Legislative Audit
December 6, 2024
Senator David Wallace Good morning, folks. Thank you all for being here. We're called to order. Our first item is adoption of the minutes of the October 11-- hey, gentlemen. Folks, you're welcome to take it outside. Can you hear me now? Wonderful. We'll start over. Glad to have you all here today. First item is call to order by the chair. We've done that. Next item is adoption of minutes of the October 11th, 2024, meeting. Do I have a motion? I have a motion. Do I have a second? I see a second. All in favor, say aye. Any opposed, say no. We have adopted those.
Moving on to Executive Committee. The Executive Committee met Thursday, December 5, 2024, and adopted the minutes from the meeting held October the 10th. Staff reported to the Committee the audit and special reports scheduled to be presented to the standing committees and the full Legislative Joint Audit Committee this month. Staff also noted reports that are anticipated to be completed by the end of the year.
And new business, a request for a special report on the Fountain Lake Volunteer Fire Department was deferred to the May 2025 meeting. In other business Senator Wallace introduced Senator Jim Petty as the next chair of Joint Audit. And Mr. Kevin White presented the 2025 Audit calendar, which has been previously approved. With no additional business to discuss, the meeting was adjourned. This next meeting of the Committee is scheduled for Thursday, May 8, 2025, or at the call of the chairs. And I move for adoption of this report. And I have a second. Thank you. All in favor, say aye. Any opposed? And that has been approved.
I will next recognize Representative Lundstrum to present the State Agencies report. We're still giving this new system a test flight.
Representative Robin Lundstrum Good morning. 15 reports were on the Committee's agenda yesterday. Five reports with the following findings were presented. The attorney general erroneously made a career service payment to an employee, and that was corrected. The Department of Human Services could not locate all the equipment items sampled, incorrectly posted investment activity to foster care accounts and did not properly account for credit card purchases. The Labor Department and Licensing did not obtain the special authorization needed for board meetings, meals, improperly reimbursed travel expenses to employees and did not properly record or account for various licensing fees.
The Department of Parks, Heritage and Tourism did not properly calculate sick leave payouts and reports to lost receipts at one of the museums. Finally, Game and Fish Commission reported various thefts of property. Various agency staff members presented reports on how the agencies intended to address the audit findings and to answer Committee questions during the meeting. The Committee filed 15 reports. I move to adopt this report.
Senator David Wallace I have a motion. Do I have a second? I have a second. All in favor, say aye. Any opposed, say nay. And it has been adopted. Moving on to the Standing Committee on County and Municipalities. Representative Rye?
Representative Johnny Rye The Committee adopted the minutes of the meeting held October 10, 2024. The Committee was updated on the status of water and sewer audits. Staff sent certified letters to the mayors, treasurers, clerk and all council members at five entities that are delinquent in submitting reports reminding them to submit written plans for how these reports will be obtained. Two entities provided written responses. The Committee approved a motion for the state Treasurer to escrow state turnback funds for the three remaining entities until they obtain the required reports.
Officials for the town of Gilmore were present to address questions regarding the town's failure to meet the requirement of its approved plan for repaying misused street funds. The Committee voted to notify the state Treasurer and the town officials that the town's highway revenue will be withheld until the balance due is paid in full. Officials for the town of Oil Trough were present to address questions regarding the town's noncompliance with municipal accounting law. The Committee approved the motion to give town officials 30 days to reach compliance as required under Arkansas Code annotated 14-59-117. The Committee reviewed 16 deferred reports and 155 current reports. Officials from seven entities were present to address repeated findings. 15 previously deferred reports were filed.
Of the 155 current reports reviewed, eight were referred to the prosecuting attorney and attorney general, and one was certified to the Governmental Bonding Board. The Committee filed 144 current reports and deferred 11 to allow officials to answer questions or provide further information at a future meeting. Mr. Chair, I motion for adoption of this report, sir.
Senator David Wallace Thank you, Representative Rye. Do I have a second? I see a second. All in favor, say aye. Any opposed, say no. And the report has been adopted. Moving to our next item. The Standing Committee on Educational Institutions will be briefed by Senator Petty. And Jim, you are recognized.
Senator Jim Petty Thank you, Mr. Chair. The Committee met yesterday to review six audit reports included on the agenda. Representatives from the Lonoke School District, Kipp Delta Public Schools and Arkansas State University were present and answered questions from the Committee related to findings contained in their audit reports. The Lonoke School District report was deferred from the October meeting, and the Kipp Delta report contained a repeat finding. The audit report of Arkansas Tech University was certified to the Governmental Bonding Board as well as referred to the applicable prosecuting attorney and attorney general. The audit reports for the Arkansas State University system and Blytheville school system were referred to the applicable prosecuting attorney and attorney general. The Committee filed the six audit reports that were brought before it. Mr. Chairman, I move for adoption of this report.
Senator David Wallace Members, I have a motion. I have a second. All in favor, say aye. Any opposed, say no. Seeing none, this report has been adopted. Moving on to item D, summary of intercollegiate athletic revenue and expenditures. And I'm going to recognize Mr. Nick Fuller. And sir, if you will introduce yourself.
Nick Fuller Good morning. I'm Nick Fuller, the assistant commissioner for the Division of Higher Education.
Senator David Wallace Sir, you are recognized.
Nick Fuller This report I'm presenting to you this morning is the details of athletic expenditures and revenues for each higher education institution for fiscal year 23-24. This report has been approved from the Higher Education Coordinating Board at our October meeting and is presented to you once that approval was passed. This includes all generated revenues from the athletic programs and the expenses associated with those. As you'll note, institutions are allowed to transfer up to 2% of their educational and general revenues to athletics to cover any expenses.
For fiscal year 24, total athletic expenditures for universities was $254,887,000. For the two year colleges, it was $5.4 million. The total of $260 million is an increase of almost $14 million over the prior year, which is a 5.6% increase, mainly associated with the increased costs of travel across the institutions. There wasn't an increased amount of travel, but the cost of the travel increased across the board, so the costs went up. That's the main correlation for that increase.
Comparing the 24 expenditures to the 24 budgeted revenues and expenses that institutions submitted for the year, the institutions spent 9.7% more than what they had planned and submitted for a budget for the 24 fiscal year. This ranged from almost 40% below planned budget to almost 76% above that budget. I will mention that while these exceed their budget, this is just a small portion of expenses that are paid out of their larger approved cash appropriations that you all approve. So they're not exceeding authorized appropriation levels. This is just the budget amount specific for athletics that is presented to our coordinating board, that they're going over the planned budget that they started at the beginning of the fiscal year. And you'll see the chart at the back of the presentation that details all types of revenues and then the associated expenditures that correlate to those. I'll answer any questions you may have.
Senator David Wallace Members, do you have any questions? Seeing none, do I have a motion to approve? I have a motion. Do I have a second? I have a second. All in favor, say aye. Any opposed, say no. And this has been reviewed. Moving on to item E. This is a special report and review of the transactions and services of Solution Tree. And with that, Miss Rachel Ragland is recognized.
Rachel Ragland Thank you, Mr. Chair. This report is issued in response to a request approved by this Committee for Legislative Audit to review expenditures made by the Department of Education, public school districts, education service cooperatives and higher education institutions to Solution Tree and its affiliates. Act 427 of 2017 requires that additional funding in professional development be used for professional learning communities for the benefit of school districts. The Office of State Procurement authorized ADE to initiate special procurement of a contract with Solution Tree starting July 1st, 2017, without seeking bids.
The purpose of this contract was for Solution Tree to train Arkansas teachers and administrators in the PLC At Work process referred to in this report as the PLC project. To expand the PLC project ADE awarded a grant of just under $5.1 million using federal ARPA funds to the Arkansas Association for Educational Administrators with a grant award period of July 1, 2021, through September 30, 2024. Additionally, higher education institutions, schools and co-ops have contracted directly with Solution Tree and affiliates to provide professional development services.
Established in 1998, Solution Tree offers events for educators, virtual and onsite professional development, resources such as books, videos and online courses and programs such as PLC At Work. It primarily operates from headquarters in Indiana and maintains offices in six other states, including Arkansas. The two Solution Tree affiliates discussed in this report are Marzano Resources and Results Coaching Global.
Objective one was to provide payments made by ADE, schools, co-ops and higher education institutions to Solution Tree and affiliates. During the review period, Solution Tree and affiliates received a total of $144.6 million, including $80 million from ADE, $63 million from schools and co-ops and $1.6 million from seven higher education institutions in the state. During fiscal year 2023, nearly $36 million was paid to Solution Tree and affiliates, with approximately 47% coming from federal sources, 51.7% from non federal sources and 1.4% coming from unclassified sources, as shown in schedule two on page 11.
Objective two was to determine services provided by Solution Tree and affiliates to ADE and assess compliance with Arkansas procurement laws. As previously noted, the OSP director authorized ADE to initiate special procurement of a contract with Solution Tree without seeking bids. To execute a special procurement, an unusual or unique situation must make competitive bidding contrary to public interest. The OSP director stated that the limited amount of time ADE had to implement PLCs for the school year as required by Act 427 created an unusual and unique situation.
All nonexempt contracts for services as defined in Arkansas procurement law must be presented for legislative review if they have an annual contract amount that equals or exceeds $50,000 in any contract year or a total projected contract amount of $350,000. OSP submitted the Solution Tree contract and subsequent amendments to Legislative Council annually. The contract term and corresponding amounts are provided in Exhibit one on page three of the report.
Since August 2017, schools in six cohorts have participated in the PLC project, as shown in Schedule three on page 12. Additional PLC networks or programs were developed to support various schools, co ops, higher education institutions and educational renewal zones not part of the PLC project cohort. Based on a review of Solution Tree invoices, payments totaling $16.5 million under the PLC contract for fiscal year 2023 are consistent with services outlined in the contract.
A summary of monthly services provided to 31 individual schools and 9 districts is provided in schedule four on page 13. Certain commodities and services specified in Arkansas code are exempt from standard procurement procedures. Educational books were purchased from Marzano Resources as an exempt commodity. Based on the review of invoices for fiscal year 2023, Marzano Resources was paid just under $4,000 for books and instructional toolkits for ADE Office of Special Projects Staff and $3,300 for speaking fees for two statewide virtual conferences.
As previously mentioned, ADE awarded a $5.1 million ARPA funded grant to AAEA to form the PLC regional network, which utilized Arkansas practitioners previously trained by Solution Tree to lead schools and districts in the state. AAEA contacted 31 Arkansas practitioners, mainly principals, during the grant period to request that each practitioner provide at least one day of onsite coaching per month to a member of the PLC regional network. In addition, 19 teachers participated during the grant period to lead collaborative teams virtually after conclusion of the school day. In total, individuals and school districts had received over $642,000 from AAEA as of December 31, 2023. Based on review of invoices, contract documentation and other supporting documentation, we determined that these services, as well as the contract and payments for services rendered, comply with Arkansas procurement laws.
Objective three was to obtain and review fiscal year 2023 school and co-op contracts with Solution Tree and affiliates to determine services provided in compliance with Arkansas procurement laws. School districts traditionally do not procure professional development services through a bidding process due to the specific nature of the services being provided. Arkansas Code requires bid solicitation for purchases of commodities unless otherwise excluded at or above the purchasing threshold, which was $23,100 for 2022-2023 school year. We reviewed invoice documentation provided by a sample of 30 school districts and co-ops for payments to Solution Tree and affiliates in fiscal year 2023.
Payments reviewed comprise 69% of the $17.7 million total expenditures for these vendors by schools and co-ops, as shown in schedule six on page 15 and schedule seven on page 16. Of the 30 districts reviewed, 18 paid nonrefundable advance deposits totaling $1.2 million in compliance with their contract terms. However, paying advance deposits from public funds is not a recommended business practice. We concluded that contracts and payments for services reviewed complied with Arkansas procurement laws.
Objective four was to determine whether employees of ADE schools and co ops are employed by or performed contract services for Solution Tree and affiliates and identify potential conflicts of interest. Based on our inquiry of ADE management and review of invoices, no ADE employees are employed by Solution Tree or its affiliates. It should be noted that an Associate Deputy Commissioner published one book and provided a one day training through Solution Tree and properly disclosed the services.
For fiscal year 2023, we reviewed payments totaling over $67,000 and $7,200 made by ADE to Solution Tree and Marzano Resources, respectively. In addition to the contract related payments, we noted no purchases of books authored by ADE employees and no conflicts of interest in the authorization and approval of invoices and contracts. None of the authors or speakers listed on these invoices were found to be employed by ADE or Arkansas schools. Based on review of the Solution Tree website, we identified 15 practitioners who provided services and were employees of Arkansas schools or ADE. Of this 15, 10 were employed by schools selected for testing in objective three and one was employed by ADE. All 11 were disclosed by the seven respective schools and by ADE. In addition, a school disclosed one employee who was not listed on the Solution Tree website as having a relationship with Solution Tree, bringing the total number of employees examined to 12.
We reviewed invoices for fiscal year 2023 contracts and responses from schools for the 12 employees and noted the following. One school purchased five copies of a book authored by an ADE employee and published by Solution Tree. Two school employees provided coaching services through Solution Tree to other Arkansas schools, though neither was involved in school contract procurement. Two school employees and an administrator were identified by their respective schools as participating in the school's procurement process of contracts with Solution Tree and affiliates. However, none were listed on any invoices reviewed as a coach instructor or author of services and products purchased.
Solution Tree provided the information illustrated in Exhibit two on page seven and on this slide regarding compensation to 16 Arkansas practitioners who were utilized as independent contractors during the years 2021, 2022, and 2023. During 2021, three Arkansas practitioners were compensated for services. During 2022, nine Arkansas practitioners were compensated. During 2023, 14 Arkansas practitioners were compensated. Additionally, book royalty payments between $1,000 and $10,000 were made to a practitioner in calendar year 2023 and an Ed tech contributor payment totaling $500 or less was made to a practitioner in calendar year 2021. These payments are not included in Exhibit two.
We also examined supporting documentation for ten AAEA grant expenditures. None of the employees examined were identified on Solution Tree's website as having a relationship with Solution Tree. Additionally, the employee's schools were reimbursed a daily rate for any training that occurred on a contract day. Based on our review of fiscal year 2023 invoices from the 30 sample schools, none of these employees were listed as a coach instructor or author of services and products purchased.
Overall, we determined that no roles or responsibilities of the practitioners examined who are associated with ADE schools, co-ops and AAEA appear to conflict with Arkansas ethics requirements. In summary, Solution Tree and affiliates received a total of $144.6 million from ADE schools, co-ops and higher education institutions during the review period. Of the employees identified with the relationship to Solution Tree, no roles or responsibilities appeared to conflict with Arkansas ethics requirements. Finally, services and products purchased from Solution Tree and affiliates appear to comply with Arkansas procurement laws.
However, making advanced deposits using public funds is not a recommended business practice. Mr. Chair, this concludes my presentation. ADE's response to the report is provided in Appendix A and ADE representatives are present to respond to Committee questions.
Senator David Wallace Thank you, Rochelle. Senator Hammer, you're first up in the queue and you are recognized, sir.
Senator Kim Hammer Thank you, Mr. Chair. Could the staff restate or reread that section that was given as far as it being a unique event that justified the expense? Or where's that in the report?
Kevin White Thank you, Senator. So on page three of the report, this is where we speak about the unusual and unique situation. It's underneath objective two, Solution Tree and contract. Like I say, stated in the report and the aforementioned letter, the OSP director stated that the limited amount of time it had to implement the policies for the school year as required by Act 427 created an unusual and unique situation.
Senator Kim Hammer Okay. And then at the proper time, chair, I'd like to ask the agency a question. The practitioners that were paid funds, do we know though, did they or did they not take personal leave time from their schools so as to not be a conflict? I know some have taken personal leave time in order to be able to-- or did y'all go into that and look into that?
Rachel Ragland For the practitioners who were compensated through the AAEA grant, they were compensated a different amount if it was a non contract day, and they were compensated a lower amount if it was a contract today because they did receive their normal payment from each school. But the school was reimbursed for their daily rates and fringe benefits.
Senator Kim Hammer All right. So there was no case then, based on what you said and how you described it, there was no case of double dipping, what I'd refer to as double dipping. They were functioning appropriately within what was allowed for them to be able to take payments, as you described.
Rachel Ragland Yes, the schools were made whole for that grant.
Senator Kim Hammer Okay. All right. Mr. Chair, at the appropriate time, agency question, please.
Senator David Wallace Yes, sir. Senator Chesterfield, you're recognized, ma'am.
Senator Linda Chesterfield Thank you, Mr. Chair. Having been one of those who asked for it, it is nice to know that there's nothing nefarious that seems to jump out. I'm just amazed at the amount of money that has been paid from so many various sources. Would you repeat to me how much came from the Department of Ed, how much came from school districts, how much came from co-ops, how much came from higher ed?
Rachel Ragland The total for the entire review period was $144.6 million. ADE paid $80.1 million. We do not have the breakdown between schools and co-ops, but schools and co-ops combined was $63 million and then higher education institutions was $1.6 million.
Senator Linda Chesterfield One more time, please.
Rachel Ragland Total $144.6 million. ADE $80.1 million. Schools and co-ops combined $63 million. Higher education institutions $1.6 million.
Senator Linda Chesterfield Could you tell me why we didn't differentiate between the schools and the co-ops? Because they are two different entities. Why was that? Was it just inconvenient or am I missing something there?
Kevin White Senator, there's, I guess, no real reason that we distinguished between the two other than they came from the same system. Both of them come from the APSCN system, both schools and co-ops. So it was pulling from that system combined as opposed to ADE pulling from a separate system, which is ASIS, the statewide system. And then the higher education amounts, we had to reach out to the institutions of higher education individually and compile that and combine it.
Senator Linda Chesterfield I see. Well, thank you and I'll await hearing from Higher Ed. But let me just say, as one of those who was around when we started this thing, we were told that they were the only ones available to provide the services, not that it was of such a rush, if my memory serves me correctly, that it was such a rush that we had to do it because it was the only thing that was available at the time and we needed to get this procurement thing going.
I was under the impression that they were the only ones who were providing the services, only to find out later that that was not the case. But it was unusual and a unique situation is what I'm reading here on page three. And because it created an unusual and unique situation, then we needed to forego ordinary procurement practices. But at one time the procurement director raised issues about Solution Tree and the process itself. Was that looked at at all?
Kevin White I'm sorry, Senator. I'm not aware of that situation, of those concerns being raised.
Senator Linda Chesterfield All right. Thank you. I'll get back in the queue, Mr. Chair.
Senator David Wallace Thank you, Senator. Representative Eubanks, You are recognized, sir.
Representative Jon Eubanks Thank you, Mr. Chair. As someone else that has been involved in this from the very beginning, the reason for that special procurement-- because I spoke with the OSP director myself about that because we had passed the legislation enabling this program to get started. And we didn't have the time in order to go through a regular bidding process at that time because we were wanting to implement it for that coming school year. The other problem was that the legislation didn't have an emergency clause on it, which caused us additional issues with regard to the amount of time that would have been needed in order to do that.
Also, the contracts were renewed each year, I think, by this body. So I think if there had ever been any real concerns about how that process proceeded, that they should have been brought up at those times. This started when Speaker Gillam sent a group of legislators to one of the Solution Tree conferences in Phoenix, Arizona. That group, I think, was unanimous in the fact that they were very impressed with what they learned, not from Solution Tree themselves, but from the attendees, the teachers and administrators that were there. And it was approximately 1,500 educators at that conference. Our sole purpose in trying to implement this program in Arkansas was to try to do something that was going to reach the needs of our kids where they are, whether they are struggling or whether they needed enrichment of some sort.
But I believe ADE identified Solution Tree as probably the best provider of those services at that time. I think when this went out for bids this past year that the scoring indicates that they are the best in the country with regard to the services that they provide. They're not the cheapest by any stretch. We can see that. And we know that from how the bids came in. But if we are genuinely interested in addressing public education and the needs of our children, then I think we need to put our money where our mouth is.
And people ask me why I've been so passionate about this process and it's because of the educators that have come to me voluntarily of their own accord and told me that they thought this was the best professional development that they've ever been offered in the state of Arkansas. I personally invited schools and administrators to come here and share that information with the members of this Committee and the Education Committee so they could hear it firsthand from those practitioners that were doing it in the field.
I think the vast majority of the people that have been involved in this PLC process would agree that they are seeing progress within their schools and with the students that they are responsible for. I was disappointed that this audit was even asked for because I felt, and I may be off base here, but I felt it was almost an attempt to impugn the reputation of Solution Tree. I believe they do provide the best services in the country. The people that they hire to be associates, to be these coaches in these schools, have to prove that they are capable of doing the PLC process. They have to have implemented it in their schools for a minimum of three years and shown that they can be successful.
Consequently, I think that was why some of the people within the state, within schools were asked to go out and coach other schools. I think we were reaching a point in the state where at some point, I think at the end of what that proposed contract was that we would have had the capacity within the state that we wouldn't have to rely on an outside contractor in order to provide these services. Like I said, if we're truly interested in improving public education and addressing the needs of our students, I think we have to look at what's available across the country. I would once again ask you to contact some of the schools that I personally contacted and had come here to testify to the Education Committee and to the Review Committee so that you would know firsthand what the people that are actually doing the work, how they felt about it.
So I think Solution Tree personally deserves an apology here because I think people were actually trying to impugn their reputation as to whether they are qualified to offer these services. I want to thank them personally for the work they've done in the state. And I, for one, want to see public education succeed in this state. Thank you.
Senator David Wallace Senator Sullivan, you are recognized, sir.
Senator Dan Sullivan Thank you, Mr. Chair. And I appreciate what the representative said. They were very meticulous. Solution Tree was in making sure we followed procurement laws. And it seems like they did a good job at that. You know, I think, however, every audit is not an attempt to impugn anyone. They're just there to audit, to show us what the facts are. And I trust our Legislative Audit to show us what the facts are. And that's what this did.
There was clearly a significant web of interaction. And again, they followed the law, but it was very entangled. And I think, you know, whatever happened in the past, the legislature has addressed, which is our job, to provide the best education. And I think a month or so ago, we made steps in that direction. And if schools want to hire Solution Tree to go forward, they're very welcome to do so.
I would ask, Mr. Chair, in the report it mentions a lot of names and ranges of payment. You know, we hired these people and they hired those people. That information would seem to be subject to FOIA. Can the individuals that are mentioned here as being paid by Solution Tree, is that public information and available to the legislature? I mean, it says in some places they were paid $1,000 to $10,000 and some paid more than $10,000. I'd like to know the names of those people and the exact amount they were paid.
Kevin White Senator, Kevin White, Legislative Auditor. You know, we would not feel comfortable at this time providing those names, that information. There is a potential constitutional privacy right that those individuals might have in relation to that compensation. We'd like to talk about this more offline.
Senator Dan Sullivan So these are contracts that the state has with a company who then contracted with state employees according to proper procurement law and confidentiality. And then those employees provided a service to the school. So they actually showed up at a school and provided a service. And we're not allowed to know who those people are?
Kevin White My apologies, Senator. I misunderstood your question. As far as the individuals that provided services to Arkansas schools, I mean, we would know the names of those individuals if they were on the face of the invoices that we looked at and those invoices would be public record. That would be public information.
Senator Dan Sullivan Okay. Can we get a copy of those invoices in a report? Provide that to us.
Kevin White We can get you that information. If it's the information you're looking for, it's those individuals listed on the face of invoices that were paid by public school districts.
Senator Dan Sullivan Correct. And just for the record, I'm not trying to impugn anybody's reputation, but just like we as legislators sign off and it's public information and what we do, it should be the same for all public employees when they sign paperwork and they provide a service to the school at a public contract. That should be public information. And asking for public information should not be construed as trying to impugn someone's character. Thank you. Thank you, Mr. Chair.
Senator David Wallace Thank you, sir. Senator Hammer. Sir, you are recognized.
Senator Kim Hammer Thank you. I'd like to ask staff for clarification and I'd like to ask the agency a question, please. On page four, the scope of the audit on the first page says to review expenditures made by the Arkansas Department of Education, public school districts. Really, the scope of the audit, as I understand it, isn't to argue for or against whether or not Solution Tree provides services of value as much as just to make sure that the funding has been appropriated and spent properly according to procurement. Am I correct on that, Mr. Chair or staff?
Kevin White Yes, that is correct.
Senator Kim Hammer Okay. So with that statement, then, on page four, I'd like to make sure I'm interpreting it correctly. It says these practitioners were to be paid at a daily rate of $1,000 for school non-contract days or $500 for school contract days plus the practitioner's normal daily rate of pay. So am I to interpret that that if an individual is providing services offered by Solution Tree that they would be receiving potentially up to $1,000 a day for those services?
Rachel Ragland Yes, sir, that is correct.
Senator Kim Hammer And would I be interpreting it correctly that the majority of these people-- somewhere I read in her, I think, are principals that are operating under those terms? Or am I misinterpreting that?
Rachel Ragland You are correct. They are principals, the ones receiving that amount of compensation. There were, in addition, 19 teachers that participated after hours and they were paid $500 per semester.
Senator Kim Hammer But if it's a principal, the principal is being paid potentially up to $1,000 a day to provide those services. And for receiving that thousand dollars a day, they also received what was allowed them under their contract that they were operating under with the school?
Rachel Ragland No. If they received $1,000 a day, it was a non contract day that they did not get paid by their school.
Senator Kim Hammer Okay. So did you verify in the audit that those principals that received that money had supplied proper documentation to show that they actually took that day off with their districts? Or was that within the scope of this audit?
Rachel Ragland No, we did not verify that information, if it was a non-contract day.
Senator Kim Hammer Mr. Chair, would that be under the purview of this audit? Or that would be a separate request, I guess, to determine or just verify that for all those days that they actually completed the proper paperwork with their individual districts.
Senator David Wallace Senator Hammer, I would think that we could ask for that.
Senator Kim Hammer Sir?
Senator David Wallace I think that we could ask for that.
Senator Kim Hammer Okay. I think that would be appropriate in the line of scope of what we're looking at here. And then at the appropriate time, I would like to ask the agency a question, please.
Senator David Wallace Alright, sir. Senator Chesterfield. You are recognized, ma'am. Well, let me try it again.
Senator Linda Chesterfield Thank you so much. When is the appropriate time to hear from the Department of Ed?
Senator David Wallace Any time. We can call them up now.
Senator Linda Chesterfield I appreciate it.
Senator David Wallace Do I have a representative from the Department of Ed here? Sir, if you would announce yourself, you are recognized.
Greg Rogers Greg Rogers, Department of Education.
Senator Linda Chesterfield Thank you, Mr. Chair. Greg, you've been around here for a long time, and so have I.
Senator David Wallace Senator Chesterfield, bear with me, ma'am. I'd like to swear in the witness.
Senator Linda Chesterfield Oh, of course.
Senator David Wallace Sir, if you will stand. Sir, if you will state your full name, employer and position.
Greg Rogers Greg Rogers, Department of Education, CFO.
Senator David Wallace If you would raise your right hand. And do you solemnly swear or affirm that the testimony you're about to give will be the truth, the whole truth, and nothing but the truth?
Greg Rogers Yes.
Senator David Wallace Sir, thank you so much.
Senator Linda Chesterfield Am I recognized, Mr. Chair?
Senator David Wallace Yes, ma'am, you are.
Senator Linda Chesterfield Thank you. Greg, would you tell us the difference between formative and summative evaluations?
Greg Rogers That is way beyond my expertise.
Senator Linda Chesterfield Let me try as an old classroom teacher. A formative evaluation is how people feel about things that are going on. A summative evaluation tells us exactly how they are performing. How much increase in test scores has happened since Solution Tree has been here for seven years. Do you know?
Greg Rogers I don't have that with me, but I can get it for you.
Senator Linda Chesterfield I would appreciate that because I remember when we were dealing with the Bureau of Legislative Research during adequacy studies, there was no appreciable increase in the performance of those students. The average test score for children in reading is about 37. Is that about right? You don't know?
Greg Rogers No, ma'am.
Senator Linda Chesterfield Why are you up here, Greg?
Greg Rogers I don't have that with me.
Senator Linda Chesterfield Well, then allow me to just pontificate a minute, Mr. Chair, and I'll let Greg go. I have been asking for years for summative evaluations of Solution Tree's work. People feel good about Solution Tree, but how much have students progressed since they've been here? Has there been an appreciable increase in the performance level of students who are there in Solution Tree?
We still don't have 40% of our kids reading at grade level. We don't have 40% or maybe 40% of our kids who are performing at grade level on math tests. I don't care how people feel. I want to know how our kids are doing. And if that's not the whole purpose of this whole thing, then we are wasting our time. It is about time for us to make sure that at the higher ed level, our teachers are being taught the science of reading so that when they come into the classroom, they can teach Johnny how to read. Because if they can't come out of college teaching Johnny how to read, then what's the purpose? Johnny, whether it's 'ie' or 'y' is not reading better. They're not performing math better. And this thing has been going on for seven long years.
That's why I wanted to know where the money was going, how it was being spent. I've heard teachers say, we just feel so good. We are working together better. I think that's great. But I'm not seeing an appreciable increase in the test scores of our children over seven years. They have been here since 2017 and here we are in 2024 and we have too many DNF schools across this state that have used this program. That's my concern.
Since we're pontificating, I thought I'd take that point of personal privilege, Mr. Chair, and pontificate a minute myself. It is not an insult to ask how state monies are being spent. The governor has to say how her money is being spent. The Treasurer has to say. And it is not untoward to ask an entity that's been with us for seven years and has been given over $100 million to see where that money goes. There's nothing untoward about that.
It should have been done each and every year that they were given money, in my view. And I'm not going to ask you to agree or disagree, but I do think that we ought to look at what has happened as a result of seven years of Solution Tree. Johnny still can't read. After seven years, 50% or more of our children should have been able to read at grade level and they should have been able to perform math at grade level. And they cannot. Thank you, Mr. Chair. I feel better.
Senator David Wallace Thank you, Senator. Representative Duke, you're recognized, ma'am.
Representative Hope Duke Thank you, Mr. Chair. It's kind of hard to follow the senator there, but several of my points have already kind of been made. I would say, as being someone who also asked for this audit, it was not to impugn anybody. If I remember correctly, I think Solution Tree actually came out and said they welcomed it, which of course I would as well if I don't have anything to be concerned about. And so I think that needs to be remembered.
And I think, to take it a little bit further than what Senator Chesterfield said, it's not the state money. It's the taxpayers' money. And we have a responsibility, in my opinion, we have an obligation to make sure we know where that money is going, especially I mean, that's a big number, $144 million over seven years in our public school systems. And so I believe it was Ronald Reagan that said trust but verify. That's been my practice with my teenagers. And that's my practice as a school board member. And I think that should be our practice as legislators is absolutely we want to trust these organizations, but we have a responsibility to verify what's going on with that.
And we need accountability. We have accountability every time we're reelected, whether the taxpayers think we're doing a good job or not. And there should be accountability, I believe personally, in every dime that's going through those public schools to help educate our kids. And that accountability is results. And as the senator referenced, we did receive reports on that in the Education Committee. There was no real negligible difference between Solution Tree cohort schools and schools who were not. We saw that from the BLR report. We saw that from the education report, the other entity from the University of Arkansas, I believe, that did that. And so we've seen that consistently.
So the question in trying to do this, in getting this audit, was to make sure what was going on with that money. We need accountability for it so we can see in 2025 what we might need to do differently. Because it is a statute that has these policies in place in our school systems and in our co-ops. And so we do need to be able to have all of that information. I think this audit helped provide some insight on that. And also if we need to make some changes in some of our procurement laws or other things that we are doing to make sure there's better accountability for all vendors going forward because there's a lot of money.
I mean, this is PD money and this isn't counting the other buckets of PD money that we're using. This is additional professional development money. And so that's an important piece to know. Are we utilizing that money effectively and do we need to make sure there's higher accountability with these vendors moving forward? Because public education, as we all discussed recently, is a significant amount of money that we use in our state and we need to be using it effectively.
I can't elaborate any more on what she said on the test scores or anything like that, but I do think that we need to remember I've heard good and I have heard consistently since 2017 concerns from school officials about Solution Tree, about PLCs and about the amount of time-- and not just what the PLCs do. I mean, it's good to have effective teacher meetings. That's great. But there's also other things that go into place that come out of those teachers meeting other policies, other programs that have evolved out of that. In the seven years, I don't think we have seen that those have been effective. And we can't keep, "We'll wait another year, wait two more years." These kids are graduating every single year in our state and are having to get remediation when they go on to college on reading and math. And we cannot continue to do that.
So making sure these entities are spending their money is important correctly. And as far as the emotion piece, when I do hear people talk about that, I think Solution Tree can be a tool in your tool belt. It shouldn't be the only tool in your tool belt. But we should not be guided by emotions. They are good engines but terrible drivers. And so we need to be looking at hard facts and how this money has been utilized.
Now, I have a couple of questions in relationship to this audit, and I don't know if you can answer these or not. These may be better for offline. I don't know. But one of them is, when you were looking at the educators who were going to other schools to provide training, did you just look when they went to Arkansas schools to provide training or did we look when they were going to other states to provide training? And if so, do you know what that is? And let me see what the other one was. Well, I'll just go with that one to get back in the queue.
Rachel Ragland We did not look at any other states other than Arkansas. And for Arkansas, we used our sample of 30 school districts as our driver to determine if any of those individuals presented at those 30 schools. We did not look at any other schools that were not in our sample.
Representative Hope Duke Follow up, please.
Senator David Wallace Go right ahead.
Representative Hope Duke Just to make sure I understood you correctly, so these Arkansas educators who might have traveled to California to give a presentation or to do something, that was not included in looking to see where they might have, whether there was supposed to be compensation or were gone in that time period. It would just have been if they had gone to a local Arkansas school.
Rachel Ragland Could you repeat that?
Representative Hope Duke I'll try. I'll try to do a better job of rephrasing this. So if an Arkansas principal or teacher, whomever these were that you have, I guess, pulled out to look at what they have been doing for a Solution Tree, the way it read to me was these were teachers or principals that were going to local Arkansas schools, and this is their work within this state. But we know, at least I'm aware, that they also traveled outside of the state of Arkansas to provide services for Solution Tree, whether it's going to conferences to be presenters or going to other schools to train. Was that included, looking at whether they had gone out of state somewhere to do it or was it only looked to whether they remained in an in state school to provide services for Solution Tree?
Rachel Ragland We only looked at Arkansas. However, on page seven, Exhibit two, for the compensation, that is all compensation, including Arkansas and anywhere else they may have gone. The compensation levels are not just for Arkansas.
Senator David Wallace Go ahead.
Representative Hope Duke And my last question. It would be the amounts that are over $10,000 that they receive compensation for. Can you give us the highest range? Was it just like $10,000 or was it much significantly more or just close?
Rachel Ragland These were the ranges that were provided, $1,000 to $10,000 and more than $10,000.
Representative Hope Duke So we don't know if there was a $20,000 or $12,000?
Rachel Ragland Correct.
Senator David Wallace And Senator Hammer, you're recognized, sir.
Senator Kim Hammer Mr. Chair, I'd like to address staff and then address Greg, please.
Senator David Wallace Go ahead, sir.
Senator Kim Hammer In, in reading the report, I can't find anything that would conclude that any procurement laws or any activity of anyone involved in all of this, whether it's the individuals or whether it's Solution Tree or their affiliates, have done anything outside of what is allowed by procurement laws or by other laws that would govern this. Am I correct in that interpretation?
Kevin White Yes, Senator, you are correct. We have identified no violation.
Senator Kim Hammer Okay. So the purpose of the audit is to review expenditures made by the Department of Education, yada, yada, to make sure of that. So we're concluding that there's been no egregious activity on the part of anybody. We're down to the debate of whether we're spending our money wisely. That's an opinion. Greg, let me ask you this. A couple of things. One, and I think somebody said a while ago, what's AAEA's involvement in the administration of this?
Greg Rogers So AAEA received a grant from us from federal funds. It was the first tranche of our ESSER funds, which was to help train and expand current Arkansas educators in the PLC method. So we had our contract with Solution Tree, but then when everything was going on with the ESSER funds, we were looking to expand training within the schools. So as was mentioned earlier, grow your own within the PLC method.
Senator Kim Hammer Okay. Do you know how AAEA got paid for that or why them?
Greg Rogers We contracted with them because-- we granted the federal funds to them because they were the closest entity to have with administrators, those that had been in the PLC process and the most knowledgeable of it.
Senator Kim Hammer Okay. And I remember a couple months ago, we hashed this out for several hours one day about should we do Solution Tree or should we not? What's the justification? I cannot remember. That's why I'm asking. What was the justification for the urgency that we had to get the procurement contract rolled out as quick as we did. Just refresh my memory as to why, because that's been cited in the report as justification.
Greg Rogers And it was at the time when the PLC-- I think it was called PLC at Work, which is the Solution Tree method-- was adopted in the adequacy recommendations and the timeline for getting that started to be able to have it implemented by the time school started. The previous OSP director made the recommendation based off our information that we sent, that it was unusual and we did meet the thing for a special procurement, just for that first round, which we did it for that seven year contract, which is why this last time we went do it, we did go through the RFP process. So we did that the first time to get it started. But then we did do an RFP for the next one.
Senator Kim Hammer And any other entities out there that would offer the same thing that Solution Tree offers that it should have been put out for competitive bid?
Greg Rogers This last time we did an RFP, I want to say there were 5 or 6 different organizations that did respond to the RFP. But during the evaluation period, Solution Tree was the one that received the high score.
Senator Kim Hammer Right. And now I remember, the debate was based on the percentage and weighted allotment for the various components of who would get that, I think. Am I right on that?
Greg Rogers That was part of the discussion. Yes, sir.
Senator Kim Hammer All right. So I guess my point is, did we create the unique event or did we manufacture the unique event or did a unique event occur as a result of something else other than being self manufactured?
Greg Rogers At the time it was self manufactured when we had to get this started and get it put out based off trying to follow the law that was passed for getting the PLC method implemented. This was the best route we could go at the time to get that started in the time frame we had.
Senator Kim Hammer Okay. All right. Thank you. Thank you, Mr. Chair.
Senator David Wallace Thank you, Senator. And members I have allowed a lot of leeway on this. I've got three more individuals in the queue. I'm one going to allow them their opportunity and then we're going to move on to the next part of business here. And with that, Senator Beaty , you are recognized, sir.
Representative Howard Beaty I have been promoted. Thank you, Mr. Chairman. Well, demoted.
Senator David Wallace Enjoy it for the moment, sir.
Representative Howard Beaty I will. Thank you, Mr. Chairman. I guess my comments come back in and my questions are more for staff. How many hours and how many staff members were involved in this audit?
Kevin White Senator, I don't have the information. I'm sorry. Yes, Representative Beaty, I don't have that information in front of me.
Representative Howard Beaty Thank you.
Kevin White Yes, sir. I don't have that information in front of me. We had a couple of staff members who are kind of dedicated to the early period at the Department of Education level. Then we had one primary staff person here sitting beside me who was dedicated on the school side during the summer period. We had, you know, various other individuals chiming in at times to help out with it because I think a total of over-- there were a significant amount of invoices that we looked at and reviewed.
Representative Howard Beaty And if I ask you this, since you didn't know how many staff members or how many hours were involved in this audit, so if I ask you the follow up question to that is, how much did this audit cost the state of Arkansas for you to prepare it with your time and your resources of the department, you couldn't answer that either, could you?
Kevin White We could get you an answer to that.
Representative Howard Beaty I'd like that answer because I have sat through the discussions on Solution Tree, and I was looking forward to the audit today. And I read through the audit and all the old information in here that basically says we looked at everything and it all looked like it met the letter of the law and it looked like everything was okay. So we've done a deep dive into Solution Tree at the state, the contracts, the invoices, everything that's happened. We've done a deep dive and we've looked at it. And I came to the meeting today and what I've heard from members in this room is you want more information.
So my question to Leg Audit is: Could you not find something wrong in here that you can report to this body? Or to members: Do you want them to keep looking until they find something wrong? Because what we're looking at and what I'm focused on is the outcomes that we're getting for our students in Arkansas schools. That's not Solution Tree's problem. They didn't cause that. This is systemic over long periods of time of the results we're getting.
And I'd much rather see our time and resources and energies focused on improving those outcomes for our students than continually digging in deeper until we find something in this report. The witch hunt on Solution Tree needs to end today. And let's stop with all these other requests for information and more things, and let's move on to important things and important matters. This is the past and will not change future outcomes if this body does not learn from the errors of the past. We approved all these contracts right here in this room. They were approved here.
So the question is, when will this stop and when will we start focusing on the important matters? And that's the outcome for our students in this state. So with that, I would like that information from Leg Audit on how many members and hours and the overall cost of this audit. And I think when we as a body sit in this room, we need to think about that, too. Because we are accountable, folks.
We've made it perfectly clear that we didn't like the PLC process. There were questions and concerns about Solution Tree. And I think that was taken care of on June 30, 2024, when their contract was not renewed. And they decided they didn't want to go down that path. So my question is, let's end this today and let's move on to more important things and finding outcomes for our students that work. That's what we're all trying to do here. That's what this process was. I know it's hard. Sometimes we look at it and look at it just in that green salve and the dollars that are involved.
But there are a lot of dollars that we expend around here, too. So let's focus on those outcomes. And I'd rather hear those discussions about how we improve those test scores for students than if someone traveled out of state and made a little extra money off the deal. Those things were looked into. Let's move on to important things. Thank you.
Senator David Wallace Senator Johnson, sir, you are recognized.
Senator Mark Johnson Thank you, Mr. Chairman. Mr. Chairman, I can't help but start out by saying I want to thank Senator Chesterfield and Representative Beaty for kind of putting a cherry on top of the sundae here in getting to the point. Senator Chesterfield, if I may, I want to thank you for your years of service. And this is just one more example of why I'm going to miss having you around because when you and-- I believe that Representative Hodges and another representative. It may have been Representative Duke. If I'm blaming you or praising you, please take it as you wish. But we had a bipartisan group of legislators, bicameral group of legislators, come before our Executive Committee and say, in effect, hey, folks, we got to take a look at this. And I don't remember a whole lot of the points they brought out when they requested that our staff look at this.
But I do remember when it went over $100 million, that got my attention. And I think about $144 million. I think about the points that Senator Chesterfield made. How many reading coaches could we have hired for that? How many math coaches could we have hired for that and actually seen a change in that number? And when we talk about competency in reading and doing math at grade level. I always turn that figure upside down. We talk about, well, 34% reading at grade level. That means that 66% aren't reading at grade level. That means two out of every three kids, we're not educating them.
And Senator Chesterfield, former Senator Elliott, a lot of us have talked for years about how you could almost find a statistical parallel to those kids that are in that 66% that don't end up in a good trade or in college or in some other meaningful situation in their life. They end up costing us on the other end at the Department of Corrections. And that's a lot more than $144 million. So I want to praise our staff. They did what we asked them to do: Was this in compliance with the procurement law?
And to echo the things that Representative Beaty said, what this really is telling me is we can have all the great procurement laws on earth and everyone dots every I and crosses every T. I couldn't help but think about those $1,500 toilet seats we used to complain about the Department of Defense procuring, but I can tell you those vendors dotted every I and crossed every T. We got to look at the result. Can Johnny read, as Senator Chesterfield said. And if he can't, then we need to go back to square one and fix this.
And doing feel good programs for our educators are great if it helps Johnny read. If it doesn't, it's a waste of taxpayers money and we've got to change this systemically. I appreciate the staff again for getting us the answers to the questions about this, but this goes probably well beyond the audit function. This goes into us doing some self evaluation of, are we really doing our job? And I think this is a challenge to all of us that will be back here in January. Thank you, Mr. Chair, for indulging me. Thank you, members. Thank you. Thank you, Greg.
Senator David Wallace Representative Rye, sir, you are recognized.
Representative Johnny Rye Thank you, Mr. Chair. I have a question. On page four, it mentions about halfway down AEAA contacted 31 Arkansas practitioners, mainly principals, during the grant period to request that each practitioner provide at least one day of onsite coaching per month to a member of the PLC regional network. And it goes on to say it's $1,000 a day for non contract days. In other words, that would be outside of 178, maybe 180 days a year and then $500 for days during a contract. I just think we need a little bit better explanation, guys and ladies, of how this is being done. Because this is added on top of a normal pay period for all of our teachers and principals and superintendents statewide. I just wish we could get a little bit more information on it. I think it would probably do the public a lot better good if they knew that we knew exactly how that process was going on. Thank you.
Senator David Wallace Thank you, Representative Rye. And Senator Chesterfield, it is-- well, okay. You are recognized.
Senator Linda Chesterfield I move review of the report.
Senator David Wallace Members, I have a motion for review. Do I have a second? I have a second. All in favor, say aye. Any opposed? And the matter has been reviewed. Moving on to the next item. This is a special report for the cost benefit analysis of selected economic incentive projects. Mr. Mett, you are recognized, sir.
Staff Thank you, Mr. Chair. This is our annual review of the Consolidated Incentive Act Economic Incentive Programs. The objectives of this report were to evaluate the controls over the awarding and issuance of CIA incentives by the Arkansas Economic Development Commission and the Department of Finance and Administration, as well as to determine the overall effectiveness of the CIA programs and the effectiveness of individual selected CIA projects.
This chart, which is a part of Exhibit two on the bottom of page three of the report, shows the distribution of CIA funds by region. Incentives awarded to companies for this ten year period totaling almost $630 million. The remainder of Exhibit two, which is shown on this slide, illustrates the percentages of total incentive funds awarded in each region, which is shown in blue, as well as each region's percentage of total population which is shown in orange. This chart, which appears on page five of the report, shows the distribution of CIA funds by incentive type.
Statutory incentives accounted for 76% of all incentives awarded and issued, while discretionary incentives accounted for the remaining 24%. On page seven of the report, you can see our conclusions reached on the overall effectiveness of programs based on projects we have reviewed over the last ten years. As you can see by the green wording on the side, two of the three statutory incentives, as well as Create Rebate, a job creation discretionary incentive, resulted in a positive cost benefit to the state.
The three inconclusive discretionary programs are not as actively used, and more incentives will have to be awarded and reviewed before a conclusion can be drawn. The two programs that we have concluded result in a negative cost benefit to the state are the statutory and discretionary R&D programs. Both of these programs were altered with legislation in 2019, with some of the key changes being that the statutory R&D program was changed to a discretionary program and is now an award of up to a maximum of 20% of eligible expenditures instead of an automatic 20%.
Another big change was the supply expenses, which led to some of the larger incentives in the past are no longer allowed. Eligible expenditures are now limited to wages and benefits. In order to draw conclusions on overall programs, we look at individual projects. This year we looked at 35 projects that covered six incentive types which are listed on the slide. Of the 35 projects reviewed, seven had unfavorable cost benefit ratios. These seven projects were R&D, with five being the statutory R&D program, and two the targeted business discretionary program. All of the 28 remaining projects had a favorable cost benefit ratio.
We looked at 24 non-R&D projects. And for those, the state invested an average of just over $10,700 for each of the 2,900 new full time jobs created. There was one finding with this year's report. It is discussed on page ten of the report. And as noted in the prior report, we noted deficiencies in internal controls related to AEDC's verification process of the tax credits awarded for R&D programs. We tested 11 R&D projects for this year's report with incentives totaling $9.7 million awarded from 2017 to 2022. And we noted the following: that nine of the 11 projects contained no documented audit or review summary provided by AEDC explaining how the existence, accuracy and allowability of the R&D expenses claimed were determined to be eligible.
The two remaining projects contain a memo summarizing review steps taken by AEDC for calendar year 2022 only, which did not encompass the entire five year lives of the projects. Any disallowances noted for 2022 as a result of the review were not uniformly disallowed from prior years. It should be noted that one of the two reviews performed by AEDC resulted in a disallowance of $3.3 million in expenses that were originally submitted by the company, highlighting the importance of these reviews.
We recommend that AEDC continue to evaluate and improve its internal controls over tax credit awards to ensure that the expenditures for these awards are valid, accurate and allowable by law. Company expenses should be substantiated by supporting documents to establish a direct tie to research and development. We further recommend the AEDC establish clear guidelines and steps for its review process, which would assist in ensuring that a consistent evaluation is performed. We also recommend the AEDC consider a review of previously issued credits and attempt to recover any erroneously awarded credits.
Thank you, Mr. Chair. That concludes my presentation. There's a management response from AEDC provided in appendix C of the report, and there are officials present from AEDC to answer Committee questions.
Senator David Wallace Members Do I have any questions? Seeing none-- I'm sorry. I do have questions. Representative Beaty, you are recognized, sir.
Representative Howard Beaty Thank you, Mr. Chair. My question is on, I guess, more on page eight on the review of the selected CIA projects. You make this statement midway through, "Out of the 35 projects"-- and this is for staff-- "that were reviewed, the inclusion of supply expenses that were allowed earlier contributed to the low benefit ratio return for the state." Did you make a calculation excluding those supply expenses to see what that returned? With the expenses out of there, would any of these projects have generated a positive return? And how much of an impact did it make on that calculation?
Staff No, sir, We did not look at specifically if you would have excluded those. I can tell you just by looking at these over the last few years that a lot of times the supplies were a very, very large proportion of the expenditures. And with those changes that have been made legislatively, I believe was Act 327 of 2019. They're five year projects. So we're coming up to where next year and especially the year after we would begin to evaluate those new projects under the new rules and be able to form an opinion under the new rules what does it look like with the cost benefit.
Representative Howard Beaty Well, and I also think that it's important to note that these are research and development projects, which typically have a longer time period before you see a return on those projects in the investment of those dollars compared to some of the other programs. So thank you for that. But I know the supply side is a huge portion, and that change should have improved those time horizons as far as showing a positive rate. So thank you.
Senator David Wallace Senator Chesterfield, you're recognized, ma'am.
Senator Linda Chesterfield Thank you, Mr. Chair. I was going to make a motion for review, but I want a quick question, if I may. On the front, it says AEDC employed an inadequate verification process for research and development program expenses submitted by companies, and it resulted in the disallowance of $3.3 million in expenses. Has that process been improved as you've gone forward, or are we still in such a state that the verification process is in need of continued upgrades? Could you tell me that? Are we doing better? I'm on the front page.
Staff Yes, ma'am. So the ones that we've looked at for this year for the 11 projects, the improvement that you see in 2022, to answer your question, that is an improvement. We saw where AEDC performed their review. They documented the findings of their review. So to answer your question, there is an improvement.
Senator Linda Chesterfield They still have work to do.
Staff I think they're putting together a list of procedures that they'll consistently apply and 2022 is kind of the first year for these 11 projects that we saw that review in place.
Senator Linda Chesterfield Thank you. Motion at the proper time, Mr. Chair.
Senator David Wallace Thank you, ma'am. And, Senator Hammer, you're recognized.
Senator Kim Hammer Thank you, Mr. Chair. The selection process, it says that you selected 35 projects for review. And maybe I missed it in here. What's the criteria and how do you go about determining the projects that you choose to look at?
Staff So we wait until the projects are complete. And all of these projects have different time periods, some of them five years, some of them ten years. So once the project is complete, we consider it ready for us because we want to wait until they're done before we come in and do the cost benefit analysis. So hopefully that answers your question. We wait till they're complete, then they are subject to be selected for review.
Senator Kim Hammer Okay. So this time you all selected 35 projects. How many other projects were out there that you could have chosen from? Like you picked 35 out of 100 or 35 out of 35 or--?
Staff Yes, sir. I can't give you an exact answer to that. Every year we get information from DFA that basically updates the running database as far as the how many projects are complete. It's something I could pull together for you. It's a matter of building the database, updating it, determining what are complete. But I don't have the exact number of like how many were eligible to be picked this year and how many we ultimately looked at with me today, sir.
Senator Kim Hammer Okay. And the reason I'm wondering is, do you pick by category, by product manufactured, research? Is it a variety of things that you pick from? And is that identified in the report somewhere as far as the-- I see the tier system. But as far as the selection to make sure we got a broad perspective of all the projects that are being done, it's not all in one category, is it?
Staff That is correct. It's across all of the different categories. So that rule of thumb applies for all. If it's a completed project, we would consider it ready for review. And for this year, the 35 were spread across six of the available incentives in the Consolidated Incentive Act. And I believe the law says that we look at each project so it's spread across all of the CIA incentive types.
Senator Kim Hammer You look at all projects or just the ones you choose to select?
Staff Of all projects. Not in this one report, but eventually over the years, we will look at all projects. Yes, sir.
Senator Kim Hammer Okay. All right. Well, I'll have it offline. Thank you.
Senator David Wallace Senator Chesterfield, if you are recognized for your-- can you key up first?
Senator Linda Chesterfield Mr. Chair, I move review.
Senator David Wallace Members, I have a motion for review. Do I have a second? I have a second. All in favor, say aye. Any opposed, say nay. Seeing none, this has been reviewed. Members, moving on to other business. But before we get there, I want to take a moment for personal privilege. We have two legislators that will not be with us next time. Representative Hodges, I'd like to recognize you and thank you for your service. Appreciate what you've done. And my desk mate, Senator Chesterfield. Linda, thank you for all that you have done. 20 years, maybe 20 years plus of great service as a legislator to this great state. Thank you, ma'am. And you are recognized.
Kevin White Thank you.
Kevin White And also Lanny Fite. Is Representative Fite here? Okay. But when he comes back in, somebody holler at me. He and I came together. And go ahead, Kevin.
Kevin White Thank you, Mr. Chair. Appreciate that. I'd like to take this moment as well and speak to the co-chairs and just say that it's been an honor and blessing working beside y'all these past six months in this position, kind of over the two years in the transition. It feels like I'm drinking from a fire hose, but you all have been there beside me and I have appreciated your leadership, your support, not just for myself, but for all of my team at Legislative Audit. Truly appreciative of you all and what you all have done. Y'all have kind of set the bar for the chairs moving forward in my perspective. So, I thank you. And I just wanted to take and opportunity and say thank you for having been in that position.
Senator David Wallace Thank you, sir. Members, any other business? The next meeting of the Legislative Joint Audit Committee will be held at the call of the chairs. Is there any new business? Seeing none, members, we are adjourned.
