oversight

Review of the Office of Elementary and Secondary Education Discretionary Grants Monitoring Process.

Published by the Department of Education, Office of Inspector General on 2001-09-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

   REVIEW OF THE OFFICE OF ELEMENTARY AND
            SECONDARY EDUCATION
  DISCRETIONARY GRANTS MONITORING PROCESS



                                  FINAL AUDIT REPORT




                        CONTROL NUMBER ED-OIG/A03-A0021
                                            SEPTEMBER 2001




Our mission is to promote the efficiency,                    U.S. Department of Education
effectiveness, and integrity of the                          Office of Inspector General
Department’s programs and operations.                        Philadelphia, Pennsylvania
                               NOTICE:

Statements that financial and/or managerial practices need improvement or
recommendations that costs questioned be refunded or unsupported costs
be adequately supported, and recommendations for the better use of funds,
as well as other conclusions and recommendations in this report, represent
the opinions of the Office of Inspector General. Determinations on these
matters will be made by the appropriate Education Department officials.
In accordance with the Freedom of Information Act (5 USC §552), reports
issued by the Office of Inspector General are available, if requested, to
members of the press and general public to the extent information
contained therein is not subject to exemptions in the Act.
Review of the Office of Elementary and Secondary
Education Discretionary Grants Monitoring Process       Control Number ED-OIG/A03-A0021


                                    TABLE OF CONTENTS

                                                                               Page


Executive Summary                                                              1


Audit Results                                                                  2


     Finding No. 1 - OESE should implement a systematic process to
                     identify and monitor high-risk grantees                   2

                       Recommendations                                         4

     Finding No. 2 - OESE has not implemented the Departmental Directive
                     on monitoring discretionary grants.                       5

                       Recommendation                                          6

Background                                                                     6


Objective, Scope and Methodology                                               6


Statement on Management Controls                                               7


Appendix A: OESE Discretionary Grant Monitoring Methods                        8


Appendix B: OESE Grant Files Reviewed for Monitoring Documentation             9


Appendix C: OESE’s Comments to the Report                                      10
Review of the Office of Elementary and Secondary
Education Discretionary Grants Monitoring Process                   Control Number ED-OIG/A03-A0021


                                    EXECUTIVE SUMMARY

We performed an audit of the Office of Elementary and Secondary Education (OESE)
monitoring of discretionary grants. The objective of our audit was to evaluate OESE’s
discretionary grant monitoring process for identifying and monitoring high-risk grantees.1

Our review of the OESE discretionary grants monitoring process disclosed that OESE
program offices visited had a process for monitoring discretionary grants, but the process
needs improvement. Through interviews with representatives from OESE program
offices and a review of selected grantees’ files, we found that OESE should implement a
systematic process to identify and monitor high-risk grantees. In addition, OESE should
incorporate into the monitoring process a review of the grantees’ Single Audit reports.
Furthermore, program officials’ monitoring activity should be documented, and
information on grantees designated as high-risk should be shared with other program
offices.

We also found that OESE did not prepare a strategic monitoring plan, annual monitoring
plan or annual monitoring report in accordance with the Departmental Directive,
Monitoring Discretionary Grants and Cooperative Agreements, issued March 23, 1994.

An integral part of having an effective discretionary grant monitoring process is OESE’s
implementation of the Department’s Directive and making available to program officials
all available information to assist in identifying and monitoring high-risk grantees.

Copies of a draft audit report were provided for OESE’s review and comment. In its
response, OESE concurred with the findings and recommendations detailed in the report.

We recommend that the Assistant Secretary for Elementary and Secondary Education:

•   Develop a systematic process to identify and monitor high-risk grantees which
    includes a process for program offices to obtain and review grantees’ Single Audit
    reports, with findings related to Departmental programs, for use as an indicator to
    identify high-risk grantees.

•   Include in the monitoring process a provision for documenting the monitoring
    activity.

•   Implement a system to share information on grantees designated as high-risk between
    program offices.

•   Implement the requirements in the Departmental Directive, Monitoring Discretionary
    Grants and Cooperative Agreements.
1
  34 CFR § 80.12 states, “a grantee or subgrantee may be considered ‘high-risk’ if an awarding agency
determines that grantee or subgrantee: (1) has a history of unsatisfactory performance, or (2) is not
financially stable, or (3) has a management system which does not meet the management standards set forth
in this part, or (4) has not conformed to terms and conditions of previous awards, or (5) is otherwise not
responsible.”


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Review of the Office of Elementary and Secondary
Education Discretionary Grants Monitoring Process         Control Number ED-OIG/A03-A0021


                                        AUDIT RESULTS

Our review of OESE’s discretionary grants monitoring process disclosed that OESE
program offices visited had a process for monitoring discretionary grants, but the process
needs improvement. Through interviews with representatives from OESE program
offices and a review of selected grantees’ files, we found that OESE should implement a
systematic process to identify and monitor high-risk grantees. In addition, OESE should
incorporate into the monitoring process a review of grantees’ Single Audit reports.
Furthermore, information on grantees designated as high-risk should be shared between
program offices.

We also found that OESE did not prepare a strategic monitoring plan, annual monitoring
plan, and annual monitoring report in accordance with the Departmental Directive,
Monitoring Discretionary Grants and Cooperative Agreements.

Copies of a draft audit report were provided for OESE’s review and comment. In their
response, OESE concurred with the findings and recommendations detailed in the report.
OESE’s complete response is included as an appendix to this report.


FINDING NO. 1 - OESE should implement a systematic process to identify
and monitor high-risk grantees.


The Standards for Internal Control in the Federal Government (GAO/AIMD-00-21.3.1)
state that internal controls should generally be designed to assure that ongoing monitoring
occurs in the course of normal operations. It is performed continually and is ingrained in
the agency’s operations. It includes regular management and supervisory activities,
comparisons, reconciliations, and other actions people take in performing their duties. As
the stewards of federal education funds, the Department must ensure that federal funds
are spent appropriately and grant projects’ objectives are being met. OESE needs to
implement an office-wide strategy to identify and monitor high-risk grantees to ensure
the accountability and effectiveness of discretionary grant programs.

We performed work on nine discretionary grant programs within OESE and found that
there was not a systematic process to identify and monitor high-risk grantees. Discussion
with program officials disclosed that, although some grantees were viewed as
problematic, they did not have a systematic process for identifying grantees as high risk.
We found that only one of the nine programs had designated grantees as high-risk. That
program office identified two grantees as high-risk, one through monitoring activities and
the other from a parent’s complaint.

Program officials also indicated that 34 CFR §80.12, Special grants or subgrant
conditions for high-risk grantees, provided the guidance necessary to identify and
monitor high-risk grantees. However, 34 CFR §80.12 does not establish the procedures



                                                    2
Review of the Office of Elementary and Secondary
Education Discretionary Grants Monitoring Process           Control Number ED-OIG/A03-A0021

for determining which grantees meet the characteristics set out in the regulation. In
addition, OMB Circular A-102, Grants and Cooperative Agreements with State and
Local Governments, 2(f) Post-Award Policies - Site Visits and Technical Assistance,
states, “Agencies shall conduct site visits only as warranted by program or project needs.
Technical assistance site visits shall be provided only (1) in response to requests from
grantees, (2) based on demonstrated program need, or (3) when recipients are designated
‘high risk’ under section [34 CFR § 80] of the grants management common rule.” OESE
does not have a process to determine what grantees are high risk or when site visits are
warranted.

The basic process to identify high-risk grantees should include reviewing readily
available information pertaining to grantees. Within the Department, this information
includes (1) grantees’ annual performance reports; (2) the Department’s Grants
Administrative Payment System (GAPS) information pertaining to grantees with
excessive drawdowns of federal funds early in the performance period or drawndowns of
federal funds on an irregular basis; (3) the results of the principal office’s partnership and
accountability activities relating to the grantee; (4) information available from the Federal
Audit Clearinghouse (available on the internet at http://harvester.census.gov/sac/)
concerning the grantee’s Single Audit reports; and (5) information on grantees designated
as high-risk by other program offices. This information can be used in conjunction with
34 CFR §80.12, which establishes the criteria, special conditions or restrictions, and
notification methods for grantee or subgrantees designated as high-risk. Identifying high-
risk grantees enables program officials to assign scarce resources for additional
monitoring activities of grantees that may require the most assistance.

A review of discretionary grantees’ Single Audit reports with findings related to
Departmental programs should be incorporated into OESE program offices’
monitoring practices.

A tool available to program officials to identify and monitor high-risk grantees is the
Single Audit report. A Single Audit is an organization-wide audit of grantees that
focuses on their internal controls and compliance with laws and regulations governing
federal funds.

We found that program officials did not use the results of Single Audit reports to oversee
and monitor grantees. During our conversations with program officials, some officials
indicated that, if available, they would use information from grantees’ Single Audit
reports to help identify and monitor high-risk grantees. The summary results of most
grantees’ Single Audit reports are maintained on the Federal Audit Clearinghouse web-
site. Although this information is publicly available, it is not widely used by program
officials. The same Single Audit report information is gathered by Office of Chief
Financial Officer (OCFO) for the Department’s audit resolution process. OCFO only
shares audit finding information with program officials when the findings are specific to
the program and technical in nature. In many cases, discretionary grants do not receive
Single Audit coverage because these grants are not considered a major federal program
due to the dollar amount of the federal award. Although discretionary grants may not



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Review of the Office of Elementary and Secondary
Education Discretionary Grants Monitoring Process          Control Number ED-OIG/A03-A0021

receive audit coverage, grantees’ Single Audit reports contain useful information that
may assist program officials in identifying potential high-risk grantees that may require
additional monitoring and technical assistance. Grantees’ Single Audit reports contain
information on grantees’ financial position, an assessment of their internal and
management control system, and findings concerning other programs that may indicate
weakness in their administration of discretionary grants.

Information on grantees designated as high-risk should be shared between OESE
program offices.

Our review disclosed that when a program office identifies a grantee as high-risk, the
information is not shared with other OESE program offices. Discussions with OESE
program officials disclosed that they were not aware of two Magnet School Assistance
Program grantees that were designated high-risk. We found that one of these high-risk
grantees received twelve OESE discretionary grants and the other received one. Once a
grantee is designated as high-risk, other program offices should be aware of the grantee’s
high-risk status. The other program offices can then perform additional monitoring of
these grantees as necessary.

Monitoring activity should be documented.

In the five OESE program offices visited (nine programs reviewed), we reviewed
selected grantee files and found that program officials maintained some documentation of
monitoring activities. There were wide variations in the level of documentation of
monitoring activity contained in grant files reviewed. (See Appendix B: OESE Grant
Files Reviewed for Monitoring Documentation.) The level of documentation in the files
was based primarily on what the program staff believed to be necessary for monitoring.
We also noted that there were no written procedures as to how program staff should be
documenting ongoing monitoring activities.

Recommendations:

We recommend that the Assistant Secretary for Elementary and Secondary Education:

1.1   Develop a systematic process to identify and monitor high-risk grantees, which
      includes a process for program offices to obtain and review grantees’ Single Audit
      reports with findings related to Departmental programs, for use as an indicator to
      identify high-risk grantees.

1.2   Include in the monitoring process a provision for documenting the monitoring
      activity.

1.3   Implement a system to share information on grantees designated as high-risk
      between program offices.




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Review of the Office of Elementary and Secondary
Education Discretionary Grants Monitoring Process         Control Number ED-OIG/A03-A0021



FINDING NO. 2 - OESE has not implemented the Departmental Directive on
monitoring discretionary grants.


The Office of Elementary and Secondary Education (OESE) has not implemented the
Departmental Directive on monitoring discretionary grants that requires each principal
office to develop and implement strategies for monitoring discretionary grants. The
Departmental Directive, Monitoring Discretionary Grants and Cooperative Agreements
(the Directive) requires each of the Department’s principal offices to prepare:

•   A strategic monitoring plan, which covers a 5-year period, identifies key areas of
    improvement, and describes a general framework and approach to monitoring.

•   An annual monitoring plan, which describes the specific programs and grantees to be
    monitored, the procedures, budgets, and schedule for the fiscal year.

•   An annual monitoring report, which describes the monitoring activities, findings, and
    actions taken during the previous year.

Our review of OESE’s discretionary grants monitoring process disclosed that OESE did
not prepare a strategic monitoring plan, annual monitoring plan and annual monitoring
report in accordance with the Directive. In the OESE program offices visited, most
program officials indicated that they either were not aware of the Directive or were not
fully aware of its requirements.

Although the Directive was not implemented by OESE, program officials indicated that
they nevertheless monitored grantees’ progress throughout the grant period. We found
that some programs offices took a proactive approach towards monitoring and developed
a process for monitoring, while other offices monitored grantees in response to problems.
Although these monitoring processes did not meet the requirements of the Directive, it
indicated that program officials recognized the need for an effective monitoring process.

The monitoring methods varied among the different program offices visited. Based on
interviews with program officials, monitoring methods consist primarily of program
officials’ review of performance reports, attendance at conferences and workshops, site-
visits, and contact with the grantee. (Appendix A includes a list of monitoring methods
utilized by the program offices visited.)

We found that only one program office had a written plan on how the office was going to
perform discretionary grant monitoring. Although the plan was documented, it did not
meet the requirements of the Directive. We also found that in some instances, monitoring
activities were inconsistently carried out within the same program office.




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Review of the Office of Elementary and Secondary
Education Discretionary Grants Monitoring Process         Control Number ED-OIG/A03-A0021

OESE needs to implement the Departmental Directive and to provide a common
framework for monitoring discretionary grants. Implementing the Directive will
establish OESE-wide standards and guidance necessary to ensure that information
obtained through monitoring will be used to improve the programs’ performance and
services, and help to achieve the programs’ legislative intent. Without an effective and
common framework for monitoring, OESE officials are unable to adequately ensure that
the Department’s funds are being spent appropriately and grant project goals and
objectives are being met.

Recommendation:

2.1   The Assistant Secretary for Elementary and Secondary Education should
      implement the requirements in the Departmental Directive, Monitoring
      Discretionary Grants and Cooperative Agreements.


                                         BACKGROUND


OESE provides financial assistance to State and local education agencies for maintenance
and improvement of preschool, elementary and secondary education. OESE annually
distributes approximately $1 billion of discretionary grants to eligible grantees. Grantees
include state and local educational agencies, and other applicants. A discretionary grant
program is one that permits the Secretary to use discretionary judgment in selecting
applications for funding. Most discretionary grant programs are administered directly by
the Department.

We visited the five OESE program offices, which manage the nine programs selected for
review. The program offices are responsible for the entire grant process, which includes
planning, pre-award, award, post-award, and closeout. Grant monitoring is an integral
part of the post-award process. Monitoring ensures that grants meet their intended goals
and objectives and have effective financial management controls.


                       OBJECTIVE, SCOPE AND METHODOLOGY


The objective of our audit was to evaluate OESE’s discretionary grant monitoring process
for identifying and monitoring high-risk grantees. To accomplish our objective, we
interviewed officials from OESE program offices that administer discretionary grants.
We judgmentally selected nine out of 34 OESE programs: SDFSC, Migrant Education,
Reading Excellence Act, Compensatory Education-Even Start Indian Tribes and Tribal
Organizations, Goals 2000, Public Charter Schools, Women’s Educational Equity Act,
Magnet Schools Assistance and 21st Century Community Learning Centers. In addition,
we judgmentally selected a sample of grant files, which we reviewed for documentation
of monitoring activity. The results are summarized in Appendix B, OESE Grants Files


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Review of the Office of Elementary and Secondary
Education Discretionary Grants Monitoring Process        Control Number ED-OIG/A03-A0021

Reviewed for Monitoring Documentation. We reviewed OESE ’s discretionary grant
monitoring process for fiscal year 2000, which included grant funds awarded during
fiscal years 1997 through 1999. In addition, we interviewed officials from OESE’s
Executive Office and from the Office of the Chief Financial Officer - Grants Policy and
Oversight Staff (OCFO-GPOS).

To identify applicable criteria, we interviewed representatives from OCFO-GPOS, which
has grant oversight responsibility for the Department.

We discussed with program officials the methodology they employed to monitor grantees
and based on information obtained, we developed a chart (Appendix A: OESE
Discretionary Grant Monitoring Methods) summarizing the nine programs selected.

We reviewed the Department’s Performance Reports and Plans and determined that they
do not contain Government Performance and Results Act goals and indicators relevant to
the objective and scope of our work.

We conducted on-site fieldwork from November 28, 2000, through January 30, 2001, at
the five OESE program offices, which manage the nine programs selected for review, and
the OCFO-GPOS office in Washington, DC. The exit conference was held on February
23, 2001. Our audit was performed in accordance with government auditing standards
appropriate to the scope of the audit described above.


                     STATEMENT ON MANAGEMENT CONTROLS


As part of our audit, we assessed the system of management controls, policies,
procedures and practices applicable to OESE’s monitoring of discretionary grants.

Our assessment was to determine the nature, extent and timing of our substantive review
to accomplish the audit objectives. For the purpose of this report, we categorized the
significant controls as follows:

•   Program Offices Monitoring Policies
•   Reporting of Monitoring Data
•   Use of Monitoring Instruments

Because of the limited nature of our audit, the overall system of management controls
was not reviewed and we cannot express an overall opinion on the controls. However,
we identified weaknesses in the department’s monitoring of discretionary grants. These
weaknesses are discussed in further detail in the Audit Results section of this report.




                                                    7
Appendix A: OESE Discretionary Grant Monitoring Methods




                                                             Education – Even Start




                                                                                      Public Charter Schools




                                                                                                                                                                                                       Women’s Educational
                                                                                                                                                            Community Learning



                                                                                                                                                                                 Goals 2000 Programs




                                                                                                                                                                                                       Equity Act Programs
                                                             Tribal Organizations




                                                                                                                   Assistance Program




                                                                                                                                                                                                                             Safe and Drug-Free
                                        Reading Excellence




                                                                                                                                        Migrant Education
                                                             Indian Tribes and




                                                                                                                   Magnet Schools
                                                             Compensatory




                                                                                                                                                                                                                             Communities
                                        Act Program




                                                                                                                                                            21st Century
Monitoring Method




                                                                                                                                                                                                                             Schools and
                                                                                                                                        Programs




                                                                                                                                                                                                                             Programs
                                                                                      Program




                                                                                                                                                            Centers
Telephone Contact/
                                           4                         4                    4                           4                    4                      4                       4                4                       4
Correspondence/E-mail
Review of Performance Reports              4                         4                    4                           4                    4                      4                       4                4                       4

Site Visits                                4                         4                    4                           4                    4                      4                       4                4                       4

Workshops/Conferences/Meetings             4                         4                    4                                                4                      4                       4                                        4

Review of Grantee Materials                4                                                                                                                                              4

Technical Assistance                                                 4                                                                     4                      4                       4                                        4

Review of Evaluation Reports                                         4                                                                                            4                       4

Review of GAPS Data                                                                                                                        4                                                               4

Review of Grantee Budgets                                                                                                                                                                 4                4

Website/listserv                                                                          4                                                                       4                       4


4 Indentifies monitoring methods that program officials said were used during the discretionary grants monitoring process.




                                                                                                               8
Appendix B: OESE Grant Files Reviewed for Monitoring Documentation1




                                                                    Education – Even Start




                                                                                             Public Charter Schools




                                                                                                                                                                                                          Women’s Educational
                                                                                                                                                               Community Learning




                                                                                                                                                                                    Goals 2000 Programs




                                                                                                                                                                                                          Equity Act Programs
                                                                    Tribal Organizations




                                                                                                                      Assistance Program




                                                                                                                                                                                                                                Safe and Drug-Free
                                               Reading Excellence




                                                                                                                                           Migrant Education
                                                                    Indian Tribes and




                                                                                                                      Magnet Schools
                                                                    Compensatory




                                                                                                                                                                                                                                Communities
                                               Act Program




                                                                                                                                                               21st Century




                                                                                                                                                                                                                                Schools and
                                                                                                                                           Programs




                                                                                                                                                                                                                                Programs
                                                                                             Program




                                                                                                                                                               Centers




                                                                                                                                                                                                                                                     Total
Grant Files Reviewed                                5                        5                      5                      5                    5                    14              6                          5                     10             60

                        Performance Reports    NAa                           5                      5                      5                    5                   13b              6                          5                     10             54
                        Performance Report
                                                NA                           4                      5                      5                    5                    11              6                          5                      3             44
                        Review Notes
Monitoring Activities




                        Records of Telephone
                                                    1                        1                     --                      2                    1                     2             --                         --                      3             10
                        Conversations
                        Site Visits                 1                        3                     --                      1                    3                     --            --                         --                      1             9

                        Correspondence              2                        2                      2                      3                    5                     3              4                          4                      4             29

                        E-mail                      4                       --                     --                      2                    2                     6             --                         --                      4             18

                        Other2                      --                       4                     --                      5                    4                     4              1                          1                      8             27



1
  This table presents the number of grant files reviewed for each program office and the number of files containing the documented monitoring activities.
2
  Other monitoring methods include: grantee evaluations, surveys, reviews of grantees’ budgets, fax messages, memos, and conference/meeting notes.
a
  The first performance period has not ended as of the date of our review, therefore performance reports have not been received by the Department.
b
  Of the 14 grant files reviewed, one award was a Congressional earmark award that was not subject to continuations, therefore no performance report was
required.




                                                                                                                                   9
Appendix C




   10
11
                                     REPORT DISTRIBUTION LIST

                                                                                     No. of
Action Official:                                                                     Copies

Ms. Susan B. Neuman                                                                  4
Assistant Secretary for Elementary and Secondary Education

Other ED Officials:

Mr. Terry Abbott                                                                     1
Chief of Staff, Office of the Secretary

Mr. William Hansen                                                                   1
Deputy Secretary, Office of the Deputy Secretary

Mr. Eugene W. Hickok                                                                 1
Under Secretary, Office of the Under Secretary

Mr. Mark Carney                                                                      1
Office of the Chief Financial Officer

Ms. Blanca Rodriguez                                                                 1
Director, Grants Policy and Oversight Staff, Office of the Chief Financial Officer

Mr. Charles Miller                                                                   1
Supervisor, Post Audit Group, Office of the Chief Financial Officer

Mr. Tom Lyon                                                                         1
News and Information Dissemination Branch Chief
Office of Public Affairs, Office of the Secretary

Mr. Philip Rosenfelt                                                                 1
Assistant General Counsel, Office of General Counsel

Ms. Delores Warner                                                                   1
Audit Liaison, Office of Elementary and Secondary Education

Ms. Laurie Rich                                                                      1
Assistant Secretary for Intergovernmental and Interagency Affairs

Office of Inspector General (electronically):

Inspector General                                                                    1
Deputy Inspector General                                                             1
Assistant Inspector General for Audit                                                1
Deputy Assistant Inspector General for Audit                                         1
Assistant Inspector General for Investigations                                       1
Assistant Inspector General for Analysis and Inspections                             1
Regional Inspectors General for Audit                                                1 each
Director, State & Local Advisory and Assistance Team                                 1
Director, Non-Federal Audit Team                                                     1