![](media/image1.wmf)UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF INSPECTOR GENERAL

Audit Services

**FINAL MANAGEMENT INFORMATION REPORT**

**State and Local No. 08-01**

**TO:** Kerri L. Briggs

Assistant Secretary

> Office of Elementary and Secondary Education
>
> /s/

**FROM:** Keith West

Assistant Inspector General for Audit

**SUBJECT:** Monitoring of the Title I, Part A, Comparability of
Services Requirement

> **Control Number** ED-OIG/X05H0017

The purpose of this **Final** **Management Information Report** is to
provide the U.S. Department of Education, Office of Elementary and
Secondary Education (OESE) with information that may be beneficial in
helping OESE improve its oversight of the Title I, Part A, Comparability
of Services (Comparability) requirement. The objectives of our review
were to determine whether OESE could improve its monitoring of state
educational agencies (SEA) receiving Title I, Part A, funding and
enhance its non-regulatory guidance to provide additional clarity to the
SEAs.

BACKGROUND

The Title I, Part A, program of the Elementary and Secondary Education
Act of 1965, as amended by the No Child Left Behind Act of 2001 (Act),
provides financial assistance through SEAs to *local educational
agencies (*LEA) and those elementary and secondary schools with the
highest concentrations of children from low-income families. *Title I,
Part A, was enacted to ensure that all children have a fair, equal, and
significant opportunity to obtain a high-quality education and reach, at
a minimum, proficiency on challenging state* *academic achievement
standards and state academic assessments. To be eligible to receive
Title I, Part A, funds, an LEA must meet the fiscal requirements for
Comparability set forth in Section 1120A of the Act.* *Specifically, an
LEA may receive funds only if it will use state and local funds to
provide services in Title I schools that, taken as a whole, are at least
comparable to services provided in non-Title I schools.*

*OESE is responsible for conducting monitoring reviews of the SEAs'
administration and implementation of federal education grants,
contracts, or cooperative agreements.* Monitoring assesses the extent to
which SEAs provide leadership and guidance for LEAs and schools in
implementing policies and procedures that comply with Title I, Part A,
requirements.

According to OESE, it uses clear and consistent criteria---monitoring
indicators---to determine the degree of implementation of SEA programs
and activities. The use of such criteria ensures a consistent
application across the monitoring teams and across the SEAs. *OESE's*
monitoring plan consists of two major components: the desk review
monitoring process and the on-site review, including a pre-site visit
phase.[^1] Each SEA receives an on-site visit at least once during
OESE's three-year monitoring cycle.

OESE's Non-Regulatory Guidance, Title I Fiscal Issues (Guidance) for
Comparability was updated in May 2006 and contains acceptable guidelines
and standards concerning Comparability. Although the Guidance does not
impose requirements beyond those in the Act and other applicable federal
statutes and regulations, SEAs may consider the Guidance when developing
their own guidelines and standards. Compliance with the Guidance will be
deemed by U.S. Department of Education officials as compliance with the
applicable federal statutes and regulations.

OBSERVATIONS AND SUGGESTIONS

The Office of Inspector General conducted Title I, Part A, Comparability
requirement audits at three SEAs: Ohio Department of Education (Ohio),
Arizona Department of Education (Arizona), and Illinois State Board of
Education (Illinois). The audits' objectives were to determine whether
the SEAs (1) monitored LEAs' compliance with the Title I, Part A,
Comparability requirement and (2) ensured that the LEAs were reporting
complete and accurate Comparability information to its SEAs.[^2] All
three audits identified problems with the SEAs' monitoring of LEAs'
compliance with the Comparability requirement and with the LEAs'
Comparability information. Most of the issues with the LEAs'
Comparability information were not found during the SEA's monitoring of
the LEAs. Some of the problems were previously identified by OESE
through its monitoring efforts.

All three audits disclosed that the SEAs and LEAs were inconsistent in
their policies and procedures for collecting, reviewing and reporting
data. All three audits also disclosed that LEAs were not always
reporting complete and accurate Comparability information to the SEAs.
As a result, some LEAs improperly classified some schools as comparable
when they were not, resulting in non-compliant schools receiving Title
I, Part A, funds in violation of the law. Based on the results of the
audits, we concluded that there are areas in which OESE could improve
the effectiveness and efficiency of its monitoring and Guidance
concerning the Title I, Part A, Comparability requirement.

In its comments to the first suggestion, to consider adding a step in
its monitoring plan to verify the SEAs validated Comparability data that
all LEAs in the state reported, OESE acknowledged that the current
monitoring protocol does not include that level of detail needed to
validate the Comparability data. However, while OESE agreed with the
second suggestion's areas as appropriate to be included in OESE's
Guidance, it stated that the recommended areas are already addressed in
the Guidance. The OIG concurs that the recommended areas are mentioned
in the Guidance but still believes that SEAs and LEAs will benefit if
the Guidance included additional language to clarify the suggested
Comparability areas. We added excerpts from the Guidance in Section 2 to
demonstrate that the current Guidance only refers to the suggested
areas, and made minor modifications to the first suggestion. OESE's
response is attached at the end of this report.

**[Section 1: OESE's Monitoring Plan for Formula Grants Can be
Improved]{.underline}**

OESE's current monitoring plan does not include a step to validate the
Comparability data LEAs report to the SEAs. Our audit reports for all
three of the SEAs included the following findings in which one or more
LEAs reported inaccurate or unsupported Comparability data to its SEA.

-   Two of three Ohio LEAs reported inaccurate or unsupported
    Comparability data to the SEA. One LEA did not maintain adequate
    documentation to support the data on its Comparability reports for
    the 2003-2004 and 2004-2005 program years. Another LEA used
    incorrect instructional staff data when completing its Comparability
    reports. The same two Ohio LEAs might not have extracted the data
    from their systems used to populate the Comparability reports on the
    same date. One LEA's instructional staff and student data resided on
    separate systems and were not being updated on the same date. The
    other LEA obtained its instructional staff and student data for
    Comparability purposes in the same month but not the same date.

-   All three Arizona LEAs reported incomplete and/or inaccurate
    Comparability data to the SEA. One LEA incorrectly included
    preschool enrollment figures and federally funded staff in its
    elementary school calculations, which resulted in some schools being
    non-comparable. That same LEA also used budgeted staffing data to
    complete Comparability for the 2005-2006 program year. Another LEA
    did not extract staffing data used to populate the Comparability
    reports on the same date and did not maintain adequate documentation
    to support some data used in its 2005-2006 Comparability
    determination. A third LEA certified that it was comparable under
    all three of the SEA's allowable Comparability methods. However, it
    made incorrect assertions that all schools were comparable under two
    methods and incorrectly calculated the ratio under the third method
    by including preschool data in the calculation.

-   Two of three Illinois LEAs reported inaccurate or unsupported
    Comparability data to the SEA. One LEA included inaccurate data on
    its Comparability reports for 5 of 20 schools tested in the
    2005-2006 program year. In addition, that same LEA did not include
    charter schools in its Comparability determinations for the
    2004-2005 program year and then reported data for numerous charter
    schools more than once in separate Comparability determinations for
    the following program year. Another LEA erroneously used prior
    year's budgeted data to calculate Comparability, resulting in an
    overstatement of full-time equivalency (FTE) on its 2005-2006
    Comparability report.

If OESE added a step to its monitoring plan to (1) validate the
Comparability data the LEAs report to the SEAs or (2) verify that the
SEAs validated the Comparability data the LEAs reported, it could have
identified the inaccurate or unsupported data issues at Ohio, Arizona,
and Illinois.

**Suggestion:\
**

We suggest that the Assistant Secretary for OESE consider adding a step
in its monitoring plan to either (1) validate the Comparability data the
LEAs report to the SEAs or (2) verify that the SEAs validated the
Comparability data that all LEAs in the state reported.

**[Section 2. Title I, Part A, Comparability of Services Non-Regulatory
Guidance Can be Improved]{.underline}**

There also are areas in which OESE could improve its Guidance. Our audit
reports for all three SEAs included similar findings that might have
been prevented if the Guidance included additional language to clarify
areas such as (1) the SEA's monitoring of LEAs, (2) budgeted resources
used to determine Comparability, (3) maintenance of source documentation
by LEAs, and (4) deadlines when Comparability should be determined.

[Minimal Monitoring Suggestions for SEAs]{.underline}

The Guidance does not include minimal monitoring steps the SEA should
perform during reviews of the LEAs. The Guidance only states that "an
SEA is ultimately responsible for ensuring that its LEAs remain in
compliance with the comparability requirement. The SEA should review LEA
comparability calculations at least once every two years." The Guidance
does not explicitly state that the SEAs should have procedures in place
to determine the validity of the data the LEAs report to them.

Our audit reports for Arizona and Illinois included findings that the
SEAs did not adequately monitor their LEAs' compliance with the
Comparability requirement. The SEAs' failure to adequately monitor its
LEAs resulted in the SEAs not identifying the reporting of inaccurate or
unsupported Comparability data. Arizona did not routinely verify the
LEAs' exempt status and did not ensure LEAs submitted assurances at
least every other year to document compliance with the Comparability
requirement. Arizona did not have a process in place to regularly verify
that the LEAs claiming to be exempt made the correct assessment. It also
did not have procedures in place to routinely confirm that LEAs were
submitting the required Assurance of Comparability and could not ensure
that LEAs were documenting compliance with the Comparability requirement
every other year. Illinois did not follow up with one LEA to ensure it
made necessary adjustments to its Comparability information, which
allowed non-comparable schools within that LEA to remain non-compliant.
In addition, Illinois did not cite the LEA for not complying with the
Comparability requirements by either determining the amount of state and
local funding to be repaid or withheld for the non-compliant schools.

If OESE were to include in its Guidance a requirement that SEAs must
have policies and procedures in place to validate the accuracy of the
Comparability data reported by all LEAs in the state and some minimal
monitoring suggestions that SEAs should complete while at the LEAs, the
SEAs' ability to identify whether an LEA reports inaccurate or
unsupported Comparability data would be increased.

[Budgeted Resources Used to Determine Comparability]{.underline}

The Guidance does not include language to clarify the expenditures per
pupil and the staff per pupil methods. It does not explain to SEAs and
LEAs that, while schools are allowed to use the expenditures per pupil
method in calculating Comparability, the final expenditures must reflect
the allotted expenditures, within a reasonable tolerance permitted by
the SEA. In other words, allotted expenditures cannot be inflated simply
to meet the Comparability requirement. In addition, the Guidance does
not specify that budgeted staffing data, which includes vacant positions
within the FTE computations, cannot be used to demonstrate
Comparability.

In our Arizona and Illinois audit reports, LEAs in both SEAs used
budgeted staffing data or vacant FTEs in an attempt to demonstrate
Comparability. One Arizona LEA used budgeted staffing data to complete
its Comparability calculations for the 2005-2006 program year. We could
not determine whether the use of the staffing projections caused schools
to be non-comparable because the LEA's accounting system was not capable
of generating the actual staffing data needed to demonstrate
Comparability. In an attempt to demonstrate Comparability in the
2004-2005 and 2005-2006 program years, one Illinois LEA opened numerous
staff positions in its non-comparable schools. We reviewed the vacancies
for the 2005-2006 program year and determined that the LEA filled only
approximately 18 percent of those positions, resulting in 32 schools
remaining non-comparable. The LEA's procedures stated that, if schools
failed to demonstrate Comparability, the LEA was to inform the schools
that they should hire a certain number of positions to meet
Comparability. However, the LEA left hiring to the discretion of the
school principals.

Adding clarification in the Guidance that actual, rather than budgeted,
staffing data must be used to calculate Comparability will result in
more accurate Comparability determinations. The calculations will not
include inflated expenditures or vacant FTE positions if the expenditure
per pupil and the staff per pupil methods are used.

[LEA Maintenance of Source Documentation]{.underline}

The Guidance does not state that LEAs should maintain source
documentation to support the data used in the Comparability
calculations. The Guidance only states that "if the LEA establishes and
implements other measures for determining compliance with Comparability,
such as student/instructional staff ratios, it must maintain source
documentation to support the calculations and documentation to
demonstrate that any needed adjustments to staff assignments are made."

In our Ohio and Arizona audit reports, LEAs in both SEAs only maintained
documentation to support the calculations themselves. They did not
maintain a snapshot of the database information or maintain other
documentation to support the data used to generate the numbers used in
the calculations. One LEA in Ohio did not maintain adequate
documentation to support its instructional staff or student data in its
Comparability reports. The LEA relied on the schools to maintain
supporting documentation for data used in the Comparability reports. One
LEA in Arizona did not maintain documentation to support the staffing
data it used to prepare its 2005-2006 Comparability reports.

Maintenance of supporting documentation for data used in Comparability
calculations is critical. Much of the data is extracted from databases
that are constantly updated, making it impossible to recreate the
extraction at a later date. Making certain that LEAs have a clear
understanding that they should maintain the source documentation to
support the data used in the Comparability calculations will enable the
SEAs to more effectively monitor whether the LEAs reported accurate and
complete Comparability data.

[Specific Deadline When Comparability Should be Determined]{.underline}

The Guidance does not include language that instructs SEAs to establish
a specific deadline for when Comparability should be determined and when
the corrective actions should be completed. The Guidance only states
that an LEA must develop procedures that should, at a minimum, include
the LEA's timeline for demonstrating Comparability. The Guidance also
states that the SEA may establish deadlines for Comparability
determinations and for implementing any required corrective actions. The
Guidance goes on to state that an early determination of comparability
would allow an LEA to make adjustments with the least amount of
disruption. An example timeline within the Guidance states that the
Comparability calculations and the corrections to non-comparable schools
should be completed by October.

We reported that one Arizona LEA was allowed to make adjustments to its
non-comparable schools as late as the beginning of the second semester.
The SEA's lack of monitoring led the LEAs to believe that certifying
corrected imbalances in non-comparable schools was optional. One
Illinois LEA was including staffing positions hired as late as June 2006
in its non-comparable schools in the 2005-2006 program year
determinations in an attempt to demonstrate Comparability.

The Act requires that the schools be comparable the entire school year.
Requiring the SEAs to establish specific deadlines in their policies for
completing Comparability calculations and for implementing any required
corrective actions would help LEAs properly demonstrate compliance with
the Comparability requirement.

**Suggestions:**

We suggest that the Assistant Secretary for OESE consider revising the
Guidance to include:

-   minimal monitoring suggestions the SEA should complete while at the
    LEAs;

-   language that prohibits LEAs from using inflated, budgeted
    resources, such as vacant FTE positions, in its Comparability
    calculations;

-   a statement that LEAs should maintain source documentation that
    supports the data used to complete the Comparability calculations;
    and

-   language that requires SEAs to establish specific deadlines for when
    LEAs must determine their Comparability calculations and complete
    the necessary corrective actions.

OBJECTIVES, SCOPE, AND METHODOLOGY

The objectives of our review were to determine whether OESE could
improve its monitoring of SEAs receiving Title I, Part A, funding and
enhance its Guidance to provide additional clarity to the SEAs. To
achieve our objectives, we obtained information on OESE's current SEA
monitoring procedures, any planned changes to the current Guidance, and
any planned changes to the regulations based on reauthorization of the
Act. We also reviewed the Student Achievement and School Accountability
Program, Monitoring Plan for Formula Grant Programs, dated October 2005
and 2006, and Guidance dated May 2006. We reviewed our Ohio, Arizona,
and Illinois audit reports and identified the issues that were
identified in more than one state. Next, we determined whether the
issues could have been avoided with enhanced monitoring or Guidance. We
then developed suggestions that OESE could implement to mitigate the
risk that future non-comparable schools might exist but not be
identified.

We discussed our planned review with OESE on May 29, 2007, and discussed
the results of our review with OESE on July 23, 2007.

ADMINISTRATIVE MATTERS

### Statements that managerial practices need improvements, as well as other conclusions and suggestions in this report, represent the opinions of the Office of Inspector General. 

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 contact Jan Keeney, Acting Regional Inspector
General for Audit, U.S. Department of Education, at (816) 268-0500.

Attachment

Attachment

TO : George A. Rippey

Acting Assistant Inspector General for Audit

FROM : Kerri L. Briggs

Assistant Secretary

Office of Elementary and Secondary Education (OESE)

SUBJECT : Response to Draft Management Information Report (MIR)
ED-OIG/X05H0017

Thank you for the opportunity to respond to the Draft MIR cited above.
The MIR states that the Office of the Inspector General (OIG) conducted
audits of the comparability requirements under the No Child Left Behind
Act (NCLB) in three State educational agencies (SEA): the Ohio
Department of Education, the Arizona Department of Education and the
Illinois State Board of Education. All three audits identified problems
with the SEAs' monitoring of these requirements, and of the local
educational agencies' (LEA) compliance with comparability. In addition
to providing information as to the results of these audits, the MIR
offers suggestions to improve OESE's oversight of the comparability
requirement under NCLB, as follows:

# Section 1: OESE's Monitoring Plan for Formula Grants Can Be Improved

[Suggestion]{.underline}: The MIR suggests that the Assistant Secretary
for the Office of Elementary and Secondary Education (OESE) consider
adding a step in its monitoring plan to either (1) validate the
comparability data the LEAs report to the SEAs or (2) verify that the
SEAs validated the comparability data the LEAs reported.

[OESE Response]{.underline}: OESE appreciates the suggestion, and
acknowledges that the current monitoring protocol does not include that
level of detail. While validating comparability data that LEAs submit to
the SEAs during an onsite review would ensure that the two individual
LEAs typically included in such reviews provided accurate data in a
specific year, requiring the SEAs to provide OESE with additional
information as to how it validates comparability data for
[all]{.underline} LEAs is a more effective (systemic) and appropriate
modification to our procedures as the SEAs are responsible for ensuring
compliance with these requirements statewide. OESE will therefore ensure
that its current monitoring protocol be revised to include expanded
procedures which require SEAs to demonstrate how comparability data are
validated for [all]{.underline} LEAs in a State. This modification will
be implemented for the 2007-2008 school year.

Page 2 - George A. Rippey

**Section 2: Title I, Part A Comparability of Services Non-Regulatory
Guidance Can Be Improved**

[Suggestion]{.underline}: The MIR provides a number of suggestions,
based on the findings from the three audit reports, that the OIG
believes would improve the guidance provided to SEAs regarding the
implementation and oversight of the comparability requirements,
including clarification of areas such as (1) the SEA's monitoring of
LEAs, (2) budgeted resources used to determine comparability, (3)
maintenance of source documentation by the LEAs, and (4) deadlines when
comparability should be determined.

[OESE Response]{.underline}: While we agree with OIG's comparability
areas as appropriate to include in NCLB fiscal guidance, we point out
that the suggested areas are already addressed in the Non-Regulatory
Guidance, Title I Fiscal Issues. The areas are thoroughly addressed by
way of examples outlined in pages 17-28 and through specific questions
and answers in pages 30-34. This guidance can be accessed at
[[http://www.ed.gov/programs/titleiparta/fiscalguid.pdf]{.underline}](http://www.ed.gov/programs/titleiparta/fiscalguid.pdf).
In addition OESE will address these issues through our monitoring
protocols.

We concur with the Department's Office of General Counsel separate
comments on the MIR addressing certain legal comparability requirements.

Again, we appreciate the opportunity to provide this response to the MIR
and we look forward to receiving the final report.

[^1]: The *Student Achievement and School Accountability Programs
    Monitoring Plan for Formula Grant Programs* that we reviewed was
    dated October 1, 2006, to September 30, 2007.

[^2]: Ohio (A05-G0015), the first audit to be conducted, covered the
    period July 1, 2003, through June 30, 2004 (2003-2004 program year).
    We also obtained information covering the period July 1, 2004,
    through June 30, 2005 (2004-2005 program year) to ensure annual
    compliance with Comparability requirements. The Arizona (A09-G0020)
    and Illinois (A05-G0033) audits covered the 2004-2005 program year.
    We also obtained information from the period July 1, 2005, through
    June 30, 2006, to ensure annual compliance with the Comparability
    requirement.