oversight

Illinois: Use of Funds and Data Quality for Selected American Recovery and Reinvestment Act Programs

Published by the Department of Education, Office of Inspector General on 2011-06-09.

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

       U.S. Department of Education 

        Office of Inspector General


American Recovery and
Reinvestment Act of 2009
  Illinois: Use of Funds and Data Quality for Selected 

  American Recovery and Reinvestment Act Programs


                   Final Audit Report





                 Illinois State Capitol Building


ED-OIG/A05K0005                                    June 2011
             Abbreviations, Acronyms, and Short Forms 

                        Used in this Report 

______________________________________________________________________________

C.F.R.              Code of Federal Regulations

Chicago             Chicago Public Schools

Department          U.S. Department of Education

East Saint Louis    East Saint Louis Public Schools

ECE                 Early Childhood Education

FTE                 Full-time equivalent

Governor’s Office   Illinois Governor’s Office of Management and Budget

Hinsdale            Community Consolidated School District 181

IDEA                Part B of the Individuals with Disabilities Education Act, as amended

ISBE                Illinois State Board of Education

OIG                 U.S. Department of Education, Office of Inspector General

OMB                 Office of Management and Budget

Recovery Act        American Recovery and Reinvestment Act of 2009

Rockford            Rockford Public Schools

SFSF                State Fiscal Stabilization Fund

SFSF-Education      State Fiscal Stabilization Fund-Education Stabilization Fund

SFSF-Government     State Fiscal Stabilization Fund-Government Services Fund

Title I             Title I, Part A of the Elementary and Secondary Education Act of 1965,
                    as amended

Waukegan            Waukegan Public Schools
                                  UNITED STATES DEPARTMENT OF EDUCATION
                                                        OFFICE OF INSPECTOR GENERAL

                                                                                                               AUDIT SERVICES
                                                                                                  Chicago/Kansas City Audit Region



June 9, 2011



David Vaught                                                                                Christopher Koch, Ed.D.
Director                                                                                    State Superintendent
Governor’s Office of Management and Budget                                                  Illinois State Board of Education
100 West Randolph Street                                                                    100 North 1st Street
James R. Thompson Center, Suite 15-100                                                      Springfield, IL 62777
Chicago, IL 60601-3220

Dear Sirs:

This final audit report, Control Number ED-OIG/A05K0005, presents the results of our audit
titled “Illinois: Use of Funds and Data Quality for Selected American Recovery and
Reinvestment Act Programs.” This report incorporates the comments you provided in response
to the draft report.

If you have any additional comments or information that you believe may have a bearing on the
resolution of this audit, you should send them directly to the following U.S. Department of
Education officials, who will consider them before taking final Departmental action on this audit:

                                                      Thomas Skelly

                                             Acting Chief Financial Officer

                                           Office of the Chief Financial Officer

                                              U.S. Department of Education
                                                  550 12th Street, S.W.
                                                 Washington, DC 20202

                                                      Ann Whalen 

                                               Deputy Director for Programs

                                             Implementation and Support Unit 

                                              U.S. Department of Education
                                               400 Maryland Avenue, S.W.
                                                 Washington, DC 20202




 The Department of Education's mission is to promote student achievement and preparation for global competitiveness by fostering educational
                                                   excellence and ensuring equal access.
Transmittal Letter
ED-OIG/A05K0005                                                                       Page 2 of 2
                             Thelma Meléndez de Santa Ana, Ph.D. 

                                       Assistant Secretary

                         Office of Elementary and Secondary Education 

                                 U.S. Department of Education 

                                  400 Maryland Avenue, S.W.

                                     Washington, DC 20202 


                                     Alexa E. Posny, Ph.D. 

                                        Assistant Secretary

                     Office of Special Education and Rehabilitative Services

                                 U.S. Department of Education 

                                       550 12th Street, S.W.

                                     Washington, DC 20202 


It is the policy of the U.S. Department of Education to expedite the resolution of audits by
initiating timely action on the findings and recommendations contained therein. Therefore,
receipt of your comments within 30 days would be appreciated.

Statements that managerial practices need improvements, as well as other conclusions and
recommendations in this report, represent the opinions of the Office of Inspector General.
Determinations of corrective action to be taken, including the recovery of funds, will be made by
the appropriate U.S. Department of Education officials in accordance with the General Education
Provisions Act.

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued by the
Office of Inspector General are available to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.

Sincerely,

/s/

Gary D. Whitman
Regional Inspector General for Audit
Final Report
ED-OIG/A05K0005                                                                     Page 1 of 30

                U.S. Department of Education – Office of Inspector General
                      Illinois: Use of Funds and Data Quality for Selected 

                     American Recovery and Reinvestment Act Programs

                              Control Number ED-OIG/A05K0005

                                            PURPOSE
The American Recovery and Reinvestment Act of 2009 (Recovery Act) places a heavy emphasis
on accountability and transparency and, in doing so, increases the responsibilities of the agencies
that are impacted by the Recovery Act. Overall, the U.S. Department of Education (Department)
is responsible for ensuring that education-related Recovery Act funds reach intended recipients
and achieve intended results. This includes effectively implementing and controlling funds at the
Federal level, ensuring that recipients understand requirements and have proper controls in place
over the administration of and reporting on Recovery Act funds, and promptly identifying and
mitigating instances of fraud, waste, and abuse of the funds.

The objectives of our audit were to determine whether Illinois and its subrecipients (1) used
Recovery Act funds in accordance with applicable laws, regulations, and guidance; and
(2) reported Recovery Act data that were accurate, reliable, complete, and in compliance with
Recovery Act reporting requirements. This report provides the results of the audit we conducted
at the Illinois State Board of Education (ISBE), Chicago Public Schools (Chicago), East Saint
Louis Public Schools (East Saint Louis), Rockford Public Schools (Rockford), the University of
Illinois, and Waukegan Public Schools (Waukegan). We focused our audit on State-level and
local-level uses of funds and data quality related to Title I, Part A of the Elementary and
Secondary Education Act of 1965, as amended (Title I); Part B of the Individuals with
Disabilities Education Act, as amended (IDEA); and State Fiscal Stabilization Fund (SFSF) grant
funds received through the Recovery Act for the period February 17, 2009, through
June 30, 2010. For use of funds, the Background section, page 4, describes the time period
during which the expenditures that we reviewed at each subrecipient were made. For data
quality, we reviewed data for the quarterly reporting periods that ended September 30, 2009,
December 31, 2009, and March 31, 2010.


                                     RESULTS IN BRIEF

Illinois took proactive measures to provide reasonable assurance that it and its subrecipients
complied with Recovery Act requirements. These measures included continuous distribution of
information and guidance to assist subrecipients in understanding their Recovery Act
responsibilities. For example, ISBE distributed relevant information and guidance through
weekly Superintendent messages and other reminder communications and held webinars to
provide subrecipients with reporting details and requirements. ISBE also required subrecipient
administrators to approve data before it could be submitted, prepared detailed Recovery Act
reporting guidance and instructions for subrecipients, and modified its existing expenditure
reporting system to capture Recovery Act data for reporting purposes. Finally, as of June 2010,
ISBE had taken corrective action to address a prior U.S. Department of Education, Office of
Inspector General (OIG) audit finding related to remitting interest earned on Federal grant
Final Report
ED-OIG/A05K0005                                                                                          Page 2 of 30

advances by revising its policies and procedures. ISBE now requires subrecipients to remit
interest at least quarterly.

The subrecipients we visited generally expended Recovery Act funds in accordance with
applicable laws, regulations, and guidance. However, Illinois could do more to provide
reasonable assurance of the appropriate use of Recovery Act funds and the quality of data
reported to the Federal government. Our audit disclosed that

               ISBE and its subrecipients did not always follow Federal cash management
                requirements;
               Illinois and its subrecipients did not always ensure that data reported to the Federal
                government were accurate, reliable, and complete; and
               three of the five subrecipients that we reviewed charged a small amount of
                unallowable or inadequately documented costs to Recovery Act grants.

To reduce the likelihood of such problems occurring in the future, Illinois and its subrecipients
need to further strengthen their systems of internal control to provide reasonable assurance that

               the time elapsing between the transfer of funds by ISBE and disbursement by the
                subrecipients is minimized; and
               Illinois collects and reports complete, reliable, and accurate Recovery Act
                infrastructure1 expenditures and jobs created and retained data.

We provided the draft of this report to the Illinois Governor’s Office of Management and Budget
(Governor’s Office) and ISBE for review and comment on February 17, 2011. The Governor’s
Office did not provide comments. In its response to Recommendation 2.1, ISBE did not agree to
develop and implement a system to collect and report infrastructure expenditure data for
SFSF-Government Services Fund (SFSF-Government) grant funds because it has spent all of its
SFSF-Government funds. ISBE did not agree or disagree with the other findings and
recommendations but did describe its planned corrective actions to address the findings and
recommendations. We summarized ISBE’s comments at the end of each finding and included
the comments in their entirety as an Enclosure to this report. We did not modify our findings or
make any significant changes to the report based on ISBE’s comments. However, we did add a
new Recommendation 2.2 to address correction of the final reporting of infrastructure
expenditure data for SFSF-Government funds.

In the Other Matters section of the draft of this report, we reported that Recovery Act programs
might need to be covered by Illinois’ Treasury-State Agreement. Illinois’ Treasury-State
Agreement did not list Recovery Act Title I, IDEA, or SFSF grants as major programs even
though Illinois’ allocations for each grant exceeded the major program threshold as defined by
this agreement. ISBE did not comment on this issue or the two other issues included in the Other
Matters section of the draft of this report. However, based on communications that we had with
the U.S. Department of the Treasury, we concluded that Illinois’ Treasury-State Agreement
covering the fiscal year ended June 30, 2009, was not required to include Recovery Act
programs because the programs were not identified as major Federal assistance programs in
1
    Infrastructure is support for tangible assets or structures such as roads and public buildings, including schools.
Final Report
ED-OIG/A05K0005                                                                                  Page 3 of 30

Illinois’ most recent Single Audit.2 Therefore, we removed from the Other Matters section the
suggestion that Recovery Act programs should be covered by Illinois’ Treasury-State
Agreement.


                                              BACKGROUND

The Recovery Act was signed into law on February 17, 2009, and had three immediate goals:
(1) create new jobs and save existing ones, (2) spur economic activity and invest in long-term
growth, and (3) foster accountability and transparency in government spending. To ensure
transparency and accountability of Recovery Act spending, recipients are required to submit
quarterly reports on Recovery Act awards, spending, and jobs impact (§ 1512 of the Recovery
Act). According to the Office of Management and Budget (OMB), the reports should contain
detailed information on the projects and activities funded by the Recovery Act and will provide
the public with transparency into how Federal dollars are being spent. The reports also will help
drive accountability for the timely, prudent, and effective spending of Recovery Act funds.

We previously conducted an audit of the systems of internal control over Recovery Act funds in
Illinois.3 That audit covered ISBE’s and other Illinois agencies’ designs for systems of internal
control over the administration and use of Recovery Act funds as of October 1, 2009. We
concluded that ISBE could improve its cash management procedures and subrecipient
monitoring to provide reasonable assurance of compliance with Federal requirements.
Specifically, we reported that ISBE did not have an adequate process in place for monitoring
cash balances at subrecipients for Recovery Act Title I, IDEA, and SFSF grants. We also
reported that two of the three subrecipients visited during the audit (Chicago and Hinsdale) were
not tracking SFSF grant expenditures, while one of the three subrecipients (Hinsdale) had not
established procedures to ensure that Recovery Act IDEA data were accurate, complete, reliable,
and in compliance with Recovery Act reporting requirements.

Illinois was awarded nearly $3 billion in education-related Recovery Act funds under the Title I,
IDEA, and SFSF grants. Recovery Act Title I and IDEA grant funds were awarded to ISBE
beginning February 17, 2009, and SFSF grant funds were awarded to the Governor’s Office
beginning April 17, 2009. Table 1 identifies the amounts awarded as well as the amounts Illinois
has received from the Department. As of February 17, 2011, Illinois had received nearly
$2.6 billion, or 89 percent of the funds awarded.




2
  Treasury regulations at Title 31 Code of Federal Regulations (C.F.R.) § 205.5(e) provide that “Unless specified 

otherwise, major Federal assistance programs must be determined from the most recent Single Audit data available.”

All regulatory citations are to the July 1, 2008, volume, unless otherwise noted.

3
  “Systems of Internal Control Over Selected ARRA Funds in the State of Illinois” (ED-OIG/A05J0012, 

February 23, 2010), which included a review of Chicago, Community Consolidated School District 181 (Hinsdale), 

and East Saint Louis. 

Final Report
ED-OIG/A05K0005                                                                    Page 4 of 30

   Table 1. Recovery Act Funding for Selected Grants in Illinois, as of
            February 17, 2011
                                                                 Percentage of Award
           Grant             Awarded          Received               Received (%)
   SFSF-Education          $1,681,130,685    $1,681,130,685             100.00
   SFSF-Government           $374,041,302      $374,041,302             100.00
   SFSF Subtotal           $2,055,171,987    $2,055,171,987             100.00
   Title I                   $420,263,561      $241,798,485              57.53
   IDEA                      $506,479,753     $348,749,744               68.86
   Total                   $2,981,915,301    $2,645,720,216              88.73

The Governor’s Office, through an interagency agreement, designated ISBE to disburse and
report on SFSF-Education Stabilization Fund (SFSF-Education) and SFSF-Government funds.
The Governor’s Office determined that it would use most of the SFSF-Education and
SFSF-Government funds for general State aid payments to subrecipients. Some of the
SFSF-Government funds were used for Early Childhood Education (ECE) programs at some
subrecipients. Institutions of higher education also received a portion of the fiscal year 2010
SFSF-Education and SFSF-Government funds.

The five subrecipients that we included in this audit were allocated a total of $937,749,729 in
Recovery Act Title I, IDEA, and SFSF grant funds, which is more than 31 percent of the
Recovery Act Title I, IDEA, and SFSF grant funds provided to Illinois. Table 2, Recovery Act
Allocations and Expenditures by Subrecipient (see page 5), shows the amounts allocated to and
received by each of the five subrecipients. Table 2 also includes the amounts and the percentage
of the allocated amounts that each subrecipient had expended during the time period reviewed.
   Final Report
   ED-OIG/A05K0005                                                                              Page 5 of 30

Table 2. Recovery Act Allocations and Expenditures by Subrecipient
                                             Amount                Amount            Percentage
                                             Received             Expended                 of
                                              During            During Time           Allocation
                           Amount         Time Period               Period            Expended         Time Period
        Grant             Allocated         Reviewed             Reviewed*                (%)            Reviewed
                                                      Chicago
Title I                 $260,695,483                   $0           $42,840,281           16.43      2/17/09-3/31/10
IDEA                    $115,005,351 $36,533,298                    $35,927,710           31.24      2/17/09-3/31/10
SFSF-Education          $260,053,385 $260,053,385                 $260,053,384          100.00       4/17/09-3/31/10
SFSF-Government $33,590,625 $33,590,625                             $33,590,625         100.00       4/17/09-3/31/10
SFSF-Government $111,997,901 $72,050,373                            $74,133,970           66.19      4/17/09-3/31/10
(ECE portion)
Subtotal                $781,342,745 $402,227,681                 $446,545,970            57.15
                                                 East Saint Louis
Title I                    $6,392,926        $1,641,376               $1,784,295          27.91      2/17/09-6/30/10
IDEA                       $2,307,178          $444,246                $167,333             7.25     2/17/09-6/30/10
SFSF-Education            $23,338,714 $23,338,714                   $23,338,100         100.00       4/17/09-6/30/10
SFSF-Government            $2,855,366        $2,855,366               $2,855,630        100.00       4/17/09-6/30/10
Subtotal                  $34,894,184 $28,279,702                   $28,145,358           80.66
                                                      Rockford
Title I                    $9,209,891        $5,968,181               $2,649,572          28.77       2/17/09-3/8/10
IDEA                       $8,069,430        $4,841,657                  $45,557           0.56       2/17/09-3/8/10
SFSF-Education            $16,211,091 $16,211,091                   $16,211,091         100.00        4/17/09-3/8/10
SFSF-Government            $3,308,457        $3,308,457               $3,308,457        100.00        4/17/09-3/8/10
SFSF-Government            $8,563,634        $2,862,497               $5,041,014          58.87       4/17/09-3/8/10
(ECE)
Subtotal                  $45,362,503 $33,191,883                   $27,255,691           60.08
                                             University of Illinois
SFSF-Education            $18,670,800 $18,670,800                   $18,670,800         100.00       4/17/09-6/30/10
SFSF-Government $26,847,800 $26,847,800                             $26,847,800         100.00       4/17/09-6/30/10
Subtotal                  $45,518,600 $45,518,600                   $45,518,600         100.00
                                                     Waukegan
Title I                    $2,718,848        $1,359,423               $1,517,249          55.80      2/17/09-3/31/10
IDEA                       $4,204,235        $1,835,022              $1,397,450           33.24      2/17/09-3/31/10
SFSF-Education            $20,952,330 $20,952,330                   $20,952,329         100.00       4/17/09-3/31/10
SFSF-Government            $2,756,284        $2,756,284               $2,756,284        100.00       4/17/09-3/31/10
Subtotal                  $30,631,697 $26,903,059                   $26,623,312           86.91
Grand Total For $937,749,729 $536,120,925                         $574,088,931            61.22
All Subrecipients
Reviewed
*Four subrecipients charged to Recovery Act grants expenditures that were incurred before ISBE provided the funds to
cover those expenses (but after enactment of the Recovery Act).

    DATIONS
Final Report
ED-OIG/A05K0005                                                                                 Page 6 of 30

                           FINDINGS AND RECOMMENDATIONS

FINDING NO. 1 – ISBE and Its Subrecipients Could Strengthen Procedures
                for Complying with Federal Cash Management
                Requirements
Each of the four subrecipients that we reviewed and that received Recovery Act Title I and
IDEA funds maintained positive Recovery Act cash balances at the time of additional
disbursements by ISBE. Specifically, ISBE disbursed Recovery Act IDEA grant funds to
Chicago, Rockford, and Waukegan and Recovery Act Title I grant funds to East Saint Louis and
Rockford even though all four subrecipients had positive cash balances for those grants.

ISBE disbursed Recovery Act Title I and IDEA grant funds via the advance payment method
based on payment schedules that subrecipients submitted with their grant application budgets.
These payment schedules contained each subrecipient’s anticipated monthly cash needs based on
their budget. Subrecipients could initiate changes to their payment schedules to avoid positive
cash balances by contacting ISBE. None of the four subrecipients notified ISBE that they
needed to change their payment schedules to avoid having positive cash balances.

The Department’s guidance for funds made available under the Recovery Act addresses the
fiscal rules for these funds. The April 2009 guidance states that Recovery Act funds made
available under the Title I, IDEA, and SFSF programs must follow the requirements set forth in
34 C.F.R. § 80.21(b) and (i).4 Federal regulations at 34 C.F.R. § 80.21 prescribe the basic
standard and the methods under which grantees will make payments to subgrantees. The basic
standard is that the procedures for payment will minimize the time elapsing between the transfer
of funds and disbursement by the grantee or subgrantee. The regulations address two payment
methods:

        1.	 Advances. Grantees and subgrantees are paid in advance, provided they maintain
            or demonstrate the willingness and ability to maintain procedures to minimize the
            time elapsing between the transfer of the funds and their disbursement by the
            grantee or subgrantee.

        2.	 Reimbursement. Reimbursement is the preferred method when the requirements
            for advances are not met.

ISBE’s Quarterly Expenditure Reporting Process Did Not Provide Reasonable Assurance
of Compliance with Federal Cash Management Requirements
ISBE did not have an adequate process to monitor subrecipients’ cash balances on hand prior to
disbursing additional funds according to the subrecipients’ payment schedules. ISBE used
quarterly expenditure reports submitted by subrecipients to determine whether each subrecipient
had positive cash balances at the end of each quarter. If a positive cash balance existed at the

4
 Guidance referenced includes “Funds for Part B of the Individuals with Disabilities Education Act Made Available
Under the American Recovery and Reinvestment Act of 2009”; “Funds Under Title I, Part A of the Elementary and
Secondary Education Act of 1965 Made Available Under the American Recovery and Reinvestment Act of 2009”;
and “Guidance on the State Fiscal Stabilization Fund Program,” all dated April 2009.
Final Report
ED-OIG/A05K0005                                                                    Page 7 of 30

end of a quarter, ISBE’s policy was to withhold future disbursements for each subrecipient until
each positive cash balance had been expended. However, as reported in our February 2010 audit
report, titled “Systems of Internal Control Over Selected ARRA Funds in the State of Illinois,”
ISBE’s use of these quarterly expenditure reports did not always ensure that positive cash
balances within a quarter were detected prior to the disbursement of additional funds.

As a result, during our current audit,

       	 Chicago had a Recovery Act IDEA grant cash balance of more than $5.6 million from
          March 9, 2010, through March 31, 2010.
       	 Rockford had a Recovery Act Title I grant cash balance of more than $2.5 million
          from January 11, 2010, through February 28, 2010; and a Recovery Act IDEA grant
          cash balance of more than $2.4 million from November 19, 2009, through
          February 28, 2010.
       	 Waukegan had a Recovery Act Title I grant cash balance of more than $326,012 from
          March 9, 2010, through March 22, 2010; and a Recovery Act IDEA grant cash
          balance of more than $233,154 from November 17, 2009, through March 26, 2010.
       	 East Saint Louis had a Recovery Act Title I grant cash balance of more than $311,000
          from February 9, 2010, through March 7, 2010; and a Recovery Act IDEA grant cash
          balance of more than $276,000 from June 8, 2010, through June 30, 2010.

ISBE also disbursed Recovery Act funds to East Saint Louis based on a quarterly expenditure
report that contained an overstatement of actual expenditures. For the quarterly reporting period
ended December 31, 2009, East Saint Louis overstated Recovery Act Title I grant expenditures
by $482,044 and Recovery Act IDEA grant expenditures by $30,376. ISBE, following its
disbursement method that relied on these quarterly expenditure reports, disbursed Recovery Act
Title I funds to East Saint Louis, unaware that this disbursement resulted in East Saint Louis
having a positive cash balance. When East Saint Louis overstated expenditures in its quarterly
expenditure report, ISBE was unable to determine its actual cash position. If ISBE had known
that a positive cash balance existed, it would have withheld additional disbursements.

When we notified ISBE of the positive cash balances at the subrecipients, ISBE stated that it has
been in the process of implementing corrective action for cash management issues identified in
our February 2010 audit. In response to that audit, ISBE stated that it would take the following
corrective actions:

       1. 	 Release scheduled subrecipient payments at the beginning of the month instead of the
            end of the prior month to eliminate the risk that a subrecipient will receive funds
            earlier than intended.
       2. 	 Change the subrecipient quarterly expenditure report due date from 30 days to
            20 days from the end of the quarter.
       3. 	 Change the subrecipient excess cash calculation by using a cash basis determination
            that does not include outstanding obligations.
       4. 	 Apply any unexpended funds (on a cash basis) from a subrecipient’s prior year grant
            to its Federal project for the new fiscal year.
Final Report
ED-OIG/A05K0005 	                                                                         Page 8 of 30

During our current audit, ISBE informed us that it implemented corrective action item one in
fiscal year 2010 and would implement corrective action item two beginning with the fiscal year
2011 quarterly expenditure reports. Regarding corrective action items three and four, ISBE is
considering moving all Federal grants to a reimbursement method of funding beginning in fiscal
year 2012. The reimbursement payment method reimburses subrecipients for expenditures made
during the prior month rather than providing funds to subrecipients in advance of their use.

In its corrective action plan responding to our February 2010 audit report, ISBE also stated that it
implemented changes to its policies and procedures for remitting interest on advanced Federal
grant funds. ISBE revised its “State and Federal Grant Administration Policy and Fiscal
Requirements and Procedures” handbook in June 2010 and now requires subrecipients to remit
interest earned on at least a quarterly basis, as required by Federal regulations. Although our
current audit disclosed that subrecipients still were planning to remit interest at year-end, the data
that we reviewed at each subrecipient were for periods prior to each subrecipient being notified
of the June 2010 revision of the handbook.

Noncompliance with Federal Cash Management Requirements Increases the Risk of Harm
to the Federal Interest
It is important that prime recipients do not draw and disburse Federal funds before subrecipients
need the funds. The U.S. Department of the Treasury incurs additional borrowing costs when the
prime recipient draws and disburses Federal funds to subrecipients in advance of their immediate
cash needs. Because of the Federal deficit, the U.S. Department of the Treasury must borrow the
cash needed to fund Federal programs and, as a result, incurs interest costs. It also is important
that Federal funds not be drawn and disbursed before subrecipients need the funds because the
funds might be more susceptible to misuse when held in local accounts for extended periods.
Our past audits and investigations have identified instances involving Federal funds where the
systems of internal control were weak, by-passed, or nonexistent, resulting in the misuse or even
theft of recipients’ Federal funds.5

RECOMMENDATIONS

We recommend that the Chief Financial Officer require ISBE to—

1.1	    Further strengthen its procedures to accurately identify positive cash balances before
        approving cash disbursements so that it minimizes the time elapsing between the transfer
        of funds by the State and disbursement by the subrecipients.

1.2	    Provide assurance that it implemented its corrective action to calculate and remit interest
        earned by all subrecipients for the Recovery Act Title I and IDEA grants to the
        Department in a timely manner.




5
 “Fiscal Issues Reported in Department OIG Work Related to LEAs and SEAs” (Management Information Report,
ED-OIG/X05J0005, July 21, 2009); “An OIG Perspective on Improving Accountability and Integrity in ESEA
Programs” (ED-OIG/S09H0007, October 16, 2007).
Final Report
ED-OIG/A05K0005                                                                    Page 9 of 30

Auditee Comments
For Recommendation 1.1, ISBE stated that, beginning with fiscal year 2011, it is requiring
quarterly expenditure reports to be submitted 20 days following the end of the quarter instead of
30 days. ISBE stated that the earlier due date allows it to assess whether excess cash exists and
offset the payments scheduled for the following month prior to vouchering. In addition, on
August 31, 2010, a policy decision was made by ISBE’s Chief Financial Officer to move
towards a reimbursement method for Federal grants in fiscal year 2012, which ISBE stated will
eliminate any excess cash held by local educational agencies.

For Recommendation 1.2, ISBE stated that it has revised, expanded, and implemented new
guidance on calculating interest earned and remittance in its “State and Federal Grant
Administration Policy and Fiscal Requirements and Procedures” handbook. ISBE stated that the
internal decision to move to a reimbursement method for all Federal programs in fiscal year 2012
should eliminate this finding completely.

OIG Response
We did not make any changes to the finding or recommendations based on ISBE’s comments.
Regarding ISBE’s comments to Recommendation 1.1, subrecipients providing quarterly
expenditure reports 20 days following the end of the quarter instead of 30 days still will not
enable ISBE to detect positive cash balances within quarters prior to disbursing additional funds
during fiscal year 2011. Implementation of the reimbursement payment method beginning in
fiscal year 2012 should prevent ISBE from providing funds to subrecipients when they have
positive cash balances. For Recommendation 1.2, ISBE did not provide support for us to
confirm implementation of this new guidance.

FINDING NO. 2 – Illinois and Its Subrecipients Could Further Strengthen
                Procedures for Reporting Data That Are Accurate,
                Reliable, and Complete
ISBE reported elements on Recovery Act quarterly reports provided to FederalReporting.gov
that were not always accurate, reliable, and complete. Data that ISBE submitted for the quarterly
reporting period that ended December 31, 2009, included infrastructure expenditures for the
Recovery Act IDEA and SFSF-Government grants that were inaccurate. ISBE also submitted
inaccurate full-time equivalent (FTE) jobs created and retained data that it received from
subrecipients for the quarterly reporting periods that ended September 30, 2009, December 31,
2009, and March 31, 2010.

Inaccurate Reporting of Infrastructure Expenditure Information
Illinois did not have a system in place to collect complete, accurate, and reliable data regarding
infrastructure expenditures that subrecipients paid with Recovery Act Title I, IDEA,
SFSF-Education, and SFSF-Government grant funds. Our testing did not identify evidence that
ISBE reported inaccurate infrastructure expenditure information for the Recovery Act Title I and
SFSF-Education grants. However, for the Recovery Act IDEA and SFSF-Government grants,
ISBE reported inaccurate infrastructure expenditure information for the quarterly reporting
period that ended December 31, 2009.
Final Report
ED-OIG/A05K0005                                                                               Page 10 of 30

Recovery Act IDEA Grant
ISBE reported the total amount of approved, budgeted construction costs for subrecipients as
infrastructure expenditures for the quarterly reporting period that ended December 31, 2009.
When applying for Recovery Act IDEA funds, subrecipients submitted construction budgets to
ISBE’s IDEA program department for review and approval. For the quarterly reporting period
that ended December 31, 2009, ISBE reported the total dollar amount of the Recovery Act
IDEA construction budgets ($16,648,541) that had been approved as of December 31, 2009, in
the “Total Federal ARRA Infrastructure Expenditure” field rather than the amount that had been
expended.

Section 1512(c) of Division A of the Recovery Act6 requires recipients to report the amount of
Recovery Act funds received that were expended or obligated for projects or activities,
including infrastructure investments made by State and local governments, and states that details
on the data elements are required to comply with the Federal Funding Accountability and
Transparency Act of 2006 (Pub. L. 109-282). According to “Education Department Recipient
Reporting Tip Sheets for IDEA Formula Grant Programs,” issued August 28, 2009,
infrastructure investments include support for tangible assets or structures such as roads and
public buildings (including schools). In addition, Recovery.gov’s “Recipient Reporting Data
Model V3.0, Final Production Release – for Quarter Ending September 30, 2009,” specifies that
the “Total Federal ARRA Infrastructure Expenditure” field is for expenditures. It does not give
the option of reporting approved, budgeted costs.

Illinois did not have a system in place to collect accurate, reliable, and complete data regarding
infrastructure investments paid with Recovery Act funds. ISBE’s expenditure reporting system
did not allow for subrecipients to specifically identify infrastructure costs versus other
expenditures. Therefore, ISBE did not know the total amount of actual infrastructure
expenditures and could not report this amount to FederalReporting.gov.

SFSF-Government Grant
ISBE did not report construction costs as infrastructure expenditures for the quarterly reporting
period that ended December 31, 2009. Our review of vendor information showed that one
subrecipient used $1,064,915 in SFSF-Government funds for various construction projects.
However, ISBE did not report any infrastructure expenditures in the “Total Federal ARRA
Infrastructure Expenditure” field.

Construction costs should be categorized and reported as infrastructure expenditures on quarterly
reports. Section 1512(c) of the Recovery Act requires recipients of Recovery Act funds to
report, for infrastructure investments made by State and local governments, the purpose, total
cost, and rationale of the agency for funding the infrastructure investment with funds made
available under the Recovery Act. According to “Education Department Recipient Reporting
Tip Sheets for State Fiscal Stabilization Fund Programs,” issued August 28, 2009, infrastructure
investments are “support for tangible assets or structures such as roads, public buildings
(including schools). . . .”



6
    All subsequent section references to the Recovery Act in this report are to Division A.
Final Report
ED-OIG/A05K0005                                                                                       Page 11 of 30

ISBE distributed SFSF-Government funds as general State aid payments, which is Illinois’
primary education funding formula. Therefore, it did not require subrecipients to provide a
budget detailing how they would use these funds. ISBE expected the funds to be used for
operating expenditures, not infrastructure, and was not aware that one subrecipient had expended
funds in this manner until the subrecipient reported these vendor payments. After we notified
ISBE of this issue, we were provided with a revised Recovery Act quarterly report for
SFSF-Government funds, dated July 14, 2010, that reported $1,211,844 in Recovery Act
infrastructure expenditures.7 However, this $1,211,844 included infrastructure expenditures for
only one subrecipient, and ISBE did not provide any documentation showing that it had
established procedures to provide reasonable assurance that it is reporting infrastructure
expenditures for all subrecipients.

Inaccurate Reporting of Jobs Information
ISBE and two of the five subrecipients that we tested reported inaccurate jobs created and
retained information for Recovery Act grants. For the quarterly reporting periods that ended
September 30, 2009, and December 31, 2009, Waukegan did not collect and report to ISBE
information for the Recovery Act Title I and IDEA grants regarding jobs created and retained by
vendors. For the quarterly reporting period that ended March 31, 2010, the University of Illinois
overreported the FTE of jobs created and retained for the SFSF-Education and SFSF-
Government grants. ISBE used these data to report FTE data to FederalReporting.gov. Also, for
two other subrecipients that we tested (Rockford and Chicago), ISBE did not report revisions to
FTE data for the quarterly reporting period that ended December 31, 2009. ISBE did not report
these revisions because subrecipients provided them after the March 15, 2010, deadline for
Illinois to provide updated FTE data to FederalReporting.gov.

Waukegan
For the quarterly reporting periods that ended September 30, 2009, and December 31, 2009,
Waukegan did not collect and report to ISBE the FTE of all jobs created and retained by
Recovery Act Title I and IDEA grants. For these grants, Waukegan reported as created and
retained only the number of jobs for Waukegan employees paid with Recovery Act funds,
excluding at least 22.6 FTE jobs created and retained by vendors.

Section 1512(c) of the Recovery Act requires recipients of Recovery Act funds to report, among
other things, an estimate of the number of jobs created and the number of jobs retained by the
project or activity. In addition, the “U.S. Department of Education Clarifying Guidance on
American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5) Reporting on Jobs Creation
Estimates by Recipients,” September 2009, Question 1.3, states that “Subrecipients under this
program will be expected to contact their vendors, as necessary, to estimate the jobs created or
retained as a result of Recovery Act funding.”

Waukegan’s Director of Special Education Compliance and Monitoring informed us that she was
not aware that Waukegan needed to collect jobs data from vendors and include vendor job data
in quarterly reports to ISBE. Therefore, the number of FTE that Waukegan reported to ISBE
was underreported on the September 30, 2009, and December 31, 2009, quarterly reports. After

7
 All of these infrastructure expenditures related to the one subrecipient that reported, for the quarter that ended
December 31, 2009, using SFSF-Government funds for construction projects.
Final Report
ED-OIG/A05K0005                                                                                  Page 12 of 30

we discussed this requirement with Waukegan officials, Waukegan provided a list received from
vendors identifying 22.6 FTE jobs created and retained for the Recovery Act IDEA grant.
However, Waukegan did not provide any documentation that it (1) revised reports to ISBE to
include vendor jobs created and retained by the Recovery Act Title I and IDEA grants or
(2) changed its procedures to collect and report on data regarding jobs funded by Recovery Act
funds provided to vendors.

University of Illinois
For the quarterly reporting period that ended March 31, 2010, the University of Illinois
incorrectly calculated jobs created and retained with SFSF-Education and SFSF-Government
funds. As a result, the University of Illinois reported at least 36.44 FTE more than it should have
reported as created and retained by these funds.

We judgmentally selected the largest pay period by dollar amount for two campuses
(Urbana-Champaign and Chicago) for the SFSF-Education and SFSF-Government grants.8 For
both grants, we judgmentally selected samples totaling 22 employees (5 with salaries over
$1,000 for the SFSF-Education and SFSF-Government grants at each campus, plus the employee
paid the largest salary for the SFSF-Government grant at each campus) from universes totaling
5,495 employees paid during the selected pay periods. We determined that, for two of the
employees, the University of Illinois overreported jobs funded with SFSF. For example, for one
of the employees, the University of Illinois used SFSF to pay the employee’s salary for the
January 16, 2010, through February 15, 2010, pay period. The amount paid was the total of
separate salaries due to the employee for two part-time positions equaling 1.0 FTE. In its report
for the quarter that ended March 31, 2010, the University of Illinois reported 0.66 FTE for this
employee. The University of Illinois should have reported only 0.33 FTE for this employee for
this pay period because the SFSF grant paid the salary for a total of 1.0 FTE for this pay period
only, which is one-third of the quarterly reporting period. Because we identified problems with
2 of the 22 employees in our sample, we analyzed information regarding FTE that the University
of Illinois reported for each of the 5,564 employees paid with the 2 SFSF grants during all pay
periods. We identified 216 employees for whom the University of Illinois overreported FTE.
For these 216 employees, we calculated that the University of Illinois overstated reported jobs
funded by the 2 SFSF grants by at least 36.44 FTE. Therefore, FederalReporting.gov did not
include accurate FTE data for Illinois.

Section 1512(c) of the Recovery Act requires recipients of Recovery Act funds to report, among
other things, an estimate of the number of jobs created and the number of jobs retained by the
project or activity. Also, the December 18, 2009, “Updated Guidance on the American Recovery
and Reinvestment Act - Data Quality, Non-Reporting Recipients, and Reporting of Job Estimates
(M-10-08),” § 5.2, states that “In calculating [FTE for jobs], the number of actual hours worked
in funded jobs are divided by the number of hours representing a full work schedule for the kind
of job being estimated.” In addition, the August 26, 2010, “U.S. Department of Education
Clarifying Guidance on the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5),”
Question 3, states that “. . . If an employee is fully funded by [the Recovery Act] and works


8
 The University of Illinois did not receive any Recovery Act Title I or IDEA funds and used SFSF only for
personnel expenditures.
Final Report
ED-OIG/A05K0005                                                                       Page 13 of 30

additional hours beyond the full-time schedule that are also funded by [the Recovery Act], the
employee would be reported as more than 1 FTE.”

After we notified the University of Illinois of this issue, the University of Illinois agreed that it
overstated jobs created and retained and submitted to ISBE a corrected report for the quarterly
reporting period that ended March 31, 2010. The University of Illinois provided us the corrected
report, dated October 4, 2010, and supporting documentation showing that it reduced the
FTE jobs created and retained by the 2 SFSF grants from 2,459.29 to 2,410.30, a decrease of 49
FTE. Because the University of Illinois provided the corrected report to ISBE after the deadline
for submitting corrections to FederalReporting.gov for the quarter that ended March 31, 2010,
ISBE was unable to provide this updated information to FederalReporting.gov.

ISBE
For 2 of the subrecipients that we tested, ISBE did not report revisions that would have increased
reported jobs by a total of 224.41 FTE. In response to the issuance of “Updated Guidance on the
American Recovery and Reinvestment Act - Data Quality, Non-Reporting Recipients, and
Reporting of Job Estimates (M-10-08),” ISBE created a new Recovery Act data collection
system for subrecipients to report jobs created and retained information as well as vendor
payment data. The new Recovery Act data collection tool is a stand-alone system in ISBE’s data
collection system. On March 3, 2010, ISBE instructed subrecipients to submit revisions to their
jobs data for the quarterly reporting period that ended December 31, 2009. Two of the
subrecipients that we visited (Rockford and Chicago) submitted these revisions to ISBE after the
March 15, 2010, deadline.

       	 On April 21, 2010, Rockford reported 141 FTE for the SFSF-Government grant.
          Rockford originally reported 0 FTE for the quarter, which ISBE included in its
          quarterly report to FederalReporting.gov.

       	   On April 22, 2010, Chicago reported 655.93 FTE for the SFSF-Government grant.
            Chicago originally reported 572.52 FTE for the quarter, which ISBE included in its
            quarterly report to FederalReporting.gov.

Because subrecipients did not report revisions to jobs created and retained data in a timely
manner, ISBE could not report revised FTE information to FederalReporting.gov by the
March 15, 2010, deadline. Therefore, FederalReporting.gov did not include accurate jobs
created and retained data for Illinois.

Illinois’ system of internal control over reporting Recovery Act data was not sufficient to provide
reasonable assurance that subrecipients reported accurate, reliable, and complete jobs data in a
timely manner. ISBE stated that it made every effort to submit correct information to
FederalReporting.gov in a timely manner, including having its new data collection tool available
to subrecipients on March 1, 2010. ISBE attempted to meet the original March 31, 2010,
deadline for providing updated FTE data, but the deadline was later changed to March 15, 2010.
ISBE submitted updated FTE data to FederalReporting.gov on March 15, 2010, but the data did
not include subrecipient revisions provided after that date.
Final Report
ED-OIG/A05K0005                                                                     Page 14 of 30

RECOMMENDATIONS

We recommend that the Deputy Director for Programs, Implementation and Support Unit, in
conjunction with the Assistant Secretary for Elementary and Secondary Education and the
Assistant Secretary for Special Education and Rehabilitative Services, require Illinois to—

2.1	    Develop and implement a system to collect and report accurate, reliable, and complete
        Recovery Act infrastructure expenditure data from subrecipients.

2.2 	   Correct the final reporting of infrastructure expenditure data for SFSF-Government
        funds, ensuring that infrastructure expenditures for all subrecipients are included.

2.3 	   Ensure subrecipients implement procedures for collecting and reporting, in a timely
        manner, correct FTE for jobs, including vendor jobs, created and retained by SFSF grant
        funds.

Auditee Comments
For Recommendation 2.1, ISBE stated that it has developed and implemented formal procedures
related to the collection and reporting of infrastructure costs for Recovery Act IDEA Grant
funds. Although ISBE is aware of the reporting rules as they relate to budgeted versus expended
infrastructure costs, its current accounting system is not structured to split infrastructure
disbursements and expenditures from non-infrastructure disbursements and expenditures. ISBE
collects quarterly expenditure reports from the subrecipients that have approved infrastructure
costs, but the reports are not collected until 20 days following the end of each quarter. ISBE also
stated that, while it cannot report actual expenditures for infrastructure by the 10-day reporting
deadline defined in § 1512 of the Recovery Act, it might be able to report expenditures during
the correction window allowed by FederalReporting.gov. ISBE stated that it has fully expended
SFSF-Government funds. Therefore, no further action relating to a system to collect
infrastructure expenditure data from subrecipients is required.

For Recommendation 2.3, which was Recommendation 2.2 in the draft of this report, ISBE
stated that it tells subrecipients on a continuous basis to provide timely FTE data. ISBE’s
procedures include sending out reminders using the Superintendent’s weekly message and
monthly broadcasts through its ISBE Web Application Security System. In addition, ISBE
makes calls to those subrecipients that have not reported by the established deadline.

OIG Response
We did not make any changes to the finding based on ISBE’s comments. Regarding
Recommendation 2.1, ISBE did not agree to develop and implement a system to collect and
report infrastructure expenditure data for SFSF-Government funds. However, even though
subrecipients have expended all SFSF-Government funds, Illinois still needs to report complete
infrastructure expenditure data for all subrecipients to FederalReporting.gov. For clarity, we
added Recommendation 2.2 to address specifically SFSF-Government funds. ISBE also stated
that it has developed and implemented procedures to collect and report infrastructure expenditure
data for the Recovery Act IDEA grants. However, ISBE did not provide documentation that
would allow us to confirm the development and implementation of these procedures and stated
that these procedures still will not allow it to timely report infrastructure expenditure data.
Final Report
ED-OIG/A05K0005                                                                                 Page 15 of 30

Regarding Recommendation 2.3, which was Recommendation 2.2 in the draft of this report,
although ISBE described procedures that it implemented to address the recommendation, it did
not provide documentation that would allow us to confirm that it has ensured that subrecipients
have implemented procedures for collecting and reporting, in a timely manner, correct FTE for
jobs, including vendor jobs, created and retained by SFSF grant funds.

FINDING NO. 3 – Illinois Subrecipients Generally Spent Recovery Act Funds
                for Allowable Purposes but Minor Instances of
                Noncompliance Occurred
The subrecipients that we visited generally expended their Recovery Act funds in accordance
with applicable laws, regulations, and guidance. We did not find any unallowable or
inadequately documented costs charged to Recovery Act funds by Rockford or the University of
Illinois. However, Chicago and Waukegan used $11,042 of the $2,831,329 that we tested for
unallowable costs; and Chicago, East Saint Louis, and Waukegan used $24,273 of the
$2,831,329 that we tested for inadequately documented costs. Table 3 includes all unallowable
and inadequately documented costs.

 Table 3. Unallowable and Inadequately Documented Costs
                     Grant and                          Amount                                   Inadequately
  Subrecipient     Cost Category       Universe          Tested      Allowable    Unallowable    Documented
 Chicago          Title I Non-        $4,054,294 $1,764,722 $1,761,988               $1,042         $1,692
                  Personnel
 East Saint Louis Title I             $1,784,295        $510,246*     $506,210          $0          $4,036
                  Personnel
 Waukegan         IDEA                  $349,101          $14,621        $5,193         $0          $9,428
                  Personnel
 Waukegan         Title I                $44,325            $9,117           $0         $0          $9,117
                  Personnel
 Waukegan         IDEA Non-           $1,048,349         $532,623     $522,623      $10,000            $0
                  Personnel
 Totals                               $7,280,364 $2,831,329 $2,796,014              $11,042        $24,273
 * Amount includes nine adjusting journal entries totaling $496,100.

Unallowable Costs
Two subrecipients used Recovery Act funds for unallowable costs.

        	 Waukegan charged $20,000 to the Recovery Act IDEA grant even though there was
           only one $10,000 payment owed to one vendor. Waukegan entered the same expense
           into its accounting system twice and paid it twice. After we brought the duplicate
           charge to Waukegan’s attention, Waukegan’s Director of Grants and Budgets stated
           that this occurrence was a clerical error and provided evidence that the duplicate
           charge was reversed.

        	 Chicago used Recovery Act Title I grant funds for unallowable costs totaling $1,042:
           (a) an hour of bowling at an employee retreat ($120), (b) tax on meals at a
           professional development event for which Chicago had tax exempt status ($45), and
Final Report
ED-OIG/A05K0005                                                                   Page 16 of 30

           (c) hotel expenses for employees who attended a professional development event but
           did not actually stay overnight ($877).

OMB Circular A-87, “Cost Principles for State, Local, and Indian Tribal Governments,”
provides the requirements for determining the allowability of costs charged to Federal grants by
a State. According to “Attachment A, Paragraph C.1,” to be allowable, costs must be reasonable
and necessary for proper and efficient performance and administration of Federal awards, be
allocable to Federal awards, and be adequately documented. “Attachment B, Paragraph 14,
Entertainment,” states that costs of entertainment, including amusement, diversion, and social
activities are unallowable.

Inadequately Documented Costs
Three subrecipients charged costs to Recovery Act funds without maintaining adequate
documentation to support the costs.

       	 Waukegan did not collect and maintain adequate documentation to support $18,545 in
          personnel expenditures. The $18,545 consisted of $9,117 charged to Recovery Act
          Title I funds and $9,428 charged to Recovery Act IDEA funds. Waukegan did not
          collect and maintain semi-annual certifications for employees working solely on the
          Recovery Act and regular Title I grants and the Recovery Act and regular IDEA
          grants, as required. Waukegan could not demonstrate that each employee funded
          solely by these Federal grants spent 100 percent of his or her time working on each
          grant. However, after we notified Waukegan of this deficiency, it provided adequate
          semi-annual certifications for the employees included in our samples.

       	 East Saint Louis did not provide adequate documentation to support $4,036 in
          Recovery Act Title I grant personnel transactions related to two adjusting journal
          entries that charged the grant for Teachers’ Retirement System payments. The first,
          adjusting journal entry 665, charged a total of $19,320 to the Recovery Act Title I
          grant. However, the salary amounts recorded in the documentation provided to us,
          multiplied by the Teachers’ Retirement System rate of 24.59 percent, was only
          $16,438, a difference of $2,882. The second, adjusting journal entry 666, charged a
          total of $17,592 to the Recovery Act Title I grant. However, the salary amounts
          recorded in the documentation provided to us, multiplied by the Teachers’ Retirement
          System rate of 24.59 percent, was only $16,438, a difference of $1,154.

       	 Chicago did not provide adequate documentation to support $1,692 in Recovery Act
          Title I grant non-personnel expenditures for professional development events ($849
          paid for excessive meals and $843 for travel expenditures). Chicago provided
          attendance sheets for a professional development retreat. However, the number of
          meals for which Chicago paid exceeded the number of attendees supported by the
          attendance sheets. Chicago’s Director of Grants Management and Administration
          stated that the meals were for individuals who did not sign the attendance sheets and
          for speakers and presenters. However, Chicago did not provide documentation
          supporting any additional attendees because it did not have policies and procedures in
          place to review hotel and other travel agent invoices when travel expenses were
          pre-paid.
Final Report
ED-OIG/A05K0005                                                                      Page 17 of 30

According to OMB Circular A-87, “Cost Principles for State, Local, and Indian Tribal
Governments Attachment A, Paragraph C.1,” to be allowable, costs must be reasonable and
necessary for proper and efficient performance and administration of Federal awards, be
allocable to Federal awards, and be adequately documented. “Attachment B, Paragraph 8.h.
(3),” states, where employees are expected to work solely on a single Federal award or cost
objective, charges for their salaries and wages will be supported by periodic certifications that
the employees worked solely on that program for the period covered by the time and effort
certification. These time and effort certifications will be prepared at least semi-annually and will
be signed by the employee or supervisory official having firsthand knowledge of the work
performed by the employee.

RECOMMENDATIONS

We recommend that the Assistant Secretary for Elementary and Secondary Education, in
conjunction with the Assistant Secretary for Special Education and Rehabilitative Services,
require ISBE to ensure—

3.1 	   Chicago returns $1,042 in unallowable costs charged to the Recovery Act Title I grant to
        the Department and either provides adequate documentation to support $1,692 in
        inadequately documented costs charged to the Recovery Act Title I grant or returns that
        amount to the Department.

3.2 	   East Saint Louis either provides adequate documentation to support $4,036 in
        inadequately documented costs charged to the Recovery Act Title I grant or returns that
        amount to the Department.

3.3 	   Waukegan collects and maintains semi-annual certifications for all employees working
        on the Recovery Act and regular Title I grants and the Recovery Act and regular IDEA
        grants.ER

Auditee Comments
For Recommendations 3.1 and 3.2, ISBE stated that it will work with Chicago and East Saint
Louis to obtain documentation to support the identified unallowable costs. If the districts are
unable to provide proper documentation, ISBE will request that Chicago return the unallowable
costs to the Department and that East Saint Louis corrects its expenditure report to remove the
disallowed costs.

For Recommendation 3.3, ISBE stated that it will work with Waukegan to ensure Waukegan's
understanding of collecting and maintaining semi-annual certifications for all employees
working on the Recovery Act and regular Title I grants and the Recovery Act and regular IDEA
grants.

OIG Response
We did not make any changes to the finding and recommendations based on ISBE’s comments.
ISBE provided its planned corrective action for the three recommendations. However, for
Recommendation 3.1, ISBE did not address Chicago’s inadequately documented costs. For
Recommendation 3.3, simply making sure that Waukegan understands the rules for semi-annual
Final Report
ED-OIG/A05K0005 	                                                                  Page 18 of 30

certifications does not adequately address our recommendation. ISBE needs to ensure that
Waukegan collects and maintains semi-annual certifications.
G RE
       TTE
                                     OTHER MATTERS

During our audit, we identified two issues that we considered important enough to bring to the
attention of Illinois and Department officials but not significant enough to include as findings:
(1) two subrecipients included inaccurate information on “Study of School-Level Expenditures”
reports, and (2) Chicago employees did not follow Chicago Board of Education policies relating
to purchases of goods and services.

Two Subrecipients Included Inaccurate Information on “Study of School-Level
Expenditures Reports”
Two of the four subrecipients receiving Recovery Act Title I funds that we visited (Waukegan
and East Saint Louis) reported inaccurate per-pupil expenditure totals on the “Study of
School-Level Expenditures” reports that they provided to ISBE.

Waukegan
We reviewed data for 4 of 21 schools and found inaccurate information was reported for 1 of the
4 schools. The total reported salary expenditures for the one school should have been
$18,241,194 rather than the $18,041,194 reported. This error occurred because Waukegan
reported expenditures totaling $22,842 for one cost category (Function 2120), which was
$200,000 less than the amount supported by source documents ($222,842). We calculated a
per-pupil expenditure of $4,243, while Waukegan reported $4,196, a difference of $47 per pupil.

East Saint Louis
We reviewed data for 3 of 21 schools and found inaccurate information reported for all
3 schools.

       	 School 1: East Saint Louis omitted expenditures totaling $144,072 from its
          calculation. The total reported salary expenditures should have been $9,854,401,
          rather than the $9,710,329 reported. We calculated a per-pupil expenditure of $5,119,
          while East Saint Louis reported $5,044, a difference of $75 per pupil.

       	 School 2: East Saint Louis omitted expenditures totaling $74,197 from its calculation.
          The total reported salary expenditures should have been $3,547,372, rather than the
          $3,473,175 reported. We calculated a per-pupil expenditure of $11,555, while East
          Saint Louis reported $11,313, a difference of $242 per pupil.

       	 School 3: East Saint Louis omitted expenditures totaling $91,832 from its calculation.
          The total reported salary expenditures should have been $1,432,152, rather than the
          $1,340,320 reported. We calculated a per-pupil expenditure of $5,344, while East
          Saint Louis reported $5,001, a difference of $343 per pupil.
Final Report
ED-OIG/A05K0005                                                                     Page 19 of 30

According to “Recovery Act, Title VIII, Department of Education, Education for the
Disadvantaged,” subrecipients receiving Recovery Act Title I funds are required to file with the
State Educational Agency, no later than December 1, 2009, a school-by-school listing of per-
pupil educational expenditures from State and local sources during academic year 2008-2009.
This section also requires each State Educational Agency to report this information to the
Department by March 31, 2010. ISBE’s guidance to subrecipients reiterated these requirements.

The Department will use these data to examine the extent to which school-level education
resources are distributed equitably within and across subrecipients. Because inaccurate data
could cause the Department to make incorrect conclusions regarding the equitable distribution of
resources within and across subrecipients, ISBE should take action that provides reasonable
assurance that subrecipients provide accurate “Study of School-Level Expenditures” reports.
We suggest that ISBE require Waukegan and East Saint Louis to correct the identified
inaccuracies and review the rest of their calculations.

Chicago Employees Did Not Follow Chicago Board of Education Policies
While testing Chicago’s compliance with the requirements governing the use of Recovery Act
funds, we noted that Chicago employees were not following Chicago Board of Education
policies. We reviewed 68 non-personnel transactions charged to Chicago’s Recovery Act
Title I funds. Nine had a purchase order that was dated after the invoice. Chapter 7 of the Board
Rules of Chicago’s Board of Education provides the rules for procurement and contracting.
Section 7-1 states that no purchases shall be made except as provided in the Board Rules, and
that no employee not expressly authorized by the Board Rules shall make any purchase on behalf
of the Board of Education or enter into any contract of purchase for any apparatus, equipment,
supplies, service, repairs, goods, wares, or merchandise. Section 7-2.1 provides that services not
required to be awarded through the competitive bid solicitation process may be made by a
purchase order charging appropriated funds. Although this issue did not cause the instances of
unallowable or inadequately documented costs that we identified, employees being able to
purchase goods and services without proper authorization increases the risk of Recovery Act
Title I funds being misused.


                             SCOPE AND METHODOLOGY

The objectives of our audit were to determine whether Illinois and its subrecipients (1) used
Recovery Act funds in accordance with applicable laws, regulations, and guidance; and
(2) reported Recovery Act data that were accurate, reliable, complete, and in compliance with
Recovery Act reporting requirements. This report provides the results of the audit we conducted
at ISBE, Chicago, East Saint Louis, Rockford, the University of Illinois, and Waukegan. We
focused our audit on State-level and local-level uses of funds and data quality related to Title I,
IDEA, and SFSF grant funds received through the Recovery Act for the period
February 17, 2009, through June 30, 2010. For use of funds, the period of expenditures reviewed
at each subrecipient varied, depending on the date of our site visits. In the Background section,
Table 2, “Recovery Act Allocations and Expenditures by Subrecipient” (see page 4 of this
report), describes the time period during which the expenditures that we reviewed at each
subrecipient were made. For data quality, we reviewed data that Chicago, East Saint Louis,
Final Report
ED-OIG/A05K0005                                                                    Page 20 of 30

Rockford, and Waukegan submitted to ISBE for the quarterly reporting periods that ended
September 30, 2009, and December 31, 2009. We also reviewed data that the University of
Illinois submitted to ISBE for the quarterly reporting period that ended March 31, 2010.

To accomplish our objectives, we performed the following procedures.
 
       1.	 Obtained background information about the programs, activities, and organizations
           being audited.
       2.	 Reviewed the following prior reports to determine whether these reports identified
           any issues, findings, or recommendations relevant to our objectives: “Illinois State
           Board of Education’s Oversight of Subrecipients” (ED-OIG/A05I0016); “Systems of
           Internal Control over Selected ARRA Funds in the State of Illinois” (ED­
           OIG/A05J0012); “State of Illinois, Illinois State Board of Education Financial Audit
           and Compliance Examination for the Year Ended June 30, 2008”; “State of Illinois
           Single Audit Report For the Year Ended June 30, 2008”; “Report of Findings, Title I
           Monitoring Visit – April 14-18, 2008” (issued to ISBE by the Department’s Student
           Achievement and School Accountability Programs team); and “Recipient Reported
           Jobs Data Provide Some Insight into Use of Recovery Act Funding, but Data Quality
           and Reporting Issues Need Attention” (GAO-10-223, November 2009).
       3.	 Reviewed Recovery Act guidance issued by OMB and the Department, relevant
           Federal laws and regulations, and relevant OMB Circulars to gain an understanding
           of the requirements applicable to the use of funds and reporting of data.
       4.	 Obtained, from the Department’s payment system, the amount of Recovery Act
           Title I, IDEA, and SFSF grant funds ISBE has received.
       5.	 Interviewed various auditee officials and reviewed auditee responses to
           questionnaires to gain an understanding of the systems of internal control over the use
           of funds, cash management, and data quality.
       6.	 Tested ISBE’s system of internal control over minimizing the time between receipt of
           Federal funds and disbursement. We reviewed ISBE’s receipt and disbursement of
           Recovery Act funds to determine whether positive cash balances might have existed.
           We also reviewed Chicago’s, East Saint Louis’, Rockford’s, and Waukegan’s receipts
           and expenditures to determine whether the time between receipt and disbursement of
           Recovery Act Title I and IDEA grant funds was minimized and to determine whether
           positive cash balances existed and interest was remitted timely.
       7.	 Obtained from ISBE a list of subrecipients that received Recovery Act Title I, IDEA,
           and SFSF-Government funds from February 17, 2009, through January 31, 2010, and
           SFSF-Education funds from February 17, 2009, through March 31, 2010. We used
           the list to assist us in selecting our sample of subrecipients.
       8.	 Reviewed reports that ISBE sent to FederalReporting.gov for the quarterly reporting
           periods that ended September 30, 2009, December 31, 2009, and March 31, 2010.
           We tested various data elements at ISBE, including the reported amounts of
           subawards, subaward funds disbursed, reported infrastructure expenditures, and FTE
           of jobs created and retained, to determine whether data ISBE reported to
           FederalReporting.gov were accurate, reliable, complete, and in compliance with
           Recovery Act reporting requirements.
       9.	 Reviewed subrecipients’ quarterly expenditure reports and reports on the FTE of jobs
           for the quarterly reporting periods that ended September 30, 2009, December 31,
Final Report
ED-OIG/A05K0005                                                                                  Page 21 of 30

             2009, and March 31, 2010, including supporting documentation, to determine
             whether the subrecipients met the requirements of the Recovery Act.

We judgmentally selected five subrecipients (Chicago, East Saint Louis, Rockford, University of
Illinois, and Waukegan) to review. We selected Chicago, East Saint Louis, Rockford, and
Waukegan from a universe of 736 subrecipients that were allocated Recovery Act Title I funds.9
We selected the University of Illinois from a universe of 10 institutions of higher education that
were allocated SFSF-Education and SFSF-Government grants. We selected these subrecipients
based on selected risk factors, including the amount of Recovery Act funds received and
expended and prior audit findings.

For each subrecipient, we selected a judgmental sample of personnel and non-personnel
transactions for the Recovery Act Title I, IDEA, SFSF-Education, and SFSF-Government grants.
We selected these samples to determine whether subrecipients used these funds in accordance
with applicable laws, regulations, and guidance. We selected samples judgmentally to ensure
that we selected transactions that were generally the largest dollar amounts. To test personnel
transactions, we reviewed payroll documentation, paycheck documentation, and personnel files.
To test non-personnel transactions, we reviewed purchase orders, invoices, copies of checks, and
journal entries. The time periods reviewed for each of the subrecipient’s grants are listed in
Table 2, “Recovery Act Allocations and Expenditures by Subrecipient,” on page 4 of this report.
Because we used non-statistical sampling procedures, our judgmental sample results would not
necessarily represent the error rates for the corresponding universes.

Chicago
We judgmentally selected samples of personnel and non-personnel transactions. In general, for
personnel transactions, we judgmentally selected one of the two largest pay periods by dollar
amount for each grant. For the Recovery Act Title I and IDEA grants, we judgmentally selected
samples totaling 11 employees (5 employees from Title I and 6 from IDEA with salaries over
$1,000 in the selected pay periods) from universes with a total of 1,443 employees in the selected
pay periods. For the SFSF-Education grant, we judgmentally selected 5 employees from the
universe of 20 employees with unusually large salary amounts (over $30,000). For the SFSF-
Government grant, we randomly selected samples totaling 10 employees (5 employees each for
SFSF-Government and the ECE portion of SFSF-Government) from universes with a total of
3,708 employees in the selected pay periods. For non-personnel transactions for the Recovery
Act Title I, IDEA, SFSF-Education grants and the ECE portion of the SFSF-Government grant,
we judgmentally selected samples totaling 126 transactions that were large or appeared unusual
from universes with a total of 57,077 transactions. Table 4 shows the values of the universes and
samples for each grant, as well as the percentage of the universe represented by each sample.
There were no other non-personnel transactions for the SFSF-Government grant to test.




9
 Although our prior audit report (Control Number ED-OIG/A05J0012) had findings related to Hinsdale, we did not
select Hinsdale as a subrecipient for the Phase II audit because, as of January 31, 2010, it had not received any
Recovery Act Title I or IDEA funds.
Final Report
ED-OIG/A05K0005                                                                    Page 22 of 30

 Table 4. Universe and Sampling Information for Chicago
                                                                            Percentage of
    Recovery Act        Transaction       Universe          Sample         Universe Sampled
       Grant               Type            Amount           Amount                (%)
                       Personnel          $38,785,987          $20,114             0.05
 Title I
                       Non-personnel       $4,054,294       $1,764,722           43.53
                       Personnel          $35,915,700          $20,078             0.06
 IDEA                  Non-personnel          $12,010           $1,352           11.26
                       Personnel         $213,342,349        $134,884              0.06
 SFSF-Education
                       Non-personnel      $46,711,035       $4,641,465             9.94
 SFSF-Government       Personnel          $33,590,625          $15,066             0.04
 SFSF-Government       Personnel          $33,427,014          $25,764             0.08
 (ECE portion)         Non-personnel      $40,706,956       $1,928,124             4.74

East Saint Louis
We judgmentally selected samples of personnel and non-personnel transactions. For personnel
transactions, we judgmentally selected the largest pay period by dollar amount for each grant.
For the Recovery Act Title I, SFSF-Education, and SFSF-Government grants, we randomly
selected samples totaling 20 employees (5 each for Title I and SFSF-Government and 10 for
SFSF-Education) from universes with a total of 2,946 employees in the selected pay periods.
We also judgmentally selected 9 large adjusting journal entries from a universe of 24 adjusting
journal entries for the Recovery Act Title I grant. For non-personnel transactions for the
Recovery Act IDEA grant, we judgmentally selected a sample of 7 transactions from a universe
of 23. These 7 transactions represented the largest dollar value transaction for each vendor. The
Recovery Act IDEA grant was the only program for which funds were used for non-personnel
transactions and there were no personnel transactions for the Recovery Act IDEA grant. Table 5
shows the values of the universes and samples for each grant, as well as the percentage of the
value of the universe represented by each sample.

 Table 5. Universe and Sampling Information for East Saint Louis
                                                                            Percentage of
    Recovery Act         Transaction       Universe          Sample        Universe Sampled
         Grant              Type            Amount           Amount               (%)
 Title I                Personnel           $1,784,295        $510,246           28.60
 IDEA                   Non-personnel         $167,333        $164,762           98.46
 SFSF-Education         Personnel          $23,338,100         $39,560            0.17
 SFSF-Government        Personnel           $2,855,630         $11,692            0.41

Rockford
We judgmentally selected samples of personnel and non-personnel transactions. In general, for
personnel transactions for each Recovery Act grant, we judgmentally selected the largest pay
period by dollar amount. For all grants, we selected samples totaling 44 employees (we
randomly selected 5 for Title I, and 10 each for SFSF-Education, SFSF-Government, and the
ECE portion of SFSF-Government; and judgmentally selected all 9 for IDEA) from universes
with a total of 1,469 employees in the selected pay periods. For non-personnel transactions for
Final Report
ED-OIG/A05K0005                                                                                  Page 23 of 30

all Recovery Act grants, we judgmentally selected samples totaling 56 transactions that were
large or appeared unusual from universes with a total of 511 transactions. For the Recovery Act
IDEA grant, because the universes for personnel and non-personnel transactions were so small,
we judgmentally selected all nine personnel transactions and all four non-personnel transactions
for testing. Table 6 shows the values of the universes and samples for each grant, as well as the
percentage of the value of the universe represented by each sample. There were no
non-personnel transactions to test for the SFSF-Education and SFSF-Government grants.

     Table 6. Universe and Sampling Information for Rockford
                                                                                        Percentage of
        Recovery Act          Transaction           Universe     Sample                Universe Sampled
           Grant                  Type               Amount      Amount                      (%)
                             Personnel                  $25,044       $674                    2.69
     Title I
                             Non-personnel           $2,624,528 $1,517,111                   57.81
                             Personnel                  $19,010    $19,010                  100.00
     IDEA                    Non-personnel              $26,548    $26,548                  100.00
     SFSF-Education          Personnel              $16,211,091  $231,320                     1.43
     SFSF-Government         Personnel               $3,308,457    $64,969                    1.96
     SFSF-Government         Personnel               $4,244,826    $31,244                    0.74
     (ECE portion)           Non-personnel             $796,188  $340,507                    42.77

University of Illinois
We judgmentally selected the largest pay period by dollar amount for two campuses
(Urbana-Champaign and Chicago) for the SFSF-Education and SFSF-Government grants.10 For
both grants, we judgmentally selected samples totaling 22 employees (5 each with salaries over
$1,000 for SFSF-Education and SFSF-Government at each campus, plus the employee paid the
largest salary for the SFSF-Government grant at each campus) from universes with a total of
5,495 employees in the selected pay periods. Table 7 shows the values of the universes and
samples for each grant, as well as the percentage of the universe represented by the sample.

        Table 7. Universe and Sampling Information for University of Illinois
                                                                       Percentage of
          Recovery Act     Transaction    Universe     Sample       Universe Sampled
             Grant             Type       Amount       Amount               (%)
        SFSF-Education     Personnel     $18,670,800    $25,485             0.14
        SFSF-              Personnel     $26,847,800    $90,877             0.34
        Government

Waukegan
We judgmentally selected samples of personnel and non-personnel transactions. In general, for
personnel transactions for each Recovery Act grant, we judgmentally selected the largest pay
period by dollar amount. For all Recovery Act grants, we selected samples totaling
33 employees from universes with a total of 1,731 employees in the selected pay periods. We

10
  The University of Illinois did not receive any Recovery Act Title I or IDEA funds and used SFSF funds only for
personnel expenditures.
Final Report
ED-OIG/A05K0005                                                                     Page 24 of 30

randomly selected 10 for IDEA, 15 for SFSF-Education, and 5 for SFSF-Government; and we
judgmentally selected all 3 employees for Title I. For non-personnel transactions for the
Recovery Act Title I, IDEA, and SFSF-Education grants, we judgmentally selected
samples totaling 63 transactions that were large or appeared unusual from universes with a total
of 308 transactions. Table 8 shows the values of the universes and samples for each Recovery
act grant, as well as the percentage of the universe represented by each sample. There were not
any non-personnel transactions to test for the SFSF-Government grant.

  Table 8. Universe and Sampling Information for Waukegan
                                                                            Percentage of
    Recovery Act         Transaction        Universe        Sample         Universe Sampled
       Grant                Type             Amount         Amount                (%)
                        Personnel               $44,325        $9,117            20.57
  Title I
                        Non-personnel        $1,472,924      $908,053            61.65
                        Personnel              $349,101       $14,621              4.19
  IDEA                  Non-personnel        $1,048,349      $532,623            50.81
                        Personnel           $18,208,309       $63,895              0.35
  SFSF-Education
                        Non-personnel          $265,730      $169,956            63.96
  SFSF-Government       Personnel            $2,531,837       $10,029              0.40

We also relied, in part, on computer-processed data from ISBE’s Recovery Act reporting system.
To determine whether the computer-processed data were reliable, we relied on the limited
understanding gained in our previous audit of ISBE’s systems of internal control over Recovery
Act funds, along with additional interviews, reviews of system procedures, and limited data
testing performed during this audit. We analyzed quarterly reporting data entered into ISBE’s
system for the reporting periods that ended September 30, 2009, December 31, 2009, and
March 31, 2010. We performed various logic tests on the data, and our review did not reveal any
missing data that would indicate the data were not reliable. The relationships between the data
elements were logical, and no dates were outside of valid time frames or in an illogical
progression.

To analyze reporting data, we compared selected subrecipient data elements to the corresponding
prime recipient data elements and ensured that the data contained in the Recovery Act reporting
systems were accurately reported to FederalReporting.gov. At the subrecipient level, we
compared the data for subaward, subaward funds disbursed, and jobs to corroborating
documentation maintained by the subrecipients, if applicable. Corroborating documents
included vendor invoices, purchase orders, and cancelled checks. We also relied on general
ledgers from subrecipients’ accounting systems to obtain universes of transactions and select
samples to test. We traced sample transactions to source documents and determined that they
were supported by documentation. Based on our assessment and comparison of selected data
elements, revenues, and expenditures to source documents, we concluded that the computer-
processed data were sufficiently reliable for the purposes of our audit.

We performed this audit at ISBE (Springfield, Illinois), Chicago Public Schools (Chicago,
Illinois), East Saint Louis Public Schools (East Saint Louis, Illinois), Rockford Public Schools
(Rockford, Illinois), the University of Illinois (Urbana-Champaign and Chicago, Illinois),
Final Report
ED-OIG/A05K0005                                                                   Page 25 of 30

Waukegan Public Schools (Waukegan, Illinois), and our offices, from February through
December 2010. We discussed the results of our audit with ISBE officials on
November 10, 2010. We discussed the results of our audit with subrecipient officials as follows:
Rockford and Waukegan on October 18, 2010; Chicago and the University of Illinois on
November 4, 2010; and East Saint Louis on November 17, 2010.

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.
Final Report 

ED-OIG/A05K0005                       Page 26 of 30





                     Enclosure:


                  Auditee Comments

Final Report
ED-OIG/A05K0005                                                                      Page 27 of 30


Note: The original version of ISBE’s letter below included ISBE’s letterhead.




March 10, 2011
Gary D. Whitman
Regional Inspector General for Audit
U.S. Department of Education, Office of Inspector General
500 West Madison Street, Suite 1414
Chicago, IL 60661

Dear Mr. Whitman:

On February 17, 2011, we received your draft audit report, Control Number ED-OIG/A05K0005,
for your audit title Illinois: Use of Funds and Data Quality for Selected American Recovery and
Reinvestment Act Programs. Enclosed you will find the requested responses to your findings
and recommendations.

If you require further information or clarification, please contact Melissa Oller, Chief Internal
Auditor, at 217/782-2237 or by email at moller@isbe.net.

Sincerely,

/s/

Christopher A. Koch, Ed.D
State Superintendent of Education

Enclosure

cc: David Vaught
Final Report
ED-OIG/A05K0005                                                                      Page 28 of 30

ARRA Draft Audit Report
ED OIG/A05K0005
February 2011


Recommendations and Responses


Finding No.1: ISBE and Its Subrecipients Could Strengthen Procedures for Complying
with Federal Cash Management Requirements

Recommendation:
1.1 Further strengthen its procedures to accurately identify positive cash balances before
approving cash disbursements so that it minimizes the time elapsing between the transfer
of funds by the State and disbursement by the subrecipients.

ISBE Response:

Beginning with FY 2011, ISBE is requiring quarterly expenditure reports to be submitted 20
days following the end of the quarter instead of 30 days. The earlier due date allows the agency
to assess whether excess cash exists and offset the payments scheduled for the following month
prior to vouchering. In addition, on August 31, 2010 a policy decision was made by ISBE’s
Chief Financial Officer to move towards a reimbursement method for federal grants in FY 2012,
which will eliminate any excess cash held by LEAs.


Recommendation:
1.2 Ensure that it implemented its corrective action to calculate and remit interest earned, by
all subrecipients for the Recovery Act Title I and IDEA grants, to the Department in a
timely manner.

ISBE Response:

ISBE has revised, expanded and implemented new guidance on calculating interest earned and
remittance in the State and Federal Grant Fiscal Policy and Procedures. Again, it is hoped that
the internal decision to move to a reimbursement method for all federal programs in FY 2012
will eliminate this finding completely.


Finding No. 2: ISBE and Its Subrecipients Could Further Strengthen Procedures for
Reporting Date That Are Accurate, Reliable and Complete.

Recommendation:
2.1 Develop and implement a system to collect and report accurate, reliable, and complete
Recovery Act infrastructure expenditure data from subrecipients.
Final Report
ED-OIG/A05K0005                                                                    Page 29 of 30

ISBE Response:

ISBE has developed and implemented formal procedures related to the collection and reporting
of infrastructure costs for Recovery Act IDEA Grant funds. ISBE is aware of the reporting rules
as they relate to budgeted versus expended. The current agency accounting system that is
responsible for grant payments (i.e. Financial Reimbursement Information System or FRIS) is
not structured to split infrastructure disbursements/expenditures from regular IDEA Part B
disbursements/expenditures. Illinois has special education cooperatives that contain various
numbers of member districts. The cooperative submits an aggregate ARRA IDEA Part B budget
application for themselves and their member districts that contain a variety of expenditures (e.g.
salaries, benefits, supplies, equipment, professional development, nonpublic school expenditures
etc. along with approved infrastructure costs). The cooperative also completes a monthly
payment schedule which reflects the amount of funds the cooperative needs each month for
actual expenditures. Monthly payment schedules do not distinguish between how much is being
distributed each month for infrastructure costs apart from other costs. ISBE does collect
quarterly expenditure reports from the local education agencies that have approved infrastructure
costs; however, the reports are not collected until 20 days following the end of each quarter.
While ISBE cannot report actual expenditures for infrastructure by the 10 day reporting deadline
defined in the Section 1512 we may be able to report expenditures during the correction window
allowed on the FederalReporting.gov.site.

ISBE has fully expended SFSF government services funds; therefore, no further action relating
to a system to collect infrastructure expenditure data from subrecipients would be required.

Recommendation:
2.2 Ensure subrecipients implement procedures for collecting and reporting, in a timely
manner, correct numbers of FTE for jobs, including vendor jobs.

ISBE Response:

ISBE communicates on a continuous basis to the subrecipients the need to provide timely FTE
for jobs. ISBE’s procedures include sending out reminders utilizing the Superintendent’s weekly
message and monthly broadcasts through our ISBE Web Application Security System. In
addition, ISBE makes calls to those subrecipients that have not reported by the established
deadline.


Finding No.3: Subrecipients Generally Spent Recovery Act Funds for Allowable Purposes
but Minor Instances of Noncompliance Occurred.

Recommendation:
3.1 Chicago returns $1,042 in unallowable costs charged to the Recovery Act Title I grant to
the Department and either provides adequate documentation to support $1,692 in
inadequately documented costs charged to the Recovery Act Title I grant or returns that
amount to the Department.
Final Report
ED-OIG/A05K0005                                                                    Page 30 of 30

ISBE Response:

ISBE will work with Chicago to obtain adequate documentation to support the identified
unallowable costs. If the district is unable to provide proper documentation, ISBE will request
Chicago return the unallowable costs to the Department.


Recommendation:
3.2 East Saint Louis either provides adequate documentation to support $4,036 in
inadequately documented costs charged to the Recovery Act Title I grant or returns that
amount to the Department.

ISBE Response:

ISBE will work with East Saint Louis to obtain adequate documentation to support the identified
unallowable costs. If the district is unable to provide proper documentation, ISBE will request
that East Saint Louis correct their expenditure report and remove the disallowed costs.


Recommendation:
3.3 Waukegan collects and maintains semi-annual certifications for all employees working
on the Recovery Act and regular Title I grants and the Recovery Act and regular IDEA
grants.

ISBE Response:

ISBE will work with Waukegan to ensure their understanding of collecting and maintaining
semi-annual certifications for all employees working on the Recovery Act and regular Title I
grants as well as the Recovery Act and regular IDEA grants.
                   Anyone knowing of fraud, waste, or abuse involving
                    U.S. Department of Education funds or programs 

                should call, write, or e-mail the Office of Inspector General.


                                        Call toll-free:
                                 The Inspector General Hotline
                              1-800-MISUSED (1-800-647-8733)

                                           Or write:
                                   Inspector General Hotline
                                 U.S. Department of Education
                                  Office of Inspector General
                                   400 Maryland Ave., S.W.
                                    Washington, DC 20202

                                          Or e-mail:
                                      oig.hotline@ed.gov

                 Your report may be made anonymously or in confidence.

           For information on identity theft prevention for students and schools, visit
                   the Office of Inspector General Identity Theft Web site at:
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