Plains school district was initially funded for 2,800 credits (nearly $2 million in funding). KSDE auditors audited those credits starting in the fall of 2022.

• As a result of KSDE’s audit, auditors denied about 670 credits. This reduced Central Plains adult virtual student funding received in the 2022-23 school year by about $473,000. According to KSDE officials, the credits were rejected because they were not supported by the students’ transcripts.

• Central Plains told us that many of the rejected credits were eligible for funding. For example, they claimed that many eligible credits were rejected because the department took an “all or nothing” approach. This means when the department found a problem with 1 credit for a particular student, they did not fund any credits for that student. They told us this led to many eligible credits not being funded.

• Central Plains appealed the audit results. KSDE performed a second review of the transcripts and restored about $87,000 (122.5 credits) to the district. The specific reasons for why those credits were restored are somewhat unclear. The department’s audit documentation only notes that the credits were re-reviewed. Department officials told us the district submitted additional information but did not provide more explanation. After the second review 544.5 credits ($386,000) were still left unfunded.

We noted a couple problems with how Central Plains creates and monitors transcripts that contributed to some of the issues with the district’s audit.

• About 15% of Central Plains’ 2021-22 transcripts had problems that made accurate review for KSDE auditors difficult. Specifically, for about a dozen students the district submitted duplicate transcripts that did not match. For others, the transcript showed credits that were earned in 2020-21 as earned in 2021-22. The district told us these transcript errors were the result of an error within their student information system which generates the district’s transcripts. Further, the district also had transcript problems in the 2020-21 school year and KSDE had already instructed the district to fix the errors in a corrective action plan. Ultimately, KSDE auditors lacked confidence in the accuracy of the district’s transcripts.

• The Central Plains school district did not provide adequate oversight over the information Graduation Alliance entered into the district’s student information system. Graduation Alliance inputs course completion data into the district’s student information system which generates transcripts. District officials only review transcripts for accuracy when the student is ready to graduate. This leaves many transcripts unreviewed each year.

• District officials told us they have addressed the issues that caused the errors in their student information system. Based on our review, the district made fewer transcript errors in the following year. As such, it does appear the district is resolving this issue.

In the 2021-22 school year, KSDE’s approach for reviewing Central Plains’ transcripts resulted in some credits that appeared statutorily compliant not being paid.

• The department took an “all or none” approach when reviewing transcripts. If the department thought there were any errors on the transcript, it did not pay for any of the credits the district submitted for that student. Out of the 865 students KSDE auditors reviewed, they did not pay for any credits for 168 of them (19%).

• Some of the district’s transcripts had errors but the department’s approach did not distinguish between accurate and inaccurate credits. For about 8% of the transcripts, some credits that were earned in the 2020-21 school year were erroneously labeled as being earned in 2021-22 school year. Credits are funded in the year they are earned, so it is important that credits are labeled correctly. In many cases, only a credit or two on the transcript was mislabeled while the others were accurate. However, KSDE did not pay for any credits for these students. For example, one student transcript showed 5 credits earned in 2021-22. However, 1.5 credits were recorded in the wrong year. This left 3.5 credits that were correct, but the department did not fund those credits. It is reasonable that KSDE does not pay for credits earned in previous years. However, the department’s approach resulted in credits that appeared to be statutorily compliant, not being paid. In 2024, the Legislature passed a law that requires the department to only deduct individual credits.

• Additionally, KSDE did not pay for any credits for a student if they had an “excessive” number of credits on their transcript. This resulted in the department not paying for about 65 credits. Excess credits are credits beyond the number of credits the student needs to graduate. Department auditors appeared to view an excessive number of credits on the transcript as evidence that the transcript was unreliable. However, this decision presented a few problems.
  • A student may have earned more than 21 credits but still needs more credits to graduate. This can occur because the student may not have the “right” credits to graduate. For example, we noted a student that had 21.5 credits (the minimum needed to graduate is 21) when they enrolled at Central Plains. However, they had not yet earned several required credits such as government, U.S. History, and multiple English and math credits. These credits might have appeared excessive but were necessary for the student to graduate.
  • Some districts count credits differently (especially out-of-state districts). For example, some districts issue multiple credits when a student takes a single year of a course. Most districts would typically only award 1 credit. This can result in an inflated number of credits on the transcript.
  • Statute does not limit funding for adult virtual school credits in this way. Statute only prohibits paying more than 6 credits per year per student. It is reasonable that KSDE monitor districts to ensure adult students are graduating in a timely manner. However, statute provides no limits based on the total number of credits the student has already earned.

• Based on our review of Central Plains 2021-22 credits, we determined there were about 500 credits that appeared statutorily compliant that the department did not fund. We reviewed transcripts and other documentation provided by the district and the department to conduct our review. We reviewed the credits only to determine whether the credit met the criteria in statute.

• The difference in our results and the department’s is largely because we took different approaches.
  • The department reviewed the transcripts for accuracy. When department auditors found what they thought was an error anywhere on the transcript they determined the transcript was unreliable as evidence that a credit was earned. As a result, they did not fund any credits for that student.
  • We took a different approach. We started by evaluating the credits the district submitted for funding. We used transcripts and other documents to verify that the student passed those courses and in which year. We counted the submitted credits on the transcript that met statutory criteria, even if there were other credits on the transcript that might have been questionable.

• We agree with the department that some of the district’s transcripts had inaccuracies. However, we disagree that any error automatically invalidated all the credits the district submitted for that student.

Conclusion

The state provides funding to school districts for adult virtual students working toward a high school diploma. Based on our review, districts generally appeared to request funding for credits that met requirements in state law. However, KSDE’s process did not consistently ensure that compliant credits were funded, and non-compliant credits were not. KSDE lacked written policies and standard practices in several important areas related to auditing adult virtual credits. KSDE auditors also did not consistently apply the policies they did have. This led to inconsistencies across districts in how they were funded for adult virtual students. Further, some of the department’s practices included applying additional rules that are not in statute. Most of the inconsistencies we saw across districts were small in scope. However, for Central Plains, it appears they did not receive about $350,000 in funding in the 2021-22 school year for credits that appeared to be statutorily compliant.

Recommendations

1. The Legislature should consider clarifying in statute whether credits earned by adult virtual students who are not Kansas residents should be funded.
2. The Central Plains school district should review all transcripts each year with Graduation Alliance to ensure accurate transcripts.
   • Agency Response: Central Plains supports the recommendation. It is important to highlight that Central Plains has received positive audits from the Kansas State Department of Education (KSDE) for the 2022-2023 and 2023-2024 academic years. The internal procedures implemented through the Corrective Action Plan after the 2021-2022 audit have produced favorable results for the district and the students we serve.
3. KSDE officials should create a written policy and procedure manual that incorporates the rules the department intends to apply when reviewing adult virtual education credits. The department should ensure those policies do not inadvertently restrict or limit statutorily compliant credits from being funded.
   • Agency Response: State law allows the Kansas State Board of Education to adopt any rules and regulations relating to virtual schools which the state board deems necessary to administer and enforce the virtual school act. The KSDE Enrollment Handbook is the written policy manual adopted by the state board and it includes the rules that KSDE applies when auditing virtual credits claimed for students aged 20 and older.
4. KSDE should incorporate general audit practices such as supervisory review and appropriate audit documentation into their written policies for adult virtual school funding audits.
   • Agency Response: KSDE already includes supervisory review and appropriate audit documentation requirements in its written policies.
5. Once the department has created a written policy and procedure manual for adult virtual school funding audits, officials should train all audit staff to ensure that department policies are consistently followed.
   • Agency Response: KSDE has written policy and procedures for auditing virtual credits claimed for students aged 20 and older and trains its audit staff regularly.

Agency Response

On December 20, 2024 we provided the draft audit report to KSDE and the 9 districts we reviewed. After reviewing the first draft of this report, KSDE officials raised concerns about our methodology for reviewing Central Plains adult virtual credits for the 2021-22 school year. As a result, we sought additional documentation and re-reviewed the questionable credits using a different methodology. As a result of that work, we made only minor adjustments to the draft because both methods resulted in the same answer. We provided that revised draft to KSDE and the Central Plains school district on February 5, 2025.

Because we only made recommendations to the Central Plains school district and KSDE, they were the only auditees required to respond. Central Plains generally agreed with our findings and conclusions. However, KSDE disagreed with several of our findings. We reviewed the information agency officials provided in their response but did not change our findings for the following reasons:

KSDE contends we ignored the documentation they provided.

• We did not ignore the department’s audit documentation. For the nearly 120 transcripts that had errors regarding when the student earned the credit, we carefully reviewed all documents provided by the department that supported their work.

• We did not ignore the documentation KSDE provided regarding their audit policies for auditing adult virtual credits. We reviewed all the documents the department submitted to us or told us about. However, the documents did not provide sufficient evidence to change our findings related to adult virtual credits. For example, KSDE refers to the Enrollment Handbook as evidence of “policies for auditing adult virtual programs.” This document has some audit policies related to other audited areas such as career and technical education and transportation. However, that document does not have adequate audit policies related to adult virtual programs.

KSDE contends we did not have sufficient evidence for our findings.

• First it should be noted, we reviewed all KSDE’s documentation related to the transcripts with timing errors. We reviewed transcripts for every student the district submitted credits for in the 2021-22 school year. We reviewed KCAN and additional documents from Graduation Alliance. We also worked with district and Graduation Alliance officials to understand their transcript processes and to seek clarification about student transcripts. The department disagrees with our approach, however this audit is supported by a wealth of evidence.

• Central Plains told us they submitted the same transcripts to us as they submitted to KSDE. On a sample basis, we compared the transcripts the district gave us to the Central Plains transcripts KSDE gave us. The transcripts matched. Further, we saw many of the same problems on the transcripts Central Plains gave us as KSDE saw. The issue is not that Central Plains gave us “cleaner” transcripts. It’s that we took a different approach to reviewing the credits the district submitted for funding than KSDE did.

• Our work did not seek to replicate the department’s work. As noted previously, we took a different approach to reviewing the credits than the department did. Fundamentally, the department rejected many transcripts because they considered them unreliable. As a result, they did not fund any of the credits on those transcripts. However, we took a different audit approach and conducted additional work that allowed us to sort out which credits appeared compliant and which did not.

• To do so, we reviewed Graduation Alliance documents that provided more detail about the specific timing of earned credits. While these documents are not transcripts, they did provide evidence that a course was completed and in exactly what month. For those credits where the exact timing of when the credit was earned was at issue, we used these documents to determine when credits were earned. We considered these documents and student transcripts as sufficient and appropriate evidence for the purpose of determining when credits were earned.

KSDE Response

Dear Ms. Clarke,

The Kansas State Department of Education knows that all processes can be improved and has built a culture based upon this belief. An audit by an outside agency provides a different perspective and should help the agency gain insight into how to improve. Although this audit does provide some helpful information to improve the way adult virtual programs are administered, KSDE vehemently disagrees with most of LPA’s major findings.

The reason for this disagreement falls into two areas. The first area of disagreement is that LPA has chosen to ignore the KSDE Enrollment Handbook and the state funding rules within it when answering the audit questions approved by the Legislative Post Audit Committee. This has resulted in LPA not answering the question approved by the Legislative Post Audit Committee. The second reason for disagreement is that LPA did not follow accepted government auditing standards for conducting the audit and in reaching its conclusions.

The Audit Objectives

The Legislative Post Audit Committee approved two objectives as part of this performance audit:

1. Did the credits that adult virtual schools submitted for funding in the last few years comply with state funding rules?
2. Is KSDE’s process for auditing adult virtual school credits adequate for ensuring that funded credits comply with state law and is consistently applied across districts?

Question one, as approved by the Legislative Post Audit Committee, clearly states that LPA should consider “state funding rules.” In conducting the audit, LPA staff changed the parameter to “statutorily compliant.” However, as with most school funding laws, the Virtual School Act, which governs virtual school funding, allows the State Board of Education to establish rules and regulations to administer the law. The policy document that is the basis for all student-based state funding for public schools is the KSDE Enrollment Handbook. This document is updated annually based on changes to statute and regulation and is provided to all school districts. Additionally, KSDE provides multiple training sessions across the state each year on the contents of the Enrollment Handbook. Districts understand that the Enrollment Handbook provides the rules for how districts are to calculate and submit information for funding consideration.

LPA chose to ignore the existence of KSDE’s Enrollment Handbook when it states that KSDE does not have written policies for auditing adult virtual programs. In doing so, the audit conducted by LPA is not substantially similar to the audits conducted by KSDE. For this reason, LPA’s conclusions are not consistent with the audit questions approved by the Legislative Post Audit Committee.
 

Generally Accepted Government Auditing Standards

Although LPA states that generally accepted government auditing standards were used, it is clear from statements made in the report that LPA did not have sufficient and appropriate evidence to draw the conclusions in the report. This is the case for conclusions related to USD 112 Central Plains and findings concerning KSDE’s auditing practices and procedures.

USD 112 – Central Plains

As an overarching concern, KSDE questions why the legislative audit of adult virtual school credits was approved by the Legislative Post Audit Committee. It is important to note that USD 112 Central Plains School District accepted KSDE’s audit findings for both years in question. Since that time, USD 112 Central Plains has not had a single conversation with KSDE about concerns with the funding of their adult virtual program. The only conversations have come from registered lobbyists employed by USD 112’s third-party for-profit partner, Graduation Alliance.

LPA asserts in the report that KSDE did not fund approximately 500 credits for USD 112 for 2021-2022 “that appeared statutorily compliant.” KSDE has two primary concerns with this finding.

First, LPA ignored documentation offered and provided by KSDE and ultimately maintained its preliminary conclusions related to virtual credits claimed by USD 112 Central Plains. During LPA’s audit of KSDE, LPA provided three draft audit reports. The first two draft reports stated that LPA was “moderately confident that credits submitted by USD 112 Central Plains met statutory criteria,” but that LPA could not be “absolutely certain” because “due to time constraints” LPA was “not able to verify the credits” required to make this statement. At that time, LPA acknowledged that its staff had relied on transcripts provided by USD 112 and that the transcripts were different from those available at the time of KSDE’s audit because USD 112 had since attempted to address transcript errors and inconsistencies. Although KSDE informed LPA that the original transcripts were available, LPA did not ask to review these documents and chose to continue the audit without reviewing this information. After drafting two preliminary reports and basing conclusions on an incomplete review of transcripts, LPA asked KSDE for copies of some of the original transcripts reviewed by KSDE. This unusual practice should be called into question as it demonstrates LPA was willing to make a preliminary conclusion without having reviewed the same transcripts reviewed by KSDE upon which the KSDE audit was based. Even after LPA requested and reviewed some original transcripts, LPA ignored the accuracy and inconsistency issues in those transcripts and only slightly modified the draft report language. In essence, LPA developed and maintained preliminary findings using transcripts for which USD 112 Central Plains had two years to make corrections that had been suggested by KSDE.

The second concern is LPA’s comments about KSDE taking an “all or none” approach to reviewing USD 112 Central Plains’ transcripts and that any error “automatically” invalidated credits on a transcript. It is common practice for KSDE auditors to seek clarification if there are questions or concerns about any documentation provided by districts, including transcripts. However, there comes a point when the accuracy and validity of a document is so questionable that it cannot be relied on. During KSDE’s audit of credits claimed as earned during 2021-22, KSDE provided USD 112 Central Plains’ with at least two opportunities to correct errors on the student transcripts that raised questions. However, instead of resolving questions, the inconsistent documentation provided by USD 112 at that time raised more questions about the validity of the transcripts and the credits they represented. In instances like these, it is the duty of KSDE auditors to protect the Kansas taxpayers from fraudulent payments of state funds and therefore, the questionable transcripts were rejected.

Overall, LPA ignored documentation provided by KSDE and failed to take USD 112 Central Plains’ transcript accuracy issues into consideration when drawing conclusions regarding KSDE. Instead, LPA’s report minimizes USD 112 Central Plains’ transcript accuracy issues, noting “a couple problems” with how USD 112 Central Plains’ creates and monitors transcripts, including lack of oversight of Graduation Alliance by USD 112 Central Plains.

For these reasons and the failure to apply the state funding rules from the Enrollment Handbook, LPA lacks sufficient and appropriate evidence to state that KSDE did not fund approximately 500 credits for USD 112 for 2021-2022 “that appeared statutorily compliant.” However, KSDE, whose staff did appropriately apply state funding rules and conduct a complete audit of the transcripts available at the time of audit remains confident that USD 112 was not underfunded. This statement is further supported by USD 112’s acceptance of the audit findings for credits claimed as earned during 2021-22.

KSDE Policy and Audit Best Practice

LPA states that they did not conduct a comprehensive comparison of KSDE’s audit policies to best practices. However, LPA went on to state that KSDE lacks written policies and important best practices. These two statements are inconsistent with having sufficient, appropriate evidence to draw the conclusions provided in the report. LPA ignored documentation provided by the KSDE and did not seek clarification to any questions they might have had.

For these reasons, LPA lacks sufficient and appropriate evidence to state the KSDE lacks audit policies and practices consistent with generally accepted government auditing practices.

 
Response to specific issues cited by LPA

State law requires adult virtual students to be at least age 20 or older. KSDE primarily relies on its authenticated Kansans Can (KCAN) system to automatically calculate a student’s age as of September 20. However, when a school district does not submit a timely KCAN record for a student, KSDE has implemented steps to ensure that a student’s age is always verified. Of the 5,900 credits that LPA reports reviewing for 9 school districts, LPA found fewer than 30 credits funded for students who were not yet aged 20.

State law requires virtual students to be Kansas residents. For the 2024-25 school year, KSDE had already included policy in the Enrollment Handbook requiring districts to collect proof of Kansas residency from all virtual students and to submit that information during the district’s annual KSDE audit. Of the 5,900 credits that LPA reports reviewing for 9 school districts, LPA reports finding only 9.5 credits funded for students who were not Kansas residents. It is also important to note that at the time of enrollment, information submitted to KSDE from 1 of the 2 districts showed that 2 students were residents of the district. These 2 students earned 4.5 out of the 9.5 credits that LPA cited as incorrectly funded.

Lack of a written policy regarding what steps KSDE will take if a district does not implement a corrective action plan (CAP). It is a rare occurrence for a school district to ignore a corrective action plan (CAP). Therefore, before funding would ever be denied, KSDE’s practice is to consult with the School Finance Team and the Deputy Commissioner of Fiscal Services before denying funding because a corrective action plan was not implemented. We are happy to commit this practice to written policy. Additionally, as already outlined in the Kansas Virtual Education Requirements and Monitoring Plan, findings can impact whether KSDE approves a school district to operate a virtual school or program.

Lack of a written policy regarding whether work experience credits will be funded as virtual credits. As defined in the KSDE Enrollment Handbook, it would be unusual for work-based learning to be funded with virtual state funding. KSDE will consider adding policy language to the Enrollment Handbook to make this clear.

Conclusion

As detailed in KSDE’s response to the specific recommendations, there are some takeaways that KSDE can use to improve its practices. However, in general, the findings from this report lack sufficient, appropriate evidence to support the findings LPA reported. For this reason, findings in reference to USD 112 Central Plains and the KSDE’s audit policies and practices should be disregarded.

Respectfully submitted,

Dr. Frank Harwood

Deputy Commissioner

Central Plains Response

Thank you for the opportunity to review the recent evaluation audit titled “Evaluating Adult Virtual School Funding.” USD 112 Central Plains (Central Plains School District) appreciates the chance to respond to the findings presented in the report.

The post-legislative audit report focused on two key audit objectives. The first objective was to determine whether the credits submitted by adult virtual schools for funding in recent years comply with state funding regulations. The second objective assessed whether the Kansas State Department of Education’s (KSDE) audit process for adult virtual school credits is sufficient to ensure that these credits adhere to state law and are consistently applied across various districts.

The sample size for the audit reviewed nine Kansas school districts, including Central Plains School District, for the 2021-22 and 2022-23 school years. Central Plains School District agrees that the findings of the audit accurately reflect the Kansas State Department of Education’s (KSDE) audit practices experienced by the district during this time.

During the 2021-22 audit year, Central Plains School District faced what appeared to be an inconsistent audit, initially resulting in a deduction of 667 reported adult credits and the associated funding. After a second appeal to KSDE, 122.5 credits were reinstated, however, 544.5 credits remained unfunded.

The post-audit report identified approximately 500 credits submitted by Central Plains School District during the 2021-22 audit year as compliant yet unfunded. Similarly, an internal review conducted by the Central Plains School District identified 515.5 compliant but unfunded credits, resulting in a loss of $365,489.50- an impactful loss for a district serving a marginalized student population.

Since the 2021-22 audit year, Central Plains School District has observed positive practices and outcomes in the annual adult credit audits conducted by the Kansas State Department of Education (KSDE). The district is grateful for KSDE’s willingness to enhance verbal communication and implement more transparent audit practices.

Despite these improvements in communication, the written methodology for auditing adult virtual credits remains unclear. The absence of written, publicly available audit methodology and inconsistent audit procedures across the state highlight the need for a clear, standardized approach and methodology.

Central Plains School District appreciates the Post-Legislative Audit team’s efforts to align KSDE audit practices with state statute for consistent implementation of auditing procedures.  The district remains hopeful that the Kansas State Department of Education will provide clear, written guidelines to prevent future audit discrepancies and to better support educational opportunities for students of all ages in Kansas.

Sincerely,

Bobby Murphy

Superintendent

USD 112 Central Plains