May 25, 2017 2016-129
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the K-12 High Speed Network (K12HSN) program’s operations and funding.
This report concludes that by the end of fiscal year 2014–15 the Imperial County Office of Education (ICOE) had accumulated operating reserves for the K12HSN program that totaled nearly $15 million. These reserves appear to be a product of inadequate budgeting by ICOE and a lack of oversight at the state level. At the end of fiscal year 2015–16, ICOE’s operating reserve for the program declined to approximately $5.7 million primarily as a result of it not receiving state funding in that fiscal year. ICOE has taken some steps to improve its budgeting practices for K12HSN; however, concerns remain about its accuracy and transparency.
In addition, ICOE needs to improve its planning processes in order to manage network development at the lowest possible cost to the State. Specifically, ICOE has increased or is planning to increase capacity for some portions of the network at significant cost without justifying the need for those increases based on the actual usage of the network. ICOE currently lacks a detailed methodology for determining the appropriate timing and magnitude of capacity increases, and as a result has defaulted to large capacity increases that involve substantial upfront and recurring costs. The recommendations we make to ICOE in these areas are intended to improve the quality of its network development process and to provide state decision makers with better information with which to determine appropriate funding levels for the program.
ICOE can also do more to measure and report on the K12HSN program’s effectiveness. State law sets forth specific responsibilities and goals for ICOE in administering the K12HSN program, but ICOE has not reported on some of these areas, such as the network’s reliability and cost-effectiveness, and the California Department of Education (Education) has not required ICOE to do so. Without this information, the State cannot fully evaluate the benefits of the network’s current structure and administration. We therefore recommend that Education, which the law assigns responsibility for measuring K12HSN’s success, direct ICOE to report annually on specific performance measures we identified.
ELAINE M. HOWLE, CPA