Examining the Accuracy of School Funding Systems at OSPI

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Washington’s state Constitution requires the Legislature to fund K–12 public education, and state law defines the formulas for basic education funding. State and local taxes make up the core funding sources, and the Office of Superintendent of Public Instruction (OSPI) manages how these dollars are distributed.

OSPI runs these calculations through a suite of software applications known as the apportionment system. This system ensures school districts receive the correct monthly allotment of state and federal funds based on their actual activities. A failure in any of the systems’ components could result in incorrect payments, disrupting a district’s ability to pay staff and operate schools.

While our Office routinely audits individual school districts, this is the first comprehensive audit of OSPI’s apportionment system as a whole. The audit also included determining whether the system accurately calculates school funding.

Read a two-page summary of the report (PDF).

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Key results

The software system at the heart of this audit performs highly complex calculations that determine funding for more than 1 million Washington students. The formulas are subject to change every year and must be precise, as those calculations allocate $30 billion to school districts in a biennium.

Our audit produced the first mapping of the apportionment system's full complexity. We found OSPI's system is outdated and unstable, thus increasingly inefficient and at risk of errors. Its 17‑year‑old structure depends on eight feeder systems and its aging computing infrastructure forms a shaky foundation that is increasingly unreliable.

We also found weak controls across both core and feeder systems. The gaps in these controls increase the risk that essential data may not be complete, accurate, secure and reliable. Our testing of funding calculations for three school districts identified only minor discrepancies. Nonetheless, the state’s assurance over accuracy in future calculations depends on OSPI addressing the broader issues we identified.

Background

State law and the Legislature’s budget describe K–12 funding amounts to be distributed to all qualifying schools. The Legislature may decide to change educational allocations at any time during the biennium.

OSPI must update its formulas and calculations whenever needed. To determine basic education funding for each district, OSPI requires all schools to collect accurate data about students and a dozen or more other factors, including:

  • Student enrollment
  • Staff salaries and benefits
  • Certain operating costs, such as transportation, meals and instructional materials

Districts must provide this information to OSPI at various times of the year.

Over time, OSPI’s apportionment system has grown to include eight additional software applications. Nine employees in OSPI’s School Apportionment and Financial Services (SAFS) unit oversee the applications used to gather, calculate and distribute education funding.

Complexity layered on outdated foundations

Our review found OSPI still relies on infrastructure first built in 2008. Today’s larger datasets and more complicated funding formulas strain the system’s capacity. Because all agency systems share the same infrastructure, an outage in one system can limit access to others.

As a result, the system’s suite of applications relies on an aging, unstable foundation that struggles to meet business needs. Frequent legislative changes require recurring formula and code updates, but the outdated system makes those changes difficult, leading staff to use manual workarounds.

OSPI officials said they are aware of these challenges and have been working to rebuild or replace parts of the system.

Essential controls lacking in many areas

OSPI leadership is responsible for ensuring the apportionment system is complete, accurate, secure and reliable. These four attributes of sound IT system management rely on controls in five areas:

  • General IT
  • System input
  • Data processing
  • System output
  • Oversight and monitoring

The audit found significant control gaps in all five areas. The agency also lacks documentation for internal controls and calculation processes, and lacks an internal audit function.

Although OSPI staff work hard to produce accurate allocations, we did not find the strong controls we would expect for a system of this size. In the absence of automated controls, OSPI relies heavily on its IT vendor and a few longtime employees whose institutional knowledge is essential to operations.

Discrepancies in testing

These systemic issues prompted us to test apportionment system calculations. Given the system’s complexity, we limited our testing to three school districts. Also, this limited review captures only the formula and calculations applied in the 2023-2024 school year.

In each case, we found coding discrepancies in which state law and the state budget did not align. They were relatively small discrepancies — for example, rounding to six decimal places instead of the required three – which we identified by comparing statutory requirements to actual apportionment system calculations that were based on the state budget. To reconcile the differences, OSPI followed the state budget, which ensured the system did not allocate more funding than allowed.

Given the legal requirement for precise calculations, we considered whether OSPI should have notified the Office of Financial Management or legislative fiscal analysts about these discrepancies. OSPI staff did not have documentation confirming they had done so. However, when we met with both OFM and OSPI, OFM confirmed that following the state budget was the correct approach.

Recommendations

We recognize IT upgrades are costly and that technology needs are high across state government. Still, this legacy system must be replaced. For lawmakers, school districts and the public, this report sheds needed light on a critical but largely unseen component of Washington’s education funding structure.

The report includes recommendations for OSPI to address risks tied to the outdated and unstable apportionment system and to strengthen controls that support reliability, accountability, functionality and accuracy. We also provided recommendations related to staffing.