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An Audit Report on the Texas Education Agency’s Procurement and Oversight of Texas Virtual School Network Contracts

September 2016

Summary Analysis

The Texas Education Agency (Agency) should improve its contract formation processes and strengthen its oversight of the contracts audited for the Texas Virtual School Network (TxVSN) to ensure that it complies with statutes, Office of the Comptroller of Public Accounts (Comptroller’s Office) requirements, Agency policies and procedures, and the contracts’ requirements. Specifically, the Agency did not have an executed contract before it allowed the Region 10 Education Service Center in Richardson (Region 10 ESC) to administer the TxVSN. In addition, the Agency did not consistently provide sufficient oversight of certain components of its contracts with the Region 10 ESC.

 Jump to Overall Conclusion

The Agency executed two contracts and a contract renewal with the Region 10 ESC more than four to six months after the contracts were effective and the Region 10 ESC and its subcontractor had begun performing work covered by those contracts. As a result, the Agency did not have a contract in place for the operation of the TxVSN for more than 15 months during fiscal years 2015 and 2016.

Although the Agency did not make any payments to the Region 10 ESC for services performed until after the contracts had been executed, the Agency’s Contract Development and Administration Manual states that contracts should be signed before any services are rendered. Allowing services to be performed prior to having agreed-upon contract terms, conditions, and a budget in place limits the Agency’s ability to effectively monitor the program and leaves the Agency, the contractor, and the subcontractor without adequate direction on performance and budget expectations.

Jump to Chapter 1-A 

Although Agency staff were in frequent communication with the Region 10 ESC and its subcontractor regarding work related to the TxVSN, the Agency did not require sufficient supporting documentation to allow it to verify that services were received prior to payment and expenditures were allowable. In addition, the Agency did not require Region 10 ESC to submit a monthly list of tasks and activities performed with the invoice as required by the contract or provide other documentation allowing the Agency to tie the invoices to work performed related to contract deliverables.

As a result, auditors could not determine whether (1) the Agency verified that services had been received prior to payment, (2) the reimbursements were for allowable expenditures, and (3) payments coincided with the Region 10 ESC and its subcontractor’s work on the deliverables. In addition, the Agency did not complete a risk assessment for the fiscal year 2015 TxVSN contract that could have helped ensure that the Agency adequately monitored the performance of the Region 10 ESC and its subcontractor, and it did not complete all required documentation and procedures when renewing and closing out the fiscal year 2015 TxVSN contracts.

Jump to Chapter 1-B 

The Agency established and generally followed entitywide contracting policies and procedures that were consistent with the State of Texas Contract Management Guide to award the fiscal year 2016 TxVSN contract. However, the Agency did not post certain contracting procedures to its Web site or provide a link to those procedures for inclusion on the Comptroller’s Web site, as required. While Agency contract managers met training and certification requirements and applicable personnel completed nondisclosure and conflict of interest statements, the Agency did not ensure that all purchasing personnel completed required disclosure statements prior to awarding the fiscal year 2016 TxVSN contract. The Agency also did not fully define the contract deliverables in its solicitation, which would have helped facilitate the Agency’s monitoring of those deliverables.

Jump to Chapter 2 

Graphics, Media, Supporting documents

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