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December 29, 2005

**Control Number ED-OIG/A07F0014**

Dr. Henry L. Johnson

Assistant Secretary

Office of Elementary and Secondary Education

###### U.S. Department of Education, Room 3W315

400 Maryland Avenue, SW

###### Washington, DC 20202

Dear Dr. Johnson:

This Final Audit Report, titled *The U.S. Department of Education's
Activities Relating to Consolidating Funds in Schoolwide Programs
Provisions* presents the results of our audit. Our objectives were to
determine (i) what the U.S. Department of Education (Department) has
done to assist State Education Agencies (SEAs) in modifying or
eliminating state fiscal and accounting barriers to consolidating funds
and encouraging schools to consolidate funds in their schoolwide
programs; and (ii) what the Department could do to further assist SEAs
in these two areas. Our review covered the period July 1, 2004, through
June 30, 2005.

BACKGROUND

##### **Federal Legislation on Consolidating Funds in Schoolwide Programs** 

The Elementary and Secondary Education Act of 1965, as amended by the No
Child Left Behind Act of 2001, authorizes schoolwide programs to use
funds under Title I, Part A, along with other federal, state and local
funds, to upgrade the entire educational program in a school in order to
improve the academic achievement of all students, particularly the
lowest-achieving students. This is in contrast to targeted assistance
programs, in which program funds may be used only for supplementary
educational services for eligible children identified as being most at
risk of not meeting state standards.

A school operating a schoolwide program is not required to identify
particular students as eligible to participate in the program, or
demonstrate that the services provided with Title I, Part A funds are
supplemental to services that would otherwise be provided. The school is
also not required to maintain separate fiscal accounting records, by
program, that identify the specific activities supported by those
particular funds, but must maintain records that demonstrate that the
schoolwide program addresses the intent and purposes of each of the
federal programs whose funds were consolidated to support the schoolwide
program.

Congress, under the No Child Left Behind Act, effective January 8, 2002,
stated that SEAs must encourage schools to consolidate funds from
federal, state and local sources in their schoolwide programs, and must
modify or eliminate state fiscal and accounting barriers so that these
funds can easily be consolidated.

**[Departmental Units Responsible for Consolidating Funds]{.underline}**

The organizational unit responsible for implementing the Department's
responsibilities regarding consolidating funds in schoolwide programs is
the Student Achievement and School Accountability (SASA) unit in the
Office of Elementary and Secondary Education (OESE). Local educational
agencies (LEAs) and schools have been advised to contact SASA if they
have any questions about consolidating funds. Within SASA, the Policy
Coordination Group is responsible for, among other things, assisting in
the development of guidance relative to the provisions of the No Child
Left Behind Act. The Monitoring and Audit Group, also within SASA, is
responsible for implementing monitoring procedures issued by SASA.

**[OIG Reviews of SEA Administration of Provisions Relating to
Consolidating Funds]{.underline}**

We issued a report titled "Combining Funds in Schoolwide Programs" in
March 2000 (ED-OIG/A0490008), in which we reported the results of
interviews with officials from 15 SEAs, 16 LEAs and 13 schools. In that
report we recommended that the Assistant Secretary for Elementary and
Secondary Education should work with other Assistant Secretaries to
"consider whether it would be useful to provide additional guidance in
publications to help state and local educational agencies address
concerns that may prohibit them from allowing schools to combine funds
in schoolwide programs." We also recommended that the Assistant
Secretary consider whether it would be useful to work with federal and
state education officials to assist SEAs in understanding how combining
funds would work in a schoolwide setting. In general, the Assistant
Secretary concurred with our recommendations. He indicated, however,
that his office did not have immediate plans to develop a fiscal guide
for schoolwide programs. He stated that "the primary focus at this time
is to ensure the correct implementation of schoolwide programs."

Since April 2004, we conducted additional reviews of SEA administration
of consolidating funds provisions. We audited SEAs in Missouri and
Illinois[^1] to determine if they were fulfilling their responsibilities
to encourage schools to consolidate funds in their schoolwide programs
and to modify or eliminate state fiscal and accounting barriers so that
these funds can easily be consolidated. We found that neither state had
encouraged schools to consolidate funds in their schoolwide programs,
but also that neither state had fiscal and accounting barriers to
consolidating funds.

In addition to these two audits, we conducted a survey of nine SEAs to
determine if they had encouraged consolidating funds and if they had
modified or eliminated state fiscal and accounting barriers to
consolidating funds. The cumulative results of our audits and our survey
of SEA administration of the consolidating funds provisions are
presented as Attachment 1.

AUDIT RESULTS

We found that the Department has provided some assistance to SEAs in
modifying or eliminating state fiscal and accounting barriers to
consolidating funds and encouraging schools to consolidate funds in
their schoolwide programs. It published a notice in the *Federal
Register* on July 2, 2004 (Vol. 69, No. 127) that, among other things,
reminded readers that SEAs are required to encourage schools to
consolidate funds in their schoolwide program and indicated that the
Secretary intended to issue guidance in the near future. It has also
offered additional guidance in the form of questions and answers on its
website, at
<http://www.ed.gov/legislation/ESEA/Title_I/swpguid1.html#fedfund>.

The Department, however, has not published the guidance on schoolwide
programs it promised to publish and has not written up findings about
SEAs that it discovered, during site visits, were not encouraging the
consolidation of funds. Department officials told us that the delay in
publishing guidance for consolidating funds was a matter of priority.
However, the delay may have contributed to SEAs' failure to encourage
consolidation of funds in schoolwide programs and the lack of
utilization of the option by LEAs.

We received your comments regarding our draft report, which concurred
with both findings. While you indicated qualified concurrence with the
recommendations for Finding No. 1, you indicated that you could not
concur with the 2^nd^ recommendation for Finding No. 2 at this time.
Your comments are summarized at the end of each finding. The full text
of the comments on the draft report is included as Attachment 2 to the
report.

**FINDING NO. 1 -- The Department could do more to support SEAs in
fulfilling their responsibilities under the schoolwide consolidating
funds provisions by publishing the guidance on schoolwide programs it
promised in the July 2, 2004, notice in the *Federal Register.******\
***

The Department has not published promised non-regulatory guidance on
schoolwide programs. We found through our review of SEAs and our
interviews with Department staff who conduct site-visits of SEAs that a
lack of guidance from the Department was a reason given by SEAs for not
fulfilling their responsibility to encourage consolidating funds.

The July 2004 *Federal Register* stated, "The Secretary intends to issue
additional guidance on schoolwide programs in the near future." At least
one draft, dated December 4, 2004, had been prepared and circulated
among Departmental officials for comment. However, as of August 26,
2005, the Department had not published the guidance. Also, the draft
guidance contained limited

guidance for LEAs on consolidating funds[^2] and did not mention the
responsibilities of SEAs to encourage consolidating funds and to
eliminate or modify state barriers to consolidating funds. While the
July 2004 notice did not state explicitly that the promised guidance
would cover consolidating funds, it was reasonable to assume that it
would do so since virtually all of the notice dealt with the issue of
consolidating funds.

Although three SEAs had developed extensive guidance for LEAs and
schools on consolidating funds, officials of two SEAs specifically told
us that they had not taken action to fulfill their responsibilities
under the consolidating funds provisions because of lack of guidance
from the Department. Department officials who conducted on-site reviews
of SEAs during the period July 1, 2004, through June 30, 2005, confirmed
that a common reason given by SEAs for not encouraging consolidation was
that the Department had not issued guidance on what consolidation was
and how to implement it.

The Department explained that the reason it had not published guidance
on consolidating funds earlier was a matter of priority. It said that
after any new major legislation, such as the No Child Left Behind Act,
they always work on the most fundamental issues first and then proceed
to other issues. It said that, from its beginnings, the basic concept of
schoolwide programs has been that whatever services a school determines
are needed to improve student achievement should drive everything else
at the school. The Department commented that consolidating funds should
not be seen as a desired end in and of itself. Some schools might find
it to be a means to achieving the end of maximizing student achievement
but others might not.

However, in the Assistant Secretary's January 19, 2001, response to our
March 2000 report, he committed his office to provide technical
assistance and support for state and local efforts in the area of
combining funds in schoolwide programs and the other flexibility
provisions of the Improving America's Schools Act. In 2002, in the No
Child Left Behind Act, Congress itself indicated that a schoolwide
program's consideration of the option of consolidating funds was
important enough to the correct implementation of schoolwide programs to
place new requirements on SEAs that would have the effect of making it
easier for LEAs and schools to consolidate funds.

After we had completed our fieldwork for this audit, we discussed our
findings with officials from OESE and other Department offices. OESE and
the Office of the Chief Financial Officer agreed that a guidance
document should be developed "that would set out best practices related
to accounting principles for the consolidation of funds." SASA proposed
that it be the lead office for the development of this document.

**Recommendations:**

We recommend that the Assistant Secretary for Elementary and Secondary
Education require the Director of Student Achievement and School
Accountability Programs to ensure that her staff:

1.  Develop and issue guidance on consolidating federal, state, and
    local funds in schoolwide programs that would include:

    a.  Options on consolidating funds that would best accommodate
        federal programmatic and reporting requirements, and

    b.  Information about the potential advantages of consolidating
        funds.

> 1.2 As part of developing new guidance on consolidating funds, meet
> with officials from the three SEAs that we found to have developed the
> most extensive guidance on consolidating funds in order to:

a.  Ensure that the Department's guidance in this area takes advantage
    of the most promising practices, and

b.  Learn what SEAs perceive to be federal barriers to consolidating
    funds.

OESE Comments

OESE concurred with this finding and indicated qualified concurrence
with its recommendations in its memorandum dated November 21, 2005.[^3]
OESE stated that it was working to obtain final clearance on a document
giving guidance for schoolwide programs and was also working to gain
clearance on Title I fiscal guidance that would, among other things,
address consolidating funds in schoolwide programs. It noted, however,
that OCFO was interpreting the Office of Management and Budget
Compliance Supplement to require semi-annual time and effort
certification for employees in schoolwide programs as with other school
employees. OESE stated that it believes that these semi-annual
certifications are not required for schoolwide programs that consolidate
funds and it indicated that if this issue is resolved in favor of
flexibility for schoolwide programs, it was "prepared to provide more
specific guidance and examples on ways LEAs and schools may account for
consolidated funds in schoolwide settings."

**FINDING NO. 2 -- Even though Department site-visitors have found that
SEAs generally have not encouraged LEAs and schools to consolidate funds
in their schoolwide programs, they have not included these findings in
site-visit reports.****\
**

During the period July 1, 2004, through June 30, 2005, Department
officials conducted on-site reviews of at least 16 SEAs. All but one
reviewer told us in interviews that the SEAs were doing little, if
anything, to encourage LEAs to consolidate funds, as required. Yet, none
of the reports covering these reviews contained any findings or
recommendations for corrective action relating to SEA responsibilities
under the consolidating funds provisions. As a result, SEAs will
possibly continue to pay little attention to the provisions and their
potential benefits.

Department officials reported that SEAs generally are neither positive
nor negative about the option of consolidating funds when SEAs present
it to LEAs and schools. If the advantages in consolidating funds were
more widely publicized, more LEAs might take advantage of the option.
Only 9 of the 76 LEAs we covered in our audits and survey reported that
they consolidated funds. The benefits that were reported by LEAs that
were using the option might not be fully appreciated by other LEAs if
these potential benefits are not explained to them. The main benefits
cited by LEAs were that the option made it easier for them to accomplish
the goals of their schoolwide programs and reduced their paperwork or
accounting burdens.

The Department is responsible for overseeing SEAs, as it is with other
entities that participate in federal education programs, to ensure that
they comply with federal requirements. It may not be fulfilling its
oversight responsibility with respect to the SEA consolidating funds
provisions because site-visitors in the SASA Monitoring and Audit Group
are not aware of relevant site-visit procedures in a monitoring
protocol[^4] issued by SASA in January 2005. This protocol directed
site-visitors to determine how a SEA encourages LEAs and schools to
combine funds within schoolwide programs and if the SEA has identified
and minimized barriers to combining funds in schoolwide programs. We
learned from Department staff who conducted SEA site visits that they
did not recall seeing this monitoring protocol. One site-visitor said
that the guide he used did not cover the SEA consolidating funds
requirements. However, OESE officials advised us that every staff member
conducting any monitoring of SEAs did so using the SASA monitoring
protocol.

**Recommendations:**

We recommend that the Assistant Secretary for Elementary and Secondary
Education require the Director of Student Achievement and School
Accountability Programs to ensure that her staff

2.1 Follow the Department's current SEA monitoring procedures with
respect to the consolidating funds responsibilities of SEAs.

2.2 Include in reports for SEA program reviews findings, and
recommendations for corrective action, regarding any failures on the
part of SEAs to fulfill their responsibilities under the provisions in
Title I, Part A, §§ 1111(c)(9) and (10).

OESE Comments

In OESE's memorandum dated December 28, 2005, it concurred with this
finding and the first of its recommendations, but indicated that it
could not concur with its second recommendation at this time. It stated
that the primary reason Department monitors have not pursued the issue
of consolidating funds with SEAs is an apparent contradiction between
the No Child Left Behind Act and an OMB Compliance Supplement
requirement for semi-annual certifications for employees who work on
activities supported with consolidated federal, state, and local funds.

OBJECTIVES, SCOPE, AND METHODOLOGY

The objectives of our audit were to determine (i) what the Department
has done to assist SEAs in modifying or eliminating state fiscal and
accounting barriers to consolidating funds and encouraging schools to
consolidate funds in their schoolwide programs; and (ii) what the
Department could do to further assist SEAs in these two areas.

To accomplish our objectives, we

-   Reviewed applicable federal law and regulations;

-   Interviewed Department officials;

-   Reviewed the results of our on-site audits of Missouri and Illinois
    as background for planning our survey of states regarding the
    consolidating funds provisions;

-   Planned the survey of states to determine the extent of the need for
    any further assistance the Department might be able to offer the
    states in meeting their responsibilities under the consolidating
    funds provisions;

-   Disseminated survey questionnaires to nine SEAs;

-   Conducted follow-up interviews with the SEAs;

-   Interviewed officials from 37 LEAs that had schools with schoolwide
    programs; and

-   Analyzed and summarized the information we obtained from the SEA and
    LEA officials we had interviewed as part of our survey and our
    audits of Missouri and Illinois.

We identified the SEAs for our survey by selecting three SEAs (South
Carolina, Texas, and Washington) that we knew had developed guidance for
consolidating funds in schoolwide programs. We then stratified the
states into four tiers in terms of the amount of Title I money they had
been awarded for 2004-05. Next, we randomly selected six states to
ensure that, counting the two states we had audited (Missouri and
Illinois), at least two states from each of the three tiers with the
most heavily funded states were included and one state from the tier
with the lowest funded states was included. We also accounted for
geographic distribution by ensuring that all seven of the OIG regions
were represented.

We interviewed officials from at least three LEAs for each of the nine
states covered by our survey. We randomly selected three LEAs from each
state in our survey from lists of LEAs having schools with schoolwide
programs that had been provided to us by the SEAs. We also interviewed
officials from 10 additional LEAs that SEAs had identified as being
exemplary in their use of the consolidating funds option.

We conducted our interviews with SEA and LEA officials during the period
from May 2 to June 21, 2005. We held a final exit conference with
Department officials on August 26, 2005. Our audit was conducted in
accordance with generally accepted government auditing standards
appropriate to the scope of review described above.

####### ADMINISTRATIVE MATTERS

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). Department policy requires that you develop a final corrective
action plan (CAP) for our review in the automated system within 30 days
of the issuance of this report. The CAP should set forth the specific
action items and targeted completion dates necessary to implement final
corrective actions on the findings and recommendations contained in this
final audit report. An electronic copy of this report has been provided
to your Audit Liaison Officer.

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.

If you have any questions, please contact Richard J. Dowd, Regional
Inspector General for Audit, at 312-886-6503.

> Sincerely,
>
> Helen Lew

######## Assistant Inspector General

> for Audit Services

Attachments

## ATTACHMENT 1: 

## SEA ADMINISTRATION OF PROVISIONS RELATING

## TO CONSOLIDATING FUNDS IN SCHOOLWIDE PROGRAMS

Our review included audits of SEAs in Illinois and Missouri and a survey
of SEAs in Iowa, Colorado, Georgia, Michigan, New York, South Carolina,
Texas, Virginia, and Washington. The objectives of our audits and survey
of states were to determine (i) if their SEAs had encouraged schools to
consolidate funds from federal, state, and local sources in their
schoolwide programs; (ii) if their SEAs had modified or eliminated state
fiscal and accounting barriers so that schools can easily consolidate
funds from federal, state, and local sources in their schoolwide
programs; and (iii) whether schools are consolidating funds and their
reasons for doing or not doing so. The results of our review are listed
below.

##### **Are SEAs Modifying or Eliminating State Fiscal and Accounting Barriers to Consolidating Funds?** 

The 11 SEAs covered by our survey and audits reported that there were no
state fiscal and accounting barriers to consolidating funds. The LEA
officials we interviewed generally concurred with this assessment,
although officials from 13 of the 76 LEAs covered by our survey and
audits reported that they tracked funds separately to satisfy audit or
state preferences or requirements (such as state reporting
requirements).

##### **Are SEAs Encouraging LEAs and Schools with Schoolwide Programs to Consolidate Funds?** 

Five of the 11 SEAs covered by our survey and audits submitted
documentation to us that showed, at least to some degree, that they were
encouraging LEAs and schools to consolidate funds in their schoolwide
programs. However, we had selected three of these SEAs because we had
prior knowledge that they were doing so.

Four of the five SEAs that had encouraged consolidating funds had
published guidance for their LEAs and schools on how to consolidate
funds and two of them had created new fund (or object-class) codes for
accounting for the consolidated funds. Other types of encouragement that
SEAs reported were providing on-site technical assistance regarding
consolidating funds and making presentations on consolidating funds at
workshops and conferences. One SEA reported making regional, statewide,
and national presentations on the topic.

However, one of the three SEAs that had done the most to develop and
publicize systems for consolidating funds stated that it had become
\"prohibitively expensive\" for schools to set up the accounting and
grants systems required to consolidate funds on a full-scale basis and
asked if the Department was taking any steps to stop or reverse the
trend in establishing new program restrictions and requirements that
make it increasingly difficult to consolidate funds.

In our survey questionnaire, we did not ask specifically why SEAs were
not encouraging LEAs and schools to consolidate funds, but we did ask
them to explain what the SEAs saw as potential advantages and
disadvantages to consolidating funds. The following are some of their
answers to these questions that indicate why some SEAs are not
encouraging consolidating funds:

-   "Given the flexibility in using funds from various sources, we do
    not see advantages in consolidating funds."

-   "As long as the requirements remain to report each program
    individually, there is potential to make the record-keeping more
    complex than it would be if funds were not consolidated."

-   Consolidating funds may give the "perception that funds are not
    being used to serve the intended population."

-   The Department has not provided the guidance on consolidating funds
    that it said would be issued in the near future.

-   We have not done more to discuss consolidating funds with LEAs and
    schools because of other priorities, such as adequate yearly
    progress and the option of transferring funds between ESEA programs.

-   Consolidating funds would create a burden on the LEAs for devising
    new reporting and other data systems.

[**Are Schools with Schoolwide Programs Consolidating
Funds?**]{.underline}

Of the 76 LEAs we reviewed in our audits and survey, all of which had
schools with schoolwide programs, 9 were taking advantage of the
consolidating funds option.

##### **What Reasons Did LEAs Give for Consolidating Funds?** 

The most common reasons cited for consolidating funds were as follows:
[^5]

-   Five LEAs stated that it reduced paperwork or accounting burdens for
    them;

-   Three LEAs stated that it made it easier to accomplish the goals of
    their schoolwide programs, e.g., that it allowed them greater
    flexibility in the use of funds; and

-   Two LEAs, in one state, commented that their State Auditor or their
    SEA required them to consolidate funds. (In this state, SEA
    officials also indicated that their State Auditor had interpreted
    the consolidating funds provisions as requiring that schools
    consolidate funds in their schoolwide programs.)

##### **What Reasons Did LEAs Give for Not Consolidating Funds?** 

The most common reasons cited for not consolidating funds were as
follows:[^6]

-   Twenty-two LEAs stated that it appeared to them that it was easier
    not to consolidate funds;

-   Fourteen LEAs stated that they did not know that the option was
    available to them;

-   Thirteen LEAs believed that it was necessary to track funds
    separately to satisfy audit or state requirements or preferences;

-   Ten LEAs stated that they had no need to consolidate funds or saw no
    advantage to consolidating funds;

-   Nine LEAs stated that they had always kept funds separate and they
    just continued to do so;

-   Four LEAs stated that they had enough money from Title I to do what
    they wanted in their schoolwide programs; and

-   Four LEAs stated that they did not know how to consolidate funds.

**ATTACHMENT 2**

November 21, 2005

TO: Richard J. Dowd

Regional Inspector General for Audit

FROM: Jeanette J. Lim /s/

Deputy Assistant Secretary

##### Office of Elementary and Secondary Education (OESE)

SUBJECT: Comments on the Draft Audit Report, *U. S. Department of
Education's Activities Relating to Consolidating Funds in Schoolwide
Programs Provisions, #ED-OIG/A07F0014*

> Attached please find supplemental comments on the Office of Inspector
> General's Draft Audit Report, *U. S. Department of Education's
> Activities Relating to Consolidating Funds in Schoolwide Programs
> Provisions, ACN ED-OIG/A07F0014.* This supplements our previous
> comments transmitted to you on November 18, 2005, which addresses the
> findings of the report and provides updated information. If you have
> any questions, please contact Chuck Laster at 202-205-2189.

Attachment

### SUPPLEMENTAL COMMENTS FROM STUDENT ACHIEVEMENT AND SCHOOL

**[accountability programs (sasa) draft audit report, *u. s. department
of*]{.smallcaps}**

***[education's activities relating to consolidating funds in
schoolwide]{.smallcaps}***

#### programs provisions, acn: ED-OIG/A07F0014

Following are comments that supplement what OESE previously transmitted
on the above referenced draft audit report and that also address the
findings:

The Student Achievement and School Accountability (SASA) office is in
the process of incorporating comments on its schoolwide guidance from
the various offices in the Department and is working to obtain final
clearance so that we can release this document.

In addition, SASA's guidance on Title I fiscal issues is in the
clearance process. The guidance will, among other things, address
consolidation of funds in schoolwide programs. One specific issue that
this guidance addresses are LEA requirements with regard to documenting
employee time and effort in schools that operate schoolwide programs,
which is seen as a major barrier at the local and State level to
consolidating funds.

Because a schoolwide program school may consolidate funds from different
Federal programs, the draft guidance takes the position that a school or
LEA is "not required to maintain separate fiscal accounting records, by
program, that identify the specific activities supported by those
particular funds as long as the school maintains records that
demonstrate that the schoolwide program, considered as a whole,
addresses the intent and purposes of each of the Federal programs that
were consolidated to support the schoolwide program." (See section
1114(a)(3)(C) of the Title I statute.) In other words, a schoolwide
program school does not have to track the expenditure of federal funds
to particular activities; hence, it does not know which personnel are
funded with federal funds.[^7]

However, this position contrasts with the OMB Compliance Supplement used
by auditors to audit Federal programs. At the insistence of OCFO, the
Compliance Supplement requires semi-annual certifications for those
employees in a schoolwide program who work on activities supported with
consolidated Federal, State and local funds. This provision appears to
contradict the provision in section 1114(a)(3)(C). We believe that
semi-annual certifications are not required in a schoolwide program that
consolidates Federal, State, and local funds.

This area of policy concerning semi-annual certification of employee
activity has impeded States from modifying current accounting practices
that would eliminate fiscal barriers to consolidating Federal, State,
and local funds in school operating schoolwide programs. In monitoring
visits to the States, State officials have repeatedly indicated to our
staff their reluctance to modify their accounting practices with regard
to schoolwide programs until this apparent contradiction is resolved.

If this issue is resolved in favor of being more flexible, SASA is
prepared to provide more specific guidance and examples on ways LEAs and
schools may account for consolidated funds in schoolwide settings.

DEC 28, 2005

TO: Richard J. Dowd

Regional Inspector General for Audit

FROM: Jeanette J. Lim /s/

Deputy Assistant Secretary

> Office of Elementary and Secondary Education (OESE)

RE: OESE Comments on the Draft Audit Report, *U. S. Department of
Education's Activities Relating to Consolidating Funds in Schoolwide
Programs Provisions, #ED-OIG/A07F0014*

Thank you for the opportunity to provide supplemental comments to the
Office of Inspector General's Draft Audit Report, *U.S. Department of
Education's Activities Relating to Consolidating Funds in Schoolwide
Programs Provisions, #ED-OIG/A07F0014* specific to Finding Number two*.*
This response supplements our previous comments transmitted to you on
November 18 and November 21, 2005.

With regard to Finding Number two and the concomitant recommendations
set forth in the report, OESE would like to offer the following
comments:

**FINDING NO. 2 -- Even though Department site-visitors have found that
SEAs generally have not encouraged LEAs and schools to consolidate funds
in their schoolwide programs, they have not included these findings in
site-visit reports.**

The report states that during the period July 1, 2004 through June 30,
2005, Department officials conducted reviews of 16 LEAs but that none of
the monitoring reports resulting from these reviews contained any
findings or recommendations for corrective action relating to SEA
responsibilities under the consolidating funds provisions.

The Department does not dispute this finding. The Department's program
monitors have not pursued this issue primarily due to the apparent
contradiction between the requirements in the No Child Left Behind
(NCLB) statute at section 1114(a)(3)(C) which states that a schoolwide
program school does not need to track the expenditure of Federal funds
to specific activities or funded positions, and the OMB Compliance
Supplement requirement for semi-annual certifications for employees who
work on activities supported with consolidated Federal, State and local
funds. LEAs interviewed as part of the Department's monitoring process
most often cite these requirements as the reason they do not consolidate
funds in their schoolwide programs.

Regarding the recommendations, the Department will continue to follow
the current SEA monitoring procedures with respect to the consolidating
funds responsibilities of SEAs,

Page 2 -- Richard J. Dowd

as it does for all Title I requirements under NCLB (Recommendation 2.1).
The Department will not, however, include findings and corrective
actions in monitoring reports in this specific area (Recommendation 2.2)
until the contradiction between NCLB and OMB Compliance Supplement
requirements is resolved.

[^1]: *Missouri Department of Elementary and Secondary Education
    Consolidating Funds in Schoolwide Programs (ACN ED-OIG/A07E0018)*
    *and Illinois State Board of Education Consolidating Funds in
    Schoolwide Programs (ACN ED-OIG/A07E0029).*

[^2]: For example, in the discussion of integrating federal, state, and
    local services and programs, there was no mention of integrating
    resources; and in the discussion of establishing a schoolwide
    planning team, there was no mention of the fiscal personnel that
    would be needed to implement the consolidating funds option, should
    the school choose to do so.

[^3]: OESE submitted three sets of comments: the first was dated
    November 18, 2005, the second was dated November 21, 2005, and the
    third was dated December 28, 2005. We considered the November 18,
    2005, comments to be technical corrections and the November 21 and
    December 28 comments to be the official comments to the draft
    report.

[^4]: The full title of this document is "Student Achievement and School
    Accountability Program (SASA)

    Internal Monitoring Procedures for Title I, Part A Formula Grant
    Programs for October 1, 2004 to September 30, 2005."

[^5]: Because some LEAs gave more than one reason for consolidating
    funds in their schoolwide programs, the total number of reasons
    listed does not equal the total number of LEAs in each category.

[^6]: ^5^ Because some LEAs gave more than one reason for not
    consolidating funds in their schoolwide programs, the total number
    of reasons listed does not equal the total number of LEAs in each
    category.

[^7]: This is essentially the position of the old schoolwide guidance
    issued in 1996.