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March 22, 2006

> **Control Number**
>
> **ED-OIG/A05F0015**

William McCabe

Acting Chief Financial Officer

U.S. Department of Education

Office of the Chief Financial Officer

400 Maryland Avenue, SW

Washington, DC 20202

Dear Mr. McCabe:

This **Final** Audit Report, entitled *The U.S. Department of
Education's Monitoring of Adherence to Matching Requirements*, presents
the results of our audit. The purpose of the audit was to determine if
the U.S. Department of Education (ED) had adequate procedures in place
for monitoring grantees' adherence to matching fund requirements of
applicable ED programs. Our audit covered the period October 1, 2003,
through September 30, 2004 (FY 2004).

BACKGROUND

The Office of the Chief Financial Officer (OCFO) has the primary
responsibility for serving as the principal advisor to the U.S.
Department of Education on all matters related to discretionary
grant-making, cooperative agreements, and procurement, as well as
financial management, financial control, and accounting. The OCFO\'s
mission is to provide accurate, timely, and useful grant, contract and
financial management information and services to all of ED's
stakeholders. The OCFO supervises the Grants Policy and Oversight Staff
(GPOS), which is divided into two components, the Grants Policy and
Analysis Team and the Grants Management Improvement Team.

Match, which is also referred to as cost-share, is defined as the
portion of program costs contributed by a grant applicant. It is either
a statutorily specified percentage of program costs that must be
contributed by a grant applicant in order to be eligible or where the
applicant voluntarily shares in the costs of the program. Matching
contributions must

> • be comprised of cash or in-kind contributions
>
> • be fully documented and accounted for in the grantee's expenditure
> records and reports, and
>
> • meet the same standards for allowable costs as the federal share.

Matching contributions are a significant factor in the overall success
of achieving program goals and objectives. In FY 2004, ED had at least
41 programs in 6 Principal Offices with matching requirements. ED
awarded over \$5.4 billion to grantees during FY 2004 for these 41
programs. Using FY 2004 appropriations and the minimum percentage of
match required for each of the 41 programs, we concluded that these
programs required at least \$1.5 billion[^1] in matching contributions.
(See Attachment 1.)

AUDIT RESULTS

ED administers at least 41 discretionary and formula grants, in 6
Principal Offices, with specific requirements for matching
contributions. Based on a survey of monitoring plans and further review
at a number of program offices, we found that ED did not have adequate
procedures in place for monitoring grantees' adherence to matching
requirements for the majority of these programs. The program offices did
not consistently monitor match in part because GPOS did not provide
adequate guidance, training, and oversight of procedures and practices
to monitor cost-sharing/match. The inadequate coverage of match
represented a significant weakness in ED's internal controls over the
grant monitoring process.

We received your response dated March 2, 2006, which provided corrective
action for each of our recommendations in our draft report dated January
17, 2006. The response is summarized following the finding and
recommendations and is included in its entirety as Attachment 3.

**FINDING** -- **GPOS Did Not Assure That Program Offices Adequately
Monitored The Estimated \$1.5** **Billion In Grant Resources Provided By
Matching Contributions**

We determined that the guidance and training GPOS provided was not
adequate in assisting Principal Offices to monitor grantees' compliance
with matching requirements, which is a goal included in GPOS'
responsibilities. In addition, the monitoring plans Principal Offices
submitted to GPOS were not specifically reviewed for measures to monitor
compliance with matching requirements, and only 6 of the 41 programs had
program-specific monitoring plans that included specific measures to
monitor match. Therefore, we could not rely on the monitoring plans to
document the procedures in place to monitor match.

The absence of specific measures to monitor match in the monitoring
plans was consistent with the observed procedures in place at the
program office level. Our review of 13 judgmentally selected programs,
summarized in Attachment 2, revealed that the programs were not
monitoring match adequately. We determined that only three programs:
Even Start -- State Educational Agencies, Adult Education - State Grant
Program, and Vocational Education -- Basic Grants to States, were able
to document a thorough understanding of the match provisions in the
following areas: Monitoring Plans, Monitoring Instruments, and Site
Visit Reports. In these areas, the other 10 programs addressed their
matching requirements either minimally or not at all. Our review also
revealed that none of the programs adequately documented an in-depth
monitoring of their matching requirements in the Program Grant Files.
Without adequate monitoring of matching requirements, ED cannot ensure
that program recipients are receiving full benefits and services.

According to its mission statement and the Handbook for the
Discretionary Grant Process[^2] (Handbook), GPOS is responsible for
providing ED-wide oversight to ensure that policies relative to the
grant award and administration process are effectively communicated to
Principal Offices and to assist them in their efforts to adhere to the
approved policies. GPOS' oversight includes several interrelated
responsibilities and functions carried out in partnership with ED's
Principal Offices' officials and their staff. These responsibilities
include, but are not limited to, the following:

-   Establishing clear policies that are based on statutes, regulations,
    and other requirements that enable consistent policy interpretation
    and implementation on grant administration issues.

-   Providing training and technical assistance to Principal Offices.
    Principal Offices must have a working knowledge of grant policy and
    how it applies to different situations for effective grant
    administration.

-   Collaborating with program officials responsible for grant programs
    to achieve effective monitoring of grant programs and to ensure that
    monitoring activities and processes are conducted consistently and
    comply with ED regulations and policies.

-   Collaborating with program officials to conduct periodic reviews and
    evaluate the internal policies and procedures of ED's overall
    discretionary grant process.

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-   Maintaining and updating the Handbook.

The Principal Offices did not adequately monitor match requirements
because GPOS did not (1) consider the requirements to be significant,
(2) provide sufficient guidance on the requirements, (3) provide
sufficient training on the requirement, or (4) require monitoring plans
to include specific measures to monitor the requirements.

[Significance]{.underline}

In response to an interim exception report, the Director of GPOS stated
that matching requirements are not a significant concern or risk because
it only affects 20 percent of all programs. In addition, there has been
no indication from grantee audits or other sources that improper or
insufficient match contributions have been a significant problem. For
those reasons, GPOS (1) rejected the notion that match is an inherent
"risk" area; and (2) did not think it was necessary to single out match
through its issuances or presentations. Further, GPOS believed that
increasing the awareness of match would result in implying that there is
a problem with match when none exists. Lastly, GPOS believed that any
risk associated with match falls within the responsibility of the
grantee, not with the actual match cost category. Therefore, the
associated risk would involve the grantee's own funds and not federal
funds.

Given that matching requirements are contained in 20 percent of ED
programs (at least 41 individual programs in 6 Principal Offices with an
estimated \$1.5 billion in matching contributions), we believe matching
requirements are significant enough to merit specific monitoring
efforts. Matching contributions symbolize services and benefits program
recipients receive. Matching contributions are not just entity funds;
they are a major part of the entire program. Without matching
contributions, programs jeopardize successful accomplishment of their
goals and objectives. Improper and insufficient match has been
identified as an issue, as noted in OIG Audit Reports (e.g., A05-D0017
issued January 14, 2004, and A07-B0011 issued May 8, 2003). These two
reports recommended a recovery amount of over \$2.8 million, due to the
matching contributions not meeting federal requirements. We agree that
match does not need to be singled out for separate training; however,
because of the dollars and benefits at risk, in addition to match being
a specific requirement of the programs' statutes enacted by Congress,
GPOS should ensure that match is adequately covered in existing training
and guidance.

[Guidance\
]{.underline}GPOS provided limited information on match in its published
guidance and individual program offices were on their own to determine
how to monitor grantees' compliance with matching requirements. Our
discussions with program staff revealed that some within the Principal
Offices did not use or did not know that GPOS was available as an active
resource for match-related issues because GPOS provided only limited
guidance. Therefore, these program staff generally sought guidance from
the Office of General Counsel.

The Handbook includes limited guidance on match.

-   [Section 5.7 Other Project Costs]{.underline}: Section 5.7.1-Grantee
    Cost Sharing or Matching (Non-Federal Share), defines the meaning of
    cost-sharing or matching. It covers basic information that a
    grantee's application must include on match. The second section,
    5.7.2-Calculating Cost Share Amounts, presents examples on
    calculating the applicants' matching contributions. Although the
    Handbook references **Education Department General Administrative
    Regulations** (EDGAR) and states that the non-federal share of the
    project must be allowable, it does not provide information to
    program staff on valuing contributions, types of allowable
    contributions, or what constitutes adequate documentation to support
    a grantee's match.

-   [Section 6.4 Monitoring]{.underline}: The monitoring guidance in
    Section 6.4.3-Purposes, lists nine purposes that must be addressed
    in its monitoring procedures including Fiscal Accountability, which
    is defined as "Verifying that federal funds are being managed
    according to federal cash management requirements and expended for
    authorized purposes." Section 6.4.5-Monitoring Procedures and
    Requirements, outlines special requirements for fiscal monitoring.
    It states that program staff is required to pay particular attention
    to grantees' fiscal activities as part of the monitoring process,
    using GAPS as the primary tool for fiscal oversight. Although GAPS
    can capture grantees' proposed match contribution, it cannot capture
    grantees' actual matching contributions. The Handbook also makes no
    reference to fiscal responsibility other than drawdowns of federal
    funds. Further, nowhere in the Handbook is monitoring a program's
    matching requirement clearly and specifically addressed.

-   [Section 6.4 Monitoring]{.underline}: The section also addresses the
    required monitoring plans and states that each Principal Office must
    design its monitoring procedures to address compliance and fiscal
    accountability. It further states that the monitoring plans must
    address several considerations, including Grantee or Program Risk
    Factors, and that the Director of GPOS shall review the plans and
    work with Principal Office staff to incorporate suggestions for
    improvement to the plan or resolve issues of concern.

The Handbook should be the primary resource for program staff and serve
as the foundation for all grant-related activities. By compiling,
highlighting, and summarizing information on match-related topics, such
as valuing contributions, types of allowable contribution, and adequate
documentation to support match contributions, program staff will have
effective and efficient access to information to answer any
match-related questions they have. In addition, the Handbook should
direct program staff to resources that can provide clear and detailed
answers to program or grantee-specific questions.

[Training\
]{.underline}The training GPOS provided was consistent with its
guidance. We reviewed GPOS training and found the only training related
to match covered the ED 524B form (an annual reporting form GPOS created
for grantees to report fiscal and performance data simultaneously). In
this training, match was only briefly addressed and attendance was not
mandatory. GPOS did not provide any in-depth training on how to monitor
matching requirements. The training that was offered did not provide
coverage or examples on evaluating the value of match contributions,
allowable in-kind contributions, or adequate documentation to support
in-kind contributions. The ED 524B training slide for ED staff on Budget
Expenditures relating to match consisted of one line, "Breakdown
expenditures between Federal and Non-Federal funds," in the entire
presentation. In addition, the ED 524B form does not include sufficient
detail on match contribution sources.

[**Monitoring Plans**\
]{.underline}ED issued memoranda requiring some Principal Offices to
submit a FY 2003 and FY 2004 program-specific monitoring plan for every
formula and discretionary grant program. In FY 2004, Principal Offices
were also required to submit office-wide monitoring coordination plans.
As stated in the memoranda, the purpose of the monitoring plans was to
emphasize the need for monitoring to focus on performance and results,
compliance with the law, and protection against fraud, waste, and abuse.
The monitoring plans were also to provide GPOS with an overview of the
actual monitoring practices within ED. When creating the monitoring
plans, program offices were to describe their respective monitoring
activities, while addressing all considerations identified in the
memoranda and related guidance, including "Grantee or Program Risk
Factors." The plans were to also benefit the Principal Offices by
articulating, in writing, the monitoring procedures each office follows.
However, the instructions for developing program-specific monitoring
plans did not sufficiently emphasize the importance of including
high-risk areas, such as non-federal match, in the plans.

GPOS officials informed us that the Grants Management Improvement Team
was delegated the responsibility of collecting, reviewing, analyzing,
and reporting on the program-specific monitoring plans and office-wide
monitoring coordination plans. The Team reviewed the monitoring plans to
determine if Principal Offices complied with the memoranda and the
policy in the Handbook for (1) procedures to identify risky programs and
monitor the different levels of performance; and (2) best practices
applied strategically for frequency of monitoring, monitoring
techniques, and training for staff. Specific measures to monitor match
were included in the monitoring plans for only 6 of the 41 programs.
None of the office-wide plans contained such measures. Nevertheless, the
Team did not consider the plans to be incomplete.

Matching contributions represent a significant portion of the funding
for each program. Without adequate monitoring of match, ED does not know
if grantees are providing their required match contribution, which is
essential to achieving program goals and objectives. In addition,
non-compliance with match requirements results in program recipients not
receiving the full benefits of a program's services. Furthermore, if
grantees are non-compliant with match and then draw down federal funds,
those funds may be classified as unallowable (see 34 C.F.R. §§ 80.43 and
80.44 and Title 20 U.S.C. Chapter 31, Subchapter IV §§ 1234-1234i).

Finally, GPOS' inattention to match requirements within ED resulted in
the lack of procedures to monitor match at the program level as
identified in the extended review of the 13 programs reported above and
in Attachment 2. Discussions with program staff for the 13 programs also
revealed that many do not review grantees' Single Audit reports as part
of their monitoring process. In addition, program staff told us that
many of the programs do not place match as a high priority when
monitoring grantees. This represents a significant weakness in ED's
internal controls over the grant monitoring process. By not providing
adequate oversight to Principal Offices, GPOS missed an opportunity to
compile and publish best practices from program offices that understood
and monitored match well. In Attachment 2, we have documented the better
practices observed at the 13 program offices we reviewed.

[]{.mark}

**Recommendations:*\
***We recommend that the Office of the Chief Financial Officer require
the Grants Policy and Oversight Staff to

1.  Revise the Handbook to include specifics on monitoring match, such
    as how to value a matching contribution, examples of allowable
    in-kind contributions, and acceptable documentation to support
    matches involving cash and/or in-kind contributions. Also, ensure
    that the Handbook incorporates descriptions of various matching
    requirements. This information could be included in the Monitoring
    Plan section of the Handbook.

2.  Ensure that staff with oversight responsibilities for grant programs
    with a matching component receive training on monitoring match.
    Ensure that the training includes any noted best practices and
    issues identified in audits and/or program reviews.

3.  Require Principal Offices to update their monitoring plans to
    include specific measures for monitoring grantees' adherence to
    program matching requirements.

4.  Review all monitoring plans to ensure that specific measures for
    monitoring match are included.

5.  Conduct program reviews to ensure program staff are monitoring match
    as prescribed in their respective monitoring plans.

6.  Advise program staff to review grantees' Single Audit reports for
    applicable findings as part of the match monitoring process.

7.  Establish a mechanism for publishing best practices regarding
    monitoring match for Principal Offices to reference. The best
    practices may include examples of monitoring tools and forms.

## Auditee Comments {#auditee-comments .RptSubcaption}

The OCFO stated that it recognized that policy and training related to
monitoring grantees' matching requirements could be strengthened and
improved.

The OCFO also commented on the audit sample. It stated that a majority
of the programs and dollars examined were formula programs, and that a
larger sample of discretionary grant programs would have given the OCFO
a better understanding of any deficiencies related to monitoring
matching requirements. The OCFO also stated that the "OCFO only has
oversight responsibility regarding discretionary grantmaking."

OIG Response

The majority of the programs and dollars examined in the audit sample
were discretionary programs. Of the 13 programs sampled, only 3 (23%)
were formula programs representing only \$277 million (37%) of the \$744
million minimum match for the 13 programs. Thus, the results of our
review should provide GPOS with a better understanding of the
deficiencies related to monitoring matching requirements. We acknowledge
that for the 41 ED grants with a matching requirement, the total minimum
match for the 6 formula grants exceeded the dollar amount for
discretionary grants.

We also note that the OCFO's oversight is not limited to discretionary
programs as evidenced by the ED memoranda requiring both discretionary
and formula grant programs to submit their monitoring plans for OCFO's
review and analysis.

OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of our audit was to determine if ED has adequate
procedures in place for monitoring grantees' adherence to matching fund
requirements of applicable ED programs. The audit covered the period
October 1, 2003, through September 30, 2004 (FY 2004).

[]{.mark}

To achieve the audit objective, we

-   Conducted interviews with ED officials and program staff of selected
    programs from the Office of Postsecondary Education (OPE), Office of
    Elementary and Secondary Education (OESE), Office of Vocational and
    Adult Education (OVAE), Office of Special Education and
    Rehabilitative Services (OSERS), Office of English Language
    Acquisition (OELA), and Office of Innovation and Improvement (OII).

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-   Conducted interviews with the Director of GPOS, along with staff
    from the Grants Policy and Analysis Team and the Grants Management
    Improvement Team.

-   Identified 41 discretionary/formula grant programs within 6
    Principal Offices that have specific requirements for matching
    contributions.

-   Reviewed legislation and regulations governing each of the 41
    programs.

-   Reviewed policies and procedures GPOS developed for monitoring ED
    programs.

-   Reviewed policies and procedures from each Principal Office and all
    41 program offices related to monitoring grantees' adherence to
    matching requirements.

-   Obtained and reviewed all program-specific and office-wide
    monitoring plans submitted to GPOS for FY 2003 and FY 2004. We
    reviewed a total of 77 (40[^3] FY 2003 plans and 37[^4] FY 2004
    plans)[^5] program-specific monitoring plans and 5 office-wide
    monitoring plans.

-   Performed a risk assessment to determine which of the 41 programs
    had adequate procedures in place to monitor their grantees\'
    adherence to matching fund requirements of applicable programs.

-   Classified 13 of the 41 programs as high-risk.

For our review of 12 of the 13 programs identified as high-risk, we
judgmentally selected from available program grant files and site-visit
reports that covered FY 2003 and FY 2004. For one program, grant files
were not made available during our site visit. We reviewed between 1[^6]
and 5 program grant files for each program. The file review was
conducted only for the purpose of confirming reported controls and
procedures over the process for monitoring match requirements. We are
not projecting the results of our file review to each program's universe
of grantees. For site-visit reports, program staff informed us which
grantees received site-visits, and we judgmentally selected reports for
review.

To achieve our audit objective, we relied, in part, on data from the
General Services Administration's Catalog of Federal Domestic Assistance
to determine the number of grant programs with matching requirements. We
verified the accuracy of the list of programs with officials from each
Principal Office. We also obtained FY 2004 appropriations from each
Principal Office's homepage as shown on ED's website
([www.ed.gov](http://www.ed.gov/)) and obtained FY 2004 funding from the
U.S. Department of Education's Grant Award Database.

Fieldwork was performed at OPE, OESE, OVAE, OSERS, OELA, OII, and GPOS
offices in Washington, D.C. during the periods of April 18-22, May
16-20, and July 25-29, 2005. We conducted an exit conference with GPOS
on October 27, 2005. Our audit was conducted in accordance with
generally accepted government auditing standards appropriate to the
scope of the review described above.

ADMINISTRATIVE MATTERS

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. An electronic copy has been provided to your Audit Liaison
Officer.

Corrective actions proposed (resolution phase) and implemented (closure
phase) by your office will be monitored and tracked through the
Department's Audit Accountability and Resolution Tracking System
(AARTS). ED 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 the specific action
items, and targeted completion dates, necessary to implement final
corrective actions on the finding 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 the date
of issuance.

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 Richard J. Dowd, Regional Inspector General
for Audit, at (312) 886-6503.

> Sincerely,
>
> Helen Lew /s/
>
> Assistant Inspector General for Audit Services

Attachments

######## Attachment 1 

+---------+----------------+-------+---------+-----------+-----------+
| # U     |                |       |         |           |           |
| .S. Dep |                |       |         |           |           |
| artment |                |       |         |           |           |
|  of Edu |                |       |         |           |           |
| cation  |                |       |         |           |           |
| Program |                |       |         |           |           |
| s With  |                |       |         |           |           |
| Matchin |                |       |         |           |           |
| g Requi |                |       |         |           |           |
| rements |                |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
| **      | **P            | **CF  | **      | **Total   | **        |
| Program | rogram/Grant** | DA#** | Minimum | Appro     | Estimated |
| O       |                |       | Pe      | priations | Minimum   |
| ffice** |                |       | rcentag | for FY    | Match     |
|         |                |       | e**[^7] | 04**      | Con       |
|         |                |       | **Match |           | tribution |
|         |                |       | Req     |           | R         |
|         |                |       | uired** |           | equired** |
|         |                |       | [^8]    |           |           |
+---------+----------------+-------+---------+-----------+-----------+
| Office  | Rehabilitation | 8     | 21.30%  | \$2,55    | \$69      |
| of      | Servi          | 4.126 | of PC   | 3,362,000 | 1,062,396 |
| Special | ces-Vocational |       |         |           |           |
| Ed      | Rehabilitation |       |         |           |           |
| ucation | Grants to      |       |         |           |           |
| and     | States         |       |         |           |           |
| Rehabil |                |       |         |           |           |
| itative |                |       |         |           |           |
| S       |                |       |         |           |           |
| ervices |                |       |         |           |           |
| (OSERS) |                |       |         |           |           |
|         |                |       |         |           |           |
| ** **   |                |       |         |           |           |
|         |                |       |         |           |           |
| ** **   |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 84    | 10% of  | \$        | \$257,914 |
|         | Se             | .128G | PC      | 2,321,223 |           |
|         | rvices-Service |       |         |           |           |
|         | Projects:      |       |         |           |           |
|         | Migrant and    |       |         |           |           |
|         | Seasonal Farm  |       |         |           |           |
|         | Workers        |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 84    | 25% of  | \$        | \$854,595 |
|         | Se             | .128J | PC      | 2,563,784 |           |
|         | rvices-Service |       |         |           |           |
|         | Projects:      |       |         |           |           |
|         | Special        |       |         |           |           |
|         | Recreation     |       |         |           |           |
|         | Programs for   |       |         |           |           |
|         | Individuals    |       |         |           |           |
|         | with           |       |         |           |           |
|         | Disabilities   |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 8     | 10% of  | \$1       | \$        |
|         | Long-Term      | 4.129 | TPC     | 8,882,472 | 2,098,052 |
|         | Training       |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Independent    | 8     | 10% of  | \$2       | \$        |
|         | Living-State   | 4.169 | PC      | 2,020,309 | 2,446,701 |
|         | Grants         |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 8     | 10% of  | \$3       | \$        |
|         | Servic         | 4.177 | PC      | 1,811,200 | 3,534,578 |
|         | es-Independent |       |         |           |           |
|         | Living         |       |         |           |           |
|         | Services for   |       |         |           |           |
|         | Older          |       |         |           |           |
|         | Individuals    |       |         |           |           |
|         | Who are Blind  |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Assistive      | 84    | 50% of  | \$0       | \$0       |
|         | Technology:    | .224C | PC      |           |           |
|         | Alternative    |       |         |           |           |
|         | Financing      |       |         |           |           |
|         | Program\*      |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Projects With  | 8     | 20% of  | \$2       | \$        |
|         | Industry       | 4.234 | PC      | 1,798,625 | 5,449,656 |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 8     | 10% of  | \$449,992 | \$49,999  |
|         | Short-Term     | 4.246 | PC      |           |           |
|         | Training       |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 8     | 10% of  | \$3       | \$        |
|         | Ser            | 4.250 | TPC     | 0,800,000 | 3,422,222 |
|         | vices-American |       |         |           |           |
|         | Indians with   |       |         |           |           |
|         | Disabilities   |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 8     | 10% of  | \$297,710 | \$33,079  |
|         | Trainin        | 4.263 | PC      |           |           |
|         | g-Experimental |       |         |           |           |
|         | and Innovative |       |         |           |           |
|         | Training       |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 8     | 10% of  | \$1       | \$        |
|         | Train          | 4.264 | PC      | 0,388,010 | 1,154,223 |
|         | ing-Continuing |       |         |           |           |
|         | Education      |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Rehabilitation | 8     | 10% of  | \$        | \$652,659 |
|         | Training-State | 4.265 | PC      | 5,873,934 |           |
|         | Vocational     |       |         |           |           |
|         | Rehabilitation |       |         |           |           |
|         | Unit           |       |         |           |           |
|         | In-Service     |       |         |           |           |
|         | Training       |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Special        | 84    | 10% of  | \$0       | \$0       |
|         | Education      | .324M | PC      |           |           |
|         | Research and   |       |         |           |           |
|         | Innovation to  |       |         |           |           |
|         | Improve        |       |         |           |           |
|         | Services and   |       |         |           |           |
|         | Results for    |       |         |           |           |
|         | Children with  |       |         |           |           |
|         | Disa           |       |         |           |           |
|         | bilities/Model |       |         |           |           |
|         | Demonstration  |       |         |           |           |
|         | Projects for   |       |         |           |           |
|         | Children with  |       |         |           |           |
|         | Disabilities   |       |         |           |           |
|         | \*             |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+

+---------+----------------+-------+---------+-----------+-----------+
| **      | **P            | *     | **      | **Total   | **        |
| Program | rogram/Grant** | *CFDA | Minimum | Appro     | Estimated |
| O       |                | \#**  | Per     | priations | Minimum   |
| ffice** |                |       | centage | for FY    | Match     |
|         |                |       | Match   | 04**      | Con       |
|         |                |       | Req     |           | tribution |
|         |                |       | uired** |           | R         |
|         |                |       |         |           | equired** |
+---------+----------------+-------+---------+-----------+-----------+
| OSERS   | Special        | 84    | 10% of  | \$0       | \$0       |
|         | Education      | .324R | PC      |           |           |
|         | Research and   |       |         |           |           |
|         | Innovation to  |       |         |           |           |
|         | Improve        |       |         |           |           |
|         | Services and   |       |         |           |           |
|         | Results for    |       |         |           |           |
|         | Children with  |       |         |           |           |
|         | Disabil        |       |         |           |           |
|         | ities/Outreach |       |         |           |           |
|         | Projects\*     |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
| Office  | Star Schools   | 8     | 25% of  | \$2       | \$        |
| of      |                | 4.203 | PC      | 0,362,150 | 6,787,383 |
| Inn     |                |       | []      |           |           |
| ovation |                |       | {.mark} |           |           |
| and     |                |       |         |           |           |
| Impr    |                |       |         |           |           |
| ovement |                |       |         |           |           |
| (OII)   |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | State Charter  | 84    | 10% of  | \$1       | \$        |
|         | School         | .282D | PC      | 8,700,000 | 2,077,778 |
|         | Facilities     |       | []      |           |           |
|         | Incentives     |       | {.mark} |           |           |
|         | Grant Programs |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Ready To Teach | 84    | 100% of | \$        | \$        |
|         | \*\*           | .286B | FF      | 2,091,228 | 2,091,228 |
+---------+----------------+-------+---------+-----------+-----------+
|         | Parent         | 8     | No      | \$4       |           |
|         | Information    | 4.310 | minimum | 1,974,878 |           |
|         | and Resource   |       |         |           |           |
|         | Center \*\*\*  |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
| Office  | Foreign        | 8     | 100% of | \$1       | \$1       |
| of      | Language       | 4.293 | FF      | 6,545,800 | 6,545,800 |
| English | Assistance     |       |         |           |           |
| L       |                |       |         |           |           |
| anguage |                |       |         |           |           |
| Acqu    |                |       |         |           |           |
| isition |                |       |         |           |           |
| (OELA)  |                |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
| Office  | Adult          | 8     | 25% of  | \$56      | \$18      |
| of      | Education -    | 4.002 | TPC     | 4,220,084 | 8,073,361 |
| Voc     | State Grant    |       |         |           |           |
| ational | Program        |       |         |           |           |
| and     | \*\*\*\*\*\*\* |       |         |           |           |
| Adult   |                |       |         |           |           |
| Ed      |                |       |         |           |           |
| ucation |                |       |         |           |           |
| (OVAE)  |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Vocational     | 8     | 5% of   | \$1,19    | \$6       |
|         | Education -    | 4.048 | PC      | 5,007,610 | 2,895,137 |
|         | Basic Grants   |       |         |           |           |
|         | to             |       |         |           |           |
|         | States\*\*\*\* |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Community      | 8     | 50% of  | \$        | \$        |
|         | Technology     | 4.341 | TPC     | 9,941,000 | 9,941,000 |
|         | Centers        |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
| Office  | Even Start -   | 8     | 10% of  | \$24      | \$2       |
| of      | State          | 4.213 | TPC     | 6,909,587 | 5,788,335 |
| Ele     | Educational    |       |         |           |           |
| mentary | Agencies\*     |       |         |           |           |
| and     | \*\*\*\*\*\*\* |       |         |           |           |
| Se      |                |       |         |           |           |
| condary |                |       |         |           |           |
| Ed      |                |       |         |           |           |
| ucation |                |       |         |           |           |
| (OESE)  |                |       |         |           |           |
|         |                |       |         |           |           |
| * *     |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
| * *     |                |       |         |           |           |
|         |                |       |         |           |           |
| * *     |                |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Even Start -   | 8     | 10% of  | \$        | \$511,111 |
|         | Migrant        | 4.214 | TPC     | 4,600,000 |           |
|         | Education      |       | []      |           |           |
|         |                |       | {.mark} |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Even Start -   | 8     | 10% of  | \$        | \$548,688 |
|         | Indian Tribes  | 4.258 | TPC     | 4,938,192 |           |
|         | and Tribal     |       | []      |           |           |
|         | Organizations  |       | {.mark} |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Eisenhower     | 8     | 20% of  | \$1       | \$        |
|         | Regional       | 4.319 | PC      | 4,814,078 | 3,703,520 |
|         | Mathematics    |       |         |           |           |
|         | and Science    |       |         |           |           |
|         | Education      |       |         |           |           |
|         | Consortia      |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Comprehensive  | 84    | 10% of  | \$        | \$567,000 |
|         | School         | .332B | FF      | 5,670,000 |           |
|         | Reform-Quality |       |         |           |           |
|         | Initiatives    |       |         |           |           |
|         | Technology     |       |         |           |           |
|         | Assistance     |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Early          | 84    | 50% of  | \$1       | \$1       |
|         | Childhood      | .349A | TPC     | 4,814,000 | 4,814,000 |
|         | Educator       |       |         |           |           |
|         | Professional   |       |         |           |           |
|         | Development    |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
| Office  | Undergraduate  | 8     | 50% of  | \$        | \$        |
| of      | International  | 4.016 | TPC     | 4,490,000 | 4,490,000 |
| Postse  | Studies and    |       |         |           |           |
| condary | Foreign        |       |         |           |           |
| Ed      | Language       |       |         |           |           |
| ucation | Program        |       |         |           |           |
| (OPE)   |                |       |         |           |           |
|         |                |       |         |           |           |
|         |                |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+

+---------+----------------+-------+---------+-----------+-----------+
| **      | ####           | *     | **      | **Total   | **        |
| Program |  Program/Grant | *CFDA | Minimum | Appro     | Estimated |
| O       |                | \#**  | Per     | priations | Minimum   |
| ffice** |                |       | centage | for FY    | Match     |
|         |                |       | Match   | 04**      | Con       |
|         |                |       | Req     |           | tribution |
|         |                |       | uired** |           | R         |
|         |                |       |         |           | equired** |
+---------+----------------+-------+---------+-----------+-----------+
| OPE     | Higher         | 84    | 100% of | \$5       | \$3       |
|         | Education -    | .031B | FF      | 3,100,000 | 5,100,000 |
|         | Institutional  |       |         |           |           |
|         | Ai             |       |         |           |           |
|         | d-Historically |       |         |           |           |
|         | Black Graduate |       |         |           |           |
|         | Institut       |       |         |           |           |
|         | ions\*\*\*\*\* |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Higher         | 84    | 100% of | \$8       | \$8       |
|         | Education -    | .031B | FF      | 2,941,697 | 2,941,697 |
|         | Institutional  |       |         |           |           |
|         | Ai             |       |         |           |           |
|         | d-Historically |       |         |           |           |
|         | Black Colleges |       |         |           |           |
|         | and            |       |         |           |           |
|         | Universiti     |       |         |           |           |
|         | es\*\*\*\*\*\* |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Business and   | 8     | 50% of  | \$        | \$        |
|         | International  | 4.153 | PC      | 4,490,000 | 4,490,000 |
|         | Education      |       |         |           |           |
|         | Projects       |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Graduate       | 8     | 25% of  | \$3       | \$1       |
|         | Assistance in  | 4.200 | TPC     | 0,616,000 | 0,205,333 |
|         | Areas of       |       |         |           |           |
|         | National Need  |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Centers for    | 8     | 10% of  | \$1       | \$        |
|         | International  | 4.220 | PC      | 0,700,000 | 1,188,889 |
|         | Business       |       |         |           |           |
|         | Education      |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Institute for  | 8     | 50% of  | \$        | \$        |
|         | International  | 4.269 | PC      | 1,639,330 | 1,639,330 |
|         | Public Policy  |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Gaining Early  | 8     | 100% of | \$29      | \$29      |
|         | Awareness and  | 4.334 | FF      | 8,230,000 | 8,230,000 |
|         | Readiness for  |       |         |           |           |
|         | Undergraduate  |       |         |           |           |
|         | Programs       |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Teacher        | 8     | 25% of  | \$8       | \$2       |
|         | Quality        | 4.336 | FF      | 8,887,451 | 2,221,863 |
|         | Enhancement    |       |         |           |           |
|         | Grants         |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | International  | 8     | 33.33%  | \$        | \$849,873 |
|         | Education -    | 4.337 | of TPC  | 1,700,000 |           |
|         | Technological  |       |         |           |           |
|         | Innovation and |       |         |           |           |
|         | Cooperation    |       |         |           |           |
|         | for Foreign    |       |         |           |           |
|         | Information    |       |         |           |           |
|         | Access         |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Preparing      | 8     | 50% of  | \$0       | \$0       |
|         | Tomorrow\'s    | 4.342 | TPC     |           |           |
|         | Teachers to    |       |         |           |           |
|         | Use            |       |         |           |           |
|         | Technology\*   |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         | Underground    | 8     | 80% of  | \$        | \$        |
|         | Railroad       | 4.345 | FF      | 2,222,000 | 1,777,600 |
|         | Educational    |       |         |           |           |
|         | and Cultural   |       |         |           |           |
|         | Program        |       |         |           |           |
+---------+----------------+-------+---------+-----------+-----------+
|         |                |       |         | *         | *         |
|         |                |       |         | *\$5,440, | *\$1,508, |
|         |                |       |         | 174,344** | 495,001** |
+---------+----------------+-------+---------+-----------+-----------+

**Notes:**

\* Program has active non-competing continuation grants, but no new
appropriations in FY 2004.

\*\* The match requirement was only for a subprogram: 84.286B. Because
the appropriation was for the total program, we used the award funding
for the subprogram instead of total appropriations.

\*\*\* This program has no minimum match requirement. Therefore, we
assumed zero funds at risk from match.

\*\*\*\* This program has a match only for administrative costs. Because
administrative costs cannot exceed 5%, we calculated the match as 5% of
the appropriations.

\*\*\*\*\* The match requirement is for funds above \$1,000,000 per
grantee. Because there are 18 grantees, we subtracted \$18,000,000 from
the total appropriations to get the amount of funds grantees must match.

\*\*\*\*\*\* The match requirement is only for grantees that participate
in the endowment challenge. Therefore, we used the FY 2004 funding for
those grantees participating in the endowment challenge.

####### \*\*\*\*\*\*\* The stated match requirement is the requirement for the States. Outlying areas such as Guam and American Samoa are required to provide a match of 12%. 

####### \*\*\*\*\*\*\*\* Because grantees are allowed to reserve up to 6% of its allocation for State-level activities for which no match is required, we reduced the appropriations 6% before calculating the minimum match contribution required. 

####### The rows highlighted in yellow represent the 13 programs we selected for review. (See Attachment 2.) 

####### Attachment 2

+--------------+----+----------+--------+--------+---------+--------+
| ##           |    |          |        |        |         |        |
| # **OVERALL  |    |          |        |        |         |        |
| RANKING OF 1 |    |          |        |        |         |        |
| 3 PROGRAMS** |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| # Program    | ** | *        | **Moni | **Moni | **      | **Site |
|              | CF | *Overall | toring | toring | Program | Vi     |
|              | DA | Under-   | P      | I      | Grant   | sits** |
|              | ** | standing | lans** | nstrum | Files** |        |
|              |    | of       |        | ents** |         |        |
|              |    | Match/Gr |        |        |         |        |
|              |    | antees** |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Star Schools | 84 | Su       | Re     | Yellow | R       | Re     |
|              | .2 | fficient | d**¢** |        | ed**¢** | d**¢** |
|              | 03 |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| State        | 8  | Su       | Red    | Yellow | N/A\*\* | N      |
| Charter      | 4. | fficient | \*\*   |        |         | /A\*\* |
| School       | 28 |          |        |        |         |        |
| Facilities   | 2D |          |        |        |         |        |
| Incentives   |    |          |        |        |         |        |
| Grant        |    |          |        |        |         |        |
| Program      |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Ready To     | 84 | Su       | Re     | Yellow | R       | Re     |
| Teach        | .2 | fficient | d**¢** |        | ed**¢** | d**¢** |
|              | 86 |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Adult        | 84 | Su       | Green  | Green  | Yellow  | Green  |
| Education -  | .0 | fficient |        |        |         |        |
| State Grant  | 02 |          |        |        |         |        |
| Program      |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Vocational   | 84 | Su       | Green  | Green  | Yellow  | Green  |
| Education -  | .0 | fficient |        |        |         |        |
| Basic Grants | 48 |          |        |        |         |        |
| to States    |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Even Start   | 84 | Su       | Green  | Green  | R       | Green  |
| -- State     | .2 | fficient |        |        | ed**¢** |        |
| Educational  | 13 |          |        |        |         |        |
| Agencies     |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Early        | 8  | Su       | Re     | Yellow | Yellow  | Re     |
| Childhood    | 4. | fficient | d**¢** |        |         | d**¢** |
| Educator     | 34 |          |        |        |         |        |
| Professional | 9A |          |        |        |         |        |
| Development  |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Higher       | 8  | Limited  | Re     | Re     | R       | Re     |
| Education -  | 4. |          | d**¢** | d**¢** | ed**¢** | d**¢** |
| I            | 03 |          |        |        |         |        |
| nstitutional | 1B |          |        |        |         |        |
| Aid -        |    |          |        |        |         |        |
| Historically |    |          |        |        |         |        |
| Black        |    |          |        |        |         |        |
| Colleges and |    |          |        |        |         |        |
| Universities |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Higher       | 8  | Su       | Re     | Re     | Yellow  | Re     |
| Education -  | 4. | fficient | d**¢** | d**¢** |         | d**¢** |
| I            | 03 |          |        |        |         |        |
| nstitutional | 1B |          |        |        |         |        |
| Aid -        |    |          |        |        |         |        |
| Historically |    |          |        |        |         |        |
| Black        |    |          |        |        |         |        |
| Graduate     |    |          |        |        |         |        |
| Institutions |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| I            | 84 | Su       | Re     | Yellow | Yellow  | Yellow |
| nternational | .2 | fficient | d**¢** |        |         |        |
| Institute    | 69 |          |        |        |         |        |
| for Public   |    |          |        |        |         |        |
| Policy       |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Gaining      | 84 | Su       | Green  | Yellow | Red     | Green  |
| Early        | .3 | fficient |        |        |         |        |
| Awareness    | 34 |          |        |        |         |        |
| and          |    |          |        |        |         |        |
| Readiness    |    |          |        |        |         |        |
| for          |    |          |        |        |         |        |
| U            |    |          |        |        |         |        |
| ndergraduate |    |          |        |        |         |        |
| Programs     |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Teacher      | 84 | Su       | Green  | Yellow | R       | Yellow |
| Quality      | .3 | fficient |        |        | ed**¢** |        |
| Enhancement  | 36 |          |        |        |         |        |
| Grants       |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+
| Underground  | 84 | Limited  | Re     | Re     | R       | Re     |
| Railroad     | .3 |          | d**¢** | d**¢** | ed**¢** | d**¢** |
| Educational  | 45 |          |        |        |         |        |
| and Cultural |    |          |        |        |         |        |
| Program      |    |          |        |        |         |        |
+--------------+----+----------+--------+--------+---------+--------+

**Overall Understanding of Match/Grantees:** Whether the program staff
clearly understood the match requirements and which grantees had match
requirements.

**Monitoring Plans:** Whether the program-specific plans from FY 2003
and FY 2004 contain specific language regarding monitoring match.

**Monitoring Instruments:** Whether the instruments program staff use to
monitor grantees include specific language regarding monitoring match.

Program Grant Files: Whether the program grant files we reviewed
contained documentation of match reviewed.

**Site Visits:** Whether the FY 2003 and FY 2004 site visit reports we
reviewed covered match.

**Red:** Contains no indicators/language and/or documentation
specifically related to match.

**Yellow:** Contains minimal/vague language and/or documentation
specifically related to match.

**Green:** Contains specific indicators/language and/or documentation
specifically related to match.

**\*\*** This grant first received funding in FY 2004, and, for that
reason, a FY 2003 program-specific monitoring plan was not required.
Because the grant did not exist in FY 2003, and first received funding
in FY 2004, no site visits were conducted in either fiscal year.

Based on our review, we have noted below the better practices observed
at the 13 program offices.

**Monitoring Plans:**

We reviewed the program-specific monitoring plans for specific language
indicating that monitoring for match is incorporated as a step in the
monitoring process for the programs. We found 5 of the 13 programs have
program-specific monitoring plans that contain such language: Even Start
-- State Educational Agencies, Adult Education -- State Grant Program,
Vocational Education -- Basic Grants to States, Gaining Early Awareness
and Readiness for Undergraduate Programs (GEAR UP), and Teacher Quality
Enhancement Grants (TQE).

The Even Start monitoring plan defined monitoring and had an appendix
that included monitoring indicators. The indicators required the
monitoring team to determine if the State Educational Agency ensured
that sub-grantees comply with statutory and regulatory requirements on
use of funds and matching. It provided the applicable regulations,
acceptable supporting documentation, and information to obtain during
interviews with grantee staff.

The Adult Education monitoring plan included a technical review
instrument that required program staff to determine if the grantee met
the match requirement. In addition, the instrument also stated what
evidence the program staff should review to determine compliance.

The Vocational Education monitoring plan stated that program officers
are to use the ledgers of federal and non-federal expenditures for State
Administration for the monitored year and the year previous to the
monitored year to determine whether the grantee was in compliance with
the matching requirement. The program officers then write yes or no on
the checklist. This checklist required program officers to determine
whether the grantee was in compliance with the match and also provided
guidance as to the supporting documentation the program officer should
use to make such a determination.

The GEAR UP monitoring plan stated that matching requirements is an area
where many grantees have trouble. To resolve this high-risk performance
area, the plan stated that the program office would provide technical
assistance on match to grantees. The program office would also work with
a national association to assist grantees in attracting new partners and
matching contributions. Also, the program would reduce awards for
grantees that did not meet matching requirements.

The TQE plan stated that the program office flagged grantees that it
noted were having trouble meeting the match requirement. The program
office flagged the grantees for monitoring to aid them in becoming
compliant with the fiscal issues. Monitoring would consist of phone
contact on a scheduled basis and site visits.

**Monitoring Instruments:**

Monitoring instruments consist of specific tools program staff use to
monitor grantees on an ongoing basis. These tools should include
specific steps the staff must perform to indicate that match is
reviewed. We found 3 of the 13 programs have monitoring instruments that
require program staff to review match: Even Start -- State Educational
Agencies, Adult Education -- State Grant Program, and Vocational
Education -- Basic Grants to States.

For Even Start, the program staff was required to determine if the State
Educational Agency ensured that sub-grantees comply with statutory and
regulatory requirements on uses of funds and matching. It provided the
applicable regulations, acceptable supporting documentation, and
information to obtain during interviews with grantee staff.

For Adult Education, program staff created spreadsheets that indicate
the total amount of federal funds allocated and the total amount of
non-federal funds expended per state per federal fiscal year. This
allowed staff to monitor whether the state met its matching requirements
and to determine trends in non-compliance with the matching requirement.
Adult Education staff also used the State Program and Technical
Assistance Review Instrument to guide them in conducting site visits and
as a tool for monitoring program performance. Module 7 of the Review
Instrument focused on the review of financial considerations. It called
for program staff to determine whether the state met the matching
provisions for the previous year. Program staff should also determine
compliance to matching requirements in preparation for site visits. The
Review Instrument indicated that the program officers should use the
prior year's fiscal report to determine whether the grantee met the
matching requirements.

For Vocational Education, program staff used a Pre-Monitoring Checksheet
for fiscal review. One section required a review of the matching
requirement to State Administration expenses (the program's matching
requirement only applies to State Administration expenses). The
Checksheet required program staff to use ledgers of federal and
non-federal expenditures for State Administration for the monitored year
and the year previous to the monitored year for secondary and
postsecondary institutions as evidence to determine whether the grantee
complied with matching requirements. The final Financial Status Report
also has a checklist, which required program staff to review State
administration expenditures.

**Program Grant Files:**

Program grant files include all grant-related information for individual
grantees. The program grant files should include evidence of in-depth
monitoring of grantees' match requirements, including, but not limited
to: grant award notifications with the correct match requirement,
correspondence between grantees and program officers, partial or
complete source documentation of the match contributions, calculations
on the values of match contributions, and/or comments about the
allowability and reasonableness of the match contributions. We found
that none of the 13 programs had program grant files with evidence of
in-depth monitoring of match.

**Site Visit Reports:**

Site visit reports summarize the results of program staff visits to
grantees. These reports should include evidence that match was reviewed
to determine compliance with the requirements. In addition, the site
visit reports may include information related to grantees' specific
match questions. We found 4 of the 13 programs have site visit reports
containing evidence of match reviewed: Even Start -- State Educational
Agencies, Adult Education -- State Grant Program, Vocational Education
-- Basic Grants to States, and GEAR UP.

The site visit reports we reviewed for Even Start showed that the
monitoring teams reviewed match and discovered related findings. These
findings included unallowable expenditures, such as indirect costs, as
part of the budget for the matching requirement for the program. Another
finding indicated one grantee's grant application included budget forms
allowing the use of funds for capital outlay for buildings, land, and
improvements, which also are not allowable under the Even Start program.
The grantee was informed that it must ensure that project staff do not
charge indirect costs to the Even Start program and should remove
reference in the budget forms to the use of funds for capital outlay for
sites, building, or site improvements.

While there were no findings from Adult Education site visits, we did
note that program staff did discuss specific match-related questions
with grantees. For example, the appendix of one site visit report listed
the grantee's specific questions and the corresponding answers. One
question was regarding a waiver of the first \$200,000 of non-federal
share of outlays and how that would impact the reporting of non-federal
share of outlays on its Financial Status Report. The second question was
regarding allowable matching funds.

Our review of Vocational Education site visit reports revealed one
finding related to match. The finding stated that the grantee had not
documented its non-federal administration match to ensure that it met
the requirements of the program's legislation. The monitoring team
recommended that the grantee develop policies and procedures to clearly
delineate the various line-item expenditures that were merged together
to form the basis for the non-federal administrative match and explain
how the expenditures were calculated. Also, the grantee needed to report
the amount of non-federal expenditures for administration for previous
fiscal years.

Our review of GEAR UP site visit reports indicated staff reviewed match
and had related findings. One grantee provided an itemized list of
matching contributions to cover the five-year performance period.
However, during the site review, the grantee was unable to supply any
documentation of the matching contributions provided by the project. As
corrective action, the monitoring team indicated that the project staff
needed to submit documentation of matching contributions for the 2001
budget period and develop procedures to ensure that future matching
contributions were documented adequately. Another site visit report we
reviewed noted a finding related to large adjustments in the annual
performance report for the match contributions during the first grant
year. The monitoring team noted that the match reported in the first
year annual performance report was \$12,158.65. However, in the second
grant year's annual performance report, the match for the first grant
year was adjusted to \$203,940.95. This was a significant change in the
match reported. Because of the significant change in match reported for
the first grant year, the monitoring team requested the grantee to
breakdown the match to: the specific GEAR UP activity and date
associated with the cost; who provided the in-kind match; and which line
item is associated with the in-kind match (salary, travel, etc.). The
monitoring team also emphasized the importance of the match component of
the grant and the need for clear, complete, and concise records to
document the match. The monitoring team also stated that in the event of
an audit, undocumented match would not be considered in meeting the
match commitment.

**[Attachment 3]{.underline}**

**Auditee Response**

March 2, 2006

Memorandum

To: Helen Lew

> Assistant Inspector General for Audit Services

From: Danny A. Harris, PhD /s/

Deputy Chief Financial Officer

Subject: Draft Audit Report "The US Department of Education's Monitoring
of

> Adherence to Matching Requirements" ED-OIG/A05F0015

Thank you for the opportunity to comment on the Draft Audit Report,
entitled *The U.S. Department of Education's Monitoring of Adherence to
Matching Requirements* (Control Number ED-OIG/A05F0015).

We share OIG's concern that program offices monitor their grants
properly, not only for cost-sharing/matching requirements, but for
grantees' conformity to all other legal and administrative requirements
as well. Since the decentralization of the discretionary grantmaking
functions to the program offices in 1996, the Grants Policy and
Oversight Staff (GPOS) within the Office of the Chief Financial Officer
(OCFO) has continually worked to ensure that better policy, guidance,
and training are made available to program offices on a wide array of
grants administration issues. The current *Handbook for the
Discretionary Grant Process* (Handbook), the product of a collaborative
effort between OCFO and the cross-Department Grants Policy Advisory
Team, is the most comprehensive grants policy document on discretionary
grantmaking ever available to Department grant staff to support their
work.

OCFO recognizes that policy and training related to monitoring of
grantees' adherence to matching requirements can be strengthened and
improved. However, while we understand your reasoning leading to your
finding that "GPOS did not assure that Program Offices adequately
monitored the estimated \$1.3 billion in grant resources provided by
matching contributions," we need to clarify the functional
responsibilities of GPOS in the development of the Department's grants
policy and training.

**[Discretionary Grants Policy Development]{.underline}**

As noted above, the Handbook was a result of a joint effort between OCFO
and the Grants Policy Advisory Team, which was chartered in 2001 to
ensure that all Department offices involved in the discretionary grant
process participate in the development of policy to improve that
process. All Department program offices and the Office of the General
Counsel, Office of Inspector General, Budget Service, and the Office of
Planning, Evaluation and Policy Development have team representatives.

During monthly team meetings, these offices bring the full Department
perspective to the discretionary grant process and highlight issues or
concerns related to this process based on their unique roles within the
Department. Because program staff were involved in the development of a
fundamental grants monitoring course described in the Training section
to follow, we are assured of the commitment of team members to more
rigorous monitoring and improved performance in all Department programs.

**[Grants Policy Training]{.underline}**

OCFO's role in providing training in Department grants management also
requires clarification. Since the devolution of discretionary grants
management in 1996, training in this field has been provided not only by
GPOS, but also by the Department's Training and Development Center, the
program offices themselves, and even other parts of OCFO on matters such
as indirect cost. For example, as we just mentioned, a Department-wide
team recently worked with a contractor to develop a fundamental
monitoring course for discretionary and formula program staff.
Development of the course was a 2004 Discretionary Grant Improvement
Team initiative, and OCFO staff and senior program managers contributed
significantly to the course's content and organization.

OCFO will continue to collaborate with all offices involved with
discretionary grant training to ensure that cross-cutting issues such as
cost-sharing/matching are addressed where appropriate and that any
policy changes or clarifications are included in those training
sessions. OCFO will play a leading role in the development and/or
enhancement of supplemental courses that cover specific aspects of grant
monitoring, as well as providing instruction on coursework covering
adherence to existing policies and regulations.

Further, OCFO will recommend to senior Department officials that they
require attendance by program staff at all grants training provided by
the Department. Mandatory training will ensure that staff are kept
current on grants management policies, procedures and practices and are
knowledgeable about the landscape of issues related to important topics
that cut across the grants process such as cost-sharing and matching.

**[Audit Sample]{.underline}**

We note that a majority of the programs and dollars examined in the
audit are formula programs. Numerous formula programs have specialized
cost-sharing/matching requirements, often ones indirectly implied
through maintenance-of-effort or supplement-not-supplant requirements
contained in legislation. Since OCFO only has oversight responsibility
regarding discretionary grantmaking, our influence to effect changes in
formula programs is limited. Except in specific cases, the policies and
procedures in the Handbook are not applicable to these formula programs.
Such programs evolve their own monitoring systems and procedures that
meet their specific requirements, often in conjunction with guidance
from their OGC program attorneys.

In order to gain a better understanding of any deficiencies related to
monitoring the matching requirements of discretionary grants that might
be occurring across the Department, a larger sample of discretionary
grant programs would have given OCFO a more complete picture of the
scope and nature of the issues and problems and help it better determine
both policy and training needs.

**[Responses to Recommendations]{.underline}**

OCFO's responses and corrective actions to the audit's recommendations
and corrective actions are as follows:

**Recommendation 1.1 -- Revise the Handbook to include specifics on
monitoring match, such as how to value a matching contribution, examples
of allowable in-kind contributions, and acceptable documentation to
support matches involving cash and/or in-kind contributions. Also,
ensure that the Handbook incorporates descriptions of various matching
requirements. This information could be included in the Monitoring Plan
section of the Handbook.**

**CORRECTIVE ACTION:**

OCFO will review the Handbook and identify which applicable sections can
be modified to call program staff's attention to the issue of
cost-sharing/matching, where that is appropriate. An effective way to
focus program staff's attention to this issue is to "front-load" the
process by providing them more comprehensive information from grantees
so as to keep cost-sharing/matching at a high level of awareness. To
accomplish this, OCFO will:

-   Develop standard language, based on text in Section 4.3.2.2 of the
    revised *Handbook*, which OCFO would direct program staff to include
    in their application packages, so that applicants would understand
    the kinds of information related to cost-sharing/matching that must
    be included when developing application budgets; and

-   Working with the Grants Policy Advisory Team, propose amendments to
    the ED 524B performance report 1) to ask whether a grantee has
    deviated significantly from the originally approved
    cost-sharing/matching portion of the budget---e.g., having made
    changes that would have required prior approval; 2) to require that
    grantees update the ED 524B soon after the previous budget period
    ends, with their final information on non-Federal contributions
    provided for the period; and 3) to amend the instructions for
    reporting cost-sharing/matching information to remind grantees of
    the requirements for acceptable documentation that they are required
    to maintain to support the dollar figures reported on the form for
    both Federal and non-Federal items. If changes to the ED 524B are
    approved by OMB, OCFO will recommend to program offices that they
    modify their program-specific reporting forms and instructions to
    include similar content when these documents next come up for OMB
    review and clearance.

Please note that non-Federal cost-sharing/matching contributions are
part of the grantees' total project costs and must meet the same tests
of allowability as Federal grant funds. Both Federal and non-Federal
funds are therefore treated similarly in terms of reporting and
financial monitoring by the Department. On both the ED 524B and the
SF-269 Financial Status Report, which is used widely across Federal
grant-making agencies, both Federal and non-Federal funds expended for
the reported period are reported as a cumulative total only \-- neither
Federal nor non-Federal expenditures are broken down by budget cost
category. Just as the Department does not routinely require grantees to
provide detailed expenditure reports or documentation to justify the
allowability of Federal expenditures, likewise source documentation and
other expenditure information is not normally required of grantees to
justify non-Federal matching contributions. Nonetheless, these efforts
and accompanying training will ensure that matching requirements are
more carefully scrutinized during monitoring activities.

**Recommendation 1.2 \-- Ensure that staff with oversight
responsibilities for programs with a matching component receive training
on monitoring match. Ensure that the training includes any noted best
practices and issues identified in audits and/or program reviews.**

OCFO will update all relevant courses that include the issue of
cost-sharing/matching to ensure that program staff understand their
responsibilities regarding monitoring for match. Specifically, OCFO will
ensure that the newly developed Department-wide monitoring training is
modified to include discussion of the aspect of cost-sharing/matching as
an item on the list of topics for monitoring review. The modifications
could take into account such aspects as the EDGAR guidance on valuing
contributions and note best practices and issues identified in audits
and /or program reviews. OCFO will also review, and modify as necessary,
the content for the current "Cost Analysis and Budget Review" course to
ensure that the issue of reviewing an applicant's proposed
cost-sharing/matching contributions is adequately addressed. Future
training sessions on the ED 524B, Grant Performance Report, will also
stress the importance of monitoring for adherence to matching
requirements when reviewing performance reports prior to making
non-competing continuation awards.

Furthermore, the OCFO all-Department briefing on the revised Handbook
conducted on February 28, 2006, highlighted sections in the Handbook
that discuss cost-sharing/matching and reminded program staff of their
responsibility to monitor for match.

OCFO will coordinate with other offices that conduct training on this
topic to ensure that their training content reflects current policy.

As stated earlier, OCFO will strongly encourage senior Department
officials to require that program staff with responsibility for
discretionary grants attend all grant training sessions offered by the
Department. OCFO will also recommend that line managers and supervisors
use the new Learning Management System to monitor the course-taking
activity of program staff and ensure that they are attending all grants
training opportunities.

**Recommendation 1.3 \-- Require Principal Offices to update monitoring
plans to include specific measures for monitoring grantees' adherence to
program matching requirements.**

**CORRECTIVE ACTION:**

As you have mentioned in your draft report, OCFO annually collects
information on the discretionary grant monitoring plans of program
offices via its Monitoring Information System database. We will add a
question to the current CFDA program monitoring questions in the
database in FY 2006 that requests a measure(s) for monitoring matching
requirements.

**Recommendation 1.4 \-- Review all monitoring plans to ensure specific
measures for monitoring match are included.**

**CORRECTIVE ACTION:**

OCFO annually collects reports on each program office's monitoring
activity with respect to discretionary grants, which you also pointed
out in the draft report. Based on the review of the FY 2004-2005
office-wide monitoring reports, which will be completed this spring, we
will advise appropriate principal offices about the inclusion of
measures for monitoring the matching requirement for their specific CFDA
programs in FY 2006.

**Recommendation 1.5 \-- Conduct program reviews to ensure program staff
are monitoring match as prescribed in their respective monitoring
plans.**

**CORRECTIVE ACTION:**

OCFO will develop a representative sample of programs with matching
requirements in selected principal offices and review those programs for
compliance during FY 2007.

**Recommendation 1.6 \-- Advise program staff to review grantees' Single
Audit Reports for applicable findings as part of the match monitoring
process.**

## 

## CURRENT ACTION 

Please note that the Handbook (at section 5.4.8) already advises program
staff to use applicable audit history to guide their work and inform
their decisions.

As part of the CFDA program profile in the Monitoring Information System
(MIS) database, program offices are required to indicate whether they
used Single Audit reports as a monitoring tool, including the frequency
and purpose of use. As part of the FY 2005 review of this information
that will be completed this spring, OCFO requested the completion of
this item for all discretionary grant programs, including those with
matching requirements, if this information was missing in the original
program profile.

**Recommendation 1.7 \-- Establish a mechanism for publishing best
practices regarding monitoring match for Principal Offices to reference.
The best practices may include examples of monitoring tools and forms.**

## 

## CORRECTIVE ACTION:

As noted in our response to Recommendation 1.3, in FY 2006 Principal
Offices will be required to include measures for monitoring matching
requirements in the MIS database. Principal Offices will be required to
report on these measures in the FY 2006 annual office-wide monitoring
reports and will be asked to provide any monitoring tools that they used
to monitor for adherence to matching requirements. OCFO will develop an
instrument and canvass agencies in the grantmaking community to gather
additional monitoring best practices. In FY 2007, GPOS will post
information on the identified best practices and monitoring tools
related to monitoring match on the GPOS web page on connectED.

Additionally, we have attached technical clarifications for your
consideration in the final audit report.

OCFO appreciates this opportunity to comment on the Draft Audit Report.
Please contact Blanca Rodriguez, GPOS Director, if you have any
questions about our comments or the Corrective Action Plan.

Thank you.

Attachment

cc: Linda Stracke

Charles Miller

Gail Cornish

Dick Dowd

[^1]: The stated amount is a conservative estimate using the smallest
    required match for all programs. Principal Office officials have
    stated that for a number of programs, the actual match required is
    much larger.

[^2]: Handbook OCFO-04, dated 3/31/2003. (GPOS published a revised
    version of the Handbook on February 24, []{.mark}2006. In reviewing
    the revised Handbook, we did not note any significant changes from
    the previous version relating to monitoring matching contributions.)

[^3]: The State Charter School Facilities Incentives Grant Program, CFDA
    84.282D, first received funding in FY 2004, so an FY 2003
    program-specific monitoring plan was not required.

[^4]: OSERS did not submit four program-specific FY 2004 monitoring
    plans.

[^5]: In FY 2004, Principal Offices were required to only submit updates
    to the FY 2003 program-specific monitoring plans. Therefore, we
    reviewed both the FY 2003 and FY 2004 plans to achieve our audit
    objective.

[^6]: We reviewed fewer than three files only when there were no other
    files available to review.

[^7]: For those programs that have a progressive match requirement
    during the grant cycle, we used the minimum percentage of match
    required during the entire grant cycle to provide a conservative
    estimate of the total funds required from matching contributions in
    FY 2004.

[^8]: For those programs that have a match requirement as a percentage
    of federal funds, we used the acronym "FF." For those programs that
    have a match requirement as a percentage of total project costs or
    project costs, we used the acronym "TPC" or "PC," respectively.