#  Guidance on the

**Transferability Authority**

This document is the Final Guidance on the Transferability Authority -
August 2004. The Draft Guidance on Transferability Authority was
previously published on October 4, 2002. A *Summary of Major Changes* is
included in this document.

Compared to the Draft Guidance, the enclosed Final Guidance provides
considerably more information to both State Educational Agency (SEA) and
Local Educational Agency (LEA) grantees on the operation of the
transferability authority. Since the Draft Guidance was published, the
Department has had the opportunity to better understand grantees' use of
the authority and to understand how some of the complexities of the
authority affect their educational approaches.

The audience for this important flexibility authority includes State and
local program staff as well as financial staff. In order to improve
understanding for both sets of staff, the number of examples of
financial calculations has been expanded and placed in Appendix C. While
basic policies for the authority remain intact, greater detail and
clarification have been added in several sections, including those
concerning notification processes and fund availability by fiscal year.

LEAs are not required to report their use of the transferability
authority to the Department. However, the consolidated report provides
the Department with data on the incidence of LEA use of transferability
and the educational flexibilities it is providing.

![](media/image1.png){width="1.5in" height="1.4347222222222222in"}

**U.S. Department of Education**

> **June 8, 2004**

TABLE OF CONTENTS

[SUMMARY OF MAJOR CHANGES v](#summary-of-major-changes)

[INTRODUCTION 1](#introduction)

[1. What is transferability? 1](#what-is-transferability)

[2. Why is transferability important?
1](#why-is-transferability-important)

[3. Does transferability provide SEAs and LEAs with additional Federal
funding?
1](#does-transferability-provide-seas-and-leas-with-additional-federal-funding)

[4. What is the statutory authority for transferability?
1](#what-is-the-statutory-authority-for-transferability)

[5. What agencies may transfer funds under the transferability
authority?
1](#what-agencies-may-transfer-funds-under-the-transferability-authority)

[6. Are the outlying areas and the Bureau of Indian Affairs (BIA)
eligible to exercise transferability authority?
2](#are-the-outlying-areas-and-the-bureau-of-indian-affairs-bia-eligible-to-exercise-transferability-authority)

[7. What rules and requirements apply to funds that an SEA or LEA
transfers from one program to another?
2](#what-rules-and-requirements-apply-to-funds-that-an-sea-or-lea-transfers-from-one-program-to-another)

[I. TRANSFERS BY SEAs 3](#i.-transfers-by-seas)

[I-A. SEA Eligibility for Transferability
3](#i-a.-sea-eligibility-for-transferability)

[I-A-1. May any SEA transfer funds under the transferability authority?
3](#i-a-1.-may-any-sea-transfer-funds-under-the-transferability-authority)

[I-A-2. Does an SEA need to obtain the U.S. Department of Education's
approval in order to transfer funds?
3](#i-a-2.-does-an-sea-need-to-obtain-the-u.s.-department-of-educations-approval-in-order-to-transfer-funds)

[I-B. Funds Affected by SEA Transferability
3](#i-b.-funds-affected-by-sea-transferability)

[I-B-1. What funds may an SEA transfer?
3](#i-b-1.-what-funds-may-an-sea-transfer)

[I-B-2. Does the 50 percent limitation apply to non-administrative funds
available under *each* of the programs to which the transferability
authority applies, or to the total amount of non-administrative funds
available under all of these programs?
3](#i-b-2.-does-the-50-percent-limitation-apply-to-non-administrative-funds-available-under-each-of-the-programs-to-which-the-transferability-authority-applies-or-to-the-total-amount-of-non-administrative-funds-available-under-all-of-these-programs)

[I-B-3. May an SEA transfer administrative funds under the
transferability authority? 4](#__RefHeading___Toc74639759)

[I-B-4. To which allocations may an SEA transfer funds?
4](#i-b-4.-to-which-allocations-may-an-sea-transfer-funds)

[I-B-5. May an SEA transfer funds *from* its allocation under Part A of
Title I to its allocation under other eligible programs?
5](#i-b-5.-may-an-sea-transfer-funds-from-its-allocation-under-part-a-of-title-i-to-its-allocation-under-other-eligible-programs)

[I-B-6. May an SEA transfer an amount that is greater than 50 percent of
its State-level, non-administrative funds under one of the programs
listed in I-B-1 if the transfer is made to its allocation under Part A
of Title I?
5](#i-b-6.-may-an-sea-transfer-an-amount-that-is-greater-than-50-percent-of-its-state-level-non-administrative-funds-under-one-of-the-programs-listed-in-i-b-1-if-the-transfer-is-made-to-its-allocation-under-part-a-of-title-i)

[I-C. The SEA Transfer Process 5](#i-c.-the-sea-transfer-process)

[I-C-1. What steps must an SEA take before transferring funds?
5](#i-c-1.-what-steps-must-an-sea-take-before-transferring-funds)

[I-C-2. What information must an SEA include in its transferability
notification to the U.S. Department of Education?
6](#i-c-2.-what-information-must-an-sea-include-in-its-transferability-notification-to-the-u.s.-department-of-education)

[I-C-3. How do requirements relating to equitable participation of
private school students and staff apply to funds that an SEA is
considering to transfer?
6](#i-c-3.-how-do-requirements-relating-to-equitable-participation-of-private-school-students-and-staff-apply-to-funds-that-an-sea-is-considering-to-transfer)

[I-C-4. May an SEA transfer only those funds that are to be used for
services to private school students and/or staff?
6](#i-c-4.-may-an-sea-transfer-only-those-funds-that-are-to-be-used-for-services-to-private-school-students-andor-staff)

[I-C-5. If an SEA notifies ED that it intends to transfer funds, must
the SEA notify ED if it subsequently changes its plans to transfer those
funds?
7](#i-c-5.-if-an-sea-notifies-ed-that-it-intends-to-transfer-funds-must-the-sea-notify-ed-if-it-subsequently-changes-its-plans-to-transfer-those-funds)

[I-C-6. Is there a limit on the number of times an SEA may transfer
funds into, or from, an individual program during a fiscal year?
7](#i-c-6.-is-there-a-limit-on-the-number-of-times-an-sea-may-transfer-funds-into-or-from-an-individual-program-during-a-fiscal-year)

[I-C-7. After transferring funds into a program, is an SEA limited in
any way in transferring funds out of that same program?
7](#i-c-7.-after-transferring-funds-into-a-program-is-an-sea-limited-in-any-way-in-transferring-funds-out-of-that-same-program)

[I-C-8. What is the funding base on which the 50 percent transferability
limitation is calculated?
7](#i-c-8.-what-is-the-funding-base-on-which-the-50-percent-transferability-limitation-is-calculated)

[I-C-9. How much may an SEA transfer from a program when there are
multiple transfers?
9](#i-c-9.-how-much-may-an-sea-transfer-from-a-program-when-there-are-multiple-transfers)

[I-C-10. If an SEA has carryover funds under one of the programs to
which the transferability authority applies, may the SEA transfer those
funds to another program?
9](#i-c-10.-if-an-sea-has-carryover-funds-under-one-of-the-programs-to-which-the-transferability-authority-applies-may-the-sea-transfer-those-funds-to-another-program)

[I-C-11. After transferring funds, what information must an SEA submit
to the U.S. Department of Education?
10](#i-c-11.-after-transferring-funds-what-information-must-an-sea-submit-to-the-u.s.-department-of-education)

[I-C-12*.* How does an SEA make a transfer?
10](#i-c-12.-how-does-an-sea-make-a-transfer)

[I-C-13. Once it is notified of an SEA's intent to transfer funds, will
the U.S. Department of Education actually transfer funds from one
account to another in the Department's financial system?
12](#i-c-13.-once-it-is-notified-of-an-seas-intent-to-transfer-funds-will-the-u.s.-department-of-education-actually-transfer-funds-from-one-account-to-another-in-the-departments-financial-system)

[I-C-14. What are an SEA's responsibilities for funds it transfers?
12](#i-c-14.-what-are-an-seas-responsibilities-for-funds-it-transfers)

[I-C-15. How does an SEA account for transfers in reports it submits to
the Department?
12](#i-c-15.-how-does-an-sea-account-for-transfers-in-reports-it-submits-to-the-department)

[I-C-16. How will auditors be informed of SEA transferability authority?
12](#i-c-16.-how-will-auditors-be-informed-of-sea-transferability-authority)

[I-D. Effects of an SEA Transfer 13](#i-d.-effects-of-an-sea-transfer)

[I-D-1. What rules and requirements govern funds that an SEA transfers
from one program to another?
13](#i-d-1.-what-rules-and-requirements-govern-funds-that-an-sea-transfers-from-one-program-to-another)

[I-D-2. Can State-level, non-administrative funds that an SEA transfers
into Title I be used for administrative purposes?
13](#i-d-2.-can-state-level-non-administrative-funds-that-an-sea-transfers-into-title-i-be-used-for-administrative-purposes)

[I-D-3. What effect does an SEA's transfer of funds have on its future
allocations under the programs covered by the transferability authority?
13](#i-d-3.-what-effect-does-an-seas-transfer-of-funds-have-on-its-future-allocations-under-the-programs-covered-by-the-transferability-authority)

[I-D-4. Does the transferability authority affect maintenance-of-effort
calculations?
13](#i-d-4.-does-the-transferability-authority-affect-maintenance-of-effort-calculations)

[I-D-5. May an SEA transfer funds from an account for one fiscal year to
an account for a different fiscal year?
13](#i-d-5.-may-an-sea-transfer-funds-from-an-account-for-one-fiscal-year-to-an-account-for-a-different-fiscal-year)

[I-D-6. Does a transfer extend the period of availability of the
affected funds?
14](#i-d-6.-does-a-transfer-extend-the-period-of-availability-of-the-affected-funds)

[II. TRANSFERS BY LEAs 14](#ii.-transfers-by-leas)

[II-A. LEA Eligibility for Transferability
14](#ii-a.-lea-eligibility-for-transferability)

[II-A-1. May any LEA transfer funds under the transferability authority?
14](#ii-a-1.-may-any-lea-transfer-funds-under-the-transferability-authority)

[II-A-2. May an LEA identified for improvement under section 1116(c)(3)
of the ESEA transfer funds?
15](#ii-a-2.-may-an-lea-identified-for-improvement-under-section-1116c3-of-the-esea-transfer-funds)

[II-A-3. Once an LEA has been identified for improvement, do the
limitations on transferability apply immediately?
15](#ii-a-3.-once-an-lea-has-been-identified-for-improvement-do-the-limitations-on-transferability-apply-immediately)

[II-A-4. May an LEA identified for corrective action under section
1116(c)(10) transfer funds?
15](#ii-a-4.-may-an-lea-identified-for-corrective-action-under-section-1116c10-transfer-funds)

[II-A-5. Once an LEA has been identified for corrective action, does it
immediately lose its authority to transfer funds?
16](#ii-a-5.-once-an-lea-has-been-identified-for-corrective-action-does-it-immediately-lose-its-authority-to-transfer-funds)

[II-A-6. Does an LEA need to obtain the approval of either the U.S.
Department of Education or its SEA before it may transfer funds?
16](#ii-a-6.-does-an-lea-need-to-obtain-the-approval-of-either-the-u.s.-department-of-education-or-its-sea-before-it-may-transfer-funds)

[II-B. Funds Affected by LEA Transferability
16](#ii-b.-funds-affected-by-lea-transferability)

[II-B-1. What funds may an LEA transfer?
16](#ii-b-1.-what-funds-may-an-lea-transfer)

[II-B-2. Does the 50 percent transferability limitation (and the 30
percent limitation for LEAs identified for improvement) apply to formula
grant funds an LEA receives under *each* of the programs to which the
transferability authority applies, or to the total amount of formula
grant funds an LEA receives under all of these programs?
16](#ii-b-2.-does-the-50-percent-transferability-limitation-and-the-30-percent-limitation-for-leas-identified-for-improvement-apply-to-formula-grant-funds-an-lea-receives-under-each-of-the-programs-to-which-the-transferability-authority-applies-or-to-the-total-amount-of-formula-grant-funds-an-lea-receives-under-all-of-these-programs)

[II-B-3. To which programs may an LEA transfer funds?
17](#ii-b-3.-to-which-programs-may-an-lea-transfer-funds)

[II-B-4. May an LEA identified for improvement transfer funds only to
its allocation under Part A of Title I?
18](#ii-b-4.-may-an-lea-identified-for-improvement-transfer-funds-only-to-its-allocation-under-part-a-of-title-i)

[II-B-5. May an LEA transfer funds *from* its allocation under Part A of
Title I to its allocation under other programs?
18](#ii-b-5.-may-an-lea-transfer-funds-from-its-allocation-under-part-a-of-title-i-to-its-allocation-under-other-programs)

[II-B-6. May an LEA transfer an amount that is greater than 50 percent
of its formula grant allocation under one of the programs listed in
II-B-1 if the transfer is made to its allocation under Part A of Title
I?
18](#ii-b-6.-may-an-lea-transfer-an-amount-that-is-greater-than-50-percent-of-its-formula-grant-allocation-under-one-of-the-programs-listed-in-ii-b-1-if-the-transfer-is-made-to-its-allocation-under-part-a-of-title-i)

[II-C. The LEA Transfer Process 18](#ii-c.-the-lea-transfer-process)

[II-C-1. What steps must an LEA take before transferring funds?
18](#ii-c-1.-what-steps-must-an-lea-take-before-transferring-funds)

[II-C-2. What information must an LEA include in its notification to the
SEA?
19](#ii-c-2.-what-information-must-an-lea-include-in-its-notification-to-the-sea)

[II-C-3. How do requirements relating to the equitable participation of
private school students and staff apply to funds an LEA is considering
to transfer?
19](#ii-c-3.-how-do-requirements-relating-to-the-equitable-participation-of-private-school-students-and-staff-apply-to-funds-an-lea-is-considering-to-transfer)

[II-C-4. May an LEA transfer only those funds that are to be used for
services to private school students and/or staff?
19](#ii-c-4.-may-an-lea-transfer-only-those-funds-that-are-to-be-used-for-services-to-private-school-students-andor-staff)

[II-C-5. If an LEA notifies the SEA that it intends to transfer funds,
must the LEA notify the SEA if it subsequently changes its plans to
transfer those funds?
20](#ii-c-5.-if-an-lea-notifies-the-sea-that-it-intends-to-transfer-funds-must-the-lea-notify-the-sea-if-it-subsequently-changes-its-plans-to-transfer-those-funds)

[II-C-6. Is there a limit on the number of times an LEA may transfer
funds into, or from, an individual program during a fiscal year?
20](#ii-c-6.-is-there-a-limit-on-the-number-of-times-an-lea-may-transfer-funds-into-or-from-an-individual-program-during-a-fiscal-year)

[II-C-7. After transferring funds into a program, is an LEA limited in
any way in transferring funds from the same program?
20](#ii-c-7.-after-transferring-funds-into-a-program-is-an-lea-limited-in-any-way-in-transferring-funds-from-the-same-program)

[II-C-8. What is the funding base on which the 50 percent
transferability limitation is calculated?
20](#ii-c-8.-what-is-the-funding-base-on-which-the-50-percent-transferability-limitation-is-calculated)

[II-C-9. If an LEA has carryover funds under one of the programs to
which the transferability authority applies, may the LEA transfer those
funds to another program?
21](#ii-c-9.-if-an-lea-has-carryover-funds-under-one-of-the-programs-to-which-the-transferability-authority-applies-may-the-lea-transfer-those-funds-to-another-program)

[II-C-10. How does an LEA make a transfer?
23](#ii-c-10.-how-does-an-lea-make-a-transfer)

[II-C-11. Once it is notified of an LEA's intent to transfer funds, must
the SEA transfer funds from one account to another in the State's
financial system?
23](#ii-c-11.-once-it-is-notified-of-an-leas-intent-to-transfer-funds-must-the-sea-transfer-funds-from-one-account-to-another-in-the-states-financial-system)

[II-C-12. What are an LEA's responsibilities for funds that it
transfers?
24](#ii-c-12.-what-are-an-leas-responsibilities-for-funds-that-it-transfers)

[II-C-13. How does an LEA account for transferred funds in reports that
it submits to its SEA?
24](#ii-c-13.-how-does-an-lea-account-for-transferred-funds-in-reports-that-it-submits-to-its-sea)

[II-C-14 What are an SEA's responsibilities regarding funds transferred
by an LEA?
24](#ii-c-14-what-are-an-seas-responsibilities-regarding-funds-transferred-by-an-lea)

[II-C-15 May a State restrict an LEA's use of the transferability
authority beyond those limitations in the statute?
25](#ii-c-15-may-a-state-restrict-an-leas-use-of-the-transferability-authority-beyond-those-limitations-in-the-statute)

[II-C-16 How will auditors be informed of LEA transferability authority?
25](#ii-c-16-how-will-auditors-be-informed-of-lea-transferability-authority)

[II-D. Effects of an LEA Transfer 25](#ii-d.-effects-of-an-lea-transfer)

[II-D-1. What rules and requirements govern funds that an LEA transfers
from one program to another?
25](#ii-d-1.-what-rules-and-requirements-govern-funds-that-an-lea-transfers-from-one-program-to-another)

[II-D-2. Which programs affected by LEA transferability have set-aside
limitations?
26](#ii-d-2.-which-programs-affected-by-lea-transferability-have-set-aside-limitations)

[II-D-3. How are funds that an LEA transfers into Part A of Title I
affected by the LEA set-aside provisions?
26](#ii-d-3.-how-are-funds-that-an-lea-transfers-into-part-a-of-title-i-affected-by-the-lea-set-aside-provisions)

[II-D-4. What effect does an LEA's transfer of funds have on its future
formula allocations under the programs covered by the transferability
authority?
26](#ii-d-4.-what-effect-does-an-leas-transfer-of-funds-have-on-its-future-formula-allocations-under-the-programs-covered-by-the-transferability-authority)

[II-D-5. Does the transferability authority affect maintenance-of-effort
calculations?
27](#ii-d-5.-does-the-transferability-authority-affect-maintenance-of-effort-calculations)

[II-D-6. May an LEA transfer funds from an account for one fiscal year
to an account for a different fiscal year?
27](#ii-d-6.-may-an-lea-transfer-funds-from-an-account-for-one-fiscal-year-to-an-account-for-a-different-fiscal-year)

[II-D-7. Does a fund transfer extend the period of availability of the
affected funds?
27](#ii-d-7.-does-a-fund-transfer-extend-the-period-of-availability-of-the-affected-funds)

[APPENDIX A -- TRANSFERABILITY STATUTE
28](#appendix-a-transferability-statute)

[APPENDIX B -- EXAMPLES OF STATUTORY SET-ASIDE PROVISIONS AFFECTING
TRANSFERRED FUNDS
30](#appendix-b-examples-of-statutory-set-aside-provisions-affecting-transferred-funds)

[APPENDIX C -- EXAMPLES CALCULATING AMOUNTS AVAILABLE FOR TRANSFER
Error! Bookmark not defined.](#__RefHeading___Toc74639829)

### SUMMARY OF MAJOR CHANGES

This Guidance on the Transferability Authority updates the Draft
Guidance on the Transferability Authority of October 4, 2002. It
clarifies certain existing policies and re-formats many examples within
the text to a side-by-side format in shaded text boxes. It also adds
Appendix C, which displays 13 pages of detailed spreadsheet examples.

In particular, the Guidance\--

-   Simplifies financial examples in the body of the Guidance by placing
    a written description of a transfer scenario on the left side of a
    text box with a corresponding financial calculation on the right.
    (*See* Examples 2, 3, 7 8, 9, 10, and 11.)

-   Clarifies that a State, in its notification to the U.S. Department
    of Education, must establish an effective date for transferring
    funds and must specify the fiscal year of the funds to be
    transferred. (*See* I-C-1 and II-C-1.)

-   Specifies the office within the U.S. Department of Education to
    which a State must send a transfer notice and requires a State to
    identify a point of contact for the transfer process. (*See* I-C-1.)

-   Clarifies that a State must re-notify the U.S. Department of
    Education if it decides not to transfer funds after sending a
    notification of a future transfer. The State also must re-notify if
    it alters elements of the transfer, such as the level of funds
    transferred or the programs to, and from, which funds are to be
    transferred. (*See* I-C-5 and II-C-5.)

-   Clarifies that the transferability authority does not affect
    maintenance-of-effort requirements since maintenance-of-effort
    calculations are made on the basis of non-Federal funds. (*See*
    I-D-4 and II-D-5.)

-   Clarifies that funds cannot be transferred across fiscal years.
    (*See* I-D-5 and II-D-6.)

-   Shows how to calculate the amounts available for transfer when an
    LEA is placed in improvement status. (*See* Example 7.)

-   Clarifies that the State, in its responsibility for administering
    the LEA transfer authority, must ensure program integrity and ensure
    that funds are used responsibly. (*See* II-C-14.)

-   Clarifies that a State may not restrict an LEA's use of the
    transferability authority. (*See* II-C-15.)

-   Provides detailed examples for calculating amounts permitted for
    transfer (in Excel format Appendix C). Examples include calculation
    of multiple transfers, treatment of carryover funds that may be
    transferred (with and without statutory limitations), interaction of
    transfers and set-asides, and transfers for LEAs identified for
    improvement status---both prior to, and during, the school year.

# INTRODUCTION

### 1. What is transferability?

Transferability is a flexibility authority that permits State
educational agencies (SEAs) and local educational agencies (LEAs) to
transfer a portion of the funding they receive by formula under certain
Federal programs to their allocations under other programs so they can
address more effectively their unique needs.

### 2. Why is transferability important?

Transferability provides SEAs and LEAs with unprecedented flexibility in
targeting Federal resources to meet the needs of all children. It can be
a powerful tool in assisting States and districts in pursuing their own
strategies for raising student achievement. It facilitates the
development and implementation of integrated approaches for addressing
local educational needs and priorities.

### 3. Does transferability provide SEAs and LEAs with additional Federal funding?

No. Transferability does not affect the overall amount of funds an SEA
or LEA receives, but provides them with greater flexibility in using
certain Federal funds.

### 4. What is the statutory authority for transferability?

Transferability is authorized under subpart 2 of Part A of Title VI of
the Elementary and Secondary Education Act of 1965 (ESEA), as amended by
the No Child Left Behind Act of 2001. (A copy of the transferability
legislation is attached to this guidance as Appendix A.)

### 5. What agencies may transfer funds under the transferability authority?

As a general rule, the transferability authority is available to SEAs
and LEAs. However, LEAs that have been identified for improvement under
section 1116(c) of the ESEA have more limited transferability authority,
and LEAs that have been identified for corrective action under section
1116(c) may not transfer funds. (*See* Section II-A of this guidance.)

This guidance discusses separately transfers by SEAs and by LEAs. (*See*
Sections I and II, respectively.)

### 6. Are the outlying areas and the Bureau of Indian Affairs (BIA) eligible to exercise transferability authority?

No. The statute does not provide authority for the outlying areas and
the BIA to transfer funds.

### 7. What rules and requirements apply to funds that an SEA or LEA transfers from one program to another?

Funds that an SEA or LEA transfers are subject to the rules and
requirements of the programs to which the funds are transferred.

# I. TRANSFERS BY SEAs

## I-A. SEA Eligibility for Transferability

### I-A-1. May any SEA transfer funds under the transferability authority? 

Yes. Every SEA is authorized to transfer funds under the transferability
authority.

### I-A-2. Does an SEA need to obtain the U.S. Department of Education's approval in order to transfer funds?

No. The law authorizes an SEA to transfer funds without seeking
approval. Thus, an SEA does not have to apply for transferability
authority -- it already has that authority. However, the SEA must notify
the Department of its intent to transfer funds at least 30 days before
each transfer occurs. (*See* I-C-1.)

## I-B. Funds Affected by SEA Transferability

### I-B-1. What funds may an SEA transfer?

An SEA may transfer up to 50 percent of a fiscal year's
non-administrative funds allocated for State-level activities under each
of the following provisions:

-   Section 2113(a)(3) (Improving Teacher Quality State Grants)

-   Section 2412(a)(1) (Educational Technology State Grants)

-   Section 4112(a)(1) (Safe and Drug-Free Schools and Communities
    Governor's funds, with the agreement of the Governor)

-   Section 4112(c)(1) (Safe and Drug-Free Schools and Communities SEA
    funds)

-   Section 4202(c)(3) (21^st^ Century Community Learning Centers
    Grants)

-   Section 5112(b) (State Grants for Innovative Programs)

### I-B-2. Does the 50 percent limitation apply to non-administrative funds available under *each* of the programs to which the transferability authority applies, or to the total amount of non-administrative funds available under all of these programs? 

The 50 percent limitation applies to non-administrative funds available
under each of the separate programs listed in I-B-1, not to the
aggregate amount of non-administrative funds available under all of the
programs.

######  

> **Example 1 -- SEA Transferability Limitation**
>
> **Applies Separately to Each Affected Program**
>
> An SEA reserves \$1.5 million in State-level non-administrative funds
> under the Safe and Drug-Free Schools program, \$1 million under the
> Improving Teacher Quality program, and \$500,000 under the State
> Grants for Innovative Programs, for a total of \$3 million.
>
> The SEA wishes to transfer the maximum amount of funds possible from
> its Improving Teacher Quality program allocation to its State Grants
> for Innovative Programs allocation. The maximum amount the SEA may
> transfer to State Grants for Innovative Programs from its allocation
> under the Improving Teacher Quality program is \$500,000 or 50 percent
> of that allocation.
>
> This transfer does not affect the SEA's authority to transfer funds
> from the \$1.5 million available under the Safe and Drug-Free Schools
> program allocation.

[]{#__RefHeading___Toc74639759 .anchor}I-B-3. May an SEA transfer
administrative funds under the transferability authority?

No. The transferability authority applies only to non-administrative
funds allotted under the provisions listed in I-B-1.

However, an SEA may consolidate administrative funds under the authority
in section 9201 of the ESEA and use the consolidated fund funds for
activities described in section 9201(b).

### I-B-4. To which allocations may an SEA transfer funds?

Up to the 50 percent limitation, an SEA may transfer State-level,
non-administrative funds from a program to which the transferability
authority applies (*see* I-B-1) to its allocations under *one or more*
of the other programs to which the authority applies. Subject to the 50
percent limitation, an SEA also may transfer funds to its allocation
under Part A of Title I.

### I-B-5. May an SEA transfer funds *from* its allocation under Part A of Title I to its allocation under other eligible programs?

No. An SEA may not transfer funds *from* Part A of Title I to the
programs listed in I-B-1. It may transfer up to 50 percent of the
State-level, non-administrative funds allotted under each of the
programs listed in I-B-1 *to* its allocation under Part A of Title I ,
but it may not transfer funds from Part A of Title I to any other
program.

### I-B-6. May an SEA transfer an amount that is greater than 50 percent of its State-level, non-administrative funds under one of the programs listed in I-B-1 if the transfer is made to its allocation under Part A of Title I?

No. An SEA may transfer no more than 50 percent of its State-level,
non-administrative funds under each of the programs listed in I-B-1,
regardless of which programs receive the transferred funds.

## I-C. The SEA Transfer Process

### I-C-1. What steps must an SEA take before transferring funds? 

Before transferring funds, an SEA must \--

(1) Conduct consultations in accordance with section 9501 of the ESEA in
    order to provide for the equitable participation of private school
    students and staff (*see* I-C-3);

(2) Determine the program(s) from which funds are to be transferred and
    to which funds will be transferred;

(3) Determine the amount, and Federal fiscal year, of funds to be
    transferred (subject to the 50 percent or 30 percent limitation);

(4) Establish the effective date for the transfer;

(5) As appropriate, modify each affected State plan or application to
    reflect the transfer (*See* 34 CFR 76.140(b)); and

> \(6\) Notify the U.S. Department of Education of the transfer at least
> 30
>
> days *before* the effective date of each transfer. (If an SEA modifies
> a State plan as a result of a transfer (*See* 34 CFR 76.140(b)), the
> SEA must submit to the Department, within 30 days after the transfer,
> a copy of its revised State plan. Notification of the transfer should
> be sent to the Director of School Support and Technology Programs,
> Room 3E121, Office of Elementary and Secondary Education, U.S.
> Department of Education, 400 Maryland Avenue, S.W., Washington D.C.
> 20202.)

### I-C-2. What information must an SEA include in its transferability notification to the U.S. Department of Education?

An SEA must notify the U.S. Department of Education of:

(1) The program(s) from which funds are to be transferred;

(2) The amount, and Federal fiscal year, of funds to be transferred
    (subject to the 50 percent limitation);

(3) The program(s) to which the funds will be transferred;

(4) The effective date for the transfer; and

(5) A point of contact for the transferability authority.

### I-C-3. How do requirements relating to equitable participation of private school students and staff apply to funds that an SEA is considering to transfer?

Each program covered by the SEA transferability authority is subject to
equitable participation requirements. Before an SEA may transfer funds,
it must engage in timely and meaningful consultation with officials
representing the full spectrum of private schools in the State. (See the
provision in section 5142(a) of the ESEA regarding equitable
participation with respect to instructional or training programs funded
by the SEA from Title V, Part A funds. The other programs listed in
II-B-1 are subject to the general ESEA equitable participation
requirements in Title IX of the ESEA.)

With respect to the transferred funds, private school students and
teachers must receive equitable services from the SEA based on the total
amount of funds available to each program after a transfer.

### I-C-4. May an SEA transfer only those funds that are to be used for services to private school students and/or staff?

No. An SEA may *not* transfer funds to a particular program solely to
provide services for private school students and /or teachers. Rather,
an SEA, after consulting with representatives of private schools, must
provide equitable services to private school students and teachers based
on the rules and regulations of each program and the total amount of
funds available to each program after a transfer. (*See* 6123(e)(2) of
the ESEA.)

### I-C-5. If an SEA notifies ED that it intends to transfer funds, must the SEA notify ED if it subsequently changes its plans to transfer those funds?

Yes. If an SEA has notified ED it intends to transfer funds, but then
does not do so, it must promptly notify ED it will not transfer funds.

A new 30-day notification period begins if an SEA alters its original
notification in any of the following ways:

(1) Amounts to be transferred among programs have changed;

(2) Programs involved in the transfer have changed; or

(3) The effective date of the transfer has changed.

### I-C-6. Is there a limit on the number of times an SEA may transfer funds into, or from, an individual program during a fiscal year?

No. There are no statutory limitations on the number of times an SEA may
transfer funds into, or from, an individual program during a fiscal
year. However, each transfer should be made only after the SEA has
engaged in thorough and careful planning.

### I-C-7. After transferring funds into a program, is an SEA limited in any way in transferring funds out of that same program?

Yes. An SEA may transfer no more than 50 percent of the program funding
base.

(*See* I-C-8, which describes how the 50 percent limitation is
calculated.)

An SEA may not transfer funds from Part A of Title I to another program.
If an SEA transfers funds to Part A of Title I, it subsequently may not
transfer those funds from Title I to another program.

### I-C-8. What is the funding base on which the 50 percent transferability limitation is calculated?

The 50 percent transferability limitation is calculated on the basis of
the fiscal year's State-level, non-administrative funds available under
a program listed in

I-B-1. If funds have been transferred into a program, the 50 percent (or
30 percent) transferability limitation applies to the sum of the of
State-level, non-administrative funds that were originally available to
the SEA for a given fiscal year and any funds the SEA transfers into the
program.

### I-C-9. How much may an SEA transfer from a program when there are multiple transfers? 

Multiple transfers do not affect the method of determining the maximum
amount available for transfer under the transferability authority. An
SEA may transfer up to 50 percent of the sum of a fiscal year's
State-level, non-administrative funds that were originally available to
the SEA under an applicable program and any funds the SEA transfers into
the program. (See Examples A through D in Appendix C for additional
calculations displaying the amount that may be transferred in cases of
multiple transfers.)

### I-C-10. If an SEA has carryover funds under one of the programs to which the transferability authority applies, may the SEA transfer those funds to another program? 

The amount of carryover funds, if any, an SEA may transfer depends on
the amount of funds, if any, it transferred during the year preceding
the carryover period. As stated above, an SEA may transfer up to 50
percent of a fiscal year's State-level, non-administrative funds
available under the programs listed in I-B-1. If an SEA transfers less
than 50 percent of a fiscal year's non-administrative funds available to
a program, it may transfer funds carried over to the succeeding year.

The amount of a fiscal year's carryover funds that may be transferred,
when added to amounts already transferred from those fiscal year funds,
may not exceed the 50 percent limitation. (*See* Examples E through G in
Appendix C for additional calculations displaying the amount of
carryover funds that may be transferred and Examples H and I addressing
the use of carryover funds that may be transferred.)

### I-C-11. After transferring funds, what information must an SEA submit to the U.S. Department of Education?

If an SEA modifies a State plan as a result of a transfer (S*ee* 34 CFR
76.140(b)), State plan or application, the SEA must submit to the
Department, within 30 days after a transfer, a copy of its revised State
plan.

### I-C-12*.* How does an SEA make a transfer?

The mechanics of a transfer will depend on the nature of the State's
financial reporting systems and requirements. The SEA has discretion in
the method it uses to make a transfer. For example, in transferring
funds, an SEA may --

-   Move funds from the account(s) of the program(s) from which the
    funds are being transferred into the account(s) of the program(s) to
    which the funds are being transferred.

-   Establish a new, separate account for transferred funds.

-   Keep the transferred funds in their original account(s), but
    maintain documentation that shows how transferred funds in the
    original account(s) have been reclassified. In other words, in
    transferring funds, an SEA does not actually have to move funds from
    one account to another so long as it maintains adequate
    documentation to account for the transfer.

Regardless of the method the SEA uses to transfer funds, the SEA must
maintain records demonstrating how a program's total funds (including
transferred funds) were spent. The SEA is not required to demonstrate
separately how the two sources of funds were spent on program
activities.

##### 

##### Example 4 -- Fund Accountability

> An SEA has \$100,000 of State-level,
>
> non-administrative funds under the Ed Tech program. The SEA transfers
> \$40,000 of State-level, non-administrative funds from its Safe and
> Drug-Free Schools allocation to its Ed Tech allocation, for a total of
> \$140,000 of State-level, non-administrative Ed Tech funds (\$100,000
> allocation + \$40,000 transfer = \$140,000).
>
> The SEA's Ed Tech records will reflect that \$40,000 was added to its
> allocation from the Safe and Drug-Free Schools program. The SEA must
> maintain documentation showing how \$140,000 of Ed Tech funds were
> spent, but is not required to demonstrate separately how the two
> sources of funds were spent on Ed Tech activities.
>
> In its Safe and Drug-Free Schools account, the SEA would maintain
> documentation that \$40,000 was transferred to the Ed Tech program and
> would demonstrate how the reduced level of available funding was
> expended.

### I-C-13. Once it is notified of an SEA's intent to transfer funds, will the U.S. Department of Education actually transfer funds from one account to another in the Department's financial system? 

No. The Department of Education will not transfer funds among program
accounts. Rather, the SEA must maintain documentation of the amounts
transferred from and into a program.

### I-C-14. What are an SEA's responsibilities for funds it transfers?

In addition to following the steps outlined above, an SEA must --

(1) Spend transferred funds in accordance with requirements of the
    receiving program (*see* I-D-1);

(2) Maintain records that will permit the U.S. Department of Education
    to carry out normal monitoring, evaluation, and auditing activities;
    and

(3) Produce reports on transfers the Department may request. The SEA
    also may be requested to provide information from evaluation studies
    on program activities conducted by the SEA.

### I-C-15. How does an SEA account for transfers in reports it submits to the Department?

An SEA must file program reports and financial reports for Federal grant
programs, including programs subject to the transferability authority.
The Department has developed guidance for SEAs on consolidated program
performance reports. The Department has included information on
implementation of transferability and other flexibility authorities in
that guidance.

An SEA also must report on program finances by including them in its
financial statements and in the Schedule of Expenditures of Federal
Awards. The OMB Circular A-133 Compliance Supplement encourages the use
of footnotes regarding amounts transferred among programs when
completing the Schedule of Expenditures of Federal Awards.

### I-C-16. How will auditors be informed of SEA transferability authority?

The Department's Compliance Supplement, which auditors use when
performing audits of Federal programs under the Single Audit Act,
provides guidance to auditors on the SEA and LEA transferability
authorities. (*See*
www.whitehouse.gov/omb/circulars/a133_compliance/04/04toc.html for the

A-133 Compliance Supplement.)

## I-D. Effects of an SEA Transfer

### I-D-1. What rules and requirements govern funds that an SEA transfers from one program to another?

When an SEA transfers funds, the transferred funds become funds of the
program to which they are transferred and are subject to all the rules
and requirements of the program to which the funds are transferred.

### I-D-2. Can State-level, non-administrative funds that an SEA transfers into Title I be used for administrative purposes?

**Additional guidance for this question will be provided.**

### I-D-3. What effect does an SEA's transfer of funds have on its future allocations under the programs covered by the transferability authority?

An SEA's transfer of funds does not affect its future grant allocations
under the programs covered by the transferability authority. Transferred
funds are not taken into consideration when the Department allocates
funds in subsequent years, and transferability has no effect on
statutory hold-harmless provisions governing grant allocations.

### I-D-4. Does the transferability authority affect maintenance-of-effort calculations?

Maintenance-of-effort levels are calculated on the basis of non-Federal
funds only. Transferring Federal funds among programs will not affect
the

maintenance-of-effort calculation.

### I-D-5. May an SEA transfer funds from an account for one fiscal year to an account for a different fiscal year?

No. Funds may not be transferred from an account for one fiscal year to
an account for another fiscal year. Allocated funds retain the identity
of the fiscal year for which they were appropriated. For example, when
FY 2004 funds are transferred from one program to another, they remain
FY 2004 funds. (*See* last page of Appendix C for a calendar of the
Federal fiscal year.)

### I-D-6. Does a transfer extend the period of availability of the affected funds?

No. Transferability does not extend the period during which an SEA may
obligate funds because transferred funds retain the identity of the
fiscal year for which the funds were appropriated. Funds may be
transferred only to an allocation of the same fiscal year. (See last
page of Appendix C for a calendar of the period of availability.)

#### 

#### Example 6 -- Period of Availability Unaffected 

#### By Transferability

> An SEA is awarded FY 2004 State-level, non-administrative funds under
> the Ed Tech program. These funds are available for obligation through
> September 30, 2006.
>
> The SEA transfers a portion of its FY 2004 Ed Tech funds to its FY
> 2004 Safe and Drug-Free Schools allocation, which is also available
> through September 30, 2006. The transfer does not affect the period of
> fund availability for either programs. FY 2004 funds transferred from
> one program to another remain FY 2004 funds.

# II. TRANSFERS BY LEAs

## II-A. LEA Eligibility for Transferability

### II-A-1. May any LEA transfer funds under the transferability authority? 

Any LEA, except an LEA identified for improvement or corrective action
under section 1116(c) of the ESEA, may transfer up to 50 percent of the
funds allocated to it for a given fiscal year under each of the programs
listed in II-B-1. The transferability authority of an LEA identified for
improvement under section 1116(c)(3) is limited. (*See* II-A-2 through
II-A-5.)

### II-A-2. May an LEA identified for improvement under section 1116(c)(3) of the ESEA transfer funds?

Yes. However, an LEA identified for improvement may transfer no more
than 30 percent of the funds allocated to it for a given fiscal year
under each of the programs listed in II-B-1. If an LEA has been
identified for improvement and wants to transfer funds, funds must be
transferred either to its allocation for improvement activities under
section 1003 or to one of the programs listed in II-B-1 for LEA
improvement activities consistent with section 1116(c). (*See* II-B-4.)

### 

### 

### 

### II-A-3. Once an LEA has been identified for improvement, do the limitations on transferability apply immediately?

Yes. Once an LEA has been identified for improvement, any subsequent
fund transfers must be consistent with the 30 percent limitation, and
all transferred funds must be used for improvement activities as
described in II-A-2. (*See* Examples J through L in Appendix C
displaying additional calculations of funds available for transfer under
improvement status.)

### II-A-4. May an LEA identified for corrective action under section 1116(c)(10) transfer funds?

No. An LEA identified for corrective action may not transfer funds.

### II-A-5. Once an LEA has been identified for corrective action, does it immediately lose its authority to transfer funds?

Yes. An LEA identified for corrective action may not transfer any funds
during the period it is in corrective action status.

### II-A-6. Does an LEA need to obtain the approval of either the U.S. Department of Education or its SEA before it may transfer funds?

No. The statute authorizes an eligible LEA to transfer funds without
seeking approval from either its SEA or the U.S. Department of
Education. An LEA does not have to apply for transferability authority;
it already has that authority. However, the LEA must notify its SEA of
its intent to transfer funds at least 30 days before each transfer
occurs. (*See* II-C-1.)

## II-B. Funds Affected by LEA Transferability

### II-B-1. What funds may an LEA transfer?

In general, an LEA may transfer up to 50 percent of each fiscal year's
funds it receives *by formula* under the following provisions:

-   Section 2121 (Improving Teacher Quality State Grants)

-   Section 2412(a)(2)(A) (Educational Technology State Grants)

-   Section 4112(b)(1) (Safe and Drug-Free Schools and Communities)

-   Section 5112(a) (State Grants for Innovative Programs)

An LEA identified for improvement under section 1116(c)(3) may transfer
up to 30 percent of each fiscal year's funds it receives *by formula*
under the provisions listed above. (Example 7 shows how to calculate the
amount available for transfer if an LEA is identified for improvement.
*See* Examples J through L in Appendix C for additional examples.)

An LEA identified for corrective action under 1116(c)(10) may not
transfer any funds.

### II-B-2. Does the 50 percent transferability limitation (and the 30 percent limitation for LEAs identified for improvement) apply to formula grant funds an LEA receives under *each* of the programs to which the transferability authority applies, or to the total amount of formula grant funds an LEA receives under all of these programs? 

The 50 percent transferability limitation (and the 30 percent limitation
for LEAs identified for improvement) applies to formula grant funds
available under each of the separate programs listed in II-B-1. The
limitation does not apply to the aggregate amount of formula grant funds
the LEA receives under all of the programs.

### II-B-3. To which programs may an LEA transfer funds?

An LEA may transfer up to 50 percent of its allocation from, and to,
each of the programs to which the transferability authority applies
(*see* II-B-1). It may transfer funds into, but not from, its allocation
under Part A of Title I.

An LEA identified for improvement may transfer up to 30 percent of its
allocation from, and to, each of the programs to which the
transferability authority applies (*see* II-B-1). The transferred funds
must be used for LEA improvement activities consistent with section
1116(c) of the ESEA. An LEA identified for improvement may also transfer
funds into its allocation under Section 1003, if applicable. An LEA
identified for corrective action under section 1116(c) may not transfer
funds.

### II-B-4. May an LEA identified for improvement transfer funds only to its allocation under Part A of Title I?

No. An LEA identified for improvement may transfer funds to other
applicable programs, but the funds must be used to conduct improvement
activities.

### II-B-5. May an LEA transfer funds *from* its allocation under Part A of Title I to its allocation under other programs?

No. An LEA may *not* transfer funds from Part A of Title I to its
allocations under other programs. It may only transfer funds *into* Part
A of Title I.

### II-B-6. May an LEA transfer an amount that is greater than 50 percent of its formula grant allocation under one of the programs listed in II-B-1 if the transfer is made to its allocation under Part A of Title I?

No. An LEA may transfer no more than 50 percent of its formula grant
allocation under each of the programs listed in II-B-1, regardless of
which programs, including Part A of Title I, receive the transferred
funds. (If the LEA has been identified for improvement under section
1116(c), the limitation is 30 percent.)

## II-C. The LEA Transfer Process

### II-C-1. What steps must an LEA take before transferring funds? 

Before transferring funds, an LEA must \--

(1) Conduct consultations in accordance with section 9501 of the ESEA in
    order to provide for the equitable participation of private school
    students and staff (*see* I-C-3);

(2) Determine the program(s) from which funds are to be transferred and
    to which funds will be transferred;

(3) Determine the amount, and Federal fiscal year, of funds to be
    transferred by fiscal year (subject to the 50 percent or 30 percent
    limitation);

(4) Establish the effective date for the transfer;

(5) As appropriate, modify each affected local plan or application to
    reflect the transfer; and

(6) Notify its SEA of the transfer at least 30 days before the effective
    date of the transfer. (If an LEA modifies a local plan as a result
    of a transfer, the LEA also must submit to its SEA, within 30 days
    after the transfer, a copy of its revised local plan.)

### II-C-2. What information must an LEA include in its notification to the SEA?

An LEA must notify its SEA of:

(1) The program(s) from which funds are to be transferred and to which
    funds will be transferred;

(2) The amount, and Federal fiscal year, of funds to be transferred;

(3) The program(s) to which the funds will be transferred; and

(4) The effective date for the transfer.

### II-C-3. How do requirements relating to the equitable participation of private school students and staff apply to funds an LEA is considering to transfer?

Each program covered by the LEA transferability authority is subject to
equitable participation requirements. Before an LEA may transfer funds,
it must engage in

timely and meaningful consultation with private school officials
representing the full spectrum of private schools in the district. (See
the provision in section 5142(a) of the ESEA regarding equitable
participation with respect to instructional or training programs funded
by the LEA from Title V, Part A funds. The other programs listed in
I-B-1 are subject to the general ESEA equitable participation
requirements in Title IX of the ESEA.)

With respect to the transferred funds, private school students and
teachers will receive equitable services from the LEA under the programs
to which, and from which, the funds are transferred, based on the total
amount of funds available to each program after the transfer.

### II-C-4. May an LEA transfer only those funds that are to be used for services to private school students and/or staff?

No. An LEA may *not* transfer funds to a particular program solely to
provide services for private school students and /or teachers. Rather,
an LEA, after consulting with representatives of private schools, must
provide equitable services to private school students and teachers based
on the rules and regulations of each program and the total amount of
funds available to each program, including funds that have been
transferred into or from the program. (*See* 6123(e)(2) of the ESEA.)

###  II-C-5. If an LEA notifies the SEA that it intends to transfer funds, must the LEA notify the SEA if it subsequently changes its plans to transfer those funds?

Yes. If an LEA has notified its SEA it intends to transfer funds, but
then does not do so, it must promptly notify its SEA that it will not
transfer funds.

A new 30-day notification period begins if an LEA alters its original
notification in any of the following ways:

(1) Amounts to be transferred among programs have changed;

(2) Programs involved in the transfer have changed; or

(3) The effective date of the transfer has changed.

### II-C-6. Is there a limit on the number of times an LEA may transfer funds into, or from, an individual program during a fiscal year?

No. There are no statutory limitations on the number of times an LEA may
transfer funds into, or from, an individual program during a fiscal
year. However, each transfer should be made only after the LEA has
engaged in thorough and careful planning. (*See* II-D-1 through II-D-3.)

### II-C-7. After transferring funds into a program, is an LEA limited in any way in transferring funds from the same program?

Yes. An LEA may transfer no more than 50 percent of the funding base.
(*See* II-C-8, which describes how the 50 percent limitation is
calculated.) An LEA may not transfer funds from its allocation under
Part A of Title I to another program.

### II-C-8. What is the funding base on which the 50 percent transferability limitation is calculated?

The 50 percent transferability limitation is calculated on the basis of
the fiscal year's funds available under a program listed in II-B-1. If
funds have been transferred into a program listed in II-B-1, the 50
percent transferability limitation applies to the sum of the fiscal
year's original allocation and any funds the LEA transfers into the
program.

### 

### II-C-9. If an LEA has carryover funds under one of the programs to which the transferability authority applies, may the LEA transfer those funds to another program?

The amount of carryover funds, if any, that an LEA may transfer depends
on the amount of funds, if any, that it transferred during the year
preceding the carryover period. An LEA may transfer carryover funds from
an eligible program to an eligible program to the extent it has not
exceeded the 50 percent transferability limitation.

If an LEA transfers less than 50 percent of a program's funding base for
a given fiscal year, it may transfer funds carried forward to the
succeeding fiscal year, but only to the extent that the sum of the
amount transferred during the prior year and the amount of carryover
funds to be transferred do not exceed 50 percent of the

fiscal year's funding base for that program. (*See* Examples E through G
in Appendix C for additional calculations of the amount of carryover
funds that may be transferred and Examples H and I addressing the use of
carryover funds that have been transferred.)

### II-C-10. How does an LEA make a transfer?

The mechanics of a transfer will depend on the nature of State and local
financial reporting systems and requirements. States and localities have
discretion in using a method most suitable to their needs. For example,
in transferring funds, an LEA may:

-   Move funds from the account(s) of the program(s) from which the
    funds are being transferred into the account(s) of the program(s) to
    which the funds are being transferred.

-   Establish a new, separate account(s) for transferred funds.

-   Retain the transferred funds in their original account(s), but
    maintain documentation that shows how transferred funds in the
    original account(s) have been reclassified. In other words, in
    transferring funds, an LEA does not actually have to move funds from
    one account to another so long as it maintains adequate
    documentation to account for the transfer.

Regardless of the method the LEA uses to transfer funds, the LEA must
maintain records demonstrating how a program's total funds, including
transferred funds, were spent. However, the LEA does not have to account
separately for the expenditure of the funds that were transferred into a
program and the allocation to which the transferred funds were added.

### II-C-11. Once it is notified of an LEA's intent to transfer funds, must the SEA transfer funds from one account to another in the State's financial system? 

Whether an SEA transfers funds from one account to another to reflect an
LEA's transfer depends on State and local budgeting and financial
reporting systems. The SEA is not required to transfer funds on behalf
of the LEA.

The SEA and LEA must maintain documentation that identifies, at the CFDA
level, funds an LEA transfers.

### II-C-12. What are an LEA's responsibilities for funds that it transfers?

In addition to following the steps outlined in II-C-1 through II-C-5, an
LEA must:

(1) Spend transferred funds in accordance with requirements of the
    receiving program, including statutory set-asides. (S*ee* II-D-1
    through II-D-3).

> \(2\) Maintain records of transfers that will permit the U.S.
> Department of
>
> Education and the SEA to carry out normal monitoring, evaluation, and
> auditing activities.

\(3\) Produce reports determined by the State to be adequate for
financial and

program reporting.

### II-C-13. How does an LEA account for transferred funds in reports that it submits to its SEA?

Each SEA will determine the nature of the performance and financial
reports its LEAs must submit in order to account for transferred funds.

The Department has developed guidance for SEAs on consolidated program
performance reports. The guidance includes information on implementation
of transferability and other flexibility authorities that will assist
SEAs in developing program performance reporting for their LEAs.

An LEA must report on program finances by including them in its
financial statements and in the Schedule of Expenditures of Federal
Awards. For purposes of completing the Schedule of Expenditures of
Federal Awards, the Department's Compliance Supplement encourages the
use of footnotes showing amounts transferred among programs. (S*ee*
II-C-18.)

### II-C-14 What are an SEA's responsibilities regarding funds transferred by an LEA?

To facilitate transfers by its LEAs, an SEA must:

-   Provide for the orderly and accountable disbursement of funds to the
    LEA;

-   Allow LEAs discretion in transferring funds among accounts so they
    can

> take full advantage of the flexibility offered by the statute;

-   Ensure that LEAs do not exceed statutory limitations on transfers;

-   Safeguard program integrity and ensure that funds are used
    responsibly and in accordance with the requirements of the receiving
    program; and

-   Carry out their monitoring, evaluation, and reporting
    responsibilities in a manner that recognizes the outcomes of funds
    transferred among programs.

### II-C-15 May a State restrict an LEA's use of the transferability authority beyond those limitations in the statute?

No. The transferability authority does not authorize a State to limit an
LEA's use of the transferability authority for any reason. For example,
a State may not:

-   Limit the amount of funds transferred (up to the statutory limit);

-   Limit the percentage of funds transferred (up to the statutory
    limit);

-   Limit the number of transfers during the period of availability;

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-   Specify a definition of fiscal year that differs from the Federal
    fiscal year; nor

-   Require budgetary or financial reporting systems incompatible
    between the SEA and the LEA.

### II-C-16 How will auditors be informed of LEA transferability authority?

The Department's section of OMB's Compliance Supplement, which auditors
use when performing audits of Federal programs under the Single Audit
Act, provides guidance to auditors on the SEA and LEA transferability
authorities. (*See*
www.whitehouse.gov/omb/circulars/a133_compliance/03/03toc.html for the
A-133 Compliance Supplement.)

## II-D. Effects of an LEA Transfer

### II-D-1. What rules and requirements govern funds that an LEA transfers from one program to another?

Transferred funds become funds of the program to which they are
transferred and are subject to all the rules and requirements of the
programs to which the funds are transferred. For example, statutory
provisions that establish specific set-asides governing the uses of
funds apply to funds an LEA transfers under the transferability
authority. In transferring funds, an LEA should recognize that a
transfer could affect set-aside amounts in both the program(s) from
which the LEA transfers funds and the program(s) to which the LEA
transfers funds. (*See* II-D-3. Also see Example M in Appendix C
displaying the effect of set-aside requirements for the transfer of
funds.)

### II-D-2. Which programs affected by LEA transferability have set-aside limitations?

Attachment B to this guidance identifies statutory provisions that
establish specific set-asides governing the uses of funds for the
programs affected by the transferability provisions.

As indicated in Appendix B, there are LEA set-asides in Part A of Title
I, Part D of Title II (the Ed Tech program), and Part A of Title IV
(Safe and Drug-Free Schools and Communities). (As noted in II-B-3
through II-B-5, under transferability provisions, funds may be added to,
but not removed from, an LEA's allocation under Part A of Title I.)

### II-D-3. How are funds that an LEA transfers into Part A of Title I affected by the LEA set-aside provisions?

Part A of Title I has several statutory set-asides governing an LEA's
use of funds. For example, there are set-asides prescribing the
percentages of Title I funds an LEA must spend on transportation or
supplemental services, parent involvement, professional development, and
other activities. An LEA must apply the Title I set-aside provisions to
funds it transfers to its Title I allocation.

### II-D-4. What effect does an LEA's transfer of funds have on its future formula allocations under the programs covered by the transferability authority?

An LEA's transfer of funds does not affect its future grant allocations
under the programs covered by the transferability authority. Transferred
funds are not taken into consideration when the State allocates formula
grant funds in subsequent years, and transferability has no effect on
statutory hold-harmless provisions governing grant allocations.

However, in awarding Ed Tech competitive grant funds, an SEA may
consider an LEA's previous transfer of Ed Tech formula grant funds to
other programs as evidence of a lack of need for Ed Tech competitive
grant funds.

##### 

##### Example 12 -- Transferability Does Not

> **Affect Future LEA Formula Grant Allocations**
>
> An LEA transfers \$100,000 from its Safe and Drug-Free Schools
> allocation to its allocation under Part A of Title I. The transfer has
> no effect on the amount of Title I, Part A funds (or Safe and
> Drug-Free Schools funds) that the LEA will receive in future years.

### II-D-5. Does the transferability authority affect maintenance-of-effort calculations?

Maintenance-of-effort levels are calculated on the basis of non-Federal
funds only. Transferring Federal funds among programs will not affect
the

maintenance-of-effort calculation.

### II-D-6. May an LEA transfer funds from an account for one fiscal year to an account for a different fiscal year? 

No. Funds may not be transferred from an account for one fiscal year to
an account for another fiscal year. Allocated funds retain the identity
of the fiscal year for which they were appropriated. For example, when
FY 2004 funds are transferred from one program to another, they remain
FY 2004 funds. (*See* last page of Appendix C for a calendar of the
Federal fiscal year.)

### II-D-7. Does a fund transfer extend the period of availability of the affected funds?

No. Transferability does not extend the period during which an SEA may
obligate funds because transferred funds retain the identity of the
fiscal year for which the funds were appropriated. Funds may be
transferred only to an allocation of the same fiscal year. (*See* last
page of Appendix C for a calendar of the period of availability.)

# 

# APPENDIX A -- TRANSFERABILITY STATUTE

# 

### 

**Title VI, Part A of the Elementary and Secondary Education Act**

**Subpart 2- Funding Transferability for State and Local Educational
Agencies**

SEC. 6121. SHORT TITLE.

> This subpart may be cited as the \'State and Local Transferability
> Act\'.

SEC. 6122. PURPOSE.

> The purpose of this subpart is to allow States and local educational
> agencies the flexibility ---
>
> \(1\) to target Federal funds to Federal programs that most
> effectively address the unique needs of States and localities; and
>
> \(2\) to transfer Federal funds allocated to other activities to
> allocations for certain activities authorized under title I.

SEC. 6123. TRANSFERABILITY OF FUNDS.

> \(a\) TRANSFERS BY STATES-
>
> \(1\) IN GENERAL- In accordance with this subpart, a State may
> transfer not more than 50 percent of the nonadministrative State funds
> (including funds transferred under paragraph (2)) allotted to the
> State for use for State-level activities under the following
> provisions for a fiscal year to one or more of the State\'s allotments
> for such fiscal year under any other of such provisions:
>
> \(A\) Section 2113(a)(3).
>
> \(B\) Section 2412(a)(1).
>
> \(C\) Subsections (a)(1) (with the agreement of the Governor) and
> (c)(1) of section 4112 and section 4202(c)(3).
>
> \(D\) Section 5112(b).
>
> \(2\) ADDITIONAL FUNDS FOR TITLE I- In accordance with this subpart
> and subject to the 50 percent limitation described in paragraph (1), a
> State may transfer any funds allotted to the State under a provision
> listed in paragraph (1) to its allotment under title I.
>
> \(b\) TRANSFERS BY LOCAL EDUCATIONAL AGENCIES-
>
> \(1\) AUTHORITY TO TRANSFER FUNDS-
>
> \(A\) IN GENERAL- In accordance with this subpart, a local educational
> agency (except a local educational agency identified for improvement
> under section 1116(c) or subject to corrective action under section
> 1116(c)(9)) may transfer not more than 50 percent of the funds
> allocated to it (including funds transferred under subparagraph (C))
> under each of the provisions listed in paragraph (2) for a fiscal year
> to one or more of its allocations for such fiscal year under any other
> provision listed in paragraph (2).
>
> \(B\) AGENCIES IDENTIFIED FOR IMPROVEMENT- In accordance with this
> subpart, a local educational agency identified for improvement under
> section 1116(c) may transfer not more than 30 percent of the funds
> allocated to it (including funds transferred under subparagraph (C))
> under each of the provisions listed in paragraph (2) for a fiscal year
> ---
>
> \(i\) to its allocation for school improvement for such fiscal year
> under section 1003; or
>
> \(ii\) to any other allocation for such fiscal year if such
> transferred funds are used only for local educational agency
> improvement activities consistent with section 1116(c).
>
> \(C\) ADDITIONAL FUNDS FOR TITLE I- In accordance with this subpart
> and subject to the percentage limitation described in subparagraph (A)
> or (B), as applicable, a local educational agency may transfer funds
> allocated to such agency under any of the provisions listed in
> paragraph (2) for a fiscal year to its allocation for part A of title
> I for that fiscal year.
>
> \(2\) APPLICABLE PROVISIONS- A local educational agency may transfer
> funds under subparagraph (A), (B), or (C) of paragraph (1) from
> allocations made under each of the following provisions:
>
> \(A\) Section 2121.
>
> \(B\) Section 2412(a)(2)(A).
>
> \(C\) Section 4112(b)(1).
>
> \(D\) Section 5112(a).
>
> \(c\) NO TRANSFER OF TITLE I FUNDS- A State or a local educational
> agency may not transfer under this subpart to any other program any
> funds allotted or allocated to it for part A of title I.
>
> \(d\) MODIFICATION OF PLANS AND APPLICATIONS; NOTIFICATION-
>
> \(1\) STATE TRANSFERS- Each State that makes a transfer of funds under
> this section shall ---
>
> \(A\) modify, to account for such transfer, each State plan, or
> application submitted by the State, to which such funds relate;
>
> \(B\) not later than 30 days after the date of such transfer, submit a
> copy of such modified plan or application to the Secretary; and
>
> \(C\) not later than 30 days before the effective date of such
> transfer, notify the Secretary of such transfer.
>
> \(2\) LOCAL TRANSFERS- Each local educational agency that makes a
> transfer of funds under this section shall ---
>
> \(A\) modify, to account for such transfer, each local plan, or
> application submitted by the agency, to which such funds relate;
>
> \(B\) not later than 30 days after the date of such transfer, submit a
> copy of such modified plan or application to the State; and
>
> \(C\) not later than 30 days before the effective date of such
> transfer, notify the State of such transfer.
>
> \(e\) APPLICABLE RULES-
>
> \(1\) IN GENERAL- Except as otherwise provided in this subpart, funds
> transferred under this section are subject to each of the rules and
> requirements applicable to the funds under the provision to which the
> transferred funds are transferred.
>
> \(2\) CONSULTATION- Each State educational agency or local educational
> agency that transfers funds under this section shall conduct
> consultations in accordance with section 9501, if such transfer
> transfers funds from a program that provides for the participation of
> students, teachers, or other educational personnel, from private
> schools.

# APPENDIX B -- EXAMPLES OF STATUTORY SET-ASIDE PROVISIONS AFFECTING TRANSFERRED FUNDS

As stated in the Guidance on the Transferability Authority, transferred
funds are subject to all of the rules and requirements of the program to
which the funds are transferred, including any statutory set-asides.
(*See* I-D-1, II-D-1, II-D-2, and II-D-3.)

**Title I, Part A**

-   Transportation and supplemental services (ESEA § 1116(b)(10))if an
    LEA has schools covered by the choice and supplemental services
    requirements

> \- 5 percent for choice-related transportation
>
> \- 5 percent for choice-related supplemental services
>
> \- 10 percent for transportation, supplemental services, or both

-   Professional development for LEAs identified for improvement

> (ESEA § 1116(c)(7)(A)(iii))
>
> \- at least 10 percent

-   Family literacy and parenting skills (ESEA § 1118(a)(3)(A))

> \- at least 1 percent, with exception for small LEAs

-   Professional development (ESEA § 1119(l))

> \- 5 to 10 percent of FY 2002 and 2003
>
> \- at least 5 percent in subsequent years

-   Carryover limitation (ESEA § 1127)

> \- 15 percent

-   125 percent rule (ESEA § 1113(c)(2))

> \- per-pupil school minimum, except if LEA only serves schools at 35
> percent poverty or greater (with additional exception).

**Title II, Part D (Ed Tech)**

-   Professional development (ESEA § 2416(a))

> \- 25 percent of award

**Title IV, Part A (Safe and Drug-Free Schools and Communities)**

-   LEA cap on administrative funds (ESEA § 4114(a)(2))

> \- 2 percent of award

-   Carryover limitation (ESEA § 4114(a)(3)(B))

> \- 25 percent of award

-   Security cap (ESEA § 4115(c))

> \- Maximum of 40 percent of LEA's allocation
>
> \- Maximum of 20 percent for non-personnel costs