oversight

Following the Title I, Part A and Secondary School Vocational Education Program Dollars to the Schools in 36 LEAs Visited.

Published by the Department of Education, Office of Inspector General on 1998-06-26.

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

            U.S. Department of Education
             Office of Inspector General




                  FINAL REPORT
           Audit Control Number 04-70012

                       June 1998


                AUDIT SERVICES
               ATLANTA, GEORGIA


                         NOTICE

Statements and conclusions 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.
                          U. S. DEPARTMENT OF EDUCATION
                                   OFFICE OF INSPECTOR GENERAL
                                               61 Forsyth Street
                                                 Room 18T71
                                           ATLANTA, GEORGIA 30303




                                                              June 26, 1998


MEMORANDUM

   TO:        Gerald N. Tirozzi
              Assistant Secretary
              Office of Elementary and Secondary Education

              Patricia W. McNeil
              Assistant Secretary
              Office of Vocational and Adult Education

                                  SIGNED
FROM:         Carol S. Lynch
              Regional Inspector General for Audit
              Eastern Area, Atlanta, Georgia

SUBJECT: FINAL AUDIT REPORT
         Following Title I, Part A and Secondary School Vocational
         Education Program Dollars to the Schools in 36 LEAs Visited
         ED Audit Control Number: 04-70012

Attached is our subject final report that covers the results of our review on the use of Title I, Part
A and Secondary School Vocational Education dollars by 36 local education agencies. We
received and incorporated your comments, where appropriate, on the findings discussed within
the draft of this report. An additional response is not required to this final report and,
accordingly, the report is now closed in our tracking system.

In accordance with the Freedom of Information Act (Public Law 90-23), 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. Copies of this
report have been provided to the offices shown on the distribution list enclosed in the report.

We appreciate the cooperation given us in the review. Should you have any questions concerning
this report, please call me at 404-562-6470.



Attachment




     OUR MISSION IS TO ENSURE EQUAL ACCESS TO EDUCATION AND PROMOTE EDUCATION EXCELLENCE THROUGHOUT THE NATION
                                                    TABLE OF CONTENTS

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SCOPE AND METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

            Over 92 percent of the 36 Districts Title I, Part A and Vocational Education
            Dollars Reached the Schools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

            Title I, Part A

                  92 Percent of the Dollars Reached the Schools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

                  6 Percent of the Dollars Was Used for Program Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 11

                  2 Percent of the Dollars Was Used for Indirect Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

            Vocational Education

                  95 Percent of the Dollars Reached the Schools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

                  3 Percent of the Dollars Was Used for Program Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 15

                  1 Percent of the Dollars Was Used for Indirect Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

            LEA Administration of Title I, Part A and Vocational Education Dollars . . . . . . . . . . . . . . . . . . . . . . 17

            Other Studies Show Similar Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

            Limitations on Use of Federal Dollars for SEA Administration Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 20

            Vocational Education Action Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

DEPARTMENT’S RESPONSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

FIGURES

            Figure 1:        Expenditures for School Year 1996-1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

            Figure 2:        Title I, Part A Dollars (Categories of Expenditures) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

            Figure 3:        Vocational Education Dollars (Categories of Expenditures) . . . . . . . . . . . . . . . . . . . . . . . . 8

            Figure 4:        Title I, Part A Dollars Used for School Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

            Figure 5:        Title I, Part A Dollars Used for Program Administration . . . . . . . . . . . . . . . . . . . . . . . . . 11

FINAL REPORT                                       ED-OIG-AS, Audit Control Number 04-70012
      Figure 6:   Vocational Education Dollars Used for School Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

      Figure 7:   Vocational Education Dollars Used for Program Administration . . . . . . . . . . . . . . . . . . . . 15

PHOTOGRAPHS

      Photo 1:    Title I, Part A class at Hapeville Elementary School, Atlanta, GA
                  (Taken in October 1997 during our visit to Hapeville Elementary School) . . . . . . . . . . . . . . 9

      Photo 2:    Vocational Education class at McIntosh Academy, Darien, GA
                  (Taken in October 1997 during our visit to McIntosh Academy ) . . . . . . . . . . . . . . . . . . . 13

APPENDICES

      Appendix A:      Title I, Part A: List of LEAs and Percentages Determined for (1) School Benefit,
                       (2) Program Administration, and (3)Indirect Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 23

      Appendix B:      Vocational Education: List of LEAs and Percentages Determined
                       for (1) School Benefit, (2) Program Administration, and (3)Indirect Costs                               . . . . . . . . 24

      Appendix C:      Title I, Part A: List of LEAs and Percentages Determined for (1) Salaries and
                       Benefits, (2) Materials and Equipment, (3) Professional Development, and (4)
                       Support Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

      Appendix D:      Vocational Education: List of LEAs and Percentages Determined for
                       (1) Salaries and Benefits, (2) Materials and Equipment, (3) Professional
                       Development, and (4) Support Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27




FINAL REPORT                          ED-OIG-AS, Audit Control Number 04-70012                                                              Page 1
                         EXECUTIVE SUMMARY
TITLE I, PART A AND SECONDARY SCHOOL VOCATIONAL EDUCATION:
  Over 92 Percent of the Dollars Reached the Schools at 36 School Districts Visited



      PURPOSE              The Government Performance and Results Act of 1993 (Results Act)
                           holds federal agencies accountable for achieving program results by
                           promoting a new focus on results, service quality, and customer
                           satisfaction. The Results Act specifies one of its purposes
                           as improving federal program effectiveness and public accountability.

                           The U.S. House of Representatives Committee on Education and the
                           Workforce recently conducted field hearings across the country to
                           evaluate the extent and quality of federal program involvement in
                           education. The title for the hearings was Education at a Crossroads:
                           What Works? What’s Wasted? One of the major topics discussed at
                           the hearings was “Dollars to the Classroom.” Panelists who testified
                           before the committee emphasized their concerns about the amount of
                           federal dollars being used for administrative functions and,
                           consequently, not reaching the schools. Additionally, the public has
                           expressed growing apprehension about the possibility of only a small
                           portion of the money getting to the classroom.

                           In response to the purposes of the Results Act and the concerns of
                           the public, we conducted an audit to (1) determine what percentage
                           of Title I, Part A and Secondary School Vocational Education
                           Program dollars reached the schools, and (2) identify the types of
                           expenditures for these two programs at the local educational agency
                           (LEA) and school levels.

                           We selected these two programs for several reasons. Both programs
                           are statutory formula grants serving eligible students across the
                           nation. The Title I, Part A program is the largest program
                           administered by the Office of Elementary and Secondary Education
                           (OESE) and primarily serves students aged 5 to 17 in more than
                           50,000 public schools nationwide. The Secondary School Vocational
                           Education program is funded through the Vocational Education Basic
                           State Grant program. The Basic Grant program, administered by the
                           Office of Vocational and Adult Education (OVAE), accounted for
                           approximately 90 percent of the Vocational and Adult Education
                           allocations in fiscal year 1996 and is targeted primarily to secondary
                           students.




FINAL REPORT       ED-OIG-AS, Audit Control Number 04-70012
                                                                                           Page 1
                                       In the 36 LEAs we visited, an average of over 92 percent of the
       RESULTS IN                      dollars for the two programs reached the schools during the 1996-97
         BRIEF                         school year.

                                                                                                               Vocational
                                       Category                                  Title I, Part A               Education

                                       Reached the Schools                           92.05%                      95.42%

                                       LEA Program Administration                     5.83%                       3.40%

                                       LEA Indirect Costs                             2.12%                       1.18%


                                       We further categorized school and program administration
                                       expenditures into the following: (1) salaries and benefits, (2) materials
                                       and equipment, (3) professional development, and (4) support
                                       services. As shown below, the majority of the funds were used for
                                       salaries and benefits.

                                                                                                               Vocational
                                       Expenditure Type                          Title I, Part A               Education

                                       Salaries and Benefits                         82.49%                      52.12%

                                       Materials and Equipment                        8.68%                      38.88%

                                       Professional Development                       1.96%                       5.28%

                                       Support Services                               4.75%                       2.55%

                                       Indirect Costs1                                2.12%                       1.18%


                                       During our discussions with LEA program coordinators for both
         OTHER                         programs, the majority stated that the federally required paperwork
        MATTERS                        was not burdensome and was worth the investment to receive the
                                       federal grant funds.

                                       At the state level, we reviewed documentation to determine whether
                                       the state educational agency (SEA) had complied with the established
                                       caps for using federal dollars to cover administration costs. For Title
                                       I, Part A dollars the SEAs are limited to using 1 percent or $400,000,
                                       whichever is greater. For Vocational Education Basic State Grant
                                       dollars, the SEAs are limited to using 5 percent or $250,000
                                       whichever is greater. We determined that all six SEAs complied with
                                       the limitations on administration expenses.




         1
           Indirect costs are included in this table to show 100 percent of program dollars. Any differences in the percentages
are caused by rounding.


FINAL REPORT                 ED-OIG-AS, Audit Control Number 04-70012
                                                                                                                            Page 2
                       Using our definition of “program administration”, we identified two
                       LEAs that used a significantly larger amount of Vocational
                       Education dollars to cover program administration costs than the
                       average 3 percent. Under specific circumstances specified in 34 CFR
                       403.195 (b), LEAs are limited to using five percent of its grant
                       dollars for administration costs. We have brought the issue
                       concerning the two LEAs to the attention of the Department in a
                       separate Action Memorandum.


                       Department officials were provided an opportunity to comment on
   DEPARTMENT          the findings discussed within a draft of this report. Their comments
    COMMENTS           were generally editorial in nature and were incorporated where
                       appropriate. Because of the nature of the comments, we did not
                       include them as an attachment to this report. However, copies are
                       available upon request.




FINAL REPORT   ED-OIG-AS, Audit Control Number 04-70012
                                                                                        Page 3
                           SCOPE AND METHODOLOGY

The objectives of this audit were (1) to determine what percentage of Title I, Part A2 and Secondary
School Vocational Education Program3 dollars reached the schools and (2) to identify the types of
expenditures for these two programs at the LEA and school levels.

We selected these two programs for several reasons. Both programs are statutory formula grants
serving eligible students across the nation. The Title I, Part A program is the largest program
administered by OESE and primarily serves students aged 5 to 17 in more than 50,000 public
schools nationwide. The Secondary School Vocational Education Program is funded through the
Vocational Education Basic State Grant program. The Basic Grant program, administered by
OVAE, accounted for approximately 90 percent of the Vocational and Adult Education allocations
in fiscal year 1996. The Basic Grant program is targeted primarily to secondary students with the
goal of helping them and the United States as a whole become more competitive in the world
economy by developing more fully the academic and occupational skills of all segments of the
population. For our audit, we selected school-year 1996-97. This year served as the first year of
full implementation of the Improving America’s Schools Act.

We randomly selected 6 SEAs and 36 LEAs to visit based upon their Title I allocations. The six
states received $934 million of the $6.7 billion in Title I, Part A dollars allocated to states during
fiscal year 1996. For our sampling plan, we first stratified fiscal year 1995 Title I state allocations
into three strata (large, medium, and small) and selected two states from each strata as follows:

         • Large— Florida and Michigan
         • Medium— Georgia and Washington
         • Small— Maine and Oregon

For the survey state of Florida, we used the most recent National Center for Education Statistics’
Common Core of Data information to select the LEAs for our audit. For the remaining five states,
we used school-year 1996-97 Title I, Part A allocations. We randomly selected six LEAs in each
state by first judgmentally stratifying the Title I, Part A allocations for the LEAs into the three strata
(large, medium, and small) and then randomly selecting two LEAs from each strata. This sampling
approach provided each SEA and LEA an equal chance of being selected as well as provided a
cross-sectional sample. Appendix A provides a complete list of the SEAs and LEAs selected.
During school-year 1996-97, the 36 LEAs expended about $84.2 million and $5.2 million in Title I,
Part A and Vocational Education dollars, respectively.




         2
          Title I, Part A programs authorized by the Elementary and Secondary Education Act of 1965, as amended by the
Improving America’s Schools Act of 1994 (Public Law 103-382).
         3
          Secondary School Vocational Education Programs (Title II, Part C) authorized by the Vocational Education Act of
1963 as amended by the Carl D. Perkins Vocational Act of 1984 and the Carl D. Perkins Vocational and Applied Technology
Education Act, as amended. For ease of reference, we refer to this program as Vocational Education in this report.


FINAL REPORT                           ED-OIG-AS, Audit Control Number 04-70012                                          Page 4
To accomplish our audit objectives, we reviewed expenditure data for school-year 1996-97
obtained from LEA accounting reports. Because of the timing of our audit, the expenditure data
had not been audited by the LEAs’auditors. To assess the accuracy of the data, for each SEA and
LEA, we reviewed the most recent single audit report and the auditor’s working papers related to
the internal control structure. These reports did not disclose any material weaknesses in internal
controls. Additionally, nothing came to our attention to make us doubt the validity of the data.

To categorize the expenditures, we developed the following definitions to apply to the LEAs’
financial information. These definitions were developed through discussions held with officials from
the Department and representatives from the General Accounting Office.

       C School benefit: Primarily included salaries, related benefits, and professional
         development for teachers and teacher assistants, as well as materials and equipment used
         in the classroom. The following expenditures were also included, if applicable: (1)
         salaries and related benefits for such personnel as counselors and other personnel whose
         activities are directly related to providing services to Title I, Part A and Vocational
         Education students; (2) professional development charges incurred by LEA program
         coordinators to give in-house training to classroom teachers; and (3) costs of parental
         involvement efforts.

       C Program administration: Primarily included salaries, related benefits, and professional
         development for program coordinators and their administrative staff, as well as any
         materials and equipment used to support administrative functions.

       C Indirect cost: Included costs allocable to the programs based on the LEA’s indirect cost
         rate proposal approved by the SEA.

In applying these definitions, we reviewed LEA expenditure reports. While a majority of the LEAs’
accounting systems tracked expenditures to the school level, some services that directly benefitted
schools were accounted for centrally. In all cases, we discussed expenditures with LEA officials
and reviewed appropriate accounting records to determine how to categorize the expenditures.

We further categorized the overall expenditures into the following:

       C Salaries and benefits: Included salaries and related benefits of applicable personnel such
         as teachers, counselors, and program coordinators.

       C Materials and equipment: Included materials and equipment such as computer software
         and hardware, instructional materials, and supplies.

       C Professional Development: Included costs incurred to attend training seminars or
         workshops, tuition costs for classes, etc.

       C Support Services: Included costs such as service agreements for computer hardware,
         communication expenditures, etc.




FINAL REPORT                   ED-OIG-AS, Audit Control Number 04-70012                       Page 5
We held discussions with Department officials and SEA officials responsible for administering Title
I, Part A and Vocational Education programs. We attended congressional field hearings held by the
U.S. House of Representatives’Committee on Education and the Workforce in Little Rock,
Arkansas, Cincinnati, Ohio, and Louisville, Kentucky. We also reviewed studies conducted by the
General Accounting Office and others regarding the use of federal education dollars by LEAs. Our
review was limited to Title I, Part A and Vocational Education expenditures for school-year 1996-
97 and did not include program activities paid from state or local funding sources.

Our fieldwork was conducted between May 1997 and February 1998 in accordance with
government auditing standards appropriate to the scope of the review described above.




FINAL REPORT                   ED-OIG-AS, Audit Control Number 04-70012                       Page 6
                                                   RESULTS
                 Over 92 Percent of the 36 Districts’Title I, Part A and
                  Vocational Education Dollars Reached the Schools


At 36 LEAs4, on average, 92 percent of the Title I, Part A and 95 percent of the Vocational
Education dollars provided to the LEAs reached the schools, as shown in Figure 1. A list of the
LEAs and the percentages determined for Title I, Part A, dollars can be found in appendix A.
Appendix B provides the same information for Vocational Education dollars.




                               Figure 3


We determined these percentages by:

         (1) using detailed expenditure data provided by the LEAs for school-year 1996-97.

         (2) applying our definitions (provided in the Scope and Methodology section) along with
             the explanations of the Title I, Part A and Vocational Education program coordinators.




         4
            Of the 36 LEAs, 9 were vocational education consortia. A consortium consists of an LEA joining with one or more
other LEAs for the purpose of providing services under the Secondary School Vocational Education Program in order to meet
the minimum grant requirement in Title 34 CFR 403.112 (d)(1). The consortium must serve primarily as a structure for
operating joint projects that provide services to all participating local educational agencies.


FINAL REPORT                           ED-OIG-AS, Audit Control Number 04-70012                                        Page 7
We further categorized the overall expenditures into the following: (1) Salaries and Benefits, (2)
Materials and Equipment, (3) Professional Development, and (4) Support Services. Figure 2
shows the distribution of Title I, Part A dollars. Appendix C provides a list of LEAs and the
percentages determined. Figure 3 shows the distribution of Vocational Education dollars.
Appendix D provides a list of LEAs and the percentages determined.




Figure 2                                                   Figure 3




Because we did not differentiate between indirect costs attributable to the schools and to the LEA
level, we did not include the indirect costs in these charts. We will address indirect costs later in the
report.




FINAL REPORT                    ED-OIG-AS, Audit Control Number 04-70012                           Page 8
                                          TITLE I, PART A
                        92 Percent of the Dollars Reached the Schools




  Title I, Part A class at Hapeville Elementary School in Atlanta, Georgia. This school conducts a schoolwide program.



Of the 36 LEAs we visited, 92 percent, on average, of Title I, Part A dollars provided to the LEAs
reached the schools. Appendix A provides a list of LEAs and the percentages determined.




FINAL REPORT                           ED-OIG-AS, Audit Control Number 04-70012                                          Page 9
Figure 4 shows the distribution of the $77.6 million in Title I, Part A dollars that reached the
schools. As shown, nearly 84 percent of the dollars was used to support salaries and benefits of
personnel directly related with school activities. Appendix C provides the LEAs and percentages
determined.




         Figure 4




FINAL REPORT                   ED-OIG-AS, Audit Control Number 04-70012                      Page 10
                               TITLE I, PART A
         6 Percent of the Dollars Was Used for Program Administration


Federal dollars used for program administration totaled $4.9 million, or nearly 6 percent, on
average, of the overall expenditures for the 36 LEAs. Figure 5 shows that 92 percent of program
administration expenses was attributable to salaries for program coordinators and their applicable
staff. Appendix C provides a list of LEAs and the percentages determined.




               Figure 5




Only 27 of the 36 LEAs used federal dollars for program administration costs. For the remaining
nine LEAs, the program coordinators and staff explained that because they performed many
different functions it was difficult, if not impossible, to differentiate between the time they spent for
Title I, Part A program administration and their other duties. Therefore, state and local dollars
supported 100 percent of their salaries. An additional explanation given concerned the LEA’s and
coordinator’s emphasis on ensuring that the maximum amount of Title I, Part A dollars reached the
schools.


FINAL REPORT                    ED-OIG-AS, Audit Control Number 04-70012                          Page 11
                                 TITLE I, PART A
                2 Percent of the Dollars Was Used for Indirect Costs

Federal dollars used for indirect costs totaled about $1.8 million or 2 percent, on average, of the
overall expenditures for the 36 LEAs. Only 20 LEAs used Title I, Part A dollars for indirect costs.
For the 16 LEAs that did not use federal dollars to cover indirect costs, the costs were covered
with state and local dollars.

We did not differentiate between the indirect costs that were attributable to the schools from those
attributable to program administration.




FINAL REPORT                   ED-OIG-AS, Audit Control Number 04-70012                       Page 12
                          VOCATIONAL EDUCATION
                     95 Percent of the Dollars Reached the Schools




  Vocational Education class at McIntosh Academy in Darien, Georgia.




Of the 36 LEAs, 29 had Vocational Education programs. These 29 LEAs used over 95 percent,
on average, for the schools. Appendix B provides a list of LEAs and percentages determined.




FINAL REPORT                     ED-OIG-AS, Audit Control Number 04-70012               Page 13
Figure 6 shows the distribution of the nearly $5 million in Vocational Education dollars that
reached the schools. As shown, 51 percent was used to support salaries and benefits of personnel
directly related to school level activities. Materials and equipment accounted for nearly 41 percent
of the school-level expenditures. Appendix D provides a list of LEAs and the percentages
determined.




           Figure 6




FINAL REPORT                   ED-OIG-AS, Audit Control Number 04-70012                       Page 14
                       VOCATIONAL EDUCATION
       3 Percent of the Dollars Was Used for Program Administration

Federal dollars used for program administration totaled $177 thousand or 3 percent, on average,
for the 29 LEAs. Only 15 LEAs used Vocational Education dollars for program administration.
For the 14 LEAs that did not use federal dollars to cover program administration, the costs were
covered with state and local dollars.

Figure 7 below shows that 89 percent of the total program administration dollars was attributable
to salaries for program coordinators and their applicable staff. Appendix B provides a list of
LEAs and the percentages determined.




               Figure 7




FINAL REPORT                  ED-OIG-AS, Audit Control Number 04-70012                       Page 15
                           VOCATIONAL EDUCATION
                 1 Percent of the Dollars Was Used for Indirect Costs


Federal dollars used for indirect costs totaled $61 thousand or 1 percent, on average, for the 29
LEAs. Only 10 LEAs used Vocational Education dollars for indirect costs. For the 19 LEAs that
did not use federal dollars to cover indirect costs, the costs were covered by state and local dollars.


Because of the nominal amount, we did not differentiate between the indirect costs attributable to
the schools and those attributable to program administration. Appendix B provides a list of LEAs
and the percentages determined.




FINAL REPORT                   ED-OIG-AS, Audit Control Number 04-70012                          Page 16
                                          OTHER MATTERS


          LEA Administration of Title I, Part A and Vocational Education Dollars



     Detailed Expenditure             The expenditure information at all 36 LEAs provided detailed
    Information Permitted             transactions showing specific amounts of Title I, Part A and
      Thorough Analysis
                                      Vocational Education dollars expended at the LEA and the schools.
                                      This detailed information allowed us to research specific transactions
                                      in order to appropriately categorize the expenditures. For example,
                                      one LEA used approximately $50,000 of Title I, Part A funds to
                                      purchase computers. According to the LEA’s coding information,
                                      the computers had been purchased for use at the district level.
                                      However, by researching the purchase orders and interviewing LEA
                                      staff, we determined that the computers had actually been distributed
                                      to the schools. The purchases of the computers at the LEA level
                                      were made to obtain bulk discounts and to maintain initial physical
                                      control to ensure proper distribution to the schools. Consequently,
                                      had detailed records not been available, we could have inaccurately
                                      classified the expenditures as dollars used for program administration
                                      instead of dollars reaching the schools.

                                      The program coordinators explained that the federal regulations
   Regulations Reported
                                      which have specific requirements for Title I, Part A programs5 and
    as Helping to Keep
                                      Vocational Education6 programs helped to keep them focused on the
     LEAs Focused on
   Using Federal Dollars
                                      needs of the students.7 The coordinators and staff members explained
      for the Schools                 that even though they have duties and assignments in conducting
                                      other educational programs, they must make sure that they comply
                                      with the requirements of the federal laws and regulations. They
                                      explained that this level of accountability keeps them focused in
                                      ensuring that the federal dollars reach the schools.




         5
          Elementary and Secondary Education Act, Title I, Part A Sections 1111-1120(b).
         6
          Title 34 CFR 403.111 dated July 1997.
         7
          Not all program coordinators responded specifically on this issue. We have provided the overall response from those
who did respond.


FINAL REPORT                           ED-OIG-AS, Audit Control Number 04-70012                                        Page 17
                                   The majority of the program coordinators stated that the time they
       Paperwork                   and their staffs spent in completing the federally required paperwork
      Requirements                 was worth the investment. Overall, they stated that the amount of
        Reported
                                   time used to complete the paperwork was not burdensome. While
      Not a Burden
                                   they did not routinely track the time spent annually completing the
                                   paperwork, the Title I, Part A coordinators estimated the amount of
                                   time ranged from as little as 8 hours to as much as 10 percent. The
                                   estimates provided by the Vocational Education coordinators ranged
                                   from as little as two days annually to as much as 20 percent annually.

                                   The Title I, Part A program coordinator at one LEA explained that
                                   he spent 40 to 50 percent of his time annually completing the
                                   paperwork required by both the federal and state regulations.
                                   However, he stated that, overall, the federal paperwork was not
                                   burdensome.

                                   The program coordinator at another LEA reported that the Title I,
                                   Part A paperwork requirements were burdensome. Her concerns
                                   included the time required to complete the year-end progress reports.
                                   She explained that it appeared that the Department had an interest
                                   only in the “bottom line” of the reports. Therefore, she added that
                                   the time she and her staff used in completing the narrative
                                   explanatory part of the report seemed a waste of time.


   Required Paperwork              Many of the program coordinators also explained that fulfilling the
  Reportedly Lends                 regulations resulted in documentation and analysis with multiple
  Itself to Multiple Uses          uses5. Coordinators and other staff members expressed that, in
                                   addition to the needs specified by the federal regulations, the LEAs
                                   found multiple uses for much of the federally required information.
                                   For example, the Title I, Part A requirements for (1) developing
                                   student assessments, (2) determining revisions needed to curriculum
                                   to ensure that students meet state standards, and (3) conducting
                                   meetings with teachers, staff, and parents8 resulted in their using the
                                   information for other programs within the schools.

                                   Program coordinators reported that they used the assessments for
                                   purposes in addition to the Title I, Part A program needs. They used
                                   this information to help identify students who needed remedial help in
                                   reading, to help the parents to understand the status of the students’
                                   academic standing, and to help the students themselves in
                                   understanding areas needing improvement.




      8
       Elementary and Secondary Education Act, Title I, Part A Section 1112 (b)(1), (4) and (6).


FINAL REPORT                        ED-OIG-AS, Audit Control Number 04-70012                         Page 18
                             Other Studies Show Similar Results


As part of our audit, we reviewed three studies conducted by others on the uses of federal
education dollars by LEAs. While there were some slight differences in the methodologies, two of
the studies reported similar findings to our analysis including that less than 10 percent of the LEAs’
dollars were used for administration. The studies and their findings are discussed below.

       C    General Accounting Office (GAO), Compensatory Education: Most Chapter 1 Funds
            in Eight Districts Used for Classroom Services, September 1992

            This study reviewed the Chapter 1 spending patterns of eight LEAs. The report found
            that an average of 73 percent of Chapter 1 dollars went to classroom services.
            Additionally, about 17 percent was spent for support services and about 10 percent was
            spent for administration.

       C    National Center for Education Statistics (NCES), Development of School-Level
            Reporting System on Administrative Spending, July 1997

            This report analyzed NCES transformed finance data collected from SEA
            administrative records for over 16,000 LEAs. The results stated that LEAs nationally
            spent, on average, 60 percent of their dollars on instruction and 11 percent on
            administration. The remaining dollars were used for instructional support services and
            student services (9 percent), facilities maintenance and utilities (10 percent),
            transportation (4 percent), food services (4 percent), and other programs (2 percent).

       C    Heritage Foundation, U.S. Department of Education Financing of Elementary and
            Secondary Education: Where the Money Goes, December 1996

            This study examined the Department’s spending for elementary and secondary
            education. The statistics were compiled by using a finance model based on 1993 fiscal
            year data obtained from the Department and other federal agencies. Specifically, the
            report stated that 85 percent of the Department’s appropriations for elementary and
            secondary education reached LEAs. It did not provide specific data on how LEAs used
            the funds.




FINAL REPORT                    ED-OIG-AS, Audit Control Number 04-70012                        Page 19
               Limitations on Use of Federal Dollars for SEA Administration Costs



At the state level, we reviewed documentation to determine whether the SEA had complied with
the established caps for using federal dollars to cover administration expenses. For Title I, Part A
dollars the cap is limited to 1 percent or $400,000, whichever is greater9. For the Vocational
Education Basic State Grant dollars the cap is limited to 5 percent or $250,000, whichever is
greater10. We determined that all six SEAs audited complied with the limitations on administration
expenses.



                               Vocational Education Action Memorandum


Using our definition of “program administration”, we identified two LEAs that used a significantly
larger percentage of Vocational Education dollars to cover administration costs than the average 3
percent. Under specific circumstances specified in 34 CFR 403.195 (b), LEAs are limited to using
5 percent of Vocational Education dollars for administration costs. We have brought this issue
concerning the two LEAs to the attention of the Department in a separate Action Memorandum.11




                              DEPARTMENT COMMENTS

Department officials were provided an opportunity to comment on the findings discussed within a
draft of this report. Their comments were generally editorial in nature and were incorporated where
appropriate. Because of the nature of the comments, we did not include them as an attachment to
this report. However, copies are available upon request.




       9
        Title 34 CFR 200.60 (a) (1) July 1997.
       10
            Title 34 CFR 403.180 (b) (4) July 1997.
       11
            State and Local Action Memorandum No. 98-03.


FINAL REPORT                            ED-OIG-AS, Audit Control Number 04-70012               Page 20
                                            BACKGROUND

Over the past decade, the general public has paid increasing attention to how its tax dollars are
spent. The public has expressed concerns about the amount of Department program dollars
retained for administration. Additionally, the public has expressed growing apprehension about the
possibility of only a small portion of the money getting to the classroom.

The Results Act’s purposes include improving the confidence of the American people in the
capability of the federal government. The Results Act holds federal agencies accountable for
achieving program results by promoting a new focus on results, service quality, and customer
satisfaction. The Results Act specifies one of its purposes as improving federal program
effectiveness and public accountability.12

The U.S. House of Representatives Committee on Education and the Workforce conducted field
hearings across the country beginning January 29, 1997 through March 30, 1998 to evaluate the
extent and quality of federal program involvement in education. The title for the hearings was
Education at a Crossroads: What Works? What’s Wasted? One of the major topics discussed at
the hearings was “Dollars to the Classroom.” Panelists who testified before the committee
emphasized their concerns about the amount of federal dollars being used for administrative
functions and, consequently, not reaching the schools.

In response to the purposes of the Results Act and the concerns expressed by the public, we
conducted an audit to determine spending patterns of LEAs for two of the Department’s formula
grants: (1) Title I, Part A and (2) Secondary School Vocational Education. These programs are
administered by OESE and OVAE, respectively.

                                     Title I, Part A provides supplemental financial assistance to LEAs
      Title I, Part A                through SEAs to improve the teaching and learning of children who
                                     are at-risk of not meeting challenging academic standards and who
                                     reside in areas with high concentrations of children from low-income
                                     families. For fiscal year 1996, OESE had a budget of $9.2 billion.
                                     Title I, Part A allocations alone composed $6.7 billion or 73 percent
                                     of OESE’s budget.

                                     States receive funding through a statutory formula based primarily on
                                     the number of children ages 5 through 17 from low-income families
                                     counted in the most recent decennial census. States allocate the
                                     county amounts determined by the Department to each eligible LEA
                                     within the county based on eligible child counts. LEAs must allocate
                                     dollars to schools on the basis of the total number of children from
                                     low-income families located in the attendance area. Schools located
                                     in an area with 50 percent or more poverty may use their Title I,



       12
            PL 103-62 107 Stat. 285, Government Performance and Results Act of 1993.


FINAL REPORT                           ED-OIG-AS, Audit Control Number 04-70012                      Page 21
                         Part A dollars, along with most other Federal, State, and local
                         dollars, to operate a schoolwide program to upgrade the instructional
                         program in the whole school. Otherwise, a school must operate a
                         targeted assistance program and select children deemed most needy
                         for Title I, Part A services.

                         An SEA may reserve the greater of 1 percent or $400,000 of their
                         allocation for administration costs. The SEAs also may use one-half
                         of one percent for Program Improvement. There is currently no
                         administration cost cap for LEAs.


                         The Carl D. Perkins Vocational and Applied Technology Education
      Secondary          Act (Act) provides grants to assist states and outlying areas to
   School Vocational     expand and improve their programs in vocational education and to
  Education Program      provide equal access in vocational education to special needs
    (Title II, Part C)   populations. The populations assisted by the Basic Grant program
                         under the Act (Title II) range from secondary school students in pre-
                         vocational courses through adults who need training to adapt to
                         changing technological and labor market conditions. In fiscal year
                         1996, the Department provided $972.8 million in Basic Grant dollars
                         to States, LEAs, and post-secondary institutions. The SEAs then
                         distributed the dollars for secondary school programs (Title II, Part
                         C) based on a specific formula provided in 34 CFR 403.112.

                         Section 102 of the Act requires that SEAs reserve at least 75 percent
                         of the dollars available under the Basic Grant program to be
                         distributed to LEAs and post-secondary educational institutions. The
                         remaining 25 percent is used for the Program for Single Parents,
                         Displaced Homemakers, and Single Pregnant Women (10.5 percent);
                         State Programs and State Leadership Activities (no more than 8.5
                         percent); administration costs (no more than 5 percent or $250,000
                         whichever is greater); and Programs for Criminal Offenders (1
                         percent). Under specific circumstances specified in Title 34 CFR
                         403.195, an LEA is limited to using 5 percent of funds received under
                         the Vocational Education program for administration costs.




FINAL REPORT              ED-OIG-AS, Audit Control Number 04-70012                      Page 22
                                  REPORT DISTRIBUTION LIST

                                          AUDIT CONTROL NO. 04-70012

                                                                                                                         No. of
                                                                                                                         Copies
Action Official
       Gerald Tirozzi, Assistant Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
       Office of Elementary and Secondary Education
       U. S. Department of Education
       600 Independence Avenue, SW
       PRTL, Room 4000
       Washington, D.C. 20202-6100

          Patricia W. McNeil, Assistant Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
          Office of Vocational & Adult Education
          U. S. Department of Education
          600 Independence Avenue, SW
          MES, Room 4090
          Washington, D.C. 20202-7100

Other ED Offices
      Deputy Secretary, Office of the Deputy Secretary . . . . . . . . . . . . . . . . . . . . . . . . . .                     1
      PES Program Analyst, Office of the Under Secretary . . . . . . . . . . . . . . . . . . . . . . .                         1
      Deputy General Counsel, Office of the General Counsel . . . . . . . . . . . . . . . . . . . . .                          1
      Director Financial Improvement, Receivables & Post Audit Operations,
           Office of the Chief Financial and Chief Information Officer . . . . . . . . . . . . . . .                           1
      Office of Public Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1

Office of Inspector General
       Inspector General (Acting) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1
       Deputy Inspector General (Acting) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1
       Assistant Inspector General for Audit (Acting) . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  1
       Assistant Inspector General for Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               1
       Assistant Inspector General for Operations, Eastern Area . . . . . . . . . . . . . . . . . . . .                        1
       Assistant Inspector General for Operations, Western Area . . . . . . . . . . . . . . . . . . . .                        1
       Director, Policy, Analysis and Management Services . . . . . . . . . . . . . . . . . . . . . . . .                      2
       Director, State and Local Advisory and Assistance Team . . . . . . . . . . . . . . . . . . . .                          1
       Area Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1 each

Others
          Chief State Education Agency Official
              Florida, Georgia, Maine, Michigan, Oregon, Washington . . . . . . . . . . . . . . . . . 1 each




FINAL REPORT                              ED-OIG-AS, Audit Control Number 04-70012
                               AUDIT TEAM MEMBERS


This program audit was performed with the guidance from Eastern Area Manager
Carol S. Lynch, CPA, (404) 562-6470. Major contributors to this project include:

Atlanta Regional Office
Melinda G. Stephens, CGFM, Auditor-in-Charge
C. David Kimble, CPA, Auditor
April Deaderick Potter, CGFM, Auditor


Washington, DC Advisory and Assistance Staff
Scott A. Johnston, Auditor, State and Local Programs
Richard T. Rasa, CGFM, Director, State and Local Programs


Other contributors
Stephen Hudgens, Auditor, Sacramento
Joan Morris, Auditor, Kansas City
Hector Zapata, Auditor, New York City




FINAL REPORT                  ED-OIG-AS, Audit Control Number 04-70012