In 2018, Denver voters created the Prosperity Denver Fund, a pot of money paid for through a 0.08% sales tax that partners with local nonprofits to give out college scholarships to low-income students in Denver.
But the program struggles to verify student eligibility, keep accurate data and document payments, according to a report released Thursday from the Denver Auditor's Office.
"This is yet another voter-approved tax that is bringing in significant revenue -- but with little city supervision for how those dollars go out the door," Denver Auditor Timothy O'Brien said in a statement Thursday.
The fund raised $8.9 million in 2019. That figure jumped to $14.5 million by 2022.
The Auditor's Office reviewed 7,570 scholarships and found 155 payment requests lacking enough data to determine if the student was eligible for the program based on their residency status. The report said that fund staff followed up with partner organizations to confirm eligibility but did not document that process.
Originally, students needed to live in Denver for 36 months before attending postsecondary education to qualify for the program. But fund officials said the city was only able to distribute around 40% of the money raised, in part because of the residency requirements, which they said were a barrier for students without documents to prove they lived in the city, experiencing homelessness, students who lacked legal immigration status and families priced out of Denver. In May, City Council widened the age and eligibility criteria for the program for that reason.
Prosperity Denver Fund board member Stephen Kurtz said that determining student eligibility has been difficult, especially during the pandemic.
"We have a lot of students that don't have a home, we have a lot of students who have families that are separated and someone may live in Aurora and someone may live in Denver and moving around constantly," he said at a Thursday meeting presenting the audit.
The report noted that the recent changes passed by City Council will make improving compliance with eligibility requirements "significantly easier."
Fund staff also agreed with the data collection issues found in the audit.
The report said Prosperity Denver Fund's data "is fragmented and contains inaccuracies and missing details."
"We are in total agreement that our current collection of data and our processing of data needs to be brought into the 21st century," Kurtz said.
Kurtz said Prosperity Denver Fund prioritized getting money to students in need, even when data points were missing.
"If, because of the organization's lack of ability to give us all the data we want, we felt compelled enough that that was a Denver student, low-income Denver student, that was going to a Colorado education, we made the decision, let's help the student, even though we may not be checking every box as we need to along the way," he said. "But we know that we've got to improve that. We won't be back here during the next audit."
The audit also found problems with the fund's reimbursement processes.
Prosperity Denver Fund partners with a number of local nonprofits to give scholarships out to students, and the report found that some partner organizations lacked records verifying payments and reimbursements and paid out wrong amounts to three students. In a handful of cases, students also received scholarships from nonprofits without confirmation that they met academic progress requirements, according to the audit. Fund staff said they followed up with nonprofits and confirmed eligibility.
City officials attributed the problems partially to a lack of staffing. The said that affected the fund's ability to support smaller grassroots nonprofits without as much administrative resources.
"One of the biggest concerns that we've had in our office is that we've experienced enormous growth over the last several years," said Melissa Janiszewski, Executive Director of the Denver Office of Children's Affairs. "We are dealing with staff capacity, our inability to catch up with all of the work that we have."
Janiszewski said her office requested a dedicated staff person to help oversee special revenue funds like the Denver Prosperity Fund. In addition, Janiszewski agreed to all eight recommendations from the Auditor's Office to improve data collection, reimbursement processes and program documentation.
