oversight

Combining Funds in Schoolwide Programs.

Published by the Department of Education, Office of Inspector General on 2000-03-29.

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

                     Combining Funds in Schoolwide Programs




                                          FINAL AUDIT REPORT




                                 Control Number ED-OIG/A04-90008
                                            March 2000




Our mission is to promote the efficient                        U.S. Department of Education
and effective use of taxpayer dollars                          Office of Inspector General
in support of American education.                              Atlanta, Georgia
                                  NOTICE

Statements that management practices need improvement, as well as
other conclusions and recommendations in this report, represent the
    opinions of the Office of Inspector General. Determination of
corrective action to be taken will be made by appropriate Department
                         of Education officials.

In accordance with the Freedom of Information Act (5 U.S.C. §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.
                       UNITED STATES DEPARTMENT OF EDUCATION
                                     OFFICE OF INSPECTOR GENERAL


                                                                                 THE INSPECTOR GENERAL


MEMORANDUM


DATE:           MAR 29 2000

TO:             Mike Cohen
                Assistant Secretary of Elementary and Secondary Education

FROM:           Lorraine Lewis (Signed)

SUBJECT:        FINAL AUDIT REPORT
                “Combining Funds in Schoolwide Programs”
                Control Number: ED-OIG/A04-90008

Attached is our subject final report that covers the results of our review of Combining Funds in
Schoolwide Programs at various locations. We received your comments concurring with the findings and
recommendations in our draft audit report.

You have been designated as the primary action official for this report. The Assistant Secretary of Special
Education and Rehabilitation Services; the Assistant Secretary of Vocational and Adult Education; and,
the Acting Director of Bilingual Education and Minority Languages Affairs are collateral officials. Please
coordinate with them regarding any actions in connection with the recommendations.

Please provide the Supervisor, Post Audit Group, Financial Improvement, Receivables and Post Audit
Operations, Office of Chief Financial Officer and the Office of Inspector General, Acting Assistant
Inspector General for Analysis and Inspection Services, with semiannual status reports on promised
corrective actions until all correctives actions have been completed or continued follow-up is unnecessary.

In accordance with the Freedom of Information Act (Public Law 90-23), reports 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 audit 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 Carol Lynch, Regional Inspector General for Audit, at (404) 562-6462.

Attachment
                     UNITED STATES DEPARTMENT OF EDUCATION

                                   OFFICE OF INSPECTOR GENERAL


                                                                             THE INSPECTOR GENERAL


MEMORANDUM


DATE:          MAR 29 2000

TO:            Patricia McNeil
               Assistant Secretary of Vocational and Adult Education

FROM:          Lorraine Lewis (Signed)

SUBJECT:       FINAL AUDIT REPORT
               “Combining Funds in Schoolwide Programs”
               Control Number: ED-OIG/A04-90008

Attached is our subject final report that covers the results of our review of Combining Funds in
Schoolwide Programs at various locations. We received your comments and made some changes
to the report as a result. Other comments were outside the scope of the audit. However, Office
of Inspector General staff will meet with you at your convenience to discuss those comments.

You have been designated as a collateral action official for this report. The Assistant Secretary of
Elementary and Secondary Education has been assigned as the primary action official. Please
coordinate with him regarding any actions in connection with the recommendations as the
recommendations pertain to programs administered by your office.

In accordance with the Freedom of Information Act (Public Law 90-23), reports 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 audit 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 Carol Lynch, Regional Inspector General for Audit, at (404) 562-6462.

Attachment
                     UNITED STATES DEPARTMENT OF EDUCATION

                                  OFFICE OF INSPECTOR GENERAL


                                                                            THE INSPECTOR GENERAL


MEMORANDUM


DATE:          MAR 29 2000

TO:            Judith Heumann
               Assistant Secretary of Special Education and Rehabilitative Services

FROM:          Lorraine Lewis (Signed)

SUBJECT:       FINAL AUDIT REPORT
               “Combining Funds in Schoolwide Programs”
               Control Number: ED-OIG/A04-90008

Attached is our subject final report that covers the results of our review of Combining Funds in
Schoolwide Programs at various locations.

You have been designated as a collateral action official for this report. The Assistant Secretary of
Elementary and Secondary Education has been assigned as the primary action official. Please
coordinate with him regarding any actions in connection with the recommendations as the
recommendations pertain to programs administered by your office.

In accordance with the Freedom of Information Act (Public Law 90-23), reports 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 audit
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 Carol Lynch, Regional Inspector General for Audit, at (404) 562-6462.

Attachment
                     UNITED STATES DEPARTMENT OF EDUCATION

                                  OFFICE OF INSPECTOR GENERAL


                                                                            THE INSPECTOR GENERAL


MEMORANDUM


DATE:          MAR 29 2000

TO:            Arthur Love
               Acting Director of Bilingual Education and Minority Languages Affairs

FROM:          Lorraine Lewis (Signed)

SUBJECT:       FINAL AUDIT REPORT
               “Combining Funds in Schoolwide Programs”
               Control Number: ED-OIG/A04-90008

Attached is our subject final report that covers the results of our review of Combining Funds in
Schoolwide Programs at various locations.

You have been designated as a collateral action official for this report. The Assistant Secretary of
Elementary and Secondary Education has been assigned as the primary action official. Please
coordinate with him regarding any actions in connection with the recommendations as the
recommendations pertain to programs administered by your office.

In accordance with the Freedom of Information Act (Public Law 90-23), reports 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 audit
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 Carol Lynch, Regional Inspector General for Audit, at (404) 562-6462.

Attachment
                                        TABLE OF CONTENTS


ITEM                                                                                                          Page Number

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              1

Audit Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        3

Effects Of Not Combining Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      10

Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             11

Summary of Comments from the
U.S. Department of Education Program Offices. . . . . . . . . . . . . . .                                         11

Additional Comments by
       The Office of Inspector General . . . . . . . . . . . . . . . . . . . . . . . . . .                        11

Appendix A- Background and
      Scope and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       12

Appendix B – List of Education Agencies and
Schools Contacted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         14

Appendix C – Full Responses From
U.S. Department of Education Program Offices . . . . . . . . . . . . . .                                          15
                     EXECUTIVE SUMMARY

Eligible schools participating in schoolwide programs are not taking advantage of the flexible
accounting provisions of the Improving America's Schools Act. Our audit identified a need for
improving the flow of information, guidance and technical assistance from the U.S. Department
of Education (Department) to the state and local education agencies and to state and independent
auditors.

Congress gave states, school districts and schools more flexibility in using Federal education
dollars and other resources with the enactment of the Improving America’s Schools Act (the Act)
in October 1994, Public Law 103-382. Title I of the Act is entitled “Helping Disadvantaged
Children Meet High Standards.” Section 1114 of Subpart 1, allows a local education agency to
use funds, in combination with other Federal, state and local funds to upgrade the entire
educational program in an eligible school.

The Department has issued regulations and general guidance to state and local education
agencies. Policy Guidance for Title I, Part A – Improving Basic Programs Operated by Local
Education Agencies, issued on April 11, 1996, with later revisions, states that Federal education
funds, included in a schoolwide plan, do not have to be accounted for separately. These funds
may also be combined with state and local funds to implement a schoolwide program plan. In
addition, the Department has made efforts to promote the flexibility provisions through the
Internet, publications, presentations, speeches and national and regional conferences.

The Office of Management and Budget’s Compliance Supplement on Elementary and Secondary
Education Act (ESEA) programs contains guidance on schoolwide programs. The Compliance
Supplement is used by state and independent auditors who audit the expenditure of Federal
program funds by schools and local education agencies in accordance with the Single Audit Act.

Despite these efforts, we found that:

  1. Some state accounting policies and procedures and some state laws do not allow funds to
     be combined.

  2. Federal laws and program requirements designed to maintain accountability may be
     barriers to combining funds.

  3. Local education agencies did not always know about or have sufficient guidance to
     combine funds in schoolwide programs.

  4. State and independent auditors may not always be aware of how to audit Federal funds that
     are combined in schoolwide programs.
The Assistant Secretary for Elementary and Secondary Education should work with other
appropriate Assistant Secretaries to consider whether it would be useful to:

  1. Provide additional guidance in publications to help state and local education agencies
     address concerns that may prohibit them from allowing schools to combine funds in
     schoolwide programs . Guidance could include what information is required when
     reporting on schoolwide programs, and what is no longer required when Federal programs
     are a part of a schoolwide program. For example, a fiscal companion guide to the “Idea
     Book” on combining funds in schoolwide programs could be issued. This guide could
     include illustrations and examples of how local education agencies and schools could
     account for and report funds in a combined setting.

  2. Work with Federal and state education officials to focus on the principles of the
     schoolwide program, and assist state education agencies in their efforts to understand how
     combining funds would work in a schoolwide setting. Also, the Department should work
     with state education agencies and assist them in working with local education agencies to
     take full advantage of the flexibility provisions contained in the Improving America’s
     Schools Act.

  3. Work with state education agencies to help state and independent auditors better
     understand the relationship between the Single Audit Act and the flexibility provisions of
     the Improving America’s Schools Act.

We held an exit conference with Department officials and discussed our findings and
recommendations. Department officials generally agreed with the issues reported.

U.S. Department of Education officials’ response to the draft report generally agreed that the
Department should continue to assist state education agencies in their efforts to understand how
combining funds would work in a schoolwide setting. Department officials also agreed that the
Department should provide whatever assistance necessary to help state and independent auditors
better understand the Single Audit Act and the flexibility provisions of the Improving America's
Schools Act.

The Office of Inspector General agreed with the responses and made minor changes to the report
as suggested.
                               AUDIT RESULTS
The results of this audit suggest that, despite the intentions of Congress and efforts by the
Department, eligible schools participating in schoolwide programs were not taking advantage of
the provision to combine separate program resources into a single accounting fund in schoolwide
programs. Some state education officials reported that state laws, accounting procedures and
policies require strict accountability and reporting by program and do not allow combining of
funds from various sources. Local education agencies were reluctant to allow schools to
combine funds into a single accounting fund even where states do not have such restrictions.
Local officials are concerned about audit and individual program requirements. In some local
education agencies, officials were not aware that program funds could be combined into a single
accounting fund in a schoolwide program. Other officials did not believe that they had the
information they needed to decide whether combining funds would be useful to them or did not
know how to implement the provisions.


                               Congressional Intent

Congress intended that the           The use of the schoolwide combining funds provisions is
schoolwide program provisions be     voluntary. However, the intent of Congress was to make
available to state and local         these provisions available to state and local education
education agencies.                  agencies to assist in using Federal education funds to
                                     upgrade the entire educational program in a schoolwide
                                     program.

                                     Section 1114 of Title I of the Elementary and Secondary
                                     Education Act of 1965 (ESEA), as amended by the
                                     Improving America's Schools Act of 1994, authorizes the
                                     establishment of schoolwide programs. It states that a
                                     local education agency may use Title I funds in
                                     combination with other Federal, state and local funds in
                                     order to upgrade the entire educational program in an
                                     eligible school.

                                     The House Report that accompanied the passage of the
                                     ESEA puts Title I in the center of school reform by
                                     making it easier for high-poverty schools to operate
                                     schoolwide programs. Schools could combine all the
                                     funds they receive except for Individuals with Disabilities
                                     Education Act (IDEA) funds, to support their schoolwide
                                     program without separate accountability requirements and
                                     without requesting waivers.
                                   Congress also showed its intent by stating in Section
                                   1111, State Plans, of the Act that:

                                          -   The state education agency will provide the
                                              least restrictive and burdensome regulations for
                                              local education agencies and individual schools
                                              participating in assisted programs.

                                          -   The state education agency will encourage the
                                              use of funds from other Federal, state and local
                                              sources for schoolwide reform in schoolwide
                                              programs.



                U.S. Department of Education Efforts
                                   The U.S. Department of Education has issued regulations
The U.S. Department of Education   and general guidance to state and local education agencies
issued regulations, general        on schoolwide programs. In addition, the Department has
guidance and presented other       made an effort to promote the flexibility provisions
information to state and local     through the Internet, publications, presentations and
education agencies on schoolwide   speeches at national and regional conferences.
programs.
                                   The Department issued Policy Guidance for Title I, Part A
                                   – Improving Basic Programs Operated by Local
                                   Education Agencies in April 1996, with later revisions.
                                   The guidance was issued to assist state and local education
                                   agencies in using funds to support strong coordination
                                   with other programs, in ongoing reform efforts for the
                                   improvement of teaching and learning.

                                   Several sections of the Policy Guidance made it clear that
                                   Federal, state and local funds can be combined and need
                                   not be accounted for separately in schoolwide programs.
                                   In the introduction, the guidance states that a school may
                                   use Title I funds with other Federal education funds to
                                   upgrade a school’s entire educational program. These
                                   words are used throughout the document to emphasize the
                                   intent of a schoolwide program. Further, the guidance
                                   states specifically that “Federal education funds that are
                                   included in the schoolwide plan do not have to be
                                   accounted for separately and may be combined with state
                                   and local funds in the schoolwide program.”
The Department has made the provisions of the ESEA,
including the schoolwide provisions, available to state and
local education agencies through the Department’s
Internet web site. In addition, the Department has made
presentations at various conferences that focused on the
provisions of the Improving America's Schools Act,
including combining funds in schoolwide programs.

Further, the Office of Management and Budget’s
Compliance Supplement on Elementary and Secondary
Education Act programs contains guidance on schoolwide
programs and highlights the flexibility available to
grantees. State and independent auditors use the
Compliance Supplement to audit Federal program
expenditures in accordance with the Single Audit Act.

Despite these efforts, eligible schools participating in
schoolwide programs are not taking advantage of the
provision to combine separate program resources into a
single accounting fund in schoolwide programs.

Title 34, section 200.8 of the Code of Federal Regulations
sets out the regulatory provisions of the schoolwide
program. Much is written about the programmatic
provisions of the schoolwide program. However, nothing
in the regulations addresses the financial aspects of
combining funds.

The Department also published an “Idea Book” on
planning and implementing schoolwide programs.
However, the book does not address financial and
accounting issues that arise when Federal funds are
combined with other funds in schoolwide programs.

While the Compliance Supplement to OMB Circular A-
133, addresses schoolwide programs, state and local
officials are concerned that auditors do not understand
how individual programs are affected when included in
schoolwide programs.
                       State Education Agencies
                                 We interviewed state education agency officials in 15
Ten of the 15 state education    states. Officials in five states reported that nothing in their
agencies reviewed do not allow   state laws or accounting systems prevented local
schools participating in the     education agencies from allowing schools that participate
schoolwide program to combine    in a schoolwide program to combine funds. In the
all funds.                       remaining ten states, officials reported that they have
                                 various laws and accounting procedures and policies that
                                 do not allow schools to combine all funds into a single
                                 accounting fund in schoolwide programs.

                                 Of those ten states:

                                 -   Six states do not permit any combining of funds.

                                 -   Two states allow combining of Federal funds only.

                                 -   One state allows combining of state and local funds
                                     only.

                                 -   One state allows combining of all Federal funds and
                                     the combining of all state and local funds, but not
                                     together.

                                 The chart below shows where states stand on the issue of
                                 combining funds.
                         1
                 2
                                          5
             1



                         6

       Allow Combining of All Funds
       Allow Combining of No Funds
       Allow Combining of State Funds Only
       Allow Combining of Federal Funds Only
       Allow Combining of Each, But Not Together




Several states reported that combining funds would be
difficult because they have complex accounting systems
that were implemented as an accountability measure.
State officials stated it would be difficult to combine funds
under such a system because of a requirement for specific
accounting codes to track individual program
expenditures. For example, one state reported that it had a
uniform chart of accounts that requires a ten-digit code for
each expenditure. The first digit of the code is the funding
source (Federal, state and local). The next four digits are
reserved for the activity code, the next two are the
program report code, and the last three digits represent the
object code. State officials reported that the state
legislature mandates this kind of system as an
accountability measure.

In addition to accounting regulations and procedures, state
officials reported that there are state laws that would
prohibit state education agencies from combining funds.
Some state and some local funding are based on certain
criteria, and the dollars must be accounted for by source.
One state reported that each state program has its own
legislation, and cannot be combined with Federal funds
unless the laws are changed. State legislators also make
requests to track program dollars. State education
officials claimed that combining funds would render them
and local education officials incapable of providing such
information.
                                      One state reported that some Federal education programs
                                      still require detailed reports by program activity.
                                      Therefore, the state education officials believed that
                                      combining these funds would not be possible in a
                                      schoolwide setting. For example, the vocational education
                                      program was cited as one of the programs that required a
                                      detailed expenditure report. Another state official cited
                                      exceptional children program funds as also being difficult
                                      to combine because program officials are adamant about
                                      using those funds for a specific purpose.
                              Local Education Agencies
                                    Accountability is another area of concern cited by state
                                    education agencies. State officials told us that it would
                                    make it difficult to determine whether combined funds
Of the 16 local education agencies were used for the intended purpose and beneficiaries,
contacted, none reported that       as there would be no way of knowing if the services
schools participating in schoolwide were actually provided to the children. Some states’
programs were combining funds.      officials reported being reluctant to combine funds in
                                    schoolwide programs because a combined fund would
                                    be difficult to audit by funding source.

                                      Two state education agencies have issued guidance on
                                      combining funds. However, because of state laws, the
                                      guidance covers the combining of Federal funds only.




                                      We interviewed officials from 16 local education
                                      agencies. All said schools in their district were using, and
                                      were extremely satisfied with, the programmatic aspects
                                      of the schoolwide program. However, none reported that
                                      any school participating in the schoolwide program was
                                      combining funds into one accounting fund, despite reports
                                      from some state education agencies that schools can
                                      combine funds.

                                      Officials from one local education agency reported that
                                      they were not aware of the provisions in the Amendments
                                      to the Elementary and Secondary Education Act of 1965
                                      that allowed funds to be combined in a schoolwide
                                      program. Other concerns cited by local education
                                      agencies were similar to those cited by state education
                                      agencies. These concerns included:
                                                   2 State accounting systems.

                                                   2 Other state laws and requirements.

                                                   2 Federal laws and program requirements.

                                                   2 Accountability issues.

                                                   2 Audit requirements.

                                   Some local education agencies also expressed concerns
                                   over district and local government requirements. Requests
                                   from local school boards prompt many local education
                                   agencies to require individual schools to report
                                   expenditures by funding source. In addition to state
                                   accounting systems, some school districts reported having
                                   accounting systems that track expenditures by funding
                                   source. Other districts are reluctant to combine all
                                   Federal, state and local funds because the state requires
                                   expenditures to be reported by source.

                                   Some local education agencies are concerned that
                                   funds would lose their identity in a combined setting.
                                   One district official stated it would be difficult to
                                   picture how the source of funds would not be identified
                                   at the school level. Others did not see a combined fund
                                   as a desirable option. One official thought it would be
                                   especially difficult for funds that target specific groups
                                   suchSchools
                                         as vocational education. Another local education
                                   agency official felt that combining funds into one
                                   account might lead to a generalization of funds and loss
Although most of the school        of effectiveness of funds.
administrators contacted favored
the concept of combining funds,    Some local education officials stated that some program
none were combining funds in       officials may find it difficult to adjust to the flexibility of
schoolwide programs.               combining funds. These officials stated that, traditionally,
                                   program officials have been protective and say their
                                   program funds cannot be combined. Some are concerned
                                   that too much flexibility would take away from much-
                                   needed programs, and the program focus would be lost.
                                   Local officials were also concerned that Federal and state
                                   monitors would review individual program activities
                                   rather than the combined activities of a schoolwide
                                   program.
                                           Schools

                                      Although schools are using the programmatic flexibility
                                      provisions of Title I to upgrade the entire educational
                                      system, none of the schoolwide participants interviewed
                                      are combining funds from a fiscal standpoint. School
                                      officials raised issues and concerns such as accounting
                                      systems, program requirements, and tracking funds by
                                      source. For example, one school administrator stated that
                                      codes needed to be assigned to expenditures for
                                      accounting purposes. Another school administrator said it
                                      would be difficult to combine vocational education funds
                                      because of Federal program requirements.

                                      However, most school officials interviewed agreed that
                                      combining funds at the school level in a schoolwide
                                      program would simplify the budget and accounting
                                      process. One school administrator stated that he had eight
                                      budgets to maintain. A consolidated fund would eliminate
                                      the problem of having a small amount of funds in each
                                      account, but not enough to do anything with each fund
                                      separately. One school administrator pointed out that a
                                      consolidated fund would make planning easier and
                                      provide a more efficient delivery of services. This
                                      administrator also said that all funds should be included in
                                      the schoolwide program, including IDEA funds.

                                      A few school administrators did not think combining
                                      funds would make a difference. One official stated that
                                      the current accounting system works well because there is
                                      leeway in budgeting funds with schoolwide programs.
                                      Another stated that a single accounting source would be a
                                      good administrative tool, but the use of the funds to serve
                                      the needs of all children is the most important
                                      consideration. Another official stated that the benefits of
                                      combining funds would have to far outweigh the risk of
                                      abuse that might occur. Another administrator pointed out
                                      that combining funds would not change what the school is
                                      doing now or will be doing in the future. However, one
                                      school official pointed out that training would be
                                      necessary if combining funds was allowed.



                        Effects of Not Combining Funds

We determined that eligible schools participating in the schoolwide program are not taking
advantage of the flexible accounting provisions of the Amendments to the Elementary and
Secondary Education Act of 1965. We concluded that not combining funds may cause additional
administrative burdens. These burdens include:

       o Accounting for funds separately by source may cause additional work for school
       administrators.

       o A single purchase may have funding codes from more than one program source.

       o Funds may go unspent or needed purchases not made because of budget constraints.

       o School administrators must budget and account for expenditures by source of funds.
                                     Recommendations

The Assistant Secretary for Elementary and Secondary Education should work with other
appropriate Assistant Secretaries to consider whether it would be useful to:

1.     Provide additional guidance in publications to help state and local education agencies
       address concerns that may prohibit them from allowing schools to combine funds in
       schoolwide programs . Guidance could include what information is required when
       reporting on schoolwide programs, and what is no longer required when Federal
       programs are a part of a schoolwide program. For example, a fiscal companion guide to
       the “Idea Book” on combining funds in schoolwide programs could be issued. This
       guide could include illustrations and examples of how local education agencies and
       schools could account for and report funds in a combined setting.

2.     Work with Federal and state education officials to focus on the principles of the
       schoolwide program, and assist state education agencies in their efforts to understand
       how combining funds would work in a schoolwide setting. Also, the Department should
       work with state education agencies and assist them in working with local education
       agencies to take full advantage of the flexibility provisions contained in the Amendments
       to the Elementary and Secondary Education Act of 1965.

3.     Work with state education agencies to help state and independent auditors better
       understand the relationship between the Single Audit Act and the flexibility provisions of
       the Amendments to the Elementary and Secondary Education Act of 1965.


We received responses to the draft report from the Office of Elementary and Secondary
Education and Office of Vocational and Adult Education. The responses generally agreed that
the Department should continue to assist state education agencies in their efforts to understand
how combining funds would work in a schoolwide setting. Department officials also agreed that
the Department should provide whatever assistance necessary to help state and independent
auditors better understand the Single Audit Act and the flexibility provisions of the Improving
America's Schools Act. The Office of Inspector General did not receive responses from the
Office of Bilingual Education and Minority Languages Affairs and the Office of Special
Education and Rehabilitative Services. The full written responses are attached to the report as an
appendix.

The Office of Inspector General agreed with the responses and made minor changes to the report
as suggested.
                                      APPENDIX A

                                       Background

Congress provided states, school districts and schools with more flexibility in using Federal
education dollars and other resources with the reauthorization of the Elementary and Secondary
Education Act of 1965, as amended by the Improving America’s Schools Act in October 1994.
Title I of the Elementary and Secondary Education Act of 1965 is entitled “Helping
Disadvantaged Children Meet High Standards.” Section 1114 of Title I allows a local education
agency to use funds, in combination with other Federal, state and local funds, in order to upgrade
the entire educational program in an eligible school. In addition, the reauthorization of the
Individuals with Disabilities Education Act (IDEA), allows IDEA funds to be combined in
schoolwide programs with certain limitations.

The Department has issued regulations and general guidance to state and local education
agencies. Policy Guidance for Title I, Part A – Improving Basic Programs Operated by Local
Education Agencies, issued on April 11, 1996, with later revisions, states that Federal education
funds, included in a schoolwide plan, do not have to be accounted for separately. These funds
may also be combined with state and local funds to implement the plan in a schoolwide program.
 In addition, the Department has made efforts to promote the flexibility provisions through the
Internet, publications, presentations, speeches and national and regional conferences.

The Compliance Supplement on Elementary and Secondary Education Act (ESEA) programs
contains guidance on schoolwide programs. The Compliance Supplement is used by state and
independent auditors who audit the expenditure of Federal program funds by schools and local
education agencies in accordance with the Single Audit Act.



                                Scope and Methodology

The objective of this audit was to determine to what extent eligible schools participating in
schoolwide programs were combining funds. To meet our objectives, we interviewed education
and finance officials from 15 state education agencies. We selected the states based on the
number of schoolwide programs and the percentage of Title I schools in each state that have
schoolwide programs. We visited three of the state education agencies selected and interviewed
the remaining agencies in telephone conferences.

We interviewed officials from 16 local education agencies. Six of the agencies were in the states
we visited. The other 10 were contacted by telephone. We selected the local education agencies
based on information obtained from the state education agencies. Except for the states that we
visited, we did not contact local education agencies where we were advised by state officials that
state laws, accounting rules or policies did not allow schools participating in schoolwide
programs to combine funds.

We interviewed 13 school administrators, all in the states we visited. All the administrators were
principals or advisors at Title I schools. We included two high schools that received Title I funds
and other Federal funds, including Vocational Education, in the review. Except for the states we
visited, we did not contact school administrators where state officials advised us that the state or
local education agency did not allow schools participating in a schoolwide program to combine
funds.

We conducted the interviews between March 1999 and July 1999. A list of state and local
education agencies where officials were interviewed is in Appendix B.

Our audit was conducted according to government auditing standards appropriate to the scope of
the audit described above. Due to the limited scope of our review, and the audit objective, we
did not review the management control structures of the Department or of the entities where we
conducted interviews.
                                APPENDIX B:
     State Education Agencies, Local Education Agencies and Schools
                                Contacted
  State Education
     Agencies              Local Education Agencies               Schools
Texas               New Braunfels Independent School   Lone Star Primary
                    District                           Memorial Elementary
                    San Antonio Independent School     Barkley/Ruiz Elementary
                    District                           Fox Tech High School
Kentucky            Jefferson County Schools           Iroquois High School
                                                       Hazelwood Elementary
                    Henry County Schools               New Castle Elementary
                                                       Campbellsburg Elementary
North Carolina      Cumberland County Schools          Ben Martin Elementary
                                                       MacWilliams Middle School
                    Halifax County Schools             Bakers Elementary
                                                       Brawley Middle School
                                                       Southeast High School
Michigan            Flint City Schools
                    Detroit City Schools
Illinois            Chicago School District 299
                    Cairo School District
Maryland            Baltimore City Schools
                    Garret County Board of Education
Massachusetts       Boston Public Schools
                    Lowell Public Schools
New York            New York City District 22
                    Yonkers Public Schools
California
Oklahoma
Louisiana
Missouri
Florida
Mississippi
Alabama
                                      UNITED STATES DEPARTMENT OF EDUCATION

MEMORANDUM                                       WASHINGION,D.C. 20202- ___




                                                             Mar 15 2000

  TO: Carol Lynch, Area Manager
      Office of Inspector General


  FROM:     Michael Cohen (Signed)
            Assistant Secretary
            Office of Elementary and Secondary Education


  SUBJECT: Drafit Audit Report: "Combining Funds in Schoolwide Programs"
           CAN: ED-OIG/A04-90008

  In general, OESE agrees that a continued effort should be put forth in assisting State
  education agencies in their efforts to understand how combining funds would work in a
  schoolwide setting. We agree that we should provide whatever assistance is necessary to
  aid State education agencies in helping State and independent auditors better understand
  the relationship between the Single Audit Act and the flexibility provisions of the
  Improving America's Schools Act. We plan to ask State and local educators what kinds of
  assistance or additional guidance would be of use to them. In particular, we will be
  interested in their perceptions of barriers to further implementation of schoolwide
  programs.

  One additional technical comment: We request that the phrase "combining funds" be used
  consistently throughout the report rather than the word "commingle".
                OFFICE OF VOCATIONAL AND ADULT UNITED STATES
                                     DEPARTMENT OF EDUCATION

                                                                                              THE ASSISTANT SECRETARY




MEMORANDUM


To:                Carol Lynch, Area Manager, OIG
                   Richard Rasa, Director, State and Local Advisory and Assistance

From:               Patricia W. McNeil

Subject:            DRAFT AUDIT REPORT: "Combining Funds in Schoolwide Programs” Audit
                    Control Number: ED-OIG/A04-90008



On February 8, 2000, Lorraine Lewis, Inspector General, requested comments on the DRAFT AUDIT
REPORT "Combining Funds in Schoolwide Programs." Our comments on this draft report are presented
below

Part of Title I legislation addresses Schoolwide Programs, which permit, under certain conditions, the
flexibility of combining Federal education funds at the local school to more easily address issues
centering on student performance. Funds allocated under the Carl D. Perkins Vocational and Technical
Education Act are covered by the Schoolwide Programs initiative, and therefore can be combined with
other fluids at the local school level.

Based on the current draft report it is difficult to determine whether or not the auditors actually found
instances of Perkins funds available for Schoolwide Programs in the various sites visited. Many of the
schools cited in the draft report were elementary schools, which are by definition ineligible for Perkins
funding; hence, there are no Perkins funds available for Schoolwide Programs at these sites.

Secondly, there is no indication that the secondary institutions (or middle schools) reviewed for this audit
had Title I funds available for use. It has been our understanding that most school districts restrict Title I
funding to elementary' sites.

We recommend that the draft audit report be revised to reflect whether middle and secondary schools
reviewed for this report had not only Perkins funding available to them, but more importantly, also bad
Title I funds available. It is only when both streams of funds are available that the establishment of a
Schoolwide Program using Perkins funding can be developed. If the desire is to ascertain the degree to
which Perkins funds are used in Schoolwide Programs, the sample of reviewed sites will probably have
to be increased.


                     600 INDEPENDENCE AVE. S.W. WASHINGTON. D.C. 20202-71000
  Our mission is to ensure equal access to education and to promote educational excellence throughout the nation .
While the draft audit report is correct in noting that the formation of Schoolwide Programs is voluntary in
nature, the tone of the report seem to indicate that the Department should be doing more to promote
Schoolwide Programs. It should be noted that there are well-defined legislative criteria for establishing a
Schoolwide Program. Failure to adequately address these criteria precludes the combining of Federal funds,
and opens schools to adverse audit findings. Perhaps the audit report should focus on exploring the nature
of the requirements for a Schoolwjde Program, and whether these requirements work to impede the wide-
spread development of Schoolwide Programs.
CN: ED-OIG/A04-90008                                      Final Report

                                   REPORT DISTRIBUTION LIST
                                        AUDIT CONTROL NUMBER A04-90008

                                                                          No. of Copies
Action Official/Auditee
Mike Cohen                                                                    4
Assistant Secretary
Office of Elementary and Secondary Education
U.S. Department of Education

Collateral Action Officials

Judith Heumann                                                                1
Assistant Secretary
Office of Special Education and Rehabilitative Services
U.S. Department of Education

Arthur Love                                                                   1
Acting Director
Office of Bilingual Education and Minority Languages Affairs
U.S. Department of Education

Patricia McNeil                                                               1
Assistant Secretary
Office of Vocational and Adult Education
U.S. Department of Education

Other U.S. Department of Education Offices
Philip Rosenfelt                                                              1
Assistant General Counsel
Office of General Counsel

Office of the Deputy Secretary of Education                                    1

Office of Public Affairs

Audit Liaison Office                                                           1

Supervisor, Post Audit Group                                                   1
Office of the Chief Financial Officer

Office of Inspector General

Inspector General                                                              1
Deputy Inspector General                                                       1
Assistant Inspector General for Audit                                          1
Assistant Inspector General for Investigation                                  1
Acting Assistant Inspector General for Analysis and Inspection Services        1
Deputy Assistant Inspector General for Audit                                   1
Counsel to the Inspector General                                               1
Director, State and Local Advisory and Assistance Team                         1
Regional Inspectors General for Audit                                          1 each
CN: ED-OIG/A04-90008   Final Report