oversight

Review of the Office of Elementary & Secondary Education's Monitoring of Formula Grants.

Published by the Department of Education, Office of Inspector General on 2001-11-16.

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

  Review of the Office of Elementary & Secondary Education’s

                 Monitoring of Formula Grants


                                          FINAL AUDIT REPORT





                             Control Number ED-OIG / A04-A0013

                                       November 2001



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


                                                       NOV?. ii ~ 2001
MEMORANDUM

TO                         Susan B. Neuman
                                    Secretary for              Ipn'lpn,r~T'V   and Secondary Education


FROM
                           Assistant Inspector General for Audit

SUBJECT 	                  FINALA'dj)nT REPORT
                           Review of the Office of Elementary & Secondary Education's Monitoring
                           of Formula Grants, Control Number ED·OIG/A04·AOO13

Attached is out subject final report that covers the results of our review of the Office of
Elementary &"'Secondary Education's Monitoring of Formula Grants. We received your
comments generally concurring with the findings and recommendations in our draft audit
report.

Please provide the Supervisor, Post Audit Group, Office of Chief Financial and the Office of
Inspector General with quarterly status reports on promised corrective actions until all such
actions have been completed or continued follow-up is unnecessary.

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 process and general
public to the extent information contained there in is not subject to exemptions in the Act.

We appreciate the cooperation give us in the review. Should you have any questions
concerning this report, please call Carol S. Lynch, Regional Inspector General for Audit, at
(404) 562-6462.


Attachment


cc     Delores Warner, ALO, OESE




                                     400 MARYLAND AVE., S.W. WASHINGTON, D.C. 20202-151'

             Our mission is to ensure equal access to education and to promote educational excellence throughout the Nation.
Table of Contents


Review of the Office of Elementary & Secondary Education’s Monitoring of
Formula Grants, Control Number ED-OIG/A04-A0013


TABLE OF CONTENTS



Executive Summary                                                      1


Background                                                             3


Results of Our Review                                                  5


      Inconsistencies When Conducting Reviews                          5


      Insufficient Time for Compliance Monitoring                      6


      Single Audit                                                     7


Issues Addressed by Changes to OESE’s Monitoring                       8


Recommendations                                                        9


Objective, Scope, and Methodology                                      11


Statement on Management Controls                                       12



Exhibit      Schedule of OESE Personnel Interviewed                    13


Appendix OESE’s Comments to the Draft Report                           14

REVIEW OF OESE’s MONITORING OF FORMULA GRANTS ED-OIG/A04-A0013                            FINAL




                             EXECUTIVE SUMMARY




We performed an audit of the Office of Elementary & Secondary Education’s (OESE)
monitoring of formula grants. The objective of our audit was to determine whether OESE was
monitoring elementary and secondary education formula grant programs for compliance with
laws and regulations. The audit period covered fiscal year FY 2000 (October 1, 1999, through
September 30, 2000).

At the time of our review, OESE was monitoring elementary and secondary education formula
grant programs for compliance with laws and regulations through a process known as the
integrated review approach. At the conclusion of our review, changes were being made to
OESE’s program monitoring and oversight procedures. These changes called for program
specific monitoring, the transitioning of integrated reviews to focus on low performing schools,
and specific program leadership for other issues cutting across OESE programs.

We noted several areas of concern relating to the integrated review approach to monitoring
formula grants. Despite the fact that changes were made to OESE’s monitoring and oversight
procedures, it is important for OESE to be aware of the areas of concern that we identified. We
recognize that the changes to OESE’s monitoring begin to address some of these concerns.
However, as OESE continues to develop its new approach to monitoring, the following areas of
concern should be addressed:

       „   There was a lack of consistency across Regional Service Teams (RST)
           when conducting reviews.

       „   There was insufficient time to monitor some programs for compliance with
           laws and regulations under the integrated review approach.

       „   There was a lack of knowledge by OESE staff on the integrated review
           teams about areas examined by auditors for the single audit.




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We recommend that the Assistant Secretary for Elementary and Secondary Education ensure
consistency in the conduct of the various types of reviews conducted by OESE staff.
Specifically, OESE should:

1.1	    Ensure that changes made to the integrated review approach to monitoring address the
        areas of concern noted in our report, i.e., consistency across RSTs, amount of time to
        monitor, and knowledge of and coordination with the single audit process.

1.2	    Assign staff to both program specific and low-performing schools monitoring teams who
        possess the necessary expertise to review the program that they are representing.

1.3 	   Ensure that findings identified during program specific reviews and low-
        performing school reviews are followed up on in a consistent manner.

The Office of Elementary and Secondary Education generally concurred with the
recommendations. In their response to the draft report, they described corrective action taken or
planned. The comments are summarized in the report and the full text of the comments is
included as an attachment.




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                                   BACKGROUND




The mission of the OESE is to promote academic excellence, enhance educational opportunities
and equity for all America’s children and families, and to improve the quality of teaching and
learning by providing leadership, technical assistance, and financial support. It provides
financial assistance to state and local education agencies for maintenance and improvement of
both public and private preschool, elementary, and secondary education. The Office of
Elementary and Secondary Education administers 14 formula grant programs, programs in which
funding is distributed to all states (including Puerto Rico and the District of Columbia) based on
statutory formulas. During FY 2000, approximately $12 billion was appropriated by Congress to
these 14 formula grant programs. At the time of our review, the integrated review was the
vehicle used by OESE to examine the various states’ administration of formula grant programs.

The Department’s Strategic Plan, covering 1998 – 2002, discusses integrated program reviews as
a core strategy to achieve its objective of making sure that the Department of Education (ED)
partners have the support and flexibility they need without diminishing accountability for results.
The Strategic Plan states that, since many of the Department’s programs serve similar target
populations, the Department needs to be organized to promote the integration of federal
programs with one another, as well as with state and local programs. The integrated review was
one review process that promoted program integration by using cross-cutting program teams to
provide program monitoring and technical assistance.

To develop the integrated review process, the Quality Indicators model for OESE integrated
reviews was proposed and accepted as the conceptual model for OESE integrated reviews.
Quality Indicators for program implementation were broad descriptions of elements that are
essential to a state’s implementation of federal formula grant programs. They provided states
with guidance for reviewing their systems of administering federal programs and for
continuously improving those systems. In August 1998, a working group was formed to focus
time and effort on moving the Quality Indicators model to a functional level of development for
implementation in FY 1999 integrated reviews.

Integrated reviews were performed by staff representing the various OESE grant programs. At
the time of our review, there were a total of seven Regional Service Teams, each one having
between 11 and 17 team members. A Program Director was assigned to each RST with overall
responsibility and signed off on the team’s integrated review reports. The Team Administrator
determined who would serve as the review leader or co-leader. RSTs were responsible for
carrying out a designated number of integrated reviews each year. Teams conducting the on-site
review did not include all members of the RST, and usually consisted of seven to twelve
members. The RSTs, through a consensus process, proposed a slate of team members to conduct
each on-site integrated review. Each on-site integrated review had a review leader who was
responsible for providing the overall leadership in planning and conducting the review.


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Integrated reviews included both analysis of program administration for compliance with the
legislation and the provision of technical assistance for program improvement. States were
reviewed on a four year cycle, and included an on-site visit which lasted one week. The
integrated review process began several months prior to the actual on-site visit, when states
shared the results of a State Self-Review document with the OESE team conducting the review.
The team also reviewed other program information provided to them by the state at this time.
RST members considered their review of the State Self-Review and other supporting
documentation to be an integral part of the review.

According to the OESE Staff Manual for Integrated Reviews, reviews were designed to look at
federal education programs as a coherent set of funding efforts and emphasized program quality
and cross-program collaboration and coordination, which lessened the burden on the states. This
cross-program coordination was also emphasized in the Department’s Strategic Plan. Prior to
using the integrated review approach, reviews were conducted by individual program and
numerous visits may have been made to the same state each year. RST members that we
interviewed expressed some positive aspects to the integrated review approach to monitoring.
One RST member stated that that the integrated review approach was solid and met the
collaborative process. Another RST member felt that this process was stronger than the previous
monitoring approach.

When our review began, the integrated review was the vehicle used by OESE to examine the
various states’ administration of formula grant programs. At the conclusion of our review,
changes were being made to OESE’s program monitoring and oversight procedures. These
changes called for program specific monitoring, the transitioning of integrated reviews to focus
on low performing schools, and specific program leadership for other issues cutting across OESE
programs.

“Standards for Internal Control in the Federal Government” (GAO/AIMD-00-21.3.1, issued
November 1999 by the General Accounting Office pursuant to the Federal Managers’ Financial
Integrity Act of 1982) provides that federal managers are responsible for compliance monitoring
and safeguarding assets. The Single Audit Act Amendments of 1996, P.L. 104-156, section
7504, requires federal agencies to monitor non-federal entities’ use of federal awards and assess
the quality of audits conducted. However, there are no statutory or regulatory provisions that
direct the U.S. Department of Education to monitor states’ compliance with the various
programs, or specific provisions on how to conduct monitoring. Based on the requirements
under FMFIA and the Single Audit Act, the Department of Education has an implicit obligation
to ensure that recipients of funds under Elementary and Secondary Education programs comply
with applicable statutory and regulatory requirements.




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                          RESULTS OF OUR REVIEW




At the time of our review, OESE was monitoring elementary and secondary education formula
grant programs for compliance with laws and regulations through a process known as the
integrated review approach. At the conclusion of our review, changes were being made to
OESE’s program monitoring and oversight procedures. These changes called for program
specific monitoring, the transitioning of integrated reviews to focus on low performing schools,
and specific program leadership for other issues cutting across OESE programs. We noted
several areas of concern when examining the integrated review approach to monitoring formula
grants for compliance with laws and regulations. It is important for OESE to be aware of the
areas of concern identified. As OESE continues to develop their new approach to monitoring,
they have the opportunity to improve the new monitoring approach by addressing these concerns.
The areas of concern are discussed below.

INCONSISTENCIES WHEN CONDUCTING REVIEWS
Review of the integrated review process indicated that there was a lack of consistency in
conducting reviews. Team members had varying levels of experience with their programs.
Additionally, teams had different ways of approaching the review. For example, the focus of the
review, visits to the Local Education Agencies (LEA), and approach to follow-up varied by
team.

Staff Assignments: Staff assigned to RSTs to perform integrated reviews were often replaced by
permanent members of another RST. These reassignments occurred because the permanent
members of the RSTs did not always possess the necessary level of experience to review the
program that they were responsible for reviewing, or because the staff member assigned to
perform the review would not travel. The reassignments were often made days or weeks before
a review, which left little time for the new team members to adequately prepare for the review.

According to the 1998 OESE Staff Manual for Integrated Reviews, team members assigned to
perform integrated reviews were required to have knowledge about a large number of
documents, initiatives, procedures, and requirements related to cross-cutting issues and program
– specific information. Through interviews, we learned that members of RSTs had different
levels of experience with the program that they were responsible for reviewing. Individuals
assigned to the RSTs did not always possess the necessary level of experience to review the
program that they represented. This was particularly evident within the Title I program. On
numerous occasions, the team member assigned to represent the Title I program was replaced by
a more experienced reviewer.

We also noted that some individuals assigned to RSTs would not travel. Days or weeks before
the review, these team members would decide that they could not travel with the team on-site to
perform the review. An individual permanently assigned to another team would then replace
them.

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Members of review teams interviewed emphasized the importance of the time that they spent
planning and preparing for the integrated reviews. Planning typically began several months prior
to the review. The preparation phase for the on-site review was designed to ensure that the RST
was familiar with state specific progress and needs, and enable the team to develop specific plans
for on-site examination and technical assistance. The activities and schedule of the on-site
review were carefully chosen and designed to meet the objectives of the particular integrated
review. By replacing team members with members of another team at the last minute, there is a
risk that the new member will not be adequately prepared to meet the objectives of the particular
integrated review.

Follow-up on Review Findings: RSTs approached follow-up to review findings differently.
According to the OESE Staff Manual for Integrated Reviews, it is the responsibility of the
program officer for the affected program to assure that the state takes corrective action. The
program officer should also keep the RST apprised of the state’s progress.

During interviews, RST members were unclear as to who was responsible for following up on
findings. Not only did team members respond differently when asked about follow-up to
findings, but members on the same team also responded differently. When asked who was
responsible for follow-up, answers included all of the following: the person who wrote the
finding, the team leader, the review leader, and the Program Director.

Focus of Review: The focus of the review varied depending on the RST conducting the review.
Some teams spent most of their time on technical assistance and training while other teams
focused more on compliance issues. Differences were also noted in the degree to which the
various teams incorporate the integrated review concept of reviewing programs in a coordinated
manner into their review.

LEA Visits: Inconsistencies were noted relating to the teams’ visits to the LEAs and the selection
of the LEAs to visit. Some teams described the selection of the LEAs to visit as more of a
negotiation process with state officials. Additionally, some teams spent more of their on-site
time at the LEAs. For example, some teams spent 3 days at the LEAs and 1 day at the SEA,
while others spent more time at the SEA.


INSUFFICIENT TIME FOR COMPLIANCE MONITORING
We interviewed seventeen individuals who served on RSTs during FY2000 regarding their
thoughts on the integrated review process. This included 12 RST members, five Team
Administrators, and one Program Director. Thirteen of the seventeen individuals interviewed
felt that there was insufficient time to monitor their program for compliance under the integrated
review approach. Integrated review teams normally spent one week on-site conducting the
review. Most program representatives found that this was not enough time to monitor all
necessary areas for their program. Although some individuals interviewed did identify benefits
associated with the integrated review approach, most felt that these benefits were often at the
expense of monitoring some programs for compliance with appropriate laws and regulations.
The following are comments from team members by program:

•	 TITLE I PROGRAM: Five out of six RST members representing the Title I program, and the
   former Program Director, felt that the integrated review approach did not allow enough time

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   to monitor for compliance with their program’s requirements. These individuals stated that
   they did the best that they could to review all areas with the time that they had, but that there
   generally was not enough time to cover everything.

•	 SAFE & DRUG FREE SCHOOLS PROGRAM: Two out of two RST members representing
   this program felt that the integrated review approach did not allow enough time to monitor
   for compliance with their program’s requirements.

•	 MIGRANT EDUCATION PROGRAM: One RST member interviewed representing this
   program, when asked whether or not there was sufficient time to cover all program
   compliance areas, responded that it depended on the size of the program in the state being
   reviewed. This RST member was not certain that all compliance areas were being reviewed
   in states with a large Migrant Education Program, or in states that had not been reviewed for
   a number of years. The other individual representing the Migrant Education Program felt
   that integrated reviews should be more compliance oriented.

•	 OTHER PROGRAMS: Representatives of other programs did not voice any concerns
   regarding the time that was allotted for monitoring for compliance with appropriate laws and
   regulations. One individual interviewed representing the Title II and VI Programs felt that
   the review team had enough time to accomplish the goals of the review. Individuals
   representing the Goals 2000 Program stated that their program does not have rigorous
   legislative requirements regarding monitoring for compliance with laws and regulations.

Without sufficient time to monitor programs for compliance with laws and regulations, there is a
risk that programs that are not in compliance with program requirements will remain
unidentified.

SINGLE AUDIT
There was a lack of knowledge by OESE staff on the RSTs about areas examined by auditors for
the single audit. In planning for an on-site review, members of the review team would meet with
the audit resolution coordinator of their particular program to learn whether there were any open
or outstanding audit issues. Some review teams also requested and reviewed a copy of the audit
report for the state or district that the team was about to visit. However, most reviewers did not
conduct any detailed research relating to single audits before going on-site.

The Single Audit Act requires every non-federal entity that expends a total amount of federal
awards equal to or in excess of $300,000 to have a single audit or a program-specific audit
performed each year. In conducting the single audit, the auditor is only required to review those
federal programs identified as “major programs.” A risk-based approach is supposed to be used
to determine whether or not a federal program is a major program.

Although review teams learned whether or not there were any open or outstanding audit issues
before going on-site, they usually did not determine whether their program was covered as a
major program in the single audit performed during that fiscal year. Therefore, information from
a program’s audit resolution coordinator that there were no findings in that year’s audit report
did not necessarily mean that there were no reportable conditions in their program. No findings
could also mean that the program was not reviewed in the audit performed that year. We also
found that members of the review teams did not determine exactly what areas the auditor

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reviewed while on-site conducting the single audit. At a minimum, review team members should
determine which programs were covered by the single audit and which programs had findings.

Each year the OIG non-federal audit team solicits input from all program offices regarding
changes to be made to the Compliance Supplement. The Compliance Supplement is based on the
requirements of the 1996 Amendments and final revision of OMB Circular A-133. It provides
guidance to assist auditors in determining compliance requirements relevant to the audit, audit
objectives, and suggested audit procedures. Since it is not feasible to test compliance with all
program requirements in a single audit, the Compliance Supplement was developed to direct
auditors to specific areas that need to be examined. The Supplement outlines those requirements
that, if not complied with, could have a material (generally adverse) effect on a program.
According to the Procedures for the Annual Update of the Compliance Supplement, judgement
needs to be exercised in deciding which requirements need to be tested. Due to the expertise of
review team members with the various program compliance requirements, it would be beneficial
to include them in updating the Supplement.

A lack of knowledge by OESE staff about the single audit process and the compliance items
examined by the single auditors raises a question as to whether there is a coordination of effort
taking place. By increasing the knowledge of OESE monitoring staff about the single audit
process, OESE has the opportunity to improve its overall monitoring and oversight efforts.
OESE could develop such a relationship by working with the OCFO and OIG non-federal Audit
team to develop a better understanding of the single audit process.




     ISSUES ADDRESSED BY CHANGES TO OESE’S MONITORING




Since the completion of the on-site audit work, changes have been made to OESE’s monitoring
system. These changes call for program specific monitoring, transitioning integrated reviews to
focus on low performing schools, and leadership for other issues cutting across OESE programs.
We recognize that the changes do address several of our areas of concern. Specific concerns
addressed are as follows:

       Inconsistency in the Focus of the Review
       Under the new monitoring system, there will be two different types of reviews
       that will address different issues: reviews that focus specifically on turning
       around low performing schools and program specific reviews. Replacing the
       integrated review concept with reviews focused on turning around low-
       performing schools, and adding program specific monitoring, will address the
       issue of inconsistency regarding the focus of the review. Compliance
       monitoring and technical assistance outside of issues related to low performing
       schools will be the responsibility of each program.


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        Insufficient Time to Monitor for Compliance
        The changes to monitoring call for program specific monitoring and hold each
        Program Director responsible for developing a program specific monitoring
        plan. By making each Program Director responsible for developing his or her
        own monitoring plan, each Program Director has the opportunity to create a
        plan that will allow adequate time to monitor for compliance with program
        requirements. At the time of our review, the Title I program office had already
        begun to perform program specific monitoring using a proposal that was
        approved by the OESE Assistant Secretary.

At the completion of our on-site work, the changes to monitoring had not been fully
implemented. Therefore, we could not make any determinations on the effectiveness of the new
monitoring system, or the extent to which it completely addressed the noted areas of concern. As
OESE develops and refines the changes to its program monitoring and oversight procedures, we
recommend that OESE continue to review our observations.


RECOMMENDATIONS
We recommend that the Assistant Secretary for Elementary and Secondary Education ensure
consistency in the conduct of the various types of reviews conducted by OESE staff.
Specifically, the Assistant Secretary should:

1.1	    Ensure that changes made to the integrated review approach to monitoring address the
        areas of concern noted in our report, i.e., inconsistency across RSTs, amount of time to
        monitor, and knowledge of and coordination with the single audit process.

1.2	    Assign staff to both program specific and low performing schools monitoring teams who
        possess the necessary expertise to review the program that they are representing.

1.3 	   Ensure that findings identified during program specific reviews, and low-
        performing school reviews are followed up in a consistent manner.


AUDITEE’S RESPONSE
The Office of Elementary and Secondary Education concurred, in general, with the
recommendations. In their response to the draft report, they described the following corrective
action taken or planned:

•	 The Acting Deputy Assistant Secretary has been directed to deal with each of the areas of
   concern noted in the report. In the interim, each program office in OESE continues to
   monitor for compliance with its particular program requirements.

•	 OESE is reconsidering the previous Administration’s concept of “low-performing-school
   monitoring teams.” In the meantime, each program director has been directed to ensure that
   only qualified personnel conduct such reviews.

•	 The Acting Deputy Assistant Secretary has been asked to work with program directors to
   develop a procedure to follow up on findings and a system to keep track of the follow up.

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•	 OESE staff have attended both OIG and OCFO sponsored workshops focusing on using
   single audits for program monitoring and improving skills through sharper audit resolution.
   Additionally, OESE has recommended that OCFO include program monitoring and auditing
   data in the Department’s revised Common Audit Resolution System (CARS).




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              OBJECTIVE, SCOPE, AND METHODOLOGY



The objective of our audit was to determine whether the Office of Elementary & Secondary
Education was monitoring formula grants for compliance with appropriate laws and regulations.

The audit period covered FY 2000 (October 1, 1999, through September 30, 2000). We
performed our survey fieldwork in Washington, DC Program Offices May 9 – 12, 2000.
Detailed audit work was conducted in headquarters January 3 – 10, 2001. An exit conference
was held on April 4, 2001.

To achieve our objective we performed the following:

•	 Interviewed a total of 22 OESE representatives to obtain an understanding of the on-site
   monitoring process from planning to report issuance to follow-up. Specifically, individuals
   interviewed included: OESE officials, program directors, and members of four randomly
   selected RSTs representing the various OESE programs.

•	 Obtained and analyzed copies of integrated review reports, and reviewed documents
   maintained pertaining to the on-site visits to identify the extent of compliance monitoring
   performed while on-site.

•	 Interviewed other Department officials on issues relating to the single audit process and how
   OESE could use information found in the single audit reports to improve their current
   monitoring efforts.


Our review was conducted in accordance with generally accepted government auditing standards
appropriate to the scope of the review described above.




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            STATEMENT ON MANAGEMENT CONTROLS




As part of our review, we made an assessment of OESE’s management controls, procedures, and
practices applicable to the scope of our audit. Our assessment was performed to determine the
level of control risk for determining the nature, extent, and timing of our tests to accomplish the
audit objective. For the purposes of this report we reviewed management controls over the
integrated review process which included: state selection process, quantity of reviews,
assignment of staff to perform the reviews, documentation and file maintenance kept for each
program review, issuance of review reports, and follow-up to reviews.

Because of inherent limitations, a study and evaluation made for the limited purpose described
above would not necessarily disclose all material weaknesses in the control structure. However,
we noted the management control weaknesses that are discussed in the audit results section.




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 EXHIBIT

SCHEDULE OF OESE PERSONNEL INTERVIEWED
                  RST 1                        RST 3                          RST 4                  RST 5                            OTHERS


Number of Team    3 – Title I                  1 – Goals 2000 &               1 – Title I            2 – Title I                      Team
Members                                                 Technology Literacy   1 – Safe & Drug Free   1 – Safe & Drug Free Schools     Administrator –
                                                        Challenge Fund                   Schools                                      RST 7 (Goals
                                               1 – Migrant Ed                 1 – Migrant Ed                                          2000 & TLCF)*
                                               1 – Eisenhower & Innovative
                                                                                                                                      Team
                                                                                                                                      Administrator
                                                                                                                                      for RST Policy
                                                                                                                                      and Protocol**

                                                                                                                                      Director,
                                                                                                                                      Academic
                                                                                                                                      Improvement
Other Personnel   Team Administrator –         Team Administrator – Impact    Team Administrator –   Team Administrator – Title I**   and
                  Eisenhower & Innovative      Aid                            Migrant Ed                                              Demonstration
                                                                                                                                      Programs Unit
                  Program Director – Title I
                                                                                                                                      Deputy Assistant
                                                                                                                                      Secretary for
                                                                                                                                      Management
                                                                                                                                      and Planning

                                                                                                                                      Audit Resolution
                                                                                                                                      Coordinator for
                                                                                                                                      Compensatory
                                                                                                                                      Education**

* - This individual was interviewed during the Survey Phase of our review.

** - This individual was interviewed during both the Survey and Audit Phases of our review.

                     UNITED STATES DEPARTMENT OF EDUCATION
                          OFFICE OF ELEMENTARY AND SECONDARY EDUCATION

                                                                                            1lfE ASSISTANT SECRETARY
        RANDUM

To: 	       Lorraine Lewis
            Inspector General

From: 	 Susan B. Neuman, Ed.D

Subject: Review of the Office of Elementary & Secondary Education's Monitoring
         of Formula.;~r;f3JlPi1~D-OIG(e.04-A0013
                          \'";";. 	   :" "",,,,.:   .   ,"   :-.'ii,   ':~.,.

I am responding to the recommendations included in the Draft Audit Report at
page nine. In general, I concur with the recommendations and have instructed
my Senior Staff to address them. I have asked Acting Deputy Assistant
Secretary (DAS) Joe Conaty to direct the effort to improve the Office of
Elementary and Secondary Education's (OESE) monitoring practices.

Recommendations:

1.1 	   Ensure that changes made to the integrated review approach to
        monitoring address the areas of concern noted in the report.

The draft audit report identified a number of concerns about inconsistencies in
OESE's conduct of program reviews; insufficient time for compliance monitoring;
and lack of knowledge about the Single Audits conducted by States. I have
directed Acting DAS Conaty to deal with each of these areas of concern. In the
interim, each program office in OESE continues to monitor for compliance with
its particular program requirements.

1.2 	   Assign staff to both program-specific and low-performing-school
        monitoring teams that possess the necessary expertise to review the
        program they are representing.

At this time I am reconsidering the previous Administration's concept of "Low­
performing School Monitoring Teams." In the meantime, I have directed each
program director to ensure that only qualified personnel conduct such reviews.

1.3 	   Ensure that findings identified during program speCific reviews and low­
        performing school reviews are followed up in a consistent manner.

I have asked Acting DAS Conaty and Acting Deputy Assistant Secretary Tom
Corwin to work with program directors to develop a procedure to follow up on
findings and a system to keep track of the follow up.


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1.4 	   Develop a partnership with the OCFO and the OIG non-federal Audit Team
        through which an understanding of the Single Audit process can be
        fostered. Specifically, we recommend that the OESE monitoring staff be
        trained on the single audit process so that they know what is required of
        the Single Audit, whether or not their program is covered as a major
        program by the Single Audit, and the extent to which their program was
        covered by Single Audit. It would also be beneficial to include RST
        members in the process of updating the Compliance Supplement.

Together with the Office of Inspector General (OIG) and the Office of the Chief
Financial Officer (OCFO) OESE has taken steps to address this recommendation.
OIG presented a Single Audit overview and training on May 22 and 23 and on
June 5. The training focused on the use of single audits for program monitoring.
Staff learned how knowledge of single audits could improve grant-monitoring
skills. At that time, OIG also made a presentation on the overall Compliance
Supplement revision and updating process.

In addition, OESE staff attended an OCFO sponsored workshop on June 12
entitled "Improve your Management Skills Through Sharper Audit Resolution."

Finally, OESE has recommended that the OCFO include program monitoring and
auditing data in the Department's revised Common Audit Resolution System
(CARS). Inclusion of this information would create a single data base that
includes the current status and history of a particular State as it pertains to
program monitoring and related audit findings.

If you have any questions about this memorandum, please contact Acting DAS
Conaty at 401-9090. Please let Dr. Conaty know whom on your staff we should
contact if he has any questions.
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                       CONTROL NUMBER ED-OIG A04-A0013



                                                                            No. of Copies
Action Official / Auditee
Susan B. Neuman                                                                  Original
Assistant Secretary
Office of Elementary and Secondary Education


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Director, Office of Public Affairs                                                      1

Director, Program Legal Group, Office for Civil Rights                                  1

Audit Liaison, Office of Elementary and Secondary Education                             1



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