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Starting next year, Minnesota school districts will be asked to report in greater detail how they spend the more than $550 million earmarked to help low-achieving students.

The change comes in the wake of a Star Tribune investigation last June that found insufficient detail and major inconsistencies in how school districts track compensatory revenue spending. In March, the Minnesota Office of the Legislative Auditor released a report confirming those problems and recommending a series of changes.

Compensatory revenue is one of two pots of money collectively referred to as “basic skills revenue,” which is, by far, the largest state funding source aimed at closing the achievement gap. School districts can spend it on any of a dozen strategies to help low-achieving students catch up with their peers, then are required by law to report how it was spent.

The Star Tribune’s investigation found that school districts reported money spent only on three of the 12 categories, while other spending was generically assigned to expenses including salaries, materials or transportation expenses. Also, many districts reported spending vastly more or less than they had received in a given year.

Last summer, the Minnesota Department of Education launched a working group to develop better codes for the state’s financial reporting system to remedy these problems. The new codes include categories such as remedial reading or mathematics, study skill improvement, individualized instruction or extended school hours.

Starting next fall, school districts will have to start using these new codes and will have a new way to identify situations where they spent other funds — beyond the compensatory revenue dollars — for one of these purposes.

“By splitting out these expenditures and coding it all, we will be able to see how much more need is there,” said Mary Weigel, financial management supervisor at the Minnesota Department of Education. That, in turn, would help support funding recommendations the department makes to the state Legislature.

The legislative auditor’s report also recommended that the Legislature change some of the language in the state statute pertaining to this funding, including eliminating a requirement that districts show how the money boosted achievement — something that school districts have not been doing.

“It’s virtually impossible for districts to do what the law requires them to do,” said Jody Hauer, the audit’s project manager for the Office of the Legislative Auditor.

Instead, the audit recommends that the Department of Education come up with a list of research-based best practices and that school districts should be required to report whether any programs funded with “significant amounts” of compensatory revenue are consistent with those practices. The state would have to determine a threshold for when this reporting kicks in.

Matthew Shaver, a middle-school science teacher in Minneapolis and a member of Educators for Excellence-Minnesota, praised the idea.

“I think it’s important for the public to know how their kids are being taught and whether it’s backed up by science and research and best practices,” Shaver said. “Oftentimes we experiment on under-resourced kids, and they don’t have time for that. Our kids only get one shot at education.”

Alexis Mann, a leader of the Black Educators Alliance, thinks eliminating that requirement to show whether the money is helping close the achievement gap is a bad idea.

“Let’s be intentional in how the money is being spent in the first place,” Mann said. “Tie the money to specific programing or initiatives, and then we measure growth based on that.”

The auditor also recommended that the state find an alternative to how it determines how much money each school gets. Currently, the amount is based on how many — and the concentration of — students who were on free or reduced-price lunch the year before. The audit found this problematic because either an unexpected surge in new students in poverty at the start of a year or eligible families not applying for the lunch program would result in a significant undercount.

A survey conducted by the auditor’s office showed that 70% of school districts reported challenges with the income forms families must submit each year in order to qualify for the lunch program. Not all families who qualify actually complete the form, and school districts spend a great deal of time and resources to obtain completed forms, the auditor’s report said.

Other recommendations include repealing a requirement that districts reserve a share of the compensatory revenue for extended-time programs, such as summer school, and to clarify what documentation is needed when a school board chooses to reallocate the money to a school other than the one where it was generated.

Rep. Sondra Erickson, R-Princeton, who requested the audit, said she hopes lawmakers will give the recommendations careful consideration, although that might not happen until next year.

“These pots of money that are supposed to be helping to close the achievement gap have not been working to the level that I think they should,” Erickson said.