Audit Urges Tighter Rein on State Tests : Education: Report on embattled CLAS exams finds contracting errors and some overspending. But the problems are relatively small.

The state Department of Education should keep closer tabs on contractors doing work on the embattled statewide student achievement tests popularly known as the California Learning Assessment System, the state auditor said Monday.

But the auditor’s report, sought by Gov. Pete Wilson at the height of a controversy over the tests in May, found relatively little wrong with the financial handling of the testing system. CLAS so far has cost $50 million to develop and administer.

The report by Auditor Kurt R. Sjoberg concluded that:

* In turning to a nonprofit educational research agency, Far West Laboratory, for help in developing the tests, the Education Department circumvented state civil service rules and incurred $318,000 in administrative costs. In addition, the department’s failure to keep “adequate control” over expenses resulted in contractors exceeding state spending guidelines by about $14,000.

* The department’s failure to use specific, written guidelines for selecting test development review committees led to some imbalance in ethnic and racial diversity.

* Some of the outside firms and agencies used by the department were allowed to begin work before the contracts were authorized, thus exposing the state to financial liability had the documents ultimately not been approved.

Education Department officials disputed some of the findings, but in general greeted the audit as mostly a clean bill of health.

Noting the report’s “few recommendations,” William D. Dawson, acting superintendent of public instruction, said he welcomed the scrutiny and was “especially pleased that the auditors recognize the exceptionally demanding nature” of the radically different system, which was put together quickly in the wake of 1991 legislation.

In a rebuttal to the auditor’s key criticisms, Dawson said then-Gov. George Deukmejian’s 1990 veto of the testing system then in place, the California Assessment Program, decimated the department’s staff and rendered it unable to build a new assessment system on its own.

The committees deemed not ethnically representative of California’s population were composed mainly of teachers, who “do not yet reflect the diversity of the population,” Dawson said. He also disputed the auditor’s findings of spending-limits violations, but promised to tighten contract and oversight procedures.

Wilson’s education adviser, Maureen DiMarco, who has been critical of the department’s handling of the testing system, conceded that the report revealed no huge problems but said the audit represents another round in the barrage of criticisms of the tests.

“I think it is not insignificant that they blew almost $320,000 in administrative costs . . . and the fact they aren’t monitoring these contracts is of concern,” DiMarco said.

The auditor’s report comes as testing supporters, led by state Sen. Gary K. Hart (D-Santa Barbara), are trying to fashion a compromise with the governor before the legislative session ends next week that would keep the pioneering but controversial testing system alive.

The governor vetoed this year’s $24-million funding for the exam system, renamed the California Comprehensive Testing Program, in budget sessions earlier this summer. Wilson promised to restore the money if substantial changes were made in proposed legislation to renew the system for another five years.

Hart’s bill, SB 1273, is scheduled for a hearing before the Assembly Ways and Means Committee on Wednesday. The bill must be adopted before the Legislature’s Aug. 31 adjournment and be signed by the governor or the testing system will expire Jan. 1.

Among the governor’s demands are the inclusion of more traditional multiple-choice questions (along with the “performance-based” items that are the tests’ hallmarks) and the addition of more diverse members to boards that review tests’ contents before they are administered.

The exams were designed to spur educational reform in California by determining how well the state’s public school students understand math concepts and can think and write about what they have read. But the process has been plagued by scoring glitches and faced concerted attacks by religious conservatives about the literary selections and questions on the reading and writing portions of the exams.

The tests were given for the first time last year to about 1 million students in the fourth, eighth and 10th grades. To save money, only some of the exams were graded. Scoring is now under way for the second round of tests given this year, which included fifth-grade students.

Earlier this month, a report by a panel of statistical experts that probed scoring and test development difficulties blamed the problems in part on the pressure the Education Department was under to produce the new system in a short time and with limited funds. The panel found that the system could be fixed, however, and urged that it be continued.