The audit, K-12 High Speed Network, made recommendations from the California State Auditor’s office implicit on its title page that “improved budgeting, greater transparency and increased oversight are needed to ensure the state receives reliable service at the lowest cost.”
In the report, released on Thursday, May 25, the auditor’s office identified a key reason behind rising operating reserves held by the Imperial County Office of Education (ICOE), which has primary responsibility to design and maintain high-speed Internet that currently serves 83 percent of public schools, 85 percent of school districts and all county offices of education.
It found the amount that K12HSN spent of its annual state appropriation, averaging around $7 million from fiscal 2010-2011 through fiscal 2014-2015, was less than the $8.3 million it received annually and which ICOE continued to request.
In the audit, K12HSN CEO Luis Wong said ICOE had difficulty anticipating network costs and allowing for uncertainty surrounding state-coordinated reimbursements, along with timing of other E-rate and California Teleconnect Fund (CTF) reimbursements.
In an interview, Wong told Techwire that K12HSN, which he characterized as a program within ICOE that it operates, doesn’t view the audit in a bad light. Its reserves had risen, he said, as operational costs had dropped due to equipment and circuit upgrade costs lowering over time — and the receipt of an additional CTF subsidy.
“In the grand scheme of things, these are all things that can be solved and it’s all to help improve service to the schools,“ Wong said, noting the K12HSN program hasn’t yet reached out to the California Department of Education or deliberated on next steps, but will be doing so in coming days.
Following concerns about ICOE’s operating reserves, the state withheld its annual appropriation for fiscal 2015-2016 — prompting ICOE to use that money to cover a portion of K12HSN expenditures of $13.2 million, reducing reserves to approximately $5.7 million.
The audit noted questions and concerns remain “about what a prudent reserve should be,” as well as about ICOE’s “accuracy and transparency.” It recommended ICOE improve its planning process to ensure network development at the lowest cost, and noted projected fiscal 2017-2018 expenditures for K12HSN will require “a higher level of state funding” than the education office has previously received.
ICOE, the audit said, lacks “a detailed methodology” for identifying when it should increase bandwidth and by how much, and noted the education office “is pursuing expensive capacity increases” to circuits despite the availability of less expensive options.
Upon reviewing usage levels and the process for determining necessary levels for capacity increases, auditors found ICOE “cannot justify” costs associated with some increases.
The audit also found ICOE has not reported on “some key measures” associated with the performance of the network it manages, such as reliability, and that the Department of Education “has not required ICOE to do so” — obscuring some aspects of performance and cost-effectiveness.
ICOE, which assumed administration of K12HSN from the University of California in 2004, continued to contract with the Corporation for Education Network Initiatives in California (CENIC) to operate and administrate the network. State auditors reviewed ICOE’s contract with CENIC, as well as agreements between CENIC and Internet service providers on behalf of K12HSN, and found ICOE “could improve its processes.”
Among their recommendations, auditors called for:
- ICOE to amend its annual budget documents by November, detailing specific upgrades and costs, and to develop a methodology for reviewing circuit capacity needs to ensure updates are warranted and are achieved at the best price;
- the state Legislature to increase its fiscal 2017-2018 appropriation to an amount that doesn’t exceed $10.4 million “to help ensure continuous network operations while preserving state resources;” and
- ICOE to develop a formal methodology for reviewing capacity needs to “better guarantee” network upgrades are necessary and are “achieved at the lowest possible cost to the state,” including requesting bids at “all feasible” upgrade levels, and maintaining data on network traffic as long as feasible.
In nine of 30 instances, they noted, ICOE had chosen to upgrade capacity tenfold despite incremental increases having been cheaper.
“Yes, you could go from 10 [gigabytes] to 20 to 30, but it’s complicating balancing traffic over multiple lengths,” CENIC CEO Louis Fox told Techwire, noting that hardware is more expensive, but administrative and density costs make more sense in engineering terms when increasing capacity to 100 gigabytes.
Auditors also emphasized state law directs the Department of Education to measure the success of ICOE and K12HSN — which, they said, "is not possible without collecting performance data." The state further recommended that:
- the Department of Education is to require annual reporting on specific performance measures including cost per unit of capacity, network bandwidth, and cause and frequency of network outages or interruptions; and to make grant funding contingent on this reporting; and
- ICOE is to amend its contract with CENIC to require reporting on network performance measures.
In a letter dated Friday, May 5, that accompanied the audit, Imperial County Superintendent of Schools J. Todd Finnell said ICOE generally finds the state’s recommendations “helpful.”
He noted that the “context for network connectivity” has changed dramatically in recent years as schools have adopted online technology but that while the agency has worked to cut operational costs, expenditures for maintaining the network “will continue to increase in the next few years.”
In a second letter also dated May 5 and accompanying the audit, Michelle Zumot, the Department of Education’s chief deputy superintendent of public instruction, said the agency agrees with the auditor’s recommendation that it direct ICOE to report annually on specific performance measures.
