oversight

Audit of Allocation of Common Support Expenses.

Published by the Department of Education, Office of Inspector General on 2004-04-27.

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

          Audit of Allocation of Common Support Expenses





                                 FINAL AUDIT REPORT





                                            ED-OIG/A19-D0003
                                                April 2004




Our mission is to promote the efficiency,                      U.S. Department of Education
effectiveness, and integrity of the                            Office of Inspector General
Department’s programs and operations.                          Operations Internal Audit Team
                                                               Washington, DC
    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 will be made by

               the appropriate Department of Education Officials.



In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued

         by the Office of Inspector General are available to members of the

     press and general public to the extent information contained therein is not 

                           subject to exemptions in the Act.

                         UNITED STATES DEPARTMENT OF EDUCATION

                                         OFFICE OF INSPECTOR GENERAL




                                            April 27, 2004


MEMORANDUM
TO:	           William Leidinger
               Assistant Secretary for Management and Chief Information Officer
               Office of Management
               Lead Action Official

               Dr. Eugene Hickok

               Deputy Secretary

               Office of the Deputy Secretary

               Collateral Action Official



FROM:	         Helen Lew /s/
               Assistant Inspector General for Audit

SUBJECT:	      Final Audit Report
               Audit of Allocation of Common Support Expenses
               Control Number ED-OIG/A19-D0003

Attached is the subject final audit report that covers the results of our audit of the allocation of
common support expenses. An electronic copy has also been provided to you and your Audit
Liaison Officers. We received your comments generally concurring with the findings and
recommendations in our draft report.

Corrective actions proposed (resolution phase) and implemented (closure phase) by your offices
will be monitored and tracked through the Department’s automated audit tracking system.
Department policy requires that you develop a final Corrective Action Plan (CAP) for our review
in the automated system within 30 days of the issuance of this report. The CAP should set forth
specific action items, and targeted completion dates, necessary to implement final corrective
actions on the findings and recommendations contained in this final audit report.

In accordance with the Inspector General Act of 1978, as amended, the Office of Inspector
General is required to report to Congress twice a year on the audits that remain unresolved after
six months from date of issuance.




                          400 MARYLAND AVE., S.W. WASHINGTON, D.C. 20202-1510

           Our mission is to ensure equal access to education and to promote educational excellence
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.

We appreciate the cooperation given us during this review. If you have any questions, please
call Michele Weaver-Dugan at (202) 863-9526.

Attachment
                                  TABLE OF CONTENTS




                                                                                                     Page

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


BACKGROUND...............................................................................................3


AUDIT RESULTS ............................................................................................5


        Finding No. 1 – The Department Does Not Have An Effective

              Allocation Methodology for Common Support Expenses .................5


                Recommendations ........................................................................ 13


        Finding No. 2 –The Department Has Not Formally Communicated

              the Common Support Expense Process.......................................... 15 


                Recommendation.......................................................................... 17


OBJECTIVES, SCOPE, AND METHODOLOGY............................................ 18


STATEMENT ON MANAGEMENT CONTROLS .......................................... 20


ATTACHMENTS
        Attachment 1 – Fiscal Year (FY) 2002 Common Support Expenses: Budget Allocation
                       Methodology
        Attachment 2 – FY 2002 Allocations – Original Allocations versus Full Time Equivalent
                       Calculations
        Attachment 3 – FY 2002 Original Allocations versus Actual Expenses
        Attachment 4 – Information Technology Services/Communications: Actual Expenses
                       Not Charged to Principal Offices/Programs for which the Expense Was
                       Incurred
        Attachment 5 – Department Response to Draft Audit Report
                             EXECUTIVE SUMMARY



The Department of Education (Department) uses the term “common support” to represent
expenses necessary for the maintenance and operation of common administrative services.
Examples of these services include mailroom operations, security services, and network
administration. The Office of Management (OM), with the assistance of Budget Service in the
Office of the Deputy Secretary, currently manages the common support expense allocation
process. During FY 2002, the period primarily covered by this audit, the Office of the Chief
Information Officer (OCIO) and Office of the Chief Financial Officer staff were responsible for
management of common support expenses related to information technology.

The objectives of our audit were to:

   1.	 Determine the appropriateness of the Department’s process for allocating common
       support expenses and whether the process is periodically reeva luated.
   2.	 Determine if excess funds and chargebacks are properly explained and returned to the
       Principal Offices in a timely manner.

Overall, we found improvements were needed in the Department’s common support expense
allocation process. While we found the Department periodically reevaluated expenses to
determine the most appropriate budget allocation methodology, the actual budget methodology
employed for allocating some expenses was not always supported. In addition, the costs of some
common support projects were inappropriately allocated to Principal Offices (POs) and
Programs that did not benefit from the projects. We also found that actual expenditures were not
always charged to the POs/Programs for which the expense was incurred. As a result,
POs/Programs may be providing a disproportionate share of funding without their knowledge,
possibly reducing funds available to fulfill their missions. In addition, expenditures charged did
not always represent actual expenses to POs/Programs so the true cost of PO/Program operations
could not be determined, POs/Programs could not effectively manage their budgets, and excess
funds could not be readily determined and were not always returned timely. We also found that
policies and procedures had not been developed to document and communicate the common
support expense allocation process to Department staff. PO staff were confused and uncertain
about the process, and information was not readily available to explain the process or train new
staff.

To correct the weaknesses we identified, we recommend that the Department:

•	 Develop a methodology for appropriately allocating common support expenses to include (a)
   documentation of adjustments made to budget allocations, when such adjustments do not
   follow the established budget allocation methodology, (b) allocation of project costs to only
   those POs/Programs that benefit, (c) allocation of actual common support expenses to the
   POs/Programs for which the expense was incurred, and (d) involvement of PO/Program staff
   in monitoring expenditures to facilitate timely return of funds.

ED-OIG/A19-D0003	                                                                  Page 1
•	 Develop and implement policies and procedures that document the common support expense
   allocation process, including the methodology for developing and allocating individual
   common support budget estimates and actual expenses.

We also identified 13 telephone service accounts that could not be traced to any Department
user. We recommend that the Department take immediate action to disconnect the telephone
service for these accounts.

The Department concurred with our recommendations with two exceptions. The Department
stated that our recommendation to allocate actual common support expenses to the
POs/Programs for which the expense was incurred was impractical. The Department stated that
it has always been the responsibility of OM/OCIO to fund shortfalls on any mandated and
approved project regardless of office contribution. OIG’s recommendation does not prohibit
such action by the Department. If such adjustments are appropriately documented, as the
Department agreed to do in response to recommendation 1.1a, such actions would be
appropriate. However, we have not changed our position that shortfalls in one POs/Program
should not be funded by other POs/Programs for which all funding has not yet been used.
Rather, unused funds from POs/Programs with separate appropriations should be returned to
those POs/Programs to be used for mission-related use.

The Department also disagreed with our recommendation to establish a Department Directive to
document the common support expense allocation process policies and procedures. The
Department did agree to create a policy document outside the Department Directive process.
The Department’s response meets the intent of our recommendation. We have therefore
reworded the recommendation to remove the specific requirement for a Department Directive
and to more generally state that policies and procedures should be developed and appropriately
communicated.

The entire text of the Department’s response is provided as Attachment 5 to this report.




ED-OIG/A19-D0003	                                                                  Page 2
                                    BACKGROUND



The Department of Education (Department) uses the term “common support” to represent
expenses necessary for the maintenance and operation of common administrative services, such
as mailroom operations, security services, and network administration. The Office of
Management (OM), with the assistance of Budget Service in the Office of the Deputy Secretary,
currently manages the common support expense allocation process.

Common support expenses are classified into three categories – Central Support, Central
Information Technology (IT), and Telecommunications. During the annual budget process in
Fiscal Year (FY) 2002 and prior years, OM managed Central Support expenses, while the Office
of the Chief Information Officer (OCIO), assisted by the Office of the Chief Financial Officer
(OCFO), managed Central IT and Telecommunications expenses. Beginning in FY 2003 with
the FY 2005 budget submission, OM is responsible for managing all categories of common
support expenses.

Common support expenses are allocated to each Principal Office (PO) or Program that has a
separate administrative appropriation account. POs/Programs without separate accounts are
covered under a general account entitled “Program Administration.” The following are the
primary accounts used for the allocation of common support expenses:

   •   Program Administration
   •   Direct Loan (managed by Federal Student Aid or FSA)
   •   Federal Family Education Loan Program (FFELP, managed by FSA)
   •   Office for Civil Rights (OCR)
   •   Office of Inspector General (OIG)
   •   Student Aid Administration (SAA, managed by FSA)

In addition, allocations for some common support expenses, such as telephone services, are made
to accounts for other organizations within the Department, including Historically Black Colleges
and Universities (HBCU) Capital Financing Board, National Institute for Literacy (NIL), College
Housing and Academic Facilities Loans (CHAFL), National Assessment Governing Board
(NAGB), and the National Board for Educational Statistics (NBES), formerly known as the
National Education Research Policies and Priorities Board (NERPPB).

In FY 2002, costs for anticipated expenses were generally allocated to each PO/Program or to
Program Administration based on prio r years’ allocations, numbers of Full-Time Equivalent
(FTE) employees, or square footage. (See Attachment 1 for the FY 2002 common support
categories, the expenses under each category, and the Department’s stated methodology used to
initially estimate and allocate costs in the budget process.)



ED-OIG/A19-D0003                                                                 Page 3
POs/Programs with separate appropriations provided funding to OM for the estimated common
support expenses allocated to the PO/Program during the budget process. OM provided the
funding from Program Administration for the POs/Programs without separate appropriations.
OM used two accounting systems to track common support expenses – the Integrated
Administrative System and the Education Central Automated Processing System. POs/Programs
could review the allocations and expenditures through either system. Budget Service also
tracked allocations and expenditures through its budget formulation database system.

Actual common support expenses reported for the last four fiscal years were as follows:

   Fiscal Year    Total Expenses       Central Support      Central IT    Telecommunications
   FY 2003        $222,615,000          $140,828,000       $66,151,000       $15,636,000
   FY 2002        $200,737,000          $131,536,000       $49,127,000       $20,074,000
   FY 2001        $184,985,000          $126,503,000       $49,105,000       $ 9,377,000
   FY 2000        $155,258,000          $112,189,000       $34,261,000       $ 8,808,000




ED-OIG/A19-D0003                                                                  Page 4
                                   AUDIT RESULTS



We found that improvements were needed in the Department’s common support expense
allocation process. While we found that the Department periodically reevaluated expenses to
determine the most appropriate budget allocation methodology, the actual budget methodology
employed for allocating some expenses was not supported. In addition, the costs of some
common support projects were inappropriately allocated to POs/Programs that did not benefit
from the projects. We also found that actual expenditures were not always charged to the
POs/Programs for which the expense was incurred. As a result, POs/Programs might have been
providing a disproportionate share of funding without their knowledge, possibly reducing funds
available to fulfill their missions. We also found that policies and procedures had not been
developed to document and communicate the common support expense allocation process to
Department staff. PO staff were confused and uncertain about the process, and information was
not readily available to explain the process or train new staff.



Finding No. 1 –       The Department Did Not Have An Effective Allocation
                      Methodology for Common Support Expenses


The Department did not have an effective allocation methodology for common support expenses.
Specifically, we found that the budget methodology for allocating some common support
expenses was not adequately supported, some common support expenses were allocated to
POs/Programs that did not benefit from the projects, and actual expenses were not charged to the
POs/Programs for which the expenses were incurred. This occurred because:

   •	 Department staff did not follow the stated allocation methodology,
   •	 Department staff made adjustments to allocations without documentation of the 

      adjustments or the reasons for the adjustments, 

   •	 Complete information about specific IT projects was not communicated to the 

      POs/Programs funding the projects, and 

   •	 Actual expenses were charged back against any available funding provided as a result of
      the budget allocation process, without regard to the PO/Program for which the expense
      was incurred.

As a result, POs/Programs might have been providing a disproportionate share of funding for
common support expenses without their knowledge, possibly reducing funds available to
accomplish their mission. Expenditures charged also did not always represent actual expenses
for POs/Programs so the true costs of PO/Program operations could not be determined and
POs/Programs could not effectively manage their budgets. Budgets for future years were based


ED-OIG/A19-D0003	                                                                 Page 5
at least in part on prior years’ common support allocations, which could perpetuate the
inaccuracies in future years.

OMB Circular A-127, Financial Management Systems, Section 6 – “Policy, ” states:

       ...[F]inancial management systems must be in place to process and record
       financial events effectively and efficiently, and to provide complete, timely,
       reliable and consistent information for decision makers and the public.

OMB Circular A-127, Section 7 – “Financial Management Systems Requirements, ” states:

       Financial management systems’ designs shall support agency budget, accounting
       and financial management reporting processes by providing consistent
       information for budget formulation, budget execution, programmatic and financial
       management, performance measurement and financial statement preparation.

Statement of Federal Financial Accounting Standards No. 4, Managerial Cost Accounting
Concepts and Standards for the Federal Government, (effective for fiscal periods beginning after
September 30, 1996), states:

       The managerial cost accounting concepts and standards contained in this
       statement are aimed at providing reliable and timely information on the full cost
       of federal programs, their activities, and outputs. The cost information can be
       used by the Congress and federal executives in making decisions about allocating
       federal resources, authorizing and modifying programs, and evaluating program
       performance. The cost information can also be used by program managers in
       making managerial decisions to improve operating economy and efficiency.
       (Paragraph 1)

       Each reporting entity should accumulate and report the costs of its activities on a
       regular basis for management information purposes. Costs may be accumulated
       either through the use of cost accounting systems or through the use of cost
       finding techniques. (Paragraph 5)

       The cost assignments should be performed using the following methods listed in
       the order of preference: (a) directly tracing costs wherever feasible and
       economically practicable, (b) assigning costs on a cause-and-effect basis, or (c)
       allocating costs on a reasonable and consistent basis. (Paragraph 11)

       Sometimes, it might not be economically feasible to directly trace or assign costs
       on a cause-and-effect basis. These may include general management and support
       costs, depreciation, rent, maintenance, security, and utilities associated with
       facilities that are commonly used by various segments. (Paragraph 133)

       These supporting costs can be allocated to segments and outputs on a prorated
       basis. The cost allocations may involve two steps. The first step allocates the

ED-OIG/A19-D0003                                                                    Page 6
       costs of support services to segments, and the second step allocates those costs to
       the outputs of each segment. The cost allocations are usually based on a relevant
       common denominator such as the number of employees, square footage of office
       space, or the amount of direct costs incurred in segments. (Paragraph 134)


The Department’s Budget Methodology for Allocating Some Common Support Expenses
Was Not Adequately Supported

We found that although Department staff stated FY 2002 allocations for Central IT and
Telecommunications projects were initially based on FTE calculations, adjustments to those
calculations were made during initial budget formulation and in budget execution. No
documentation was maintained to support these adjustments or the reasons the adjustments were
made. This resulted in an allocation process that was not cons istent or equitable. POs/Programs
provided a disproportionate share of funding for certain projects – in some cases more funding
than would have been provided based on FTE, in other cases less funding than would have been
provided based on FTE.

We reviewed project worksheets for 19 of the 20 projects in these two common support
categories for FY 2002 and determined that the initial distribution for budget formulation did not
match the FTE calculations for any of the projects. Differences involving at least one
PO/Program were found in all cases. In 11 cases, the differences represented a decrease to OCR
and a corresponding increase to Program Administration, or in one case, to Direct Loans. In the
other eight cases, differences from the FTE calculatio ns were noted in multiple POs/Programs.
See Attachment 2 for details of this analysis.

Department staff stated that the FTE distribution was a starting point, and then OCIO and/or
Budget Service could make adjustments as needed based on prior usage or other factors such as
funds availability. However, no documentation was maintained to support the adjustments
made. In the 11 projects where we noted the allocation for OCR was reduced, Department staff
stated that OCR’s budget might have come in less tha n what was anticipated, so its allocation to
all common support projects was reduced. Again, no documentation was available to support
that this was the reason for these adjustments.

We further analyzed the Central IT projects to compare allocations to actual expenses for FY
2002. The total project costs for the 14 Central IT projects changed from budget formulation to
the actual expenses at the end of the year, as is to be expected with a two- year lapse in the budget
process. However, the changes were not redistributed proportionately to the POs/Programs
providing funding for any of the projects. Budget Service staff stated that they attempt to
distribute changes proportionately, but in some cases where a PO/Program does not have
sufficient funding for an increased amount, the difference is generally absorbed by Program
Administration or another program where funding is available. As with adjustments to the initial
budget allocations, we found that there was no documentation to support the rationale for the
redistribution of the funds during budget execution.




ED-OIG/A19-D0003                                                                      Page 7
The table below shows three examples of disproportionate reallocation of increases or decreases
in project costs.

                               Adjustments to Original Project Amounts

                                Disproportionate Reallocation of Costs


                                                                             Dollar
                                                                         Difference –
                                                                           Original
                                                                            Budget
                                           Original FY      FY 2002      Allocation vs.
                                           2002 Budget       Actual          Actual        Percent
               Project Title                Allocation      Expenses       Expenses       Difference

   Automated Case Management
   Program Administration                       $174,800            $0       $(174,800)      -100.0%
   Direct Loan                                   $36,000       $36,000               $0         0.0%
   FFELP                                         $23,200       $24,000             $800         3.4%
   OCR                                           $46,000       $46,000               $0         0.0%
   OIG                                           $18,000       $19,000           $1,000         5.6%
   Total                                        $298,000      $125,000       $(173,000)       -58.1%

   Information Management
   Program Administration                       $430,700      $100,000       $(330,700)       -76.8%
   Direct Loan/FSA                               $87,600       $88,000            $400          0.5%
   FFELP                                         $58,400            $0        $(58,400)      -100.0%
   OCR                                          $109,500       $80,000        $(29,500)       -26.9%
   OIG                                           $43,800       $44,000            $200          0.5%
   Total                                        $730,000      $312,000       $(418,000)       -57.3%

   Information and Critical Infrastructure Assurance Program (IT Security)
   Program Administration                        $964,700   $1,896,000        $931,300          96.5%
   Direct Loan                                   $196,200      $212,000         $15,800          8.1%
   FFELP                                         $130,800      $131,000            $200          0.2%
   OCR                                           $245,300      $128,000      $(117,300)        -47.8%
   OIG                                             $98,000      $98,000              $0          0.0%
   Total                                        $1,635,000  $2,465,000        $830,000          50.8%

See Attachment 3 for this evaluation of all 14 Central IT projects.

Budget Service staff stated that there were so many adjustments during budget formulation and
execution that it would be impossible to track the changes and document why the changes were
made. Budget Service staff stated that the budget formulation database system did not include
the capacity to make entries and provide comments as to why a change was made. OM staff
maintained a spreadsheet of the common support expenses and just changed the total amount
when adjustments were made. No record was maintained of changes to that spreadsheet. OM
staff stated that funds were moved between projects if one common support project was not
going to cost as much as anticipated, and the funds were needed in another project. OM staff
further stated that if a PO/Program did not have sufficient funds for a project, additional funds
were often provided from Program Administration.

ED-OIG/A19-D0003                                                                          Page 8
Without a record of the adjustments made, and the rationale behind the adjustments, we could
not determine the reasonableness of the allocations. The Department’s stated allocation
methodology for the Central IT and Telecommunications projects was based on FTE. We found
that methodology could not be validated for initial allocations in any of the 19 projects, or for the
final actual expenses for any of the 14 Central IT projects, due to the adjustments made during
budget formulation and execution. As such, POs/Programs were providing disproportionate
shares of funding for these projects.


Some Common Support Expenses Were Allocated to POs/Programs that Did Not Benefit
from the Projects

We reviewed the reasonableness of FY 2002 and FY 2003 actual expense allocations for 14
Central IT projects and found that allocations for 3 projects were made to POs/Programs that did
not benefit from the projects. These three projects were not for common administrative expenses
such as network support or telephone services, but for specific IT initiatives that benefited a
limited number of POs/Programs. We based our conclusions on the project descriptions and
discussions with the OCIO project managers to determine whether the POs/Programs that were
allocated costs benefited from the projects. The three projects identified were as follows:

   •	 Automated Case Management System – This project was for the development of a case
      management system for OCR. The project worksheet stated that based on the results of
      this pilot, other Principal Offices, particularly the Office of the General Counsel (OGC),
      would be given an opportunity to test the software for their own needs. (OGC falls
      within the Program Administration account.) However, according to the OCIO project
      manager, OGC had not been contacted to assess their interest. In total, costs of $139,000,
      or 56 percent of the total project costs for these two years, were allocated to FSA and
      OIG, POs/Programs that did not benefit from the project.

   •	 Data Standardization and Coordination – This project focused on data quality in the
      Department’s program databases and the collection, storage and transmission of
      education program assessment information at the local, state and federal education
      agency levels. Since the focus of this project was on data collected and transmitted to
      local and state education agencies, representing elementary and secondary education
      programs, FSA did not benefit from this project. The project manager stated that
      eventual expansion to FSA programs was anticipated, but not for a few years. Costs
      totaling $144,000, or nine percent of the total project costs, were allocated to FSA
      programs that did not benefit from this project.

   •	 Information Management – Related to the Data Standardization and Coordination
      project above, this project focused on the quality of the data collections sponsored by the
      federal government programs and supplied by the States and school districts. As with the
      project above, this project involved elementary and secondary educational programs.
      Future expansion to FSA programs was anticipated, but not for a few years. Costs


ED-OIG/A19-D0003	                                                                     Page 9
        totaling $132,000, or 42 percent of the total project costs, were allocated to FSA
        programs that did not benefit from this project.

In total, allocations of $415,000, or 20 percent of the $2.1 million total costs for these three
projects, were made to POs/Programs that did not benefit from the projects. Details are shown in
the table below.

                                     Central IT Project Costs

                        Allocations to POs/Programs that Did Not Benefit


                                                                                      Costs Allocated
                                                                                             to
                                                                                      POs/Programs
                                         Actual Costs    Actual Costs    Total Actual  that Did Not
           Central IT Project             FY 2003         FY 2002           Costs         Benefit

Automated Case Management
Program Administration                         $19,000             $0        $19,000               $0
Direct Loan                                    $60,000        $36,000        $96,000          $96,000
FFELP                                               $0        $24,000        $24,000          $24,000
OCR                                            $46,000        $46,000        $92,000               $0
OIG                                                 $0        $19,000        $19,000          $19,000
Student Aid Administration                          $0             $0             $0               $0
Total                                         $125,000       $125,000       $250,000         $139,000
Percent of Total Costs                                                                           56%

Data Standardization & Coordination
Program Administration                        $167,000      $1,246,000     $1,413,000              $0
Direct Loan                                         $0        $144,000       $144,000        $144,000
FFELP                                               $0              $0             $0              $0
OCR                                                 $0              $0             $0              $0
OIG                                                 $0              $0             $0              $0
Student Aid Administration                          $0              $0             $0              $0
Total                                         $167,000      $1,390,000     $1,557,000        $144,000
Percent of Total Costs                                                                            9%

Information Management
Program Administration                             $0        $100,000       $100,000               $0
Direct Loan/FSA                                    $0         $88,000        $88,000          $88,000
FFELP                                              $0              $0             $0               $0
OCR                                                $0         $80,000        $80,000               $0
OIG                                                $0         $44,000        $44,000          $44,000
Student Aid Administration                         $0              $0             $0               $0
Total                                              $0        $312,000       $312,000         $132,000
Percent of Total Costs                                                                           42%


Total Actual Expenses FY 2002 – FY 2003                                    $2,119,000
Total Unreasonable Expense Allocations                                                       $415,000
Percentage of Unreasonable Expenses Allocations                                                 20%


ED-OIG/A19-D0003                                                                        Page 10
We met with PO/Program staff to determine whether they were aware that they were funding the
projects. OCIO officials stated that the funding allocations were approved through the Planning
and Investment Review Working Group and that PO staff should have been aware of these
decisions. However, we found that for the three Central IT projects noted, PO/Program staff
were not aware of the nature of the projects they were funding. Project worksheets used in
budget formulation were not provided to the PO/Program staff so they were not able to
effectively evaluate the subject matter of the projects they were funding. PO/Program staff
reported that the information they received included lump-sum data for all IT projects, or general
names of projects from which they could not discern the appropriateness of the allocations.

PO/Program staff stated that the project worksheets we obtained, which included project
descriptions, as well as funding allocations, would be useful in evaluating allocations for
common support projects. These worksheets were readily available and used by OCIO for IT
projects, and should have been provided to POs/Programs that are providing funding for the
projects. Without such detailed information, PO/Program staff did not have sufficient
information on how the funds are being spent, or to question the allocations made.
Responsibility also lies with the PO/Program staff to ensure that they were familiar with the uses
of their funds.


Actual Expenses Were Not Charged to Principal Offices or Programs for Which the
Expenses Were Incurred

Actual expenditures for some common support expenses were not charged to the POs/Programs
that actually benefited from the expenditure. We reviewed a random sample of 50 common
support expenditures from FY 2002 for Communications and IT Services. These expenditures
totaled $562,085 and were charged to either Program Administration or OCR. We identified 28
instances totaling $110,567 where the actual expenditures were not charged to the POs/Programs
that benefited from the expense, as follows:

   •	 Ten expenditures totaling $14,910 were applied against OCR’s account that either did not
      benefit OCR, or that also benefited other Department offices.
   •	 Three expenditures totaling $93,720 for common services (such as network support) were
      charged only to Program Administration and not allocated to all benefiting
      POs/Programs.
   •	 Two phone service expenditures totaling $533 were applied to Program Administration
      but actually benefited OIG, a PO that provides separate funding for common support.
   •	 Six phone service expenditures totaling $1,032 were applied against OCR’s account, and
      another seven phone service expenditures totaling $372 were applied to Program
      Administration. However, when reviewed further as part of this audit, the Department
      could not identify the PO for which the charges were incurred. During our review, OCIO
      staff indicated they were taking actions to disconnect the service for these accounts.

See Attachment 4 for further details on these charges.


ED-OIG/A19-D0003	                                                                 Page 11
While anticipated expenses were allocated through the budget process, actual expenses were
charged back against any available funding provided as a result of the budget allocation process.
Department staff cited the difficulty in determining the actual POs/Programs that benefit from an
expenditure, and if the expenditure benefits several POs/Programs, applying the appropriate
funding to multiple accounts. Department staff stated that while a PO/Program might be
overcharged for some items, or be charged for some expenses from which it does not benefit, it
might be undercharged for others. OM staff stated that in many cases, Program Administration
covered a funding shortfall and additional funds were not requested from POs/Programs.

While we did see in some instances that Program Administration provided additional funds, there
were also instances where the funding to be provided by Program Administration was reduced.
Without reviewing every transaction, the overall impact of this practice could not be determined.
Common support expenses have been steadily increasing over the past several years as shown in
the Background section of this report. Total actual common support expenses have increased by
43 percent between FY 2000 and FY 2003. These expenses represent larger portions of
PO/Program budgets, and as a result, increased importance should be placed on appropriately
allocating these costs to the POs/Programs that incur the expenses to enhance the accuracy of
future budget allocations.

Because reported expenditures did not necessarily reflect PO/Program costs, POs/Programs
could not effectively manage their budgets. Since actual expenses were not reflected in the
accounts, it was difficult to predict surplus funds or the need for additional funds until the very
end of the fiscal year. We reviewed seven cases where documentation was available on the
return of common support funds to POs/Programs for FY 2001 and FY 2002. We found excess
funds were returned very late in the year, limiting the PO/Program’s ability to use the funds
effectively. In one case, the funds were returned in August. In the remaining cases, the funds
were returned in September – two instances in mid-September, and four instances in the last
three days of September.

Department staff stated that it was difficult to predict excess funds since some invoices were
received after the end of the year or contain adjustments for prior periods. There was one OM
staff member, in addition to other duties, that had the responsibility for reviewing all common
support allocations and actual expenditures to determine if excess funds would be available.
However, if actual expenses were charged back to the POs/Programs for which the expenses
were incurred, the POs/Programs would be more familiar with the actual expenses and pending
amounts, and could help monitor expenditures to identify excess funds that could be returned
more timely.

A check and balance was also missing in the system, as PO/Program staff that were more
familiar with expenses incurred were not able to detect errors or possible irregularities or
inappropriate charges. While PO/Program staff had access to financial data showing amounts
charged, assurance of the appropriateness of amounts charged was lessened since the amounts
did not necessarily relate to PO/Program expenses. As such, improper payments could not be
detected. PO/Program staff involvement in the review of expenses charged might have identified
the invalid telephone service charges noted in our review.



ED-OIG/A19-D0003                                                                    Page 12
Prior OIG Management Review

In a management review report issued in 1998, 1 the OIG recommended that the Department
continue to search for additional areas where amounts charged back to the POs/Programs could
be based on actual charges rather than on FTE usage. The Department responded that they
would continue to seek ways to determine actual charges rather than using the FTE formula and
that at every opportunity the Department uses actual data when the data is available.

We found that in charging the actual expenses back to a PO/Program, the Department’s
methodology is based on the funding estimates established in the budget process, not on charging
the actual PO/Program that benefited from the expense. As we have noted, the methodology for
establishing budget allocations was flawed, therefore any subsequent reliance on this data for
budget allocations in future years continues to perpetuate inaccuracies. Initial budget allocations
were not based on FTE for any of the 19 projects reviewed. In addition, the adjustments that
were made to the allocations throughout the budget process were not made proportionately,
resulting in unequal sharing of common support costs. Documentation was not available to
support the reasons for the adjustments made. Further, POs/Programs were allocated costs for IT
projects from which they did not benefit.

Improvements are needed to ensure that allocation of common support expenses is reasonable
and consistent.

Recommendations:

We recommend that the Assistant Secretary for Management and Chief Information Officer, in
conjunction with the Acting Deputy Secretary, take action to:

1.1	 Develop a methodology for appropriately allocating common support expenses. This
     methodology should include:

          a.	 Documentation of adjustments made to allocations, including the rationale for the
              adjustments. POs/Programs with separate appropriation accounts should be provided
              with justification for adjustments made that vary from the FTE or other stated
              allocation methodologies so that they are aware of adjustments made to uses of their
              funds.

          b.	 Allocation of Central IT project costs to only those POs/Programs that benefit. For
              POs/Programs with separate appropriation accounts that fund a project, the project
              formulation worksheets should be provided so that the POs/Programs are fully
              informed of the uses of their funds, and have the opportunity to question funding
              provided for projects from which they do not benefit.



1
    “Common Support Expense Fund,” ED -OIG/S53-70006, dated July 8, 1998.

ED-OIG/A19-D0003	                                                                   Page 13
       c.	 Allocation of actual common support expenses to the PO/Program for which the
           expense was incurred. If the specific PO/Program cannot be identified, allocate
           expenditures based on the budget methodology used to initially allocate funding.
           Where expenditures apply to all POs/Programs, allocate on the basis of number of
           FTE or another appropriate equitable method.

       d.	 Involvement of PO/Program staff in monitoring expenditures to facilitate timely
           return of funds.


We recommend that the Assistant Secretary for Management and Chief Information Officer:

   1.2	 Take immediate action to disconnect the 13 telephone service accounts identified in the
        audit. Work with the telephone service provider to determine the correct owner of the
        accounts and seek reimbursement of all amounts paid on those accounts as appropriate.


Department of Education Response:

The Department concurred with recommendations 1.1a, 1.1b, 1.1d, and 1.2, and reported that the
13 telephone service lines have been disconnected. With respect to recommendation 1.1c, the
Department stated,

       This recommendation is impractical because it will not work all of the time. This
       assumes that an actual expense will be paid for by an office. However, OM
       cannot dictate to an office which has limited resources the expectation that they
       will be required to fund an old activity in which the funding has been cut or a new
       activity where funding was never requested. In this situation, it has always been
       the responsibility of OM/OCIO to fund shortfalls on any mandated and approved
       project regardless of office contribution....


Office of Inspector General Comments:

In recommendation 1.1c, OIG provided three options – (1) allocate the expenses to the
PO/Program for which the expenses were incurred, (2) if the specific PO/Program cannot be
identified, allocate expenses based on the budget methodology, or (3) where expenditures apply
to all POs/Programs, allocate based on FTE or another appropriate equitable method. This
recommendation does not prohibit OM/OCIO from funding shortfalls. If such adjustments are
appropriately documented, as the Department agreed to do in response to recommendation 1.1a,
such actions would be appropriate. However, shortfalls in one PO/Program should not be funded
by other POs/Programs for which all funding has not yet been used. POs/Programs should be
charged for actual expenses whene ver such expenses can be identified. If the expenses for a
PO/Program cannot be identified, POs/Programs should pay for an equitable share of expenses.
OM/OCIO may continue to fund shortfalls, but unused funds from POs/Programs with separate
appropriatio ns should be returned to those POs/Programs to be used for mission-related use.

ED-OIG/A19-D0003	                                                                 Page 14
Finding No. 2 –       The Department Has Not Formally Communicated the
                      Common Support Expense Allocation Process


The Department had not formally communicated the common support expense allocation process
to staff and management. A small number of staff from OM, Budget Service, OCIO, and OCFO
were involved in managing the common support expense allocation process. Staff in other
POs/Programs had only limited information on ho w the process works and what expenses are
being charged to their organization. While some POs/Programs were included in the Program
Administration account and did not contribute funds directly to common support, other
POs/Programs did provide funds from their budgets for their share of common support expenses.
These separately funded POs/Programs especially had a need for information on how costs were
allocated and charged to their appropriations.

The General Accounting Office (GAO) “Standards for Internal Control in the Federal
Government,” dated November 1999, states that internal control “...comprises the plans, methods,
and procedures used to meet missions, goals and objectives....” GAO states:

       These standards provide a general framework. In implementing these standards,
       management is responsible for developing the detailed policies, procedures, and
       practices to fit their agency’s operations and to ensure that they are built into and
       an integral part of operations.

Under “Information and Communications,” GAO states:

       Information should be recorded and communicated to management and others
       within the entity who need it and in a form and within a time frame that enables
       them to carry out their internal control and other responsibilities.

OMB Circular A-11, Part 4, “Instructions on Budget Execution, ” Section 150.3, states:

   Your agency’s management controls are the organization, policies and procedures 

   that your agency uses to reasonably ensure that:

       •	 Programs achieve their intended results.
       •	 Resources are used consistent with agency mission.
       •	 Programs and resources are protected from waste, fraud and mismanagement.
       •	 Laws and regulations are followed.
       •	 Reliable and timely information is obtained, maintained, and reported for use
          in decision- making.

Departmental Directive OM: 1-101, “The Administrative Communication System,” dated
August 5, 2003, states under “Purpose,” that the Administrative Communication System (ACS),

ED-OIG/A19-D0003	                                                                    Page 15
“informs employees of the Department’s polices, procedures, requirements and other important
information of general applicability through the use of directives and handbooks.” Under
“Policy,” the Directive states:

       1.	     The ACS governs documents that:
               a.	 Announce administrative methods or procedures that affect more than
                      one Principal Office;
               b.	 Require action or impose workloads of a continuing nature on more
                      than one Principal Office;
               c.	 Furnish information to more than one Principal Office that is essential
                      to the operation of the Department; or
               d.	 Provide documentation of internal control systems affecting more than
                      one Principal Office.

While GAO standards, OMB guidelines, and the Department’s Directive all emphasize the use of
policies and procedures to establish and implement management controls and inform employees
of requirements, the only Department document that addressed the common support expense
allocation process was the “FY 2004 Salaries and Expenses Budget Guidance,” dated May 15,
2002. This document provided general information for preparing FY 2004 budget submissions.
Attachment D discussed the request for Central Support funds while Attachment E discussed the
request for Central IT and Telecommunications funds. However, this document did not provide
any information on how common support expenses would be allocated to the POs/Programs. No
chart or table showing the allocation methodology for each expense was available. In order to
determine the budget allocation methodology for our audit, we had to meet with OM, Budget
Service, OCIO, and OCFO staff to obtain information on each individual expense.

During our review, we met with staff from the executive offices of four POs and found that PO
staff were not familiar with how expenses are allocated on their behalf or to their appropriations.
As discussed in Finding 1, PO/Program staff did not have complete information on the Central
IT projects they were funding. This resulted in confusion and uncertainty on the part of PO staff
on the appropriateness of the allocations. POs reported receiving little information on actual
expenditur es incurred and expressed concerns on how some common support expenses are
charged. POs reported only a few areas where they worked with OM or OCIO to monitor costs,
such as postage costs or cellular telephone use.

OM staff stated that they are in cons tant communication via telephone and electronic mail with
the POs/Programs on common support issues. OM staff stated that some PO/Program budget
offices seem better able to understand the common support process than others. While we agree
that PO/Program staff are responsible for knowing the use of their funds, a published policy
represents a good internal control and should result in less confusion on the issues.

Since only a limited number of Department staff had knowledge of the methodology used to
allocate common support expenses, the Department was at risk of losing that information should
the employees leave the Department. As the Department did not have a written record of how
common support expenses were allocated, information was not readily available for training new
staff in OM or Budget Service, or within the budget offices of individual POs/Programs.

ED-OIG/A19-D0003	                                                                  Page 16
Prior OIG Management Review

In the 1998 management review report, OIG recommended that the Department develop and
communicate the policie s and procedures regarding the common support expense process. At
that time, the Department responded that it used guidelines and instructions in Department
directives and written instructions from Budget Service based on OMB Circulars. The
Department further advised that some communications were made less formally through email.
No policies and procedures specific to common support were developed as a result of the prior
review recommendation.

We found that the need still exists to formally develop policies and procedures regarding the
common support process and to communicate this information to Department stakeholders.
Confusion and uncertainty as to the common support expense allocation process continue to be
expressed by PO/Program staff.


Recommendation:

We recommend that the Acting Deputy Secretary, in conjunction with the Assistant Secretary for
Management and Chief Information Officer, take actions to:

   2.1	 Develop and implement policies and procedures that document the common support
        expense allocation process, including the methodology for developing and allocating
        individual common support budget estimates and actual expenses.


Department of Education Response:

The Department did not concur with this recommendation, stating, “...the process for clearance
and making changes is not conducive to the Directive process.” However, the Department
stated, “It is our recommendation that in conjunction with Budget Service, OM will create a
policy document that will provide explanation and clarification of the budget formulation
process.” The Department further stated that it will place a listing that can be accessed by all
offices through its intranet website, and that a detailed procedural document will be created for
internal use in OM.


Office of Inspector General Comments:

The Department’s response meets the intent of our recommendation. We have reworded the
recommendation to remove the specific requirement for a Department Directive and to more
generally state that policies and procedures sho uld be developed and appropriately
communicated.



ED-OIG/A19-D0003	                                                                  Page 17
             OBJECTIVES, SCOPE, AND METHODOLOGY



The objectives of our audit were to:

   1.	 Determine the appropriateness of the Department’s process for allocating common
       support expenses and whether the process is periodically reevaluated.
   2.	 Determine if excess funds and chargebacks are properly explained and returned to the
       Principal Offices in a timely manner.

To accomplish our objectives, we obtained an understanding of the controls in place over the
common support expense allocation process. We reviewed applicable laws and regulations,
Departmental polices, procedures, and budget guidance, and General Accounting Office
Standards for Internal Control in the Federal Government. We also examined a prior OIG
management review of the common support expense allocation process. We conducted
interviews with OM, Budget Service, OCFO, and OCIO staff responsible for managing the
common support process and common support projects. We also interviewed applicable staff
from selected POs.

To perform our audit, we reviewed the largest expenses in each of the three common support
categories. Under Central Support, the largest expense was Rent. We reviewed the expenditures
charged for two judgmentally selected months from FY 2002 (March and July). Total rent
charges for the year were $54.4 million. The two months we reviewed represented $9.3 million
in rent charges. We compared the actual expense allocations for each PO/Program to the rent
billing statements from the General Services Administration. Since this sample was
judgmentally selected, the results may not be representative of the entire population.

The largest expense under Central IT was IT Services, and under Telecommunications the largest
expense was Communications. We randomly selected a sample of 25 actual expenditures from
each of these expenses for FY 2002. The 50 expenditures reviewed totaled $562,085, from a
universe of 449 expenditures totaling $28,168,386. Our review was limited to expenses charged
to Program Administration and to OCR. To assess the accuracy and allocation of these
expenses, we reviewed actual invoices, billing statements, and other supporting documentation.

We reviewed the allocations made for 19 of the 20 Central IT and Telecommunications projects
for FY 2002. We evaluated the allocations made based on FTE calculations, and adjustments
made to the calculations from the initial budget formulation through execution. We also
evaluated the reasonableness of the final allocations made fo r the 14 Central IT projects for FY
2002 and FY 2003.

We also tested 12 POs/Programs with separate appropriations where budget allocations exceeded
the actual costs at the end of FY 2001 and FY 2002 to determine whether the funds were
returned, and if so, whether the returns were timely.

ED-OIG/A19-D0003	                                                                 Page 18
In order to assure ourselves of the reliability of computer-processed data, we reconciled OM and
Budget Service reports with the Department’s general ledger. We completed testing and review
of support schedules to the actual invoices and billing statements. Based on these assessments,
we concluded the data was sufficiently reliable to be used in meeting the audit’s objectives.

We performed our fieldwork at applicable Department of Education offices in Washington, DC,
during the period February 2003 through January 2004. We held an exit conference with
Department management on January 22, 2004. Our audit was performed in accordance with
generally accepted Government Auditing Standards appropriate to the scope of the review as
described above.




ED-OIG/A19-D0003                                                                 Page 19
             STATEMENT ON MANAGEMENT CONTROLS



As part of our review, we assessed the system of management controls, policies, procedures, and
practices applicable to the Department’s administration of the common support expense
allocation process. Our assessment was performed to determine the level of control risk for
determining the nature, extent, and timing of our substantive tests to accomplish the audit
objectives.

For the purpose of this report, we assessed and classified the significant controls into the
following categories:

   •   Policies and procedures;
   •   Allocation methodology; and
   •   Return of excess funds.

Because of inherent limitations, a study and evaluation made for the limited purpose described
above would not necessarily disclose all material weaknesses in the management controls.
However, our assessment disclosed significant management control weaknesses that adversely
affected the Department’s ability to administer the common support expense allocation process.
These weaknesses included the Department’s methodology for allocating common support
expenses during the budget process, adjustments made to these allocations, charging actual
expenditures back to POs/Programs, and the lack of policies and procedures to document and
communicate the common support expense allocation process. These weaknesses and their
effects are fully discussed in the AUDIT RESULTS section of this report.




ED-OIG/A19-D0003                                                                     Page 20
                                                                                                    Attachment 1
                                                                                                      Page 1 of 4

          FY 2002 Common Support Expenses: Budget Allocation Methodology

                  Central Support Expenses:                                       Method2
                  Awards                                                             FTE
                  Benefits                                                          Actual
                  Travel/Motorpool                                                  Actual
                  Transportation/Shipping and Freight                               Actual
                  Rent to General Services Administration                       Square Footage
                  Copier Equipment Leases/Federal Express Shipping                  Actual
                  Postage/Fees                                                      Actual
                  Printing                                                          Actual
                  Alternate Format Center                                           Actual
                  Computer-Based Training Development                                FTE
                  Communications Access                                             Actual
                  Competency Development                                             FTE
                  Copy Centers                                                      Actual
                  Customer Service Center                                            FTE
                  Drug Free Workplace Program                                       Actual
                  Department of Education Awards Ceremony                           Actual
                  Human Capital Investment                                          Actual
                  Interpreters                                                      Actual
                  Mailroom Services                                                  FTE
                  Merit Promotion Database                                           FTE
                  Management/Leadership Development                                  FTE
                  Miscellaneous Services                                             FTE
                  Moving Services                                                    FTE
                  Organizational Improvement                                        Actual
                  Parking Contracts and Services                                    Actual
                  Performance Measurement                                           Actual
                  Reasonable Accommodation Training Contract                        Actual
                  Reasonable Accommodation                                          Actual
                  Recreation Facilities                                              FTE
                  Security-Remote Mail Facility                                     Actual
                  Security-Upgrade Badge System                                     Actual
                  Shuttle Bus Service                                                FTE
                  Space Management/Planning                                         Actual




2
 “Actual” indicates estimates were based on prior year actual costs, or estimates of the costs for the current year
based on past usage or expected benefit for the current year. “FTE” indicates costs were allocated based on the
number of full time equivalent staff in the POs/Programs affected. Rent was allocated based on the square footage
of space occupied by a PO/Program.
                                                                                             Attachment 1
                                                                                               Page 2 of 4

                    Central Support Expenses (Continued)                            Method
                    Statistical Expert/Class Action Suit                             FTE
                    Training Services/Consulting                                     FTE
                    Security – X-ray Screening Training                             Actual
                    Training Development Center                                      FTE
                    Train ing – Work/Life Programs                                  Actual
                    Administrative Payments                                          FTE
                    Boston Personnel Support                                         FTE
                    Regional Cooperative Administrative Support Unit                 FTE
                    Child Care                                                       FTE *
                    Consumer Information Center                                     Actual
                    Consolidated Fund Report                                         FTE
                    Cost-for-Copy Service                                           Actual
                    Counseling Services/Employee Assistance Programs                 FTE
                    Drug Free Workplace Program                                     Actual
                    Environmental Test/Survey                                       Actual
                    Excess Property Management                                      Actual
                    Federal Audit Clearinghouse                                      FTE
                    Federal Executive Institute                                     Actual
                    Federal Quality Consulting Group                                Actual
                    Federal Payroll Personnel System                                 FTE
                    Guard Services                                                   FTE
                    Health Unit Services                                             FTE
                    Medical Offer/Reasonable Accommodation                           FTE
                    Overtime Utilities                                               FTE
                    Personnel Service Support                                        FTE
                    Security Investigations                                         Actual
                    SES Forums                                                      Actual
                    Telecenter/Flexiplace Program                                   FTE *
                    The Learning Network Framework Implementation                    FTE
                    Training Staff and Counseling                                    FTE
                    Transit Subsidy                                                 Actual
                    Work/Life Center Support Service                                 FTE
                    Work/Life Programs/Services in Regions                           FTE
                    Copier Equipment Operations/Maintenance                         Actual
                    Automated Data Processing (ADP) Services Contracts              Actual
                    Group Systems Technical Support                                 Actual
                    The Learning Network Technical Support                          Actual
                    Supplies                                                        Actual
                    Supplies – Human Resource Group                                 Actual
                    Supplies – Section 504                                          Actual
                    Supplies – Training and Development Group                       Actual
                    Supplies – Work/Life Programs Group                             Actual
                    Classroom ADP Equipment Upgrades                                Actual
                    Reasonable Accommodation/ADP Equip & Software                   Actual



*
    Beginning with FY 2003, these expenses are now allocated based on actual use.
                                                                                                Attachment 1
                                                                                                  Page 3 of 4
                  Central Support Expenses (Continued)                           Method
                  Regional ADP Equipment Upgrades                                Actual
                  Server/Software for Virtual Classrooms                         Actual
                  Furniture and Equipment – Training and Development             Actual
                  Furniture and Equipment – Work/Life Programs                   Actual
                  Kansas City Relocation                                         Actual
                  MES Modernization Project                                      Actual
                  San Francisco Relocation Project                               Actual
                  Standard Furniture and Equipment                               Actual
                  ROB-3 Modernization Project                                    Actual
                  Security – Install Guard Booths/Barriers                       Actual
                  Security – Reduce Pedestrian Entrances                         Actual
                  Security – Upgrade Security Control Room                       Actual
                  Standard Building Alterations                                  Actual

                  Central IT and Telecommunications Expenses3
                  Cable Television                                                 FTE
                  Communications                                                   FTE
                  Outreach Program                                                 FTE
                  Asset Management                                                 FTE
                  Automated Case Management System                                 FTE
                  Data Standardization and Coordination                            FTE
                  Department of Education Information Collection
                  System                                                           FTE
                  Electronic Records Management                                    FTE
                  Enterprise Intranet                                              FTE
                  Freedom of Information Act                                       FTE
                  Government Paperwork Elimination Act                             FTE
                  Information Management                                           FTE
                  Internet                                                         FTE
                  Information Technology Architecture                              FTE
                  Information Technology Investment Management                     FTE
                  Information Technology Security                                  FTE
                  Network Operations                                               FTE
                  Warmsite Engineering Services                                    FTE
                  Emerging and Assistive Technology                                FTE
                  Reliable Network                                                 FTE
                  Software Licensing                                               FTE
                  Video Teleconferencing                                           FTE
                  Call Support Services                                            FTE
                  Dedicated Circuits                                               FTE
                  Local Services                                                   FTE
                  Long Distance Services                                           FTE
                  Technology Support                                               FTE




3
 For FY 2004-2005, the Department plans to allocate costs for projects in Central IT and Telecommunications
based on the numbers of network accounts assigned to a PO/Program, rather than on FTE.
                                                                 Attachment 1
                                                                   Page 4 of 4


Central IT and Telecommunications Expenses
(Continued)                                             Method
Asset Management                                         FTE
Automated Case Management System                         FTE
Data Standardization and Coordination                    FTE
Department of Education Information Collection System    FTE
Electronic Records Management                            FTE
Enterprise Intranet                                      FTE
Freedom of Information Act                               FTE
Government Paperwork Elimination Act                     FTE
Information Management                                   FTE
Internet                                                 FTE
Information Technology Architecture                      FTE
Information Technology Investment Management             FTE
Information Technology Security                          FTE
Network Operations                                       FTE
Warmsite Engineering Services                            FTE
Emerging and Assistive Technology                        FTE
Reliable Network                                         FTE
Software Licensing                                       FTE
Video Teleconferencing                                   FTE
Call Support Services                                    FTE
Dedicated Circuits                                       FTE
Local Services                                           FTE
Long Distance Services                                   FTE
Technology Support                                       FTE
                                                                                                  Attachment 2
                                                                                                    Page 1 of 4

       FY 2002 Allocations – Original Allocations versus FTE Calculations
                                FTE              Original      Allocation Based            Dollar      Percent
Account                      Percent4          Allocation5             on FTE6         Difference    Difference

Asset Management (Enterprise Lifecycle Management Support)
Program Administration     58%          $359,900         $353,800                           $6,100         1.7%
Direct Loans/FSA           12%           $73,200           $73,200                              $0         0.0%
FFELP                       8%           $48,800           $48,800                              $0         0.0%
OCR                        16%           $91,500           $97,600                        $(6,100)        -6.3%
OIG                         6%           $36,600           $36,600                              $0         0.0%
Total                    100%           $610,000         $610,000                               $0         0.0%

Automated Case Management System
Program Administration  58%                       $174,800              $172,840            $1,960       1.13%
Direct Loans/FSA        12%                        $36,000               $35,760              $240       0.67%
FFELP                     8%                       $23,200               $23,840            $(640)      -2.68%
OCR                     16%                        $46,000               $47,680          $(1,680)      -3.52%
OIG                       6%                       $18,000               $17,880              $120       0.67%
Total                  100%                       $298,000              $298,000                $0        0.0%

Data Standardization & Coordination
Program Administration     58%                  $1,770,000            $1,740,000           $30,000         1.7%
Direct Loans/FSA           12%                    $360,000              $360,000                $0         0.0%
FFELP                       8%                    $240,000              $240,000                $0         0.0%
OCR                        16%                    $450,000              $480,000         $(30,000)        -6.3%
OIG                         6%                    $180,000              $180,000                $0         0.0%
Total                     100%                  $3,000,000            $3,000,000                $0         0.0%

ED Information Collection Management and Analysis System (EDICS)
Program Administration      58%        $177,000           $174,000                          $3,000         1.7%
Direct Loans/FSA            12%         $36,000            $36,000                              $0         0.0%
FFELP                        8%         $24,000            $24,000                              $0         0.0%
OCR                         16%         $45,000            $48,000                        $(3,000)        -6.3%
OIG                          6%         $18,000            $18,000                              $0         0.0%
Total                      100%        $300,000           $300,000                              $0         0.0%

Enterprise Electronic Records Management Application Initiative
Program Administration       58%       $398,300              $392,080                       $6,220         1.6%
Direct Loans/FSA             12%         $81,100              $81,120                        $(20)        -0.0%
FFELP                         8%         $54,100              $54,080                          $20         0.0%
OCR                          16%       $101,900              $108,160                     $(6,260)        -5.8%
OIG                           6%         $40,600              $40,560                          $40         0.1%
Total                       100%       $676,000              $676,000                           $0         0.0%

4
  Obtained from OCFO staff who used the FTE percentages to calculate the original allocations.

5
  Based on original FY 2002 project worksheets (developed in FY 2000).

6
  OIG calculation based on total projected project costs x FTE percentages.

                                                                             Attachment 2
                                                                               Page 2 of 4

                            FTE      Original    Allocation Based       Dollar     Percent
Account                  Percent    Allocation            on FTE    Difference   Difference

Enterprise Intranet
Program Administration      58%       $885,000           $870,000      $15,000        1.7%
Direct Loans/FSA            12%       $180,000           $180,000           $0        0.0%
FFELP                        8%       $120,000           $120,000           $0        0.0%
OCR                         16%       $225,000           $240,000    $(15,000)       -6.3%
OIG                          6%        $90,000            $90,000           $0        0.0%
Total                      100%     $1,500,000         $1,500,000           $0        0.0%

FOIA/PA Tracking System
Program Administration      58%       $87,000            $87,000            $0        0.0%
Direct Loans/FSA            12%       $19,000            $18,000        $1,000        5.6%
FFELP                        8%       $12,000            $12,000            $0        0.0%
OCR                         16%       $23,000            $24,000      $(1,000)       -4.2%
OIG                          6%        $9,000             $9,000            $0        0.0%
Total                      100%      $150,000           $150,000            $0        0.0%

Information Management
Program Administration      58%      $430,700           $423,400       $7,300         1.7%
Direct Loans/FSA            12%       $87,600            $87,600            $0        0.0%
FFELP                        8%       $58,400            $58,400            $0        0.0%
OCR                         16%      $109,500           $116,800      $(7,300)       -6.3%
OIG                          6%       $43,800            $43,800            $0        0.0%
Total                      100%      $730,000           $730,000            $0        0.0%

Internet Activities
Program Administration      58%     $6,162,000         $6,056,940    $105,060         1.7%
Direct Loans/FSA            12%     $1,253,000         $1,253,160       $(160)       -0.0%
FFELP                        8%       $835,000           $835,440       $(440)       -0.1%
OCR                         16%     $1,566,000         $1,670,880   $(104,880)       -6.3%
OIG                          6%       $627,000           $626,580         $420        0.1%
Total                      100%    $10,443,000        $10,443,000           $0        0.0%


IT Architecture
Program Administration      58%      $531,000           $522,000        $9,000        1.7%
Direct Loans/FSA            12%      $108,000           $108,000            $0        0.0%
FFELP                        8%       $72,000            $72,000            $0        0.0%
OCR                         16%      $135,000           $144,000      $(9,000)       -6.3%
OIG                          6%       $54,000            $54,000            $0        0.0%
Total                      100%      $900,000           $900,000            $0        0.0%
                                                                                   Attachment 2
                                                                                     Page 3 of 4

                            FTE          Original    Allocation Based         Dollar     Percent
Account                  Percent        Allocation            on FTE      Difference   Difference

IT Investment Management
Program Administration    58%            $342,200           $336,400          $5,800        1.7%
Direct Loans/FSA          12%             $69,600            $69,600              $0        0.0%
FFELP                      8%             $46,400            $46,400              $0        0.0%
OCR                       16%             $87,000            $92,800        $(5,800)       -6.3%
OIG                        6%             $34,800            $34,800              $0        0.0%
Total                    100%            $580,000           $580,000              $0        0.0%

Information and Critical Infrastructure Assurance Program (IT Security)
Program Administration       58%           $964,700          $948,300        $16,400        1.7%
Direct Loans/FSA             12%           $196,200          $196,200             $0        0.0%
FFELP                         8%           $130,800          $130,800             $0        0.0%
OCR                          16%           $245,300          $261,600      $(16,300)       -6.2%
OIG                           6%            $98,000           $98,100         $(100)       -0.1%
Total                       100%         $1,635,000        $1,635,000             $0        0.0%

Network Operations
Program Administration    58.2%        $13,226,840        $13,082,196      $144,644         1.1%
Direct Loans/FSA          12.2%         $2,697,120         $2,742,316      $(45,196)       -1.6%
NAGB                       0.3%            $34,000            $67,434      $(33,434)      -49.6%
FFELP                      7.8%         $1,798,080         $1,753,284        $44,796        2.6%
OCR                       15.4%         $3,371,400         $3,461,612      $(90,212)       -2.6%
OIG                        6.1%         $1,350,560         $1,371,158      $(20,598)       -1.5%
Total                      100%        $22,478,000        $22,478,000             $0        0.0%


Atlanta Technology Support Center (Warmsite)
Program Administration     58%        $2,033,720           $1,999,254        $34,466        1.7%
Direct Loans/FSA           12%          $413,640             $413,639             $1        0.0%
FFELP                       8%          $275,760             $275,759             $1        0.0%
OCR                        16%          $517,050             $551,518      $(34,468)       -6.2%
OIG                         6%          $206,820             $206,819             $1        0.0%
Total                     100%        $3,446,990           $3,446,990             $0        0.0%


Call Support Systems
Program Administration      58%           $796,500           $783,000        $13,500        1.7%
Direct Loans/FSA            12%           $162,000           $162,000             $0        0.0%
FFELP                        8%           $108,000           $108,000             $0        0.0%
OCR                         16%           $202,500           $216,000      $(13,500)       -6.3%
OIG                          6%            $81,000            $81,000             $0        0.0%
Total                      100%         $1,350,000         $1,350,000             $0        0.0%
                                                                                Attachment 2
                                                                                  Page 4 of 4

                            FTE         Original    Allocation Based       Dollar     Percent
Account                  Percent       Allocation            on FTE    Difference   Difference

Dedicated and Switched Data Circuits
Program Administration     58%         $1,811,300         $1,781,180      $30,120        1.7%
Direct Loans/FSA           12%           $368,400           $368,520       $(120)       -0.0%
FFELP                       8%           $246,600           $245,680         $920        0.4%
OCR                        16%           $460,500           $491,360    $(30,860)       -6.3%
OIG                         6%           $184,200           $184,260        $(60)       -0.0%
Total                     100%         $3,071,000         $3,071,000           $0        0.0%

Local Services
Program Administration   57.93%        $5,501,250         $5,430,938      $70,313        1.3%
Direct Loans/FSA         12.11%        $1,125,000         $1,135,313    $(10,313)       -0.9%
NAGB                      0.30%           $12,000            $28,125    $(16,125)      -57.3%
NIL                       0.30%            $8,000            $28,125    $(20,125)      -71.6%
FFELP                     7.81%          $750,000           $732,188      $17,813        2.4%
OCR                      15.36%        $1,406,250         $1,440,000    $(33,750)       -2.3%
OIG                       6.04%          $562,500           $566,250     $(3,750)       -0.7%
NERPPB                    0.00%                $0                 $0           $0        0.0%
CHAFL                     0.13%            $8,000            $12,188     $(4,188)      -34.4%
HBCU                      0.02%            $2,000             $1,875         $125        6.7%
Total                    100.0%        $9,375,000         $9,375,000           $0        0.0%

Long Distance
Program Administration      58%        $1,660,850         $1,632,700      $28,150        1.7%
Direct Loans/FSA            12%          $337,800           $337,800           $0        0.0%
FFELP                        8%          $225,200           $225,200           $0        0.0%
OCR                         16%          $422,250           $450,400    $(28,150)       -6.3%
OIG                          6%          $168,900           $168,900           $0        0.0%
NAGB                         0%                $0                 $0           $0        0.0%
CHAFL                        0%                $0                 $0           $0        0.0%
NIL                          0%                $0                 $0           $0        0.0%
HBCU                         0%                $0                 $0           $0        0.0%
NERPPB                       0%                $0                 $0           $0        0.0%
Total                      100%        $2,815,000         $2,815,000           $0        0.0%

Telecommunications Support
Program Administration     58%          $147,500           $145,000        $2,500        1.7%
Direct Loans/FSA           12%           $30,000            $30,000            $0        0.0%
FFELP                       8%           $20,000            $20,000            $0        0.0%
OCR                        16%           $37,500            $40,000      $(2,500)       -6.3%
OIG                         6%           $15,000            $15,000            $0        0.0%
Total                    100%           $250,000           $250,000            $0        0.0%
                                                                                         Attachment 3
                                                                                           Page 1 of 3


                FY 2002 Original Allocations versus Actual Expenses

                                                                                Dollar
                                                                            Difference -­
                                                              FY 2002         Original
                                              Original FY      Actual       Allocation vs.
                                              2002 Budget     Expenses          Actual        Percent
                Project Title                  Allocation     Charged         Expenses       Difference

Asset Management (Enterprise Lifecycle Management Support)
Program Administration                            $359,900      $224,000        $(135,900)       -37.8%
Direct Loan                                        $73,200       $73,000            $(200)        -0.3%
FFELP                                              $48,800       $49,000             $200          0.4%
OCR                                                $91,500       $92,000             $500          0.5%
OIG                                                $36,600       $36,000            $(600)        -1.6%
Total                                             $610,000      $474,000        $(136,000)       -22.3%

Automated Case Management
Program Administration                            $174,800            $0        $(174,800)      -100.0%
Direct Loan                                        $36,000       $36,000                $0         0.0%
FFELP                                              $23,200       $24,000              $800         3.4%
OCR                                                $46,000       $46,000                $0         0.0%
OIG                                                $18,000       $19,000            $1,000         5.6%
Total                                             $298,000      $125,000        $(173,000)       -58.1%

Data Standardization & Coordination
Program Administration                           $1,770,000    $1,246,000       $(524,000)       -29.6%
Direct Loan                                        $360,000      $144,000       $(216,000)       -60.0%
FFELP                                             $240,000             $0       $(240,000)      -100.0%
OCR                                                $450,000            $0       $(450,000)      -100.0%
OIG                                                $180,000            $0       $(180,000)      -100.0%
Total                                            $3,000,000    $1,390,000     $(1,610,000)       -53.7%

Education Department's Information Collection System
Program Administration                             $177,000     $179,000            $2,000         1.1%
Direct Loan                                         $36,000      $36,000                $0         0.0%
FFELP                                               $24,000      $11,000         $(13,000)       -54.2%
OCR                                                 $45,000           $0         $(45,000)      -100.0%
OIG                                                 $18,000           $0         $(18,000)      -100.0%
Total                                              $300,000     $226,000         $(74,000)       -24.7%

Electronic Records Management
Program Administration                            $398,300      $353,000         $(45,300)       -11.4%
Direct Loan                                        $81,100       $78,000          $(3,100)        -3.8%
FFELP                                              $54,100       $54,000            $(100)        -0.2%
OCR                                               $101,900       $98,000          $(3,900)        -3.8%
OIG                                                $40,600       $39,000          $(1,600)        -3.9%
Total                                             $676,000      $622,000         $(54,000)        -8.0%
                                                                                  Attachment 3
                                                                                    Page 2 of 3
                                                                         Dollar
                                                                     Difference -­
                                                       FY 2002         Original
                                        Original FY     Actual       Allocation vs.
                                        2002 Budget    Expenses          Actual         Percent
                Project Title            Allocation    Charged         Expenses        Difference
Enterprise Intranet
Program Administration                      $885,000     $550,000        $(335,000)        -37.9%
Direct Loan                                $180,000      $108,000         $(72,000)        -40.0%
FFELP                                       $120,000      $24,000         $(96,000)        -80.0%
OCR                                         $225,000      $45,000        $(180,000)        -80.0%
OIG                                          $90,000      $18,000         $(72,000)        -80.0%
Total                                     $1,500,000     $745,000        $(755,000)        -50.3%

FOIA/PA Tracking and Reporting System
Program Administration                       $87,000     $344,000         $257,000         295.4%
Direct Loan                                  $19,000       $6,000         $(13,000)        -68.4%
FFELP                                        $12,000       $6,000          $(6,000)        -50.0%
OCR                                          $23,000       $6,000         $(17,000)        -73.9%
OIG                                           $9,000       $6,000          $(3,000)        -33.3%
Total                                       $150,000     $368,000         $218,000         145.3%

Information Management
Program Administration                      $430,700     $100,000        $(330,700)        -76.8%
Direct Loan/FSA                              $87,600      $88,000             $400           0.5%
FFELP                                        $58,400           $0         $(58,400)       -100.0%
OCR                                         $109,500      $80,000         $(29,500)        -26.9%
OIG                                          $43,800      $44,000             $200           0.5%
Total                                       $730,000     $312,000        $(418,000)        -57.3%

Internet Activities
Program Administration                    $6,162,000    $4,275,000     $(1,887,000)        -30.6%
Direct Loan                               $1,253,000      $249,000     $(1,004,000)        -80.1%
FFELP                                       $835,000      $101,000       $(734,000)        -87.9%
OCR                                       $1,566,000      $196,000     $(1,370,000)        -87.5%
OIG                                         $627,000       $78,000       $(549,000)        -87.6%
Total                                    $10,443,000    $4,899,000     $(5,544,000)        -53.1%

IT Architecture
Program Administration                      $531,000     $789,000          $258,000         48.6%
Direct Loan                                 $108,000      $108,000               $0          0.0%
FFELP                                        $72,000       $72,000               $0          0.0%
OCR                                         $135,000      $135,000               $0          0.0%
OIG                                          $54,000       $54,000               $0          0.0%
Total                                       $900,000    $1,158,000         $258,000         28.7%

IT Investment Management
Program Administration                      $342,200     $336,000           $(6,200)        -1.8%
Direct Loan                                  $69,600      $70,000              $400          0.6%
FFELP                                        $46,400      $46,000             $(400)        -0.9%
OCR                                          $87,000      $87,000                 $0         0.0%
OIG                                          $34,800      $35,000              $200          0.6%
Total                                       $580,000     $574,000           $(6,000)        -1.0%
                                                                                            Attachment 3
                                                                                              Page 3 of 3
                                                                                   Dollar
                                                                               Difference -­
                                                                FY 2002          Original
                                               Original FY       Actual        Allocation vs.
                                               2002 Budget      Expenses           Actual        Percent
                Project Title                   Allocation      Charged          Expenses       Difference

Information and Critical Infrastructure Assurance Program (IT Security)
Program Administration                               $964,700     $1,896,000        $931,300         96.5%
Direct Loan                                          $196,200       $212,000          $15,800         8.1%
FFELP                                                $130,800       $131,000             $200         0.2%
OCR                                                  $245,300       $128,000       $(117,300)       -47.8%
OIG                                                   $98,000        $98,000               $0         0.0%
Total                                              $1,635,000     $2,465,000        $830,000         50.8%

Network Operations
Program Administration                           $13,226,840    $11,270,000      $(1,956,840)       -14.8%
Direct Loan                                       $2,697,120     $3,266,000         $568,880         21.1%
FFELP                                             $1,798,080     $1,798,000             $(80)        -0.0%
OCR                                               $3,371,400     $3,141,000        $(230,400)        -6.8%
OIG                                               $1,350,560     $1,238,000        $(112,560)        -8.3%
NAGB                                                 $34,000        $34,000                $0         0.0%
Total                                            $22,478,000    $20,747,000      $(1,731,000)        -7.7%

Atlanta Technology Support Center (Warmsite)
Program Administration                            $2,033,720     $4,093,000        $2,059,280       101.3%
Direct Loan                                         $413,640             $0        $(413,640)      -100.0%
FFELP                                               $275,760             $0        $(275,760)      -100.0%
OCR                                                 $517,050             $0        $(517,050)      -100.0%
OIG                                                 $206,820             $0        $(206,820)      -100.0%
Total                                             $3,446,990     $4,093,000          $646,010        18.7%


Totals by Account
Program Administration                           $27,543,160    $25,655,000      $(1,888,160)        -6.9%
Direct Loan                                       $5,610,460     $4,474,000      $(1,136,460)       -20.3%
FFELP                                             $3,738,540     $2,316,000      $(1,422,540)       -38.1%
OCR                                               $7,013,650     $4,054,000      $(2,959,650)       -42.2%
OIG                                               $2,807,180     $1,665,000      $(1,142,180)       -40.7%
NAGB                                                 $34,000        $34,000                $0         0.0%
Total                                            $46,746,990    $38,198,000      $(8,548,990)       -18.3%
                                                                                                                           Attachment 4
                                                                                                                             Page 1 of 2


                  IT Services/Communications: Actual Expenses Not Charged to POs/Programs
                                    for which the Expense Was Incurred

                 OCR or Prog. Purchase Order/
     Type        Admin. (PA) Contract Number          Date        Amount        Vendor                       Description

Charges to OCR for expenses that did not benefit OCR, or also benefited other POs/Programs
IT Services             OCR       ED01PO1114       Mar 02       $2,997.00 Silent Partner   Card readers in OCIO space
IT Services             OCR       ED01PO1114       Mar 02         $500.00 Silent Partner   Equip for Closed Circuit TV Union Station
IT Services             OCR       ED01PO1114       Mar 02         $135.00 Silent Partner   Equip for Closed Circuit TV Union Station
IT Services             OCR       ED01PO1114       Mar 02         $250.00 Silent Partner   Equip for Closed Circuit TV Union Station
IT Services             OCR       ED01PO1114        Apr 02      $1,228.00 Unitech          Web-based IT security training (5500 licenses)
IT Services             OCR       ED01PO1114        Apr 02        $600.00 Unitech          Web-based IT security training (5500 licenses)
Communications          OCR       ED01PO0890       May 02         $112.87 PRT              OIG telephone service in Puerto Rico
Communications          OCR       ED01PO0890        Jun 02         $76.98 PRT              OIG telephone service in Puerto Rico
Communications          OCR       ED01PO0682        Jul 02         $78.41 Bell South       Telephone – Program Admin. PO
Communications          OCR       MR96026101        Jul 02      $8,931.68 SW Bell          Telephone – Dept Regional Offices
        Total -- 10 charges                                     Mar 02

Charges to Program Administration that also benefited other accounts, should have been distributed
IT Services             PA      ED00CO0054           Jul 02    $32,814.19 DST, Inc.         Labor & materials (wireless phones)
IT Services             PA      ED00CO0054          Feb 02     $37,105.62 SAIC              Network services
IT Services             PA      ED01PO1114          Apr 02     $23,800.00 Silent Partner    Equip & install for Atlanta project
        Total -- 3 charges                                     $93,719.81

Charges to Program Administration for expenses that should have been charged to OCR
Communications         PA       ED01PO0850          Sep 02       $276.32 Qwest               Telephone – OCR
Communications         PA       ED01PO0850          Sep 02       $256.32 Qwest               Telephone – OCR
       Total -- 2 charges                                        $532.64
                                                                                                                       Attachment 4
                                                                                                                         Page 2 of 2


                 OCR or Prog. Purchase Order/
     Type        Admin. (PA) Contract Number         Date       Amount         Vendor                    Description

Phone service charged to OCR when the user could not be identified
Communications         OCR      ED01PO0682         Jul 02         $147.71   Bell South   Telephone – Location/User Unknown
Communications         OCR      ED01PO0682         Jul 02          $99.49   Bell South   Telephone – Location/User Unknown
Communications         OCR      ED01PO0682         Jul 02         $465.45   Bell South   Telephone – Location/User Unknown
Communications         OCR      ED01PO0682        Aug 02          $193.45   Bell South   Telephone – Location/User Unknown
Communications         OCR      ED01PO0682         Sep 02          $60.47   Bell South   Telephone – Location/User Unknown
Communications         OCR      ED01PO0682         Sep 02          $65.60   Bell South   Telephone – Location/User Unknown
       Total -- 6 charges                                       $1,032.17

Phone services charged to Program Administration when the user could not be identified
Communications        PA        ED01PO0851        Jun 02         $49.38 Qwest            Telephone – Salt Lake City, User Unknown
Communications        PA        ED01PO0851        Aug 02         $57.26 Qwest            Telephone – Salt Lake City, User Unknown
Communications        PA        ED01PO0852         Jul 02        $73.38 Qwest            Telephone – Minneapolis, User Unknown
Communications        PA        ED01PO0852        Aug 02         $40.67 Qwest            Telephone – Minneapolis, User Unknown
Communications        PA        ED01PO0854        Apr 02         $50.10 Qwest            Telephone – Phoenix, User Unknown
Communications        PA        ED01PO0854        Sep 02         $49.36 Qwest            Telephone – Phoenix, User Unknown
Communications        PA        ED01PO0854        Sep 02         $51.54 Qwest            Telephone – Phoenix, User Unknown
      Total -- 7 charges                                        $371.69
       Subtotal 13 Telephone Charges – Users Unknown           $1,403.86


       Grand Total -- 28 charges                             $110,566.25
                                                                                          Attachment 5




MEMORANDUM

TO:            Helen Lew
               Assistant Inspector General
               for Audit

FROM:          William J. Leidinger
               Assistant Secretary

               Dr. Eugene Hickok
               Acting Deputy Secretary
               Office of Deputy Secretary

SUBJECT:       Draft Audit Report of Allocation of Common Support Expenses (ED-OIG/A19-D0003)

This is the Office of Management (OM) and Office of the Deputy Secretary response to the March 1,
2004, Office of Inspector General (OIG) draft audit report (ED/OIG/A-19-D003).

Attached are the comments from the Office of Management Executive Office and Office of Deputy
Secretary, Budget Service in response to the OIG report.

If you have any questions, please do not hesitate to contact me at (202) 260-0563, or Keith Berger at
(202) 401-0693.


Attachment
        Comments on Draft Audit Reports ED-OIG/A19-D0003, March 2004

                         Audit of Allocation of Common Support Expenses


1. Executive Summary

a. The Executive Summary should state that the period audited, FY 2002, occurred during a time when
the Office of Management (OM) was not assigned the responsibility for the allocation of Information
Technology common support expenses. You state this in the Background area of the report, but it
needs to be included as well in this important first section. We would like this distinction because in
Finding 1, there is nothing regarding the non-IT common support function that was OM's
responsibility, which leads us to believe that the procedures and execution of the common support
expenses were being done properly.

b. OIG continues to request that a Department Directive be developed. We continue to strongly
oppose this recommendation. As you indicated in your review, the Department's Directive System
would not prohibit a directive. However, the process of creating directives, processing for clearance
and making cha nges is not conducive to the Directive process.

       Problem 1: Directives are circulated Department-wide for comment. Most offices have no
       stake in the common support formulation process because OM is tasked with funding
       Department operations centrally. Yet, these offices may come in and propose changes, offer
       opinions, request modifications to a Directive that does not impact their office.

       Problem 2: Directives are the formal way to lay down policy on areas that are fairly static and
       not prone to change much. The common support formulation process is very dynamic and
       changes frequently in that methodologies change, and projects are being added, changed and
       eliminated. If such a Directive exists, all changes, no matter how minor, would require a re-
       submission for comment to all offices in the Department.

2. Background.

a. In the first paragraph, you should add that OM currently manages the common support expense
allocation process. You don't state that until the 2nd paragraph. Maybe move that sentence to the first
paragraph.

b. Delete the third bullet in the third paragraph. This account no longer exists.

c. In the fourth paragraph, last line, insert “The National Board for Education Statistics (NBES),
formerly the “National Education Research Policies and Priorities Board (NERPPB).

d. In the fifth paragraph, first sentence, should state "In FY 2002, costs…"




                                                    1

3. Audit Results, Finding 1 (Concur and Non-concur, see below)

a. Title for Finding No. 1 should probably be "The Department Did Not Have….". Title alludes to a
current situation, which is not covered in this report.

b. Page 6, should continue to indicate that the analysis was conducted during the FY 2002 period of
time.

c. Page 7, the OIG continues to ignore the problems of budget formulation where initial budgets, which
are formulated based on assumptions, methodologies and procedures at one stage of the process, can
be radically altered by the time funds are appropriated by Congress. The OIG desires logical answers
and clear-cut methodologies that are anything but. Multiple cycles of the budget formulation process
exist and for a given year, funding levels can be changed during any of the cycles: Office Request,
Analyst Recommendation, ABAD Recommendation, Budget Services Recommendation, OMB
Request, President's Budget, Revised Office Request, Revised Analyst Recommendation, Revised
ABAD Recommendation, Revised Budget Service Recommendation, Revised OMB Budget, Revised
President's Budget, and Allocation.

During these cycles, the Office Request can be changed for a variety of reasons: FTE projection
changes, office requirements’ changes, reductions taken to accommodate other office needs, OMB and
Congressional cuts and rescissions, internal funding shortfalls like payroll requiring further reductions
in administrative projects. These all change the dynamics of the final allocation of funds to a
particular office. How do you address funding shortfalls in some offices? How do you re-distribute
those costs that were calculated and reviewed six months to a year prior? These are problems that are
constantly faced every year. These are not “cut and dried” situations. They often cannot be resolved
on an equitable basis because an office cannot be forced to fund something that was cut, reduced or
eliminated from their budget. What kind of reasonableness would the OIG auditors deem acceptable?

5. Recommendations

1.1.	   Develop a methodology for appropriately allocating common support expenses

        a.	 OM will concur.
              Both the Budget Service and OM will document and provide reasons why adjustments
              are made during the many cycles of the budget process. The Budget Service has always
              documented changes to the original allocations of common support expenses. This is
              done in each of the budget cycles noted above. As changes to funding levels occur, all
              changes are documented in the appropriate budget cycle. Contrary to the information
              on page 8, the budget formulation database DOES have the capacity to provide
              comments at the project level. Therefore, the Budget Service will provide reasons for
              adjustments to a particular project in the comments section of the database, as
              necessary. OM will start to notate when changes occur to actual allocations of funding.
              We will determine the best way to report these changes to offices, either through email,
              change log on OM's IAS system, etc.




                                                   2

       b. 	OM will concur.
              Currently, OM is making a concerted effort to ensure that funds benefit the office when
              they are used on a project or contract. Additionally, we will make available a
              formulation worksheet that identifies project/contract, method of allocation, and
              individual inclusions or exclusions when all offices are not affected. This will be made
              available in the S&E Budget Request guidance in May, and will be included in the
              Budget Service's Budget Formulation Database System in the instructions section. OM
              will work to get this added to it's own website as a resource for all interested offices.

       c. OM must non-concur.
             This recommendation is impractical because it will not work all of the time. This
             assumes that an actual expense will be paid for by an office. However, OM cannot
             dictate to an office which has limited resources the expectation that they will be
             required to fund an old activity in which the funding has been cut or a new activity
             where funding was never requested. In this situation, it has always been the
             responsibility of OM/OCIO to fund shortfalls on any mandated and approved project
             regardless of office contribution. This is a fact of budget formulation and execution that
             just cannot be followed through on all the time. This is where our review of activities
             can show decreases in one area that can offset increases in other areas. The idea is to
             use the total allocation of funding without having to request additional funding from
             offices that cannot provide it. As stated in 1.1.a, we shall document these kinds of
             changes.

       d. OM will concur.
             There are many avenues for these offices to monitor their expenditures. We have
             provided access to the OM IAS system that affords offices a detailed status of funds and
             identifies projects and contracts being funded from their accounts. Many have had
             access, but few currently use. We have gone out and requested they update their staff
             that potentially can have access to the IAS. We are in the process of establishing a
             larger user base that may increase their usage of the system reports. There are
             Departmental systems and reports also available that also provide a variety of
             information. These include the FMSS, the Budget Formulation Database System, and
             the COGNOS system for customized reports. OM also provides a spreadsheet of
             projects and contracts at different times in the year for their information.

1.2    The disconnection of the 13 telepho ne service accounts has been completed. The 6 Bell South
lines were disconnected in November 2003. The Qwest lines were disconnected on March 22, 2004.
The disconnection of the Qwest lines was requested at the same time as Bell South in November 2003,
but we discovered that there was miscommunication between GSA and Qwest during the transition
from Qwest to GSA.




                                                   3

6. Finding No. 2 (Non-concur)

        a. As indicated under Executive Summary, OIG continues to request that a Department
Directive be developed. We continue to strongly oppose this recommendation. As you indicated in
your review, the Department's Directive System would not prohibit a directive. However, the process
of creating directives, processing for clearance and making changes is not conducive to the Directive
process.

       Problem 1: Directives are circulated Department-wide for comment. Most offices have no
       stake in the common support formulation process because OM is tasked with funding
       Department operations centrally. Yet, these offices may come in and propose changes, offer
       opinions, request modifications to a Directive that does not impact their office.

       Problem 2: Directives are the formal way to lay down policy on areas that are fairly static and
       not prone to change much. The common support formulation process is very dynamic and
       changes frequently in that methodologies change, projects are being added, changed and
       eliminated. If such a Directive exists, all changes, no matter how minor would require a re-
       submission for comment to all offices in the Department.

       It is our recommendation that in conjunction with the Budget Service, OM will create a policy
       document that will provide explanation and clarification of the budget formulation process. It
       will allow OM and Budget Service to update as needed, whenever it is needed, and will not
       require a formal process to make this kind of information available.

       There are some offices, like the OCFO, that provide a detailed and extensive listing of policy
       and procedure documents on- line, through their intranet website. These are not formally done
       through a Department-wide distribution process, but are created and maintained as needs
       dictate. Changing these listings can be done quickly and provide up-to-date documentation for
       all offices. OM and Budget Service would like to implement something along these lines. We
       will place a listing that can be accessed by all offices through our intranet website that will
       always have the latest budget formulation data. In our view, this is more appropriate and can
       be managed easily and still will meet the OIG requirements of disclosure.

       Included with this document and/or in conjunction with it, a more detailed procedural
       document will be created for internal use in OM that will outline a more detailed expla nation of
       common support formulation procedures.

7. Recommendations

       2.1. Non-concur. Reasons and our recommendation stated above.




                                                   4

                                                                                  Attachment D

                        CENTRAL SUPPORT FUNDS INSTRUCTIONS

The Office of Management will make the request for Central Support funds for all Salaries and
Expenses accounts. Budget requests for each project/object class for 2005 and 2006 should be
distributed among the accounts as accurately as possible and only to those offices that benefit from a
particular project. The following methodologies should be used to allocate these costs:

           1.	 actual costs as documented from current and previous years’ records;
           2.	 proration of costs based on FTE levels; or
           3.	 other methods as indicated

For all accounts other than Program Administration, the Office of Management’s Executive Office
should inform each of the Department’s components with primary responsibility for any Salaries and
Expenses account of the levels of the 2005 revised request and 2006 request within a reasonable
time before the June 23 Budget Service deadline for budget submission. Offices with primary
responsibility for Salaries and Expenses accounts may also view the OM requests in report A-2 of the
database.

As part of the 2006 budget submission for Central Support, the following exhibits should be submitted
with the rest of the Office of Management (OM) budget materials.

1)	 Interagency Agreements: Provide a brief purpose statement on a separate attachment for each
    interagency agreement listed and an explanation of any cost increases/decreases in the
    Department total for 2005 and 2006. Follow the general guidelines for justifying
    increases/decreases above the President's budget.

2)	 Rent: Provide OMB Exhibit 54 – Rental Payments for Space and Land. Please submit a copy of
    the back-up rent worksheet (detailed by building/appropriations) along with a narrative to describe
    current plans, including space reduction achievements in 2004 and future space plans reflecting
    reductions, additions, and special space requirements in the regions and headquarters.

3)	 Postage: Provide a breakout by principal office and by contract where applicable, of actual costs
    for 2003, 2004 estimates, and projections for 2005 and 2006. Provide a narrative explanation
    justifying any cost increases/decreases, such as higher volume for specific purposes or postal rate
    changes, in 2005 and 2006.

The attachment provides an explanation by object class of the methodology used to develop the
Common Support budget request for the Office of Management and how the costs are distributed.
However, as additional information and data are obtained, these methodologies may be subject to
revisions.




                                                   5

                                                                                  Attachment E

         CENTRAL INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS
                                     FUNDS INSTRUCTIONS

The Office of the Chief Information Officer will make the request for Central Information Technology
and Telecommunications funds for all Salaries and Expenses accounts. Budget requests for each
project/object class for 2005 and 2006 should be distributed among the accounts as accurately as
possible and only to those offices that benefit from a particular project. The following methodologies
should be used to allocate these costs:

           1. actual costs as documented from current and from previous years’ records;
           2. proration of costs based on network connectivity or FTE levels; or
           3. other methods as indicated

For all accounts other than Program Administration, the Office of the Chief Information Officer’s
Executive Office should inform each of the Department’s components with primary responsibility for
any Salaries and Expenses account of the levels of the 2005 revised request and 2006 request within
a reasonable time before the June 23 deadline for submission of budget requests. Offices with
primary responsibility for Salaries and Expenses accounts may also view the OCIO requests in report
A-2 of the database.

The 2005 revised requests and 2006 requests should continue the policy of centralized budgeting for
IT equipment for use by individual staff and contract support personnel within the CIT budget, rather
than in each individual office. Only funds necessary for miscellaneous IT purchases (e.g.
Blackberries, cell phones, pagers, etc.) should be included in non-OCIO office requests.

The attachment provides an explanation by object class of the methodology used to develop the
Central Information Technology and Telecommunications budget requests for the Office of Chief
Information Officer and how the costs are distributed. However, as additional information and data
are obtained, these methodologies may be subject to revisions.




                                                   6

         Allocation Methodology Information Technology and Telecommunication
                                Office of the Chief Information Officer
Method: 	Network = Unique accounts on ED network
          Actual = Actual Costs/Charges based on Prior Year
          FTE = Full time PO Staff
Object                                                 Proj   OCIO               Charged to
Class                                                  Code   Office   Method     Account     Notes
23.31         Communications/Leases
              Call Support Services                     1S     TC      Network      Yes       Working towards actual charges
              Dedicated Circuits                        1G     TC      Network      Yes       Working towards actual charges
              Local Services                            1P     TC      Network      Yes       Working towards actual charges
              Long Distance Services                    1A     TC      Network      Yes       Working towards actual charges
              Technology Support (Telecom.)             1M     TC      Network      Yes
              Warmsite Dedicated Circuits               WE      IT     Network      Yes
              Cable monthly services                    UI      IT     Network      Yes       Working towards actual charges
25.21         Other Services                                    IT     Actual       No
25.22         Training                                          IT     Actual       No
25.30         Interagency Agreements
              NARA                                      NR      IM     Actual       Yes
              Dallas Move Services                      DA      IT     Network      Yes
              Chicago Move Services                     CH      IT     Network      Yes
              New York Move Services                    NY      IT     Network      Yes
              San Francisco Mover Services              SF      IT     Network      Yes
25.71         Repair and Maintenance
              VTC Equipment                             VT      IT     Network      Yes
              Software Maintenance                      FB      IT     Network      Yes
25.72         ADP Contracts and Services
              E- Travel                                 EV      IT     Actual       No
              E- Training                               ET      IT     Actual       No
              Certification Review Group                WG    ES/IA    Network      No
              Integrated Acquisition                    IA      IT     Actual       No
              Internet Redesign                         IR      IM     Network      No
              E- Loans                                  EL      IT     Actual       No        FSA only
              E- Authentication                         EA      IT     Actual       No        FSA only
              E- Benefits                               EB      IT     Actual       No        FSA only
              EDICS                                     A1      IM     Network      Yes       Limited to PA, FSA and OCR
              Electronic Records Management             RM      IM      FTE         Yes       Excludes FSA, OCR and OSERS
              Enterprise Intranet                        EI     IM     Network      Yes
              Enterprise Lifecycle Mgmt Support         AM      IT     Network      Yes
              FOIAS                                     TL      IM     Actual       Yes
              GPEA                                      PR    ES/IA    Actual       No
              Internet                                  KJ      IM     Network      Yes
              IT Architecture                           NM      IM     Network      Yes       Limited to PA and FSA
              IT for Building Modernization             BM      IT     Actual       No




                                                               7

        IT Installation / Disposal          ID    IT     Network   Yes
        IT Investment Management            VM   ES/IA   Network   Yes   Limited to PA, FSA, OCR and OIG
        IT Security                         WF   ES/IA   Network   Yes
        Program Management Support          PM   ES/IA   Network   No
        Network Operations                  SL    IT     Network   Yes
        Reliable Network                    RX    IT     Network   Yes
        Video Teleconferencing              VT    IT     Network   Yes
        Emerging and Assistive Technology   XV    IT      FTE      Yes   Limited to PA, FSA and OCR
        Blackberry Services                 BB    IT     Actual    Yes
26.01   Supplies                                  IT     Actual    No
31.01   ADP Equipment and Software
        IT Equipment Purchases              IT    IT     Actual    Yes   Depends on refresh requirements
                                                                         and office participation
        Emerging and Assistive Technology   XV    IT     Actual    Yes   Limited to PA, FSA and OCR
        Software Licensing                  FB    IT     Network   Yes
        Network                             SL    IT     Network   Yes
        Reliable Network                    RX    IT     Network   Yes
        Blackberry Devices                  BB    IT     Actual    Yes
43.01   Penalty Interest                                 Actual    Yes     FMSS generates penalty interest
                                                                                                 charges




                                                  8

                                           Allocation Methodology Common Support
                                                     Office of Management
Method:            Actual = Actual Costs/Charges based on Prior Year
                   FTE = Full time PO Staff

Object                                                 OM                    Charged
                                                                               to
 Class Category / Projects                            Office      Method     Account   Notes
 11.50 ED Awards                                       HRS        Actual       No
         SES Awards                                    HRS        Actual       No
 12.13 Compensatory Damages EEO Complaints           MS/EEO       Actual       No
         Transit Benefits                              MS         Actual       Yes     Starting in FY 04, being shown under this object class
 12.18 Workers' Compensation                           MS         Actual       Yes
 13.12 Unemployment Compensation                       HRS        Actual       No
 21.00 Travel Union                                    EXO        Actual       No
         Commercial Vehicle Leases                     MS         Actual       No
         Travel Motorpool                              MS         Actual       No
 22.00 Transportation                                  MS         Actual       No      Freight, heavy package shipments
 23.10 Rent to GSA                                      FS        Actual       Yes     Based on assigned square footage by office
 23.31 Rentals/Leases
         Copier Leases                                 MS         Actual       Yes
         Equipment Leases                              MS         Actual       Yes
         Fedex                                         MS         Actual       Yes
         Mail Meter Leases                             MS         Actual       Yes
 23.32 Postage                                         MS         Actual       Yes
 24.01 Printing                                        EXO        Actual       Yes     OGC projects based on actual
 25.21 Other Services
         Misc Reasonable Accommodation                 504        Actual       No
         Services
         Alternate Format Center                       504        Actual       Yes
         Communication Accessibility CART/CAN          504        Actual       Yes
         Interpreters                                  504        Actual       Yes
         Reasonable Accommodation Training             504        Actual       No
         Attorney Fees                                 EXO        Actual       No      Budget Services projects amount
         Transition Assistance Priority Placement      EXO        Actual       No      Budget Services projects amount
         Asset Management                               FS             FTE     Yes
         Customer Service Center                       MS              FTE     Yes
         Inventory Services                             FS             FTE     Yes
         Miscellaneous Services                         FS             FTE     Yes     Only charged if project affects office or office funds to
                                                                                       OM
         Moving Services                                FS             FTE
         Renovation services (In-house contract)        FS        Actual       No      Only charged if project affects office or office funds to
                                                                                       OM
         Space Management/Planning                      FS        Actual       No
         System Furniture Reconfig                      FS        Actual       No      Only charged if project affects office or office funds to
                                                                                       OM
         Child Care Tuition Subsidy Prog               HRS        Actual       Yes
         Demonstration Project                         HRS        Actual       No
         Drug Free Workplace Program                   HRS        Actual       No      Not cost effective to charge back
         ED Awards Ceremony                            HRS        Actual       No
      Merit Promotion Database                 HRS          FTE   Yes
      OPF / Records Management Support         HRS          FTE   Yes
      Statistical Expert/Class Action Suit     HRS          FTE   Yes
      Copy Centers                             MS       Actual    Yes   Copies generated per office
      ED Pubs                                  MS       Actual    No    Individual office budgets, PA receives allocation
      Mailroom Services                        MS           FTE   Yes
      Parking Contracts and Services           MS       Actual    Yes
      Recreation Facilities                    MS           FTE   Yes
      Shuttle Bus Service                      MS           FTE   Yes
      Organizational Improvements              PPIS     Actual    No
      Security - COOP Activities               SS       Actual    No
      Security - Occup Emerg Plan Prog         SS       Actual    No
      Support
      Security - Upgrade Badge System          SS       Actual    Yes
      Advanced Computer Specialist Training    TDT          FTE   Yes
      Bi-annual Dept. Training Needs           TDT      Actual    No
      Assessment
      Enforcement Competency Assessment        TDT          FTE   Yes
      Enforcement Competency Dev/Training      TDT          FTE   Yes
      Facilitation                             TDT          FTE   Yes
      Financial Mgmt Customized Training       TDT          FTE   Yes
      Grants Management Competency Training    TDT          FTE   Yes
      IT Customized Training Clinger-Cohen     TDT          FTE   Yes
      Compet.
      Knowledge Mgmt. Training                 TDT          FTE   Yes
      Learning Tracks Development              TDT          FTE   Yes
      Program Evaluation Monitoring Training   TDT          FTE   Yes
      Research Competency Assessment           TDT          FTE   Yes
      Research Competency                      TDT          FTE   Yes
      Development/Training
      Training Services/Consulting             TDT          FTE   Yes
25.22 Training
      Computer Training                        TDT          FTE   Yes
      Executive Development Slots              TDT          FTE   Yes
      Headquarters Training (courses < $50K)   TDT          FTE   Yes
      HQ Mgmt/Leadership Development           TDT          FTE   Yes
      Manager/Education Speaker Series         TDT          FTE   Yes
      Mentoring Program                        TDT          FTE   Yes
      New Mgmt/Leadership Development          TDT          FTE   Yes
      Program
      Project Mgmt Courses/Certification       TDT          FTE   Yes
      Program
      Regional / Mgmt Leadership Development   TDT          FTE   Yes
      Regional / Principal Office Customized   TDT          FTE   Yes
      Training
      Regional / Prof. Dev. Open Enrollment    TDT          FTE   Yes
      Courses
      Tuition Funding                          TDT      Actual    Yes
25.30 Goods/Services from Government
      Agencies
      CASU Regional Support / GSA              EXO          FTE   Yes
      Consolidated Fund Report / Census        EXO          FTE   Yes
      Federal Audit Clearinghouse / Commerce   EXO      Actual    Yes   OCFO projects based on actuals
      Above Standard Cleaning / Supply         FS       Actual    No
      Bldg Equipt Maintenance and Repairs      FS       Actual    No



                                                      10

      Chicago Move/Project Management            FS          FTE   Yes
      Dallas Move/Project Management             FS          FTE   Yes
      Excess Property Management / GSA           FS          FTE   Yes
      Kansas City Move/Project Management        FS          FTE   Yes
      MES/ROB3 Move/Project Management           FS      Actual    No
      Misc Bldg repair/renovations (Incl BPAs)   FS      Actual    No    Individual offices budget, PA receives allocation
      New York Move/Project Management           FS          FTE   Yes
      Off-site Computer Center                   FS      Actual    No
      Overtime Utilities / GSA                   FS          FTE   Yes
      San Francisco Move/Project Management      FS          FTE   Yes
      Boston Personnel Support / GSA             HRS         FTE   Yes
      Cost-for-Copy Services / GSA               HRS     Actual    No
      Drug Free Workplace Program /              HRS     Actual    No
      PHS/OPM
      EAP Counseling Services / PHS/OPM          HRS         FTE   Yes
      FPPS / DOI                                 HRS         FTE   Yes
      Medical Officer/Reas. Accomm. / PHS        HRS     Actual    No
      Telecenter / Flexiplace Program / GSA      HRS     Actual    Yes
      Environmental Test/Survey / PHS            MS      Actual    No
      Health Unit Services / PHS                 MS          FTE   Yes
      Motor Vehicle Operator / Treasury          MS      Actual    No
      Recreation Facilities / Various agencies   MS          FTE   Yes
      Transit Subsidy / DOT                      MS      Actual    Yes   Being captured now in object class 1213J
      Guard and Security Services / GSA          SS          FTE   Yes
      Security - Misc Interagency                SS      Actual    No
      Security - Systems maintenance             SS      Actual    Yes
      Security - X-ray Screening Training        SS      Actual    Yes
      Security Investigations / OPM              SS      Actual    Yes
      Computer-Based Training Development /      TDT         FTE   Yes
      OPM
      Federal Executive Institute / FEI          TDT     Actual    No
      Federal Quality Consulting Group / FQCG    TDT     Actual    No
      Management Development Ctr / OPM           TDT     Actual    No
      SES Forums / DOL                           TDT     Actual    No
      TLN Framework Implementation / OPM         TDT         FTE   Yes
      TLN Technical Support Services / OPM       TDT         FTE   Yes
      Training Staff and Counseling Services     TDT         FTE   Yes
25.71 Equipment Repair/Maint.
      Reasonable Accommodation                   504     Actual    No
      Industrial Equipment                       FS      Actual    No
      Misc Office Equipment                      FS      Actual    No
      Copier                                     MS      Actual    Yes
      Mail Meter                                 MS      Actual    Yes
      Security Equipment                         SS      Actual    Yes
25.72 IT Services and Contracts
      Asset Database Administration              FS      Actual    Yes
      Security - Front Desk Admin Support        SS      Actual    No
      Automated Indiv. Development Plan          TDT     Actual    No
      System


                                                       11

       Group Systems Technical Support           TDT         FTE   Yes
26.01 Supplies
       Section 504 Supplies                      504     Actual    No
       Misc Supplies                             EXO     Actual    No
       Copy Paper                                FS      Actual    Yes
       Packing Boxes                             FS      Actual    Yes   Only charged if project affects office or office funds to
                                                                         OM
       HR Supplies                               HRS     Actual    No
       Copier Supplies                           MS      Actual    Yes
       Letterhead and Envelopes                  MS      Actual    No
       Security-related supplies                 SS      Actual    No
       Training Supplies                         TDT     Actual    No
31.01 IT Equipment and Software
       Reasonable Accommodations                 504     Actual    No    Usually transferred to OCIO Section 508 Budget
       Mail Meter Rate Change                    MS      Actual    No
       Security - Access and Monitoring          SS      Actual    No
       Equipment
       Security - COOP Activities                SS      Actual    No
       Classrooms IT Equipment Upgrades          TDT     Actual    No
       Group Systems Hardware/Software           TDT     Actual    No
       Upgrades
       Regional IT Equipment Upgrades            TDT     Actual    No
       Servers/Software for Virtual Classrooms   TDT     Actual    No
31.03 Equipment and Furniture
       Chicago Relocation                        FS          FTE   Yes
       Dallas Relocation                         FS          FTE   Yes
       Kansas City Relocation                    FS          FTE   Yes
       MES/ROB3 Modernization                    FS      Actual    No
       New York Relocation                       FS          FTE   Yes
       Off-site Computer Center                  FS      Actual    No
       San Francisco Relocation                  FS          FTE   Yes
       Furniture and Office Equipment            FS      Actual    No    Individual office budgets, PA receives allocation
       Security - COOP Activities                SS      Actual    No
       Security - Remote Mail Facility           SS      Actual    No
32.01 Building Alterations and Renovations
       Chicago Relocation                        FS          FTE   Yes
       Dallas Relocation                         FS          FTE   Yes
       GSA Bldg Alterations & Renovations        FS      Actual    No    Individual office budgets, PA receives allocation
       Kansas City Relocation                    FS          FTE   Yes
       MES/ROB3 Modernization                    FS      Actual    No
       New York Relocation                       FS          FTE   Yes
       Non-GSA Bldg Alterations & Renovations    FS      Actual    No    Individual office budgets, PA receives allocation
       Off-site Computer Center                  FS      Actual    No
       San Francisco Relocation                  FS          FTE   Yes
       Security - Remote Mail Facility           SS      Actual    No
       Security - Special Project Renovations    SS      Actual    No
43.01 Penalty Interest                                   Actual    Yes   FMSS generates penalty interest charges




                                                       12