DPI veterans question cost, speed, and value of latest agency audit

The longtime leaders of North Carolina’s top public school agency are questioning the depth and the cost of a newly-released organizational review that calls for a “transformation” in the N.C. Department of Public Instruction.

Consultants with Ernst & Young conducted the agency review over a period of 12 weeks this year, after state Superintendent Mark Johnson asked for and received a $1 million budget allocation from state legislators last year to audit DPI.

The results, released in a 106-page report to the State Board of Education on Tuesday of this week, outline 18 recommendations that would theoretically save the agency an estimated $5 million, provided the department invests $4 million in updated business systems, “streamlined” support for local school districts and consolidation of the department’s information technology work, according to the global consulting firm.

The report prompted Johnson and state board members, in an unusual sign of unity, to call on lawmakers to delay more than $5 million in cuts that are currently budgeted for the agency in the upcoming fiscal year, on top of $22 million in cuts since 2009.

Those cuts, according to the state board’s report to the legislature, will “prevent the strategic implementation of thoughtful changes” yielded by this year’s work.

Yet many of the necessary DPI improvements listed in the review—a tendency to work in fragmented “silos,” lackluster regional support for school systems and rising turnover—can be attributed to those deep legislative cuts, according to former state Superintendent June Atkinson and the department’s longtime finance chief, Philip Price.

“I am disappointed that the report does not outline where DPI needs to be reinforced with people and budget,” Price told Policy Watch this week. “What they outline as recommendations are the result of staffing and budget. Why not correct that problem?”

Among its recommendations, the firm said DPI should create a central, data repository; redesign the budget process to get more input from division heads; and speed a “slow” state hiring and contracting process that’s left many lingering vacancies, among others.

The report also suggested moving the department’s IT services to the state’s IT office, although some suggested that an estimated $4 million in DPI savings that would result from the move would represent more of a “cost shift” than a savings.

Despite its relatively modest financial impact, the review could have weighty implications for DPI, which manages a $9 billion, K-12 budget and provides support for North Carolina’s 115 local school districts. That support includes professional development and intervention in poor and struggling school districts.

Chris Librizzi, a managing director for Ernst & Young who helped to lead the organizational review, said this week that the firm kept an “open mind” when considering the financial implications for DPI, although state lawmakers last year took the unusual step of budgeting $1 million in expected cuts from the audit for the coming year.

Librizzi did not respond when asked if the firm considered areas in the department that were underfunded by the state legislature, a frequent criticism of the Republican-controlled General Assembly by leaders like Atkinson, who served as state superintendent from 2004 through 2016.

Former K-12 leaders also questioned the expense of the new review, which cost $975,000 for about three months of assessment. “I’ve been in education all my life,” said Atkinson. “It just seems to me that’s a big price tag for eight to 12 weeks of work.”

Price, who retired last year after more than 30 years in DPI finance, agreed. “It does make you question the ($975,000) price,” he wrote to Policy Watch in an email.

For comparison, Price said an organizational review of DPI, the state board and the superintendent’s office in 2008 and 2009 cost $170,000.

Ernst & Young representatives said they interviewed more than 200 people, split evenly between DPI workers and principals, teachers and district employees across the state. They said their work focused on potential DPI improvements “in terms of effectiveness, efficiency or both.”

“This has the potential to represent a real transformation of the agency for the benefit of educators and students,” said Librizzi.

Not all of the review was critical of the state agency. Librizzi said teachers, administrators and superintendents in local school districts value the agency’s support, adding that it’s particularly key in poor and rural districts without the local funding to provide necessary professional development.

“There’s a recognition that when the state does good work, it has a really positive impact on them,” Librizzi said. “And when that good work is taken away, that also has a real impact on them.”

State board members approved Ernst & Young’s review Thursday and sent it on to state lawmakers. They also agreed to launch a “transformation” office and committee to lead implementation of the assessment’s recommendations.

Board Chairman Bill Cobey declined to comment on the organizational review, but he applauded Johnson’s agreement with the board that next year’s departmental cuts would be counter-productive.

Yet DPI leaders and some state board members have long argued those efforts are hamstrung by legislative cuts, while some Republican lawmakers accuse the agency of inefficiencies and bloat. DPI’s work is mostly considered non-partisan, but Republican legislators frequently clashed publicly with the department when it was under the control of Atkinson, a Democrat.

Meanwhile, there’s been palpable tension over agency cuts between board members and Johnson, a Republican who was relatively quiet last year while the GOP-dominated legislature passed down another round of budget reductions, even as he sought funding for an audit.

Johnson said this week that the Ernst & Young review was needed “to see where we are as a department now and where we can make improvements.”

The superintendent’s office did not respond to Policy Watch requests for an in-depth discussion of the Ernst & Young report, which did not assess the still fledgling Innovative School District, the state’s licensure division or its virtual public schools, which were excluded from the review by DPI.

Tricia Willoughby is a former teacher and ex-DPI superintendent who now sits on the State Board of Education. This week, she questioned whether the organizational review also took on the alignment of senior leadership at the department, meaning Johnson’s office. Willoughby said she never received an answer to that question.

Board members have publicly chafed at divisions between DPI staff and Johnson’s office, which received funding from lawmakers last year to hire workers that report directly to him and not to the state board. For example, Johnson’s employs a communications spokesperson who operates separately from DPI’s communications office.

It’s a change from Atkinson’s days, when DPI spokespersons represented the superintendent’s office, the department and the board.

Willoughby also pointed to state cuts for some of the deficiencies noted in the Ernst & Young report. In particular, she said a recommendation to create an “end-to-end talent division” aimed at supporting teachers comes after legislators’ cuts forced the agency to eliminate a position for a director of educator effectiveness in recent years.

Meanwhile, Atkinson said the “biggest problem” with the report is time. The ex-superintendent, who lost a surprise 2016 election to Johnson amid a tide of Republican electoral wins, said the speed of the review hampered Ernst & Young’s work, even though the firm’s representatives did not comment on whether the time frame was a factor.

Last year’s budget required an “organizational, functional and business-process audit” report by May 1, although some, including Atkinson and Cobey, suggested Johnson’s office moved too slowly in finding a vendor to perform the work. The department wasn’t able to sign a contract with the firm until early 2018.

Indeed, Atkinson pointed out that the firm interviewed just 14 teachers across North Carolina during its review.

“We have 100,000 teachers in this state,” she said. “I don’t think you can draw conclusions about the voice of the teachers.”

The organizational review’s recommendations, as well as the board’s message to state lawmakers, can be read in their entirety on the State Board of Education’s site.